x Abu Dhabi, UAEWednesday 24 January 2018

Regional markets tumble

UAE and Middle Eastern stock markets slide today on continued doubts over the fallout from the debt restructuring of Dubai World.

Markets across the Gulf slid again yesterday as doubts continued over the debt restructuring of Dubai World, with banking and property stocks worst hit. @Body:Mohammed Mansoor, a Jordanian engineer, cut short his holiday in Bahrain to come to the floor of the Abu Dhabi exchange and sell his shares. "I have shares but no one wants to buy now. The volume of trade today and yesterday has been almost non-existent. I expect losses to continue for at least two weeks." The Dubai Financial Market General Index fell 5.6 per cent, while the Abu Dhabi Securities Exchange General Index closed 3.6 per cent lower, extending heavy losses from the previous day. These markets will now remain closed until Sunday. The results were much the same across the region, with Qatar falling 8.3 per cent and Kuwait 2.7 per cent. In the banking sector, Abu Dhabi Commercial Bank (ADCB) and National Bank of Abu Dhabi (NBAD) both fell the maximum 10 per cent allowed by the exchange for the second consecutive day. NBAD is the only bank in the country to have declared its exposure to Dubai World. It said it holds US$345 million (Dh1.26 billion) of Dubai World debt. ADCB was placed on credit watch negative by Standard & Poor's due to its exposure to Dubai World. Property stocks were the hardest hit. Trading in Emaar, Aldar, Sorouh and Deyaar was suspended after those stocks fell by the maximum allowable 10 per cent. Construction stocks also suffered, with trading in Drake and Scull and Arabtec halted after those shares reached the decline limit. Traders took some relief from the statement by Dubai World that it was restructuring $26bn of debt, less than half of the company's $59bn in total liabilities. Confirmation that profitable units including DP World were exempt from the restructuring allowed a recovery in DP World shares, which rose 1.1 per cent on NASDAQ Dubai after a heavy fall on Monday. But analysts sought more details regarding the restructuring. Philipp Lotter, the Middle East vice president for corporate finance at the ratings agency Moody's Investors Service, said the authorities had still not disclosed enough. "There needs to be a much clearer understanding of the co-operation and integration between Abu Dhabi and Dubai," Mr Lotter said. Identifying the companies that the governments are willing to support would greatly help international lenders and investors in understanding the situation, he added. The restructuring means that the era of cheap financing for Dubai's corporate community may be over for the foreseeable future, Moody's said yesterday. Dubai corporations that are not explicitly guaranteed by the state will now be seen as high-risk, high-yield investments, similar to those in other emerging markets. Many state-backed corporations have historically been given credit ratings above those warranted by their business fundamentals, due to their assumed government support. "The premises of our assumptions have shifted considerably," Mr Lotter said. "With some exceptions, Dubai's corporate landscape is now a high-yield market. The degree to which Dubai can fund its existing growth aspirations via the corporate sector moving forward must now be seen as in jeopardy." The long-term consequence of a reduced ability to borrow cheaply, Moody's said, could be a lowering of the infrastructure gap between Dubai and Abu Dhabi or Qatar. Energy income will allow them to fund the transport, leisure and hospitality projects that have historically been Dubai's key differentiator. @Email:tgara@thenational.ae