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Shares Continue to Fall for Third Day

DUBAI - UAE shares on Tuesday dropped for the third consecutive day, dragged by the slide in property and banking sectors on investors’ increasing wariness about the severity of the global recession and its impact on domestic growth.

The Dubai Financial Market Index edged down 1.21 per cent to 1,925.33 with decliners outnumbering advancers 18 to 1.

The Abu Dhabi Securities Exchange benchmark index shed 0.14 per cent to 2,710.5.

“There was no motivation for investors to buy stocks, they largely ignored assurances by the government that all is well despite setbacks arising from the global financial crisis,” said Vyas Jayabhanu, an analyst at Al Dhafra Financial Brokerage.

Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, said on Tuesday in Abu Dhabi the government remains positive about the country’s economic growth in 2009.

Citing UAE’s deteriorating liquidity position however, Moody’s Investor Service downgraded the ratings outlook for Dubai Islamic Bank, Abu Dhabi Commercial Bank, and First Gulf Bank PJSC to “negative” from “stable.” The ratings outlook on Dubai Bank was changed to “stable” from “positive.”

“The downgrade will make it more difficult for banks to raise money, the cost of funding will also be higher,” said Ali Khan, executive director of Arqaam Capital.

Luis Costa, emerging markets strategist at Commerzbank AG in London, said UAE banks’ high exposure to the volatile property and mortgage markets highlights their vulnerability.

“We cannot discount the possibility of a further negative outlook.”