Debt woes dampen year's gains

Global stocks headed for their best year since 2003 Thursday, but Saudi Arabia was the only Gulf state able to match the performance of the MSCI World Index.

A stock broker laughs on the telephone at the stock exchange in the central German city of Frankfurt am Main on December 30, 2009. On the final day of trading of the year 2009 was at 5.957,43 points in comparison with 4.810,20 points on the same day last year.
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Global stocks headed for their best year since 2003 Thursday, but Saudi Arabia was the only Gulf state able to match the performance of the MSCI World Index as region-wide debt restructuring cast a shadow across markets. In the UAE, it was a case of all that glisters is not sold for Damas, the Middle East's largest gold and jewellery retailer. The company, which is listed on NASDAQ Dubai, has been in business for more than a century but last year was one that its management and investors would rather forget.
About half of the stocks listed on the UAE's three main exchanges yesterday finished the last trading day of 2009 in negative territory for the year. Damas was saved from bottom spot by a pick-up in buying activity in the last few sessions of the year. But it still lost about 66 per cent of its value last year, outperforming only Gulf General Investment. The falling share prices of many UAE stocks over the course of last year may represent a buying opportunity for investors in the new year, analysts say.
"The Dubai Financial Market (DFM) General Index and the Abu Dhabi [Securities Exchange General] Index have shed most of their gains during the year and this is viewed as an opportunity for investors to enter at a low base -" said Khaled Akl, the head of research at the wealth management division of Abu Dhabi Commercial Bank. Mr Akl said investors who did so could "benefit from a recovery when the debt consolidation in Dubai is dealt with".
"This, coupled with higher oil and tourism revenues and increased trade and economic activity due to a pickup in the world economy, are expected to have a positive impact on the stock market." The MSCI World Index gained about 28 per cent over the year as stocks rebounded from the sharp corrections at the height of the global financial crisis. Only Saudi stocks achieved similar gains with kingdom's Tadawul finishing the year as the Gulf's best-performing market. It was followed by Oman, where stocks advanced 17 per cent.
Bahrain was the region's worst-performing bourse as companies were buffeted by the fallout from the debt defaults at two of Saudi Arabia's largest conglomerates, the Saad Group and Ahmad Hamad Al Gosaibi and Brothers. The Abu Dhabi Securities Exchnage was the UAE's best-performing bourse with stocks gaining about 15 per cent, while the DFM advanced 10 per cent for the year. Both exchanges may have fared better were it not for the US$26 billion (Dh95.5bn) debt restructuring at Dubai World, one of the country's largest conglomerates, with interests from ports to property.
Damas was among the region's worst-performing shares of the year, due in large part to the disclosure in October that company directors had made about $165 million in unauthorised transactions. "We are of the view that Damas needs to be financially restructured in 2010 to deal with its outstanding issues and dues to banks," said Mala Pancholia, who covers the stock at Al Mal Capital. But it wasn't all bad news for local stock market investors. The UAE's top-performing stock of the year was the NASDAQ Dubai-listed Kingdom Hotel Investments, the lodging company of the Saudi billionaire Prince Alwaleed bin Talal.
"Saudi Arabia has been hit by the international financial crisis but not as bad as Dubai, and we expect a recovery to have a stronger impact on the performance of Kingdom Hotels in 2010," said Khalid Feda, an analyst in the asset management division of KSB Capital Group.