Dubai shares rebounded strongly, driven by a surge in Emaar Properties after the country's biggest developer scrapped plans to merge with three struggling state-controlled property companies. Market confidence was lifted by the merger cancellation, which analysts said indicated a distinction between strong companies such as Emaar and those with potential financial problems. Attempting to reassure investors further, Abdulrahman al Saleh, the director of Dubai's Department of Finance, said yesterday that the emirate would emerge from the financial crisis as a "winner". The Dubai Financial Market (DFM) General Index posted its largest gain in 10 months to close 7 per cent higher and helped to trim the heavy losses of the previous three days. Emaar, seen as a market bellwether, rallied 15 per cent, its largest gain in 13 months, after fluctuating wildly in earlier trading. Emaar's shares had shed 13 per cent this week before its recovery. "We are in an oversold position and when the market goes down heavily in the short-term you expect a bounce back driven by investors," said Fadi al Said, head of regional equities at ING Investment Management Middle East. "However, you need a trigger and the trigger was the Emaar announcement." The Abu Dhabi Securities Exchange General Index also recovered from three days of heavy selling to close 1.4 per cent higher yesterday. About 22 per cent of the value of Dubai's benchmark stock index had been erased since the Dubai Government announced on November 25 that it was seeking a restructuring of the debt of state-controlled conglomerate Dubai World. Dubai World is seeking to restructure US$26 billion (Dh95.5bn) of debt including a $4bn sukuk repayment by its property arm Nakheel on Monday. Since the announcement, leading government-related entities in Dubai have been hit by ratings downgrades amid uncertainty about the level of government support for the entities. The concern also spread to the capital, with seven prominent Abu Dhabi companies placed under review for possible downgrade by Moody's Investor Service on Tuesday. Emaar, the emirate's flagship developer set to open the world's tallest tower in Dubai next month, said late on Wednesday it had cancelled a planned merger with Dubai Properties, Sama Dubai and Tatweer, property units belonging to Dubai Holding, another state-owned conglomerate. The three units have suffered as a result of steep falls in the country's property market. Emaar's decision was an indication that it would have been damaging for the company's value, analysts at Credit Suisse said in a research note. "The news may also reflect an admission by the Government that there are additional bad assets outside of Dubai World," Credit Suisse said. Emaar shareholders were relieved by the scrapping of the merger plans, said Roy Cherry, vice president of research, real estate and construction at Shuaa Capital. "This comes as good news and, contrary to popular belief, the outcome was not influenced by the problems in Dubai Inc," he said. Emaar ended the day at Dh2.94, while the construction company Arabtec Holding rose 6.9 per cent to Dh1.85. While market attention continues to focus on Dubai's estimated $85bn debt load, Emirates Airline, one of the major companies in the emirate, yesterday announced it had raised $1.13bn in financing from lenders for six new A380 aircraft. The carrier remained in a secure financial position despite the global financial crisis, said Tim Clark, the airline's president. Meanwhile, the Dubai Electricity and Water Authority (DEWA) said yesterday it was not facing debt default and its lenders confirmed their support for the utility company. It follows a research note from the ratings agency Standard & Poor's, which said DEWA might have to repay $2bn of bonds this month, ahead of maturity, after credit rating downgrades prompted a payment acceleration clause in the securities' documentation. email@example.com
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