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Wed 16 Nov 2011 10:05 AM

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Abu Dhabi shares drop to 3-week low on EU debt woes, oil

Low turnover and lack of buying power will likely continue in UAE markets, analyst says

Abu Dhabi shares drop to 3-week low on EU debt woes, oil
Abu Dhabis shares retreated to the lowest level in almost three weeks

Abu Dhabi’s shares retreated to the lowest level in almost three weeks, led
by First Gulf Bank, on concern Italy’s new government will struggle to
trim its debt and keep Europe’s crisis from spreading. Oil dropped.

FGB, controlled by Abu Dhabi’s ruling family, fell to the lowest level since
Oct. 26 and Sorouh Real Estate Co declined the most in almost a week. Abu
Dhabi’s ADX General Index slipped 0.2 percent to 2,475.57, the lowest since
Oct. 27, at the 2 pm close in the emirate. Dubai’s index lost 0.1 percent as
the value of shares traded in the emirate slumped to the lowest since August
2004.

In the UAE “low turnover and a lack of buying power will likely continue as
long as the European crisis isn’t resolved,” said Sherif El Zeneiny, head of
equity trading at National Bank of Abu Dhabi. Volumes will continue to drop as
“there is no liquidity, we need a catalyst or the markets will remain fragile,”
he said.

Standard & Poor’s 500 Index futures declined 0.8 percent at 7:56 am in
New York and the MSCI Emerging Markets Index decreased 1.1 percent. Italy’s
10-year bond yield rose above the 7 percent threshold that prompted Greece and
Portugal to seek bailouts. Italy’s prime minister designate Mario Monti is due
to meet with President Giorgio Napolitano to present his new government.

The value of shares traded in Dubai tumbled to AED19.5m ($5.3m), according
to data compiled by Bloomberg. Dubai’s benchmark DFM General Index, down 18
percent in the past year, has tumbled 84 percent from a high in 2005.

About 24 million shares traded on Wednesday in Abu Dhabi, compared with a
12-month daily average of 64 million, according to Bloomberg data. The trading
value fell to AED41.2m compared with this year’s high of AED279m on April 17.

“The only catalyst is the possible MSCI upgrade in December, which will
boost market sentiment,” NBAD’s El Zeneiny said.

UAE stock markets may be raised to emerging market status at MSCI Inc. next
month after the company delayed the decision in June. Amendments to index
constituents can alter share prices as passively managed funds buy and sell stocks
to mirror the gauges. About $3 trillion of funds are benchmarked against MSCI’s
indexes globally.

MSCI will remove Sorouh and Aldar Properties, Abu Dhabi’s biggest
developers, from its frontier market index as part of a semi-annual review, two
bankers familiar with the changes said on Wednesday. Sorouh retreated 1 percent
to 98 fils, while Aldar was unchanged at AED1.05.

First Gulf retreated 1 percent to AED14.95.

Crude for December delivery sank as much as 1 percent to $98.39 a barrel on
the New York Mercantile Exchange. Abu Dhabi holds about 7 percent of the
world’s proven oil reserves.

Saudi Arabia’s Tadawul All Share Index decreased 0.1 percent, trimming its
gain for the week to 0.1 percent. Oman’s MSM30 Index and Kuwait’s SE Unweighted
Index also retreated 0.1 percent. Qatar’s QE Index rose 0.1 percent and
Bahrain’s benchmark advanced 0.7 percent.

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