The Dubai bourse plunged six per cent, the steepest drop since June 24, to close at 4,609.67 points on Sunday, dragged down by construction giant Arabtec, which failed to shore up investor confidence.
The Arabtec sell-off was triggered by investor concerns after Aabar Investments, one of its major shareholders, did not confirm a report that said Aabar was in talks to increase its stake.
The biggest publicly-traded construction company in the UAE fell the most allowed in a day after it resumed trading following its suspension July 17.
In a statement on Sunday, Aabar did not confirm or deny the report, saying it was studying different options for its stake and that any talks on a deal would remain confidential. Talks on Aabar stake in the builder are "strictly confidential", the investment firm said in a statement to the Dubai bourse.
Disappointed retail investors dumped Arabtec as it resumed trading.
Shares of Emaar Properties, which have the biggest weighting on the DFM index, tumbled 4.5 per cent to Dh9.50, the steepest drop since June 23. Deyaar Development declined the most allowed in a day to Dh1.18.
Union Properties and Deyaar, and contractor Drake and Scull, also closed limit-down. Bourse operator Dubai Financial Market fell 8.9 per cent after it announced it had more than tripled its second-quarter net profit.
The sell-off also hit property stocks in Abu Dhabi. The emirate's biggest developer, Aldar Properties, plunged to its 10 per cent limit, as did RAK Properties and Eshraq Properties. Abu Dhabi's index closed 2.4 per cent lower.
On Thursday, Arabtec's shares, which fell 9.9 per cent, the most since June 30, were halted from trading pending clarification of its ownership.
Aabar has been in talks to buy at least half of a 28.9 per cent stake held by the construction company's former chief executive officer Hasan Ismaik, a person with knowledge of the situation said on July 15.
Aabar is negotiating a price of Dh5 to Dh6 a share, the person said. At the top end of that range, half of Ismaik's 1.27 billion shares would be worth about $1.03 billion.
Qatar's QE Index lost one per cent and Oman's MSM 30 Index retreated 0.2 per cent. Kuwait's SE Price Index slid 0.2 per cent. Saudi Arabia's Tadawul All Share Index dropped 0.6 per cent.
Federal government bonds by 2018
Meanwhile, the UAE is expected to issue its first-ever federal government bonds before 2018 to help the country's banks meet global liquidity rules, but feasibility studies are yet to be completed, a senior finance ministry official said.
UAE banks, such as National Bank of Abu Dhabi and Emirates NBD, could buy the dirham-denominated government debt to help meet liquidity requirements being phased in under the Basel III global banking standards.
With inputs from Reuters