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Mon 7 Dec 2009 09:33 AM

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Dubai slumps to 20-week low; foreigners flee

UPDATE 5: Saudi down early on, erodes previous gains; Emaar, Arabtec fall in Dubai.

Dubai's index DFM slumped to a 20-week closing low as foreign investors dumped stocks after the emirate's government said it will not sell any assets to meet the multi-billion dollar obligations of state-owned Dubai World.

Emaar Properties fell the maximum 10 percent, Arabtec dropped 9.8 percent, Drake & Scull shed 7.6 percent and Dubai Financial Market lost 9.7 percent.

"Today there's been a continuation of the selling pressure of last week - foreign investors have a bad vision for the whole market and so are downsizing their positions and are not being stock specific," says Shawkat Raslan, Prime Emirates head of sales.

"We can see this in Emaar, Arabtec, DFM, Union Properties, Air Arabia and Drake & Scull - they are the major stocks for foreigners and all have taken big falls today."

Union Properties fell 9.3 percent and Air Arabia loses 5.3 percent.

The index plunged 5.8 percent to 1,745 points, its lowest close since July 22.

Abu Dhabi shares also suffered, with Abu Dhabi Commercial Bank and First Gulf Bank dropping 8.2 and 7.7 percent respectively. ADCB said it has more than $2 billion of exposure to Dubai World, while FGB's exposure is at least $1.4 billion.

Abu Dhabi's benchmark fell 1.7 percent to 2,627 points.

Banks lifted Muscat's index MSI to a higher close after the country's central bank said Oman lenders did not need to take provisions to cover exposures to troubled Dubai World.

Bank Muscat

and
National Bank of Oman

climbed 1.2 and 1.7 percent respectively.

The index rose 0.3 percent to 6,303 points, ending a four-session losing streak as volumes fall by more than a third from the day before.

"The market should remain flat, with no major downward movement," says Sayed Quadry, vice-president of business development at Amwal Investment in Muscat.

"After Dec. 20, funds could start buying in to try and puff up prices for their end-of-year figures. People are sitting on the sidelines and don't want to put cash into the market for the time being."

Saudi Arabia's index TASI slipped in early trading as heavyweights gave up most of the previous session's gains as a broadly negative trend dominated Gulf Arab markets.

Saudi Basic Industries Corp (SABIC)

edged down 0.3 percent to 81 riyals and
Al Rajhi Bank

dropped 0.7 percent.

On Monday, HSBC started coverage on
SABIC

, giving it an overweight rating and a price target of 105 riyals.

HSBC also gave
Saudi Arabia Fertilizers

a neutral rating and a price target of 121 riyals. The stock climbed 0.6 percent to 120.75 riyals.

The index slipped 0.3 percent to 6,290 points.

"Initially, we had expected the negativity of the Dubai debt issues to have a greater effect on the TASI (index) but the market managed to shrug off the news and maintain its status,"
Shuaa Capital

wrote in a research note to clients.

"At this stage, a wait-and-see approach is required and no directional bets should be made until a clear break outside of the range is attained."

Qatar National Bank

was among early gainers on Doha's bourse after the lender said it has no exposure to Dubai World, which is restructuring $26bn worth of debt.

QNB

climbed 2.1 percent. Other banks also prospered, with
Qatar Islamic Bank

rising 1.6 percent and
Masraf Al Rayan

added 3.1 percent.

The index climbed 1.5 percent to 7,159 points. (Reuters)