UAE markets steady after Abu Dhabi offers Dubai bailout

14:09, December 18, 2009      

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by Gerard Al-Fil

United Arab Emirates (UAE) stock markets steadied on Thursday, after Abu Dhabi injected 10 billion U.S. dollars in order to save Dubai World from immediate default three days ago.

The Dubai Financial Market (DFM) did not extend its rally on Thursday, but the DFM Index closed only 0.57 percent lower at 1,879.26 points.

Since its eight-month-low at 1,533.36 points on Dec. 10, the DFM rebounded 18.4 percent. However, since Tuesday, the Dubai market remained flat. While utilities added value over the week, transport and real estate stocks suffered minor losses.

With optimism being on the return, foreign investors returned to Dubai as net buyers.

Dubai World's subsidiary Nakheel, the real estate developer which built the famous Palm Jumeirah island off Dubai's coast, has said it will pay back its 3.52 billion Islamic bonds (plus 500 million dollars profit amount) that was due Monday in the next two weeks.

The government of Dubai, one of the seven emirates of the oil-rich federation UAE, announced on Nov. 25 that it would ask Dubai World's creditors to agree to a debt moratorium of at least six months, mainly linked to its two property firms, Nakheel and Limitless World.

The Dubai World debt crisis rocked global markets. Abu Dhabi decided to give Dubai bailout on Dec. 14.


The same trend applied to the Abu Dhabi Securities Exchange (ADX).

The ADX General Index climbed 12.44 percent higher since its low on Dec. 10. The ADX ended at 2,774 points on Thursday. In Abu Dhabi, real estate shares and construction shares advanced. Banking shares retreated slightly.

At the Nasdaq Dubai, Dubai Ports (DP) World gained half a percent, closing at 0.412 dollar.

The market bellwether posted record high trading volumes during the week and recovered from a hit it took after Nov. 26, as DP World is part of the Dubai World group.

But Dubai World declared from the beginning that the container port operator was exempted from any debt restructuring.

Shares of Emirati jewelry trader Damas, on the other hand, plummeted 5 percent and closed at 0.152 dollar. The Damas management voluntarily suspended its shares on Nov. 25 before the Islamic feast of sacrifice Eid al-Adha after it delayed the publication of its interim results.

The firm reported a net loss of 194.6 million dollars for the six-month period ending on Sept. 30, compared to a profit of 24.8 million dollars in the same period a year earlier. Its CEO resigned in October over alleged "illegal transactions" of 165 million dollars.


While stock markets became more and matured, the six member nations of the Gulf Cooperation Council (GCC) were in urgent need of developing its own bond market, analysts said.

"There have been positive developments in 2009, but there is still a long way to go," Frank Beckers from Deutsche Bank Dubai told Xinhua.

Beckers, managing director of project and capital advisory for the Middle East, Africa and Asia, said that between 2005 and the third quarter of this year, "bond financing made up only 23 percent of total funding."

He believed that a well-organized bond market can help the oil-rich GCC nations, namely Saudi Arabia, Kuwait, Qatar, Bahrain, the UAE and Oman, to diversify their sources of capital and reduce financing risks.

"The average rating of the GCC stands at A+, so they should not face any issuer's concern," Beckers said.

"In 2009, the GCC states started to transform their financing risks by tapping new means of fund sources," he said, adding that among these were Public Private Partnerships, Sukuk (Islamic Bonds)and Private Equity funds.

According to Beckers, the issuance of the 750-million-dollar Eurobond for Abu Dhabi-based Dolphin Energy and the 530-million-dollar additional Islamic financing of Qatargas II this year demonstrated that there was a market for the non-loan segment.

Source: Xinhua
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