Dubai stocks closed sharply lower Tuesday weighed by growing concern about the financial health of Arabtec Holding PJSC, a Dubai-listed company.

Dubai Stocks

The Dubai Financial Market Index finished nearly 6.7% lower at 4009.01 on Tuesday, after dropping over 25% in just over six weeks.

Dubai’s overheated property market

United Arab Emirates’ largest-listed builder Arabtec Holding Co. dropped 9.8% to the lowest since January. Arabtec is one of the Middle East’s largest construction firms employing nearly 60,000 people. It has been involved in many of the region’s biggest building projects, including Dubai’s Burj Khalifa, the tallest building in the world.

Arabtec’s CEO Hasan Ismaik stepped down last Wednesday though under his leadership, the company’s order book swelled by leaps and bounds, as it aggressively built a business in Abu Dhabi and around the Persian Gulf. Investors are concerned that the construction company will pursue a more conservative strategy after the CEO’s exit.

On June 8, the U.A.E’s central bank said there are signs the property market is overheating, since when the Dubai index has dropped over 19%.

Dubai Stocks’ correction overdue

The latest declines underscore deepening concern that five years after the global financial crisis the real-estate recovery in the Middle East business hub has become overblown. Since June 2012, shares in the emirate soared over 250%, led by property and construction companies. Interestingly, every stock market in the six-nation Gulf Cooperation Council fell today, with Abu Dhabi’s index plunging 3.3% and Qatar falling 0.9%.

According to Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, selling pressure on Arabtec is causing margin calls on retail investor accounts and hence the big drop across the U.A.E. as a whole.

According to Sarmad Khan of Bloomberg, the index entered a bear market yesterday after plunging 20% from a May 6 peak. Emaar Properties PJSC, the property developer having the biggest weighting on Dubai’s gauge dropped 3.4%.

Following index provider MSCI Inc upgrading to emerging markets in June 2013, Dubai’s gauge more than doubled in anticipation that the change will lure investors managing about $8 trillion in assets.

Interestingly, both Arabtec and Emaar are among the nine U.A.E. equities included in the MSCI Emerging Markets Index.

According to data provider CMA, the cost of insuring the emirate’s debt against default rose 11 basis points, the most since March, to 154.