Emaar shares make biggest gains in 15 months

Emaar ended an attempt to acquire government land in Dubai in exchange for stock on Saturday.

Following weeks of decline, shares in Dubai developer Emaar Properties today made their biggest one-day gain in more than 15 months following news the company has dropped its share-swap deal with Dubai government.

Emaar’s stock price rallied 6.8% on Dubai Financial Market (DFM) to finish at 11 dirhams ($3), its biggest single-day rise since May 18 last year.

The share price had sank to a 28-month low of 9.75 dirhams last week as investors dumped the stock over uncertainty surrounding the deal with Dubai Holding, the investment arm of Dubai government, and because the firm said profit at its US unit would be hit by the subprime mortgage crisis.

Prior to a 5.64% rally in Emaar shares on August 23, the stock had tumbled 17.4% from March 19, when the swap deal was announced. The stock is still down almost 10% this year.

"The cancellation has removed a lot of the uneasiness that has been weighing on the stock," said Jalal Faruki, manager of the trading desk at Al Mal Capital in Dubai.

Investors had been concerned their holdings in Emaar would be diluted under the share swap deal and were frustrated that the firm failed to reveal key details about the size, location or value of the land, Faruki said.

"Now Emaar can be valued based just on its business, without this black cloud hanging over it," Faruki said.

The developer’s gains today helped pull Dubai's benchmark up 3.32% to 4,285.14 points, recovering more than two weeks of losses.

Dubai's main index had fallen below 4,000 points for the first time in almost four months last week.

"Liquidity is coming from both institutional and retail investors because the stock is undervalued and its performance had been overshadowed by a lot of uncertainty," says Joe Kawkabani, head of asset management at Dubai-based Algebra Capital. "Emaar is the market bellwether. Other stocks are following.”
Emaar ended its attempt to acquire government land in Dubai in exchange for stock on Saturday, announcing it and Dubai Holding are instead exploring joint venture arrangements to develop land in prime locations in Dubai.

The largest Arab property developer by market value had said it planned to pay for the land by giving Dubai Holding about $8 billion worth of stock.

Analysts had expected Emaar's stock would recover today because the announcement ends the uncertainty that drove the selling, especially after global credit market turmoil made investors more reluctant to take on risk.

However, ratings agencies have said the failure to agree a deal could trigger reviews of Emaar's creditworthiness by raising questions about the government's support.

Emaar allows non-Gulf Arab investors to own up to 49% of its stock and was a star attraction when Dubai showcased its companies in London this year to woo foreign funds into its market.

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