Dubai stocks fall after Dubai Bank takeover

UAE bourses tumble to a five-week low after Dubai government's announcement that it will take over Dubai Bank
Dubai stocks fall after Dubai Bank takeover
STOCK WATCH: UAE stocks opened on thin trade, edged lower amid a drop in global equities, with property stocks sagging (Getty Images)
By Reuters
Mon 16 May 2011 11:29 AM

UAE bourses tumbled to a five-week low after the Dubai government's announcement that it will take over Dubai Bank.

Dubai's government took control of troubled Islamic lender Dubai Bank on Monday to stave off a potential collapse that would undermine the emirate's banking sector.

Dubai's benchmark ended 1.4 percent lower at 1,563 points, its lowest closing since April 7.

Emaar Properties a shareholder in Dubai Bank, fell 2.2 percent, while other property stocks also closed lower.

"The market is seeing a knee-jerk reaction to this, but on a less immediate term basis, this is a positive development for Emaar because it removes uncertainty," said Ibrahim Masood, senior investment officer at Mashreq Bank. "The investment didn't really jell with Emaar's business.

Active stocks Arabtec and Deyaar slid 2.2 and 3.2 percent.

Emaar's 30 percent stake in Dubai Bank may have to be written down because a rescue by the government would not follow a normal course of business, he adds.

Banking and property stocks weighed on Abu Dhabi's index with Aldar Properties dropping 2.1 percent in high activity.

Competitor Sorouh Real Estate fell 2.2 percent, while heavyweight National Bank of Abu Dhabi was down 1.8 percent.

Losers outweighed gainers four to one.

The benchmark fell 0.5 percent to 2,641 points, its lowest close since April 12.

Oman's index MSI fell to an 11-month low as local investors were thin and first-quarter earnings continued to weigh.

The benchmark fell 0.3 percent to 6,134 points, its lowest close since June 20.

Volumes hit a month-low.

"We're are seeing very low contribution from investors... you can see the sentiment is negative," said Adel Nasr, United Securities brokerage manager.

Most companies except ones in the banking sector posted below-expected first-quarter earnings results, that may have a prolonged affect on the market, he added.

Large cap companies Bank Muscat and Oman Telecommunications Co (Omantel) slipped 0.7 and 0.9 percent respectively.

"We might continue like this for a while if the market turnover is low. Most stocks are down a lot since Q1," he said.

Losses across most sectors pushed Saudi Arabia's index TASI to a one-week low, with petrochemical stocks touching a four-week low amid declining oil prices.

The petrochem index fell 1.3 percent. Yanbu National Petrochemical Co lead losses and was down 2.5 percent. Saudi Basic Industries Corp, the largest company by market value in the Gulf, fell 0.9 percent.

Oil fell more than $1 per barrel on Monday as worries over the restructuring of euro zone debt and doubts about the pace of global growth encouraged investors to reduce risk.

Agricultural sector drew investor interest with National Agriculture Development Co and Tabuk Agriculture Development Co rising 2.2 and 9.9 percent respectively.

"Retail player's positions have shifted to locally driven small to mid caps, especially construction and agriculture stocks, and will continue to stay so to avoid relative exposure to global commodity markets," said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The benchmark TASI slipped 0.9 percent to 6,634 points, its lowest close since May 8.

Banking stocks added further weight with Samba Financial Group slipping 0.5 percent.

 

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