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Sun 29 Jul 2007 11:35 PM

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Global slump hits UAE bourses

Stock benchmarks fall to lowest closes in two months as foreign investors seek refuge in safer assets.

United Arab Emirates stock benchmarks fell to their lowest closes in more than two months on Sunday as foreign investors sought refuge in safer assets, shaken by last week's tumble in global equity markets.

Aldar Properties and Emaar Properties, two developers that are courting foreign investors, weighed on indexes in Dubai and Abu Dhabi, the two main bourses in the oil-exporting UAE federation.

"A slump in global markets ignited the declines we are seeing in the UAE," said Mohammed Yasin, managing director of Abu Dhabi-based Emirates Securities.

UAE markets were closed on Friday when the Morgan Stanley Emerging Markets Index fell 3.21 %, its biggest one-day drop in more than 20 weeks, after a sell-off on Wall Street sent Asian shares down.

Thursday's Wall Street tumble, the worst since February, was triggered by concerns about the health of the U.S. economy, and trouble in the subprime mortgage market, which encouraged investors to flee risky assets.

Gulf Arab stock markets have traditionally shrugged off turmoil in global markets because of rules that restrict foreign investment.

But both UAE bourses are now encouraging foreign investors and have showcased their companies in London this year.

"Some foreign institutions in the market are getting selling orders from their clients. Foreigners are clearly rebalancing some of their funds due to the declines in the world markets," Yasin said.

Dubai's main index fell 1.89 % to 4,250.53 points as shares of Emaar, the largest Arab real estate developer by market value, dropped 3.14 % to their lowest close in almost three months. The company allows foreigners to own up to 49 % of its stock.

Abu Dhabi's index dropped 1.32 % to 3,527.40 points. Aldar shares fell 5.08 %, their biggest one-day decline in more than three months.

Aldar's stock had rallied almost 86 % this year to the end of last week, mainly because the company relaxed ownership rules and allowed foreigners to hold up to 40 % of its stock.

Foreign investors, who accounted for about a third of trading value in UAE markets in the last six months, are beginning to influence trading patterns, said Amr Diab, head of sales in Dubai for Egyptian investment bank EFG-Hermes.

"While there is not a strong correlation between regional and global markets, we do have a lot of global investors here who are influenced by what is happening abroad," Diab said.

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