EFG Hermes cut the Dubai equity market to "underweight" from "overweight," citing the high level of uncertainty after Dubai World asked creditors of two of its flagship firms for a standstill on debt worth billions of dollars.
EFG Hermes analysts said they estimated Dubai Inc debt totaled $120bn to $150bn, significantly higher than the consensus number of $85 billion.
"We believe that concerns over the solidity and value of the implicit state guarantee will raise borrowing costs," the analysts said.
Investors can find some attractive buying opportunities outside of the real estate and banking sectors, the analysts said.
The analysts raised their discount rate across UAE coverage by up to 400 basis points, bringing down fair value estimates by as much as 45 percent. (Reuters)