Dubai World news to sustain local markets

Dubai's latest offer of support for Dubai World and Nakheel is likely to push local markets higher in coming weeks, market analysts said yesterday. But the gain is less about a change in the fundamentals than it is about perception. "While there will be details that will need to be worked out over the coming weeks and months, the most important outcome in my view is that the actions could mark the beginning of a change in investor perception regarding Dubai," said Sameh Hassan, the director of research at Rasmala Investment Bank, based in Dubai. Two years ago, Dubai was viewed as an oasis in the Middle East, profiting from unlimited government support. Then investor optimism evaporated. The Dubai Financial Market General Index dropped more than 65 per cent, at a rate well ahead of the decline in fundamentals. At DP World, for example, the stock fell from US$1.30 to as low as 18 cents, even as its earnings increased by 5 per cent between 2007 and last year. "We went from an extreme of unlimited government support and in a very short time to one of government opposition and hindrance," Mr Hassan said. The Government proposal, released on Thursday, to inject $9.5 billion into Dubai World and its property developer Nakheel has the potential to change perception again. In a matter of hours, Dubai was again seen by many as a friendly destination for the banks and construction companies needed to keep the emirate's growth plans on track. "Of all the options in place, few expected that Dubai would take a subordinate position in the capital structure, placing creditors and minority investors ahead of its own ambition," Mr Hassan said. Ali Khan, the managing director of Arqaam Capital in Dubai, agreed. "The fourth-quarter numbers out six weeks ago were pretty strong and the market chose to ignore some good numbers," he said. Although Dubai World's shadow is not entirely lifted off the markets, investors are now able to look past it and recognise some attractive valuations. halsayegh@thenational.ae