By Peter Starck
Fund manager unfazed by recent surge in Dubai debt default insurance costs.
Dubai's debt problems need to worsen before Sydinvest fund manager Anders Ronnebaek would consider shifting to "underweight" on the UAE in his Africa & Middle East equities mutual fund.
Ronnebaek cut his UAE exposure to "neutral" in November by reducing financial sector holdings after Dubai shocked investors by requesting a standstill on $26 billion of debts linked to state owned holding company Dubai World and two of its property units.
Unfazed by the recent surge in Dubai debt default insurance costs, the Denmark based fund manager has kept the fund's UAE exposure at 10 percent of its $41 million assets under management.
Within the UAE allocation, Ronnebaek's focus is more on stable, oil rich Abu Dhabi than on Dubai, whose banking, property and tourism industries until late last year sucked up foreign capital, positioning the fast growing, glitzy city as the Gulf region's foremost financial hub.
Another reason for staying put was the low rate of flows in the fund, signalling investors were satisfied with its year to date return of 9 percent, he said.
The MSCI Emerging Markets index is down 6.5 percent.
In a brief telephone interview with Reuters, Ronnebaek said: "If they can't find a solution for Dubai World, if all the debt issues worsen, I could go underweight (UAE)."
He added: "I'm waiting for a plan for Dubai World."
British Business Secretary Peter Mandelson said on Sunday the emirate's handling of the Dubai World crisis would affect future investments.
The Sydinvest Africa & Middle East fund's biggest UAE holding is Emaar Properties, accounting for just over 3 percent of assets.
Ronnebaek said Emaar's fourth-quarter results were "okay" but the report from another holding, Aldar Properties, less so.
Other UAE holdings include National Bank of Abu Dhabi, First Gulf Bank and port operator DP World.
Ronnebaek said recent volumes on UAE stock exchanges had been below pre crisis levels and that it might be difficult to pick up bargains if the newsflow were to turn positive.
Dubai's benchmark index has fallen 25 percent in the past three months. The Abu Dhabi equities benchmark is down 9 percent.
Ronnebaek said: "If there's some good news everyone will be limit up and nobody will sell." (Reuters)For all the latest market news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.