Business

Shuaa and DBG settle dispute

The agreement allows Dubai Banking Group to delay by one year the conversion of a mandatory bond into shares originally due last October.

Uta Harnischfeger

01 March, 2009

The long-running dispute over a convertible bond between Shuaa Capital and Dubai Banking Group (DBG) ended amicably yesterday when the investment bank's shareholders voted in favour of a compromise. The agreement allows Dubai Banking Group to delay by one year the conversion of a mandatory bond into shares originally due last October, because of Shuaa's declining share price. "It is the best decision under the circumstances," said Iyad Duwaji, the chief executive of Shuaa Capital. "It is in line with what the board had recommended to its shareholders."

However, shareholders rejected a second resolution which would have added three Dubai Banking Group members to Shuaa Capital's board. Some analysts had warned that Shuaa's risk profile would deteriorate if the bond was not converted because the convertible shares would be treated as debt rather than equity. But Mr Duwaji said the convertible bond was treated as equity in Shuaa's most recent accounts and he did not see any reason for that to change. "For now it is part of our equity," he said. In early December, HSBC said in a research note that Shuaa's debt was 0.5 times its equity, but that this could surge to 2.5 times in case of non-conversion.

The Dubai Government-owned DBG is a Sharia-compliant investment company and part of Dubai Holding's Dubai Group. The conversion is postponed by one year, but the two parties could extend it by another year if they agree. The dispute centres on a Dh1.5 billion (US$408 million) convertible bond. In 2007, DBG pledged to take a 32 per cent equity stake in Shuaa by converting the bonds into shares on Oct 31 last year. The conversion was set at an agreed price of Dh6 per share, which equated to 250 million shares of Shuaa. In October, Shuaa's share price had fallen to about Dh2.70 and DBG decided not to convert, claiming the bond was not mandatory.

Shuaa Capital, the largest domestic investment bank in the Emirates, posted a net loss of Dh577.4m in the final quarter of last year, according to a statement by the firm. uharnischfeger@thenational.ae

How to keep control of your emotions

If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.

Greed

Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.

Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.

Fear

The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.

Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.

Hope

While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.

Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.

Frustration

Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.

Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.

Boredom

Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.

Tip: Open an online demo account and get your thrills without risking real money.

If you go...

Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.

Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50