Loan default pushes down Dubai investment company shares

Gulf General Investment Company fell to its lowest intraday level in a week after it emerged the Dubai-based investment company defaulted on repayments on bank loans.

GGICO retreated 3.7 per cent to 34 fils a day after reports came out that the investment company defaulted on almost Dh500 million in repayments of bank loans.

The company had posted a narrowing of first quarter loss to Dh48.8m after a loss of Dh85m a year earlier. It hired HSBC Middle East as an advisor to restructure its debts due to banks.

The wider Dubai Financial Market General Index also fell 1.5 per cent, the lowest since April 7, to 1,554.81 points.

Industry experts said the decision by the Dubai government to cut spending by up to 25 per cent to help the emirate achieve a budget surplus of Dh3 billion to Dh3.5bn affected confidence and liquidity in the market.

"You need two things to stimulate the markets," said Nabil Farhat, a partner at Al Fajr Securities. "You need to have government spending and secondly you have to have relaxed monetary policy to increase liquidity [in the market]," he said.

The Abu Dhabi Securities Exchange slipped 0.2 per cent to 2,642.08 points on weak volumes.