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UPDATE: Shuaa dismisses manipulation charge
Dubai-based Shuaa Capital denied on Sunday a report by an Arab magazine that it had manipulated the price of a share purchase in Kuwait and said it would sue the Paris-based publisher for defamation.
Two United Arab Emirates market regulators are looking into allegations by Trends magazine, which said Shuaa manipulated the price of a transaction in 2005 in which it bought a stake in Kuwait's Al-Ahlia Investment Co.
Shuaa Chief Executive Iyad Duwaji said the Trends story could hamper efforts to woo foreign investment to Gulf Arab stock markets, which crashed last year and are trying to shake off a reputation for being poorly regulated."
There was nothing irregular about this whole transaction," Duwaji told Reuters in an interview.
Shuaa, which is already suing the publisher of Trends over an article written last year, would take legal action for defamation over the latest story in France, he said.
Trends said last week Shuaa, the UAE's largest investment bank by market value, had entered into an undisclosed agreement with Ahlia for a refund of part of the purchase price of 25.8 million dinars ($89.21 million).
Under the terms of the deal, Shuaa agreed to buy the Ahlia stake at 410 fils per share, Trends said. The purchase price announced was 480 fils per share, which Shuaa paid. Ahlia then refunded the difference, the magazine said.
Duwaji said Shuaa received a refund of the difference, around 3.76 million dinars, which it distributed to 29 investors on whose behalf it conducted the transaction.
"There was a commitment on the buyer and the seller to transact at a price, which was 410 fils. The difference in price was known in the market," he said.
"To me market manipulation means that someone benefited from giving false information. We have not benefited from any of this. The refund went back to the investors."
Al-Ahlia Managing Director Abdullah al-Awadi told Reuters last week his company had repaid Shuaa part of the purchase price, and said there was nothing irregular about the transaction.
The Kuwait Stock Exchange reviewed the transaction when it approved Al Ahlia's accounts for 2005, Shuaa said in a statement.
Shuaa stock fell 0.67 percent on the Dubai stock market on Sunday, extending a loss of 1.55 percent on Thursday after a UAE regulator said it was looking into the Trends report.
Shuaa's earnings in the quarter to March 31 would not be directly affected by the allegations, Duwaji said.
"The damage has been mostly to our reputation. The damage of the story is that it tries to portray our markets as still being not well regulated and not transparent," he said.
"That goes against all the efforts we have been doing to convince global investors otherwise."
Regulators are trying to improve transparency and lure more foreign institutional investment to the Gulf, which had five of the six worst-performing markets last year among 81 tracked by Birinyi Associates Inc., a U.S. research firm.
The Emirates Securities & Commodities Authority (ESCA), which regulates domestic markets, said last week it was discussing the allegations with Shuaa and would approach market authorities in Kuwait.
The Dubai Financial Services Authority (DFSA) is also talking with authorities in Kuwait and the UAE seeking more information about the allegations, DFSA Chairman Habib al-Mulla told Reuters on Sunday.
The DFSA regulates the Dubai International Financial Centre, which was set up in 2004 offering international standards of accounting and financial reporting. Shuaa has two units operating in the centre.
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