Stock trading to reopen with Dubai World fallout likely

Markets reopen in the UAE today with analysts expecting more selling pressure after heavy losses in the wake of Dubai World's request for a standstill on its debt payments.

Stock markets reopen in the UAE today after a two-day National Day holiday with analysts expecting more selling pressure after heavy losses last week in the wake of Dubai World's request for a standstill on its debt payments. The Dubai World announcement of November 25 caused declines in exchanges worldwide and spread to Gulf markets after the Eid Al Adha holiday. As UAE stock markets reopened last Monday, the Dubai Financial Market General Index lost 7.3 per cent, the most since October last year, while the Abu Dhabi Securities Exchange General Index fell 8.3 per cent, its largest drop in eight years. Those declines continued into last Tuesday.

Still, there is likely to be more stability this week, said Ian Munro, the head of research at MAC Capital Advisors. "There is some more selling pressure left in some of the core index stocks such as Emaar, DFM and some of the main banks," he said. "But, pleasingly, some of the more cash-flow positive companies without direct earnings exposure to Dubai World have found some buying support." Stocks including Emaar, Aldar and National Bank of Abu Dhabi (NBAD) were suspended last week after falling by the 10 per cent maximum. NBAD, the only UAE bank to declare its Dubai World exposure, holds US$345 million (Dh1.26 billion) of its debt.

Mr Munro said that the market was looking for clarity on the extent of banking sector exposure to Dubai World and the Dubai Government cash flow shortages. Investors were also awaiting feedback from Dubai World creditors, he said. The Saudi Tadawul benchmark index declined yesterday as it opened for the first time since the Dubai World announcement. It fell 1.1 per cent to 6,288.27 from its November 25 close, as banking and financial stocks fell 2.3 per cent.