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UAE stock markets bounce back from Dubai World's debt news

2009-12-07 08:50 BJT

Special Report: Dubai Debt Crisis |

ABU DHABI, Dec. 6 (Xinhua) -- Stocks in the United Arab Emirates (UAE) recovered some of the losses triggered by Dubai World's debt restructuring announcement after investors returned to local markets Sunday, a state-run newspaper reported.

Shares on the Abu Dhabi Securities Exchange gained the most since March, ending the day 3.9 percent higher, while the Dubai Financial Market General Index advanced 1.2 percent, The National said on its website.

"Investors returned to pick through the ruins," Gianluca Giardina, senior fund manager at EIS Asset Management, an arm of Emirates NBD, was quoted as saying. "They returned to reassess the situation and correct mistakes."

"The way the news (of the Dubai World restructuring) came out was messy. In these situations markets will always overreact. It goes back to human nature to act on impulse," he said.

Arabtec, the large construction company that is considered heavily exposed to major Dubai projects, ended the day 5.6 percent lower. But developers Sorouh and Emaar regained some of their earlier losses, closing 4.8 percent and 3.6 percent higher respectively. Drake and Scull, the specialist engineering company, gained 8.2 percent.

Most banks continued to suffer. Emirates NBD, the country's largest lender by assets, lost 4.8 percent, while Abu Dhabi Commercial Bank shed 6.6 percent.

According to The National, local banks could be forced to set aside provisions to cover their lending to Dubai World, while borrowing costs are also expected to rise. The banks may also be forced to raise their Tier 1 capital, the core measure of a bank's financial strength from a regulator's point of view, as their overall economic recovery is delayed.

The government of Dubai, a member of the oil-rich federation UAE, announced on Nov. 25 that it would ask creditors of its state conglomerate Dubai World to agree to a debt moratorium of at least six months as a first step towards restructuring.

The announcement, described by ratings agency Standard and Poor's as a default, provided the focus for global financial markets and media, affecting stock markets around the world during the Eidal-Adha holiday. Last Monday and Tuesday when the Dubai and Abu Dhabi exchanges reopened for trading, they shed about 10 percent of their value.

The bourses were closed again last Wednesday for the rest of the week for Eid al-Adha and National Day festivities in the country.

Editor: Xiong Qu | Source: Xinhua