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UAE Equities Hurt by Dubai’s Credit Woes

Investors rushed to the exits on growing fears that Dubai may default on its debts, especially if capital Abu Dhabi fails to address Dubai’s credit crisis.

Banks and property stocks in both Dubai and Abu Dhabi dragged down their indexes. Twenty five out of 27 stocks traded in Dubai fell, while 34 out of the 35 stocks traded in Abu Dhabi lost. Trading was thin with the combined value of shares in the two bourses reaching just Dh117.24 million.

The Dubai Financial Market slipped by 7.3 per cent to 1,940, its biggest single-day decline since October 8, 2008. The main index of the Abu Dhabi Securities Exchange plunged by 8.3 per cent to 2,668.23.

At Nasdaq Dubai, Dubai World subsidiary DP World, the world’s fourth largest port operator plunged by 14.9 per cent to $0.37.

Dubai index mover Emaar Properties, declined by 9.8 per cent to Dh3.75. Stock market operator Dubai Financial Market PJSC, fell by 9.7 per cent at Dh1.96. Arabtec Holding also dropped by 9.8 per cent to Dh2.77. Abu Dhabi-based Aldar Properties edged down by 9.9 per cent at Dh4.96. Sorouh Real Estate lost 9.9 per cent at Dh2.80.

“Investor confidence takes years to build up and seconds to lose, and markets are trying to price in the effects of that. The Dubai market is unlikely to stabilise until well into next week,” said Matthew Wakeman, managing director of cash and equity-linked trading at EFG-Hermes. “The growth and potential of Dubai and the UAE remains intact, but investor confidence has taken a blow. There is no quick fix or announcement that will turn this around instantly,” added Wakeman. The Dubai crisis has shaken investor confidence worldwide, and it will take awhile for the markets to get back on their feet, said Vyas Jayabhanu, head of investments at Al Dhafra Financial Brokerage.

“The credibility of Dubai is in question, this could just be the start of more downside for the markets. Investors are now questioning if all the faith they put in the markets since the rallies began was justified.” Banks took little comfort from a statement by the UAE central bank that it will support the country’s domestic and foreign banks that stand to lose due to their exposure to Dubai World.

Banks can borrow money from the central bank at half a percentage point above the three-month local benchmark interest rate.

National Bank of Abu Dhabi falling by 9.7 per cent toDh12.10 after dislcosing it has $345 million exposure to two Dubai world subsidiaries, Nakheel and Limitless. First Gulf Bank lost 9.8 per cent.

In Dubai, the Dubai Islamic Bank nearly lost 10 per cent at Dh2.44.

Emirates NBD, the country’s biggest bank by assets, shed 5 per cent to Dh0.83. “The markets will face more pressure in the days ahead, unless the government comes out with statements that will clarify the Dubai debt issue. Investors are eager to hear reassuring statements from the government, especially about the restructuring plan of Dubai World, and that Nakheel’s case is an isolated one,” said Haissam Arabi, Chief Executive Officer at Gulfmena Alternative Investments.

rocel@khaleejtimes.com