Dubai fell 5.5 percent to 4,856 points, its lowest close in a month and biggest one-day loss since Aug. 27.
“I think we’ll see more selling – the key is that Dubai broke and then closed below 5,000 points,” said Bruce Powers, technical strategist and president at WideVision in Dubai.
“It looks like we’re going to 4,715, whether we go below that remains to be seen.”
There was little apparent reason for Dubai’s sudden sell-off apart from declines on global markets due to jitters about slowing growth China.
Dubai’s drop trimmed its 2014 gains to 44.1 percent as 18 stocks fell by more than 5 percent including market heavyweights Emaar Properties and Dubai Islamic Bank.
The measure has still more than doubled from last September, but has now declined for four straight sessions, its biggest losing streak in that surge.
“For the past two weeks there were fewer stocks participating, which was a sign of underlying weakness in the market,” said Powers.
Dubai’s slump coincided with index compiler MSCI revealing which stocks from the United Arab Emirates would be included in its emerging markets index from the end of this week.
Last June, MSCI announced its intention to upgrade the UAE and Qatar from frontier market status, which should lead to a huge influx of foreign money and also helped woo back local traders.
“At the start of year, some people were saying MSCI was already priced in, but some investors actually continued to price that in right up until (Wednesday’s) announcement,” said Sanyalaksna Manibhandu, manager of research at NBAD Securities.
“Those who have made money and have less risk appetite are now looking to get out of the market. There’s danger it will create a ripple effect where those with more risk appetite also decide to get out.”
Neighbouring Abu Dhabi fell 2.3 percent to 4,870 points, its biggest drop since mid-March and lowest close in nearly eight weeks.
Elsewhere, Qatar fell 1.8 percent to a three-week low, Saudi Arabia made its biggest drop – 0.9 percent – since April 13 and Kuwait slumped to September 2013 levels.-Reuters