Dubai shares led declines across the Gulf, undoing almost all of this year's gains on uncertainty surrounding Dubai World's indebtedness and new credit rating downgrades.
Dubai shares continue fall
Dubai shares led declines across the Gulf yesterday, undoing almost all of this year's gains on uncertainty surrounding Dubai World's indebtedness and new rating downgrades. The Dubai Financial Market (DFM) General Index dropped 6.1 per cent, among the steepest declines of any stock market in the world for the second day running. The bourse is now barely in positive territory for the year after shedding about 20 per cent of its value since Dubai World, the builder of the Palm islands, said two weeks ago it was seeking to delay debt payments. By contrast, the MSCI Emerging Markets Index has gained more than 70 per cent this year. "The UAE equity market has been historically one of the most volatile in the world, and almost certainly in the GCC," said Eric Swats, the head of asset management at Rasmala Investments in Dubai. "It's all related to Dubai World." While the fallout from the US$26 billion (Dh95.5bn) debt restructuring has hit regional and international markets, investor attention is now moving beyond Dubai World to other Dubai Government-related entities and their liabilities. Morgan Stanley said in a report that the total value of debt held by Dubai Government-owned companies subject to restructuring could nearly double to $46.7bn. And UBS said Dubai's state-run companies may have to repay the equivalent of about 43 per cent of the emirate's GDP within the next two years. The impact was felt across the region's stock markets yesterday, as Dubai's finance chief indicated that the restructuring of Dubai World could take longer than six months. Dubai World is starting discussions with creditors to restructure $26bn of debt, including a $4bn payment by its property arm Nakheel on a sukuk that matures on Monday. Reuters reported that some bondholders had sent a letter to Nakheel rejecting the request for restructuring and asking to be repaid.Moody's Investor Service downgraded the ratings of six key state-owned companies yesterday. The downgrades, which make it more expensive to refinance, pushed DP World, the international ports operator, and the utility Dubai Electricity and Water Authority into junk territory for the first time. The biggest loser on the DFM yesterday was Emaar Properties, the country's largest developer, which fell 9.8 per cent to Dh2.84, after a 10 per cent decline the previous day. Emirates NBD, the largest lender in the UAE by assets, lost 4.8 per cent to close at Dh3.59, its lowest level since September 3. The Abu Dhabi Securities Exchange General Index also fell yesterday, declining 3.4 per cent. It followed a 1.7 per cent fall on Monday. "If there's anything the government can provide it is more information and transparency and clarity [on the Dubai World restructuring], which might lead to lower prices, but it would lead to a more stable market in the longer term," said Mr Swats. Elsewhere in the region, Saudi Arabia's Tadawul retreated 2.3 per cent yesterday, Bahrain's benchmark lost 0.3 per cent and Oman's MSM30 Index fell 1.4 per cent. The Doha Securities Market Index in Qatar fell 2.1 per cent. Providing the sole bright spot in the GCC was the Kuwait Stock Exchange Index, which gained 1.3 per cent. Tarnold@thenational.ae