Dubai's bourse suffered its largest loss in a month on Monday as investors sold blue chip Emaar Properties in a delayed reaction to the prospect of dilution from a convertible bond. Other regional markets were narrowly mixed.
Emaar dropped 3.3 percent to 7.14 dirhams a day after the company said it would discuss on Tuesday whether to convert the bond into shares, after bond holders asked for the conversion. The developer issued a $500 million convertible bond in 2010, with maturity in 2015.
However, if full conversion takes place at 4.38 dirhams per share, there should only be a slight dilution of 2.2 percent in the stock price, analysts at NBK Capital estimated in a note.
"Emaar has been going up too fast and if the dilution provides a break in that, it's not a bad thing," saidSanyalaksna Manibhandu, senior analyst at NBAD Securities. The stock is up 90.4 percent year-to-date.
Manibhandu also said an early bond conversion would be beneficial for Emaar by allowing a reduction in the firm's interest payments. The bond has a coupon of 7.5 percent.
NBK put Emaar's fair value at 6.88 dirhams, a minimum estimate since two new developments now underway are not included in the calculation.
Dubai's index lost 1.6 percent, falling from Sunday's five-year high.
In Kuwait, the index climbed 0.2 percent from a 10-week low to close at 7,656 points, holding major technical support on its 200-day average, now at 7,648 points.
The market, which has been underperforming the region in recent months, showed little reaction to progress on one of the major projects in the government's economic development plan. National Bank of Kuwait said the country was set to secure $1.43 billion in financing from a consortium of banks for the Az-Zour North Power and Desalination Plant.
"It's a huge deal but it's too late in the year for it to have an impact," said Fouad Darwish, head of brokerage services at Global Investment House. "Many people are talking of a good year to start next month."
Elsewhere, Saudi Arabia's market remained sluggish overall with the main index slipping 0.1 percent as most banks and petrochemical shares weighed. But insurance stocks surged, with Saudi Re up 8.1 percent, as short-term traders turned to that sector in the absence of other cues.
Rabigh Refining and Petrochemical (PetroRabigh) soared 9.9 percent for a second session to a 19-month high, after the firm said it expects 2013 revenues to rise by almost 1 billion riyals ($267 million) as its parents boost their marketing support for its products.
In Oman, Dhofar International Development & Investment Holding rose 1.3 percent after it said it had received board approval for the purchase of a 35 percent stake in Oman Investment & Finance, subject to regulatory approval. OIF gained 2.8 percent, outperforming the overall market which climbed 0.4 percent.