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Thu 25 Mar 2010 11:35 AM

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UAE markets cheer new debt restructuring plan

UPDATE 5: ADCB surges to a 17-week high in Abu Dhabi; banks gain in Dubai.

UAE markets cheer new debt restructuring plan
STOCK WATCH: Property unit Nakheel will repay 100 percent of its agreed creditor claims over a period of time. (Getty Images)

Abu Dhabi's index ADI reached a 17-week closing high after Dubai unveiled a restructuring offer for its indebted conglomerate Dubai World.

Real estate stocks surged, tracking gains in Dubai bellwether Emaar Properties, which jumped 8.8 percent. Aldar Properties rose 5.4 percent and Sorouh Real Estate added 6.8 percent.

The index ADI climbed 1.1 percent to 2,904 points, its highest close since Nov. 25, the day Dubai World asked for a debt standstill.

"Local markets received today the long awaited positive news regarding the Dubai World debt," says deputy head of institutional equities at Al Ramz Securities.

Dubai will recapitalise its Dubai World conglomerate and repay property unit Nakheel's bonds in full, with $9.5 billion of aid for a debt deal promising creditors all their money back in up to eight years.

"We could see profit-taking in the market going forwards, but this statement removes a major nightmare from the equation so people can therefore price in more normality and actually look at company numbers in terms of the macroeconomic story," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

"Companies are coming very low PEs and valuations are very attractive - Q1 results are coming up and so people will want to take positions. The bull trend should continue through April."

Dubai's index DFM made its largest gain for 11 weeks following Dubai's debt proposal for creditors of government conglomerate Dubai World.

"This is a relief rally that a solution is in hand," said Keith Edwards, head of asset management at Doha-based investment company The First Investor.

"The offer has to be positive - it has removed some uncertainty, which has been holding investors back. It's a solution to short-term problems, but it does not solve Dubai's long-term structural problems."

Emirates NBD and Abu Dhabi Commercial Bank climbed 3.4 and 5.8 percent respectively. Both lenders are part of a Dubai World creditors' committee.

"UAE banks are winners here, given that they do not have to take debt provisions to Dubai World exposures, that had previously been expected to be taken through profit and loss during FY10," Ian Munro, MAC Capital head of research, wrote in a research note.

"We expect rallies in ADCB, DIB (Dubai Islamic Bank) and Emirates NBD based on the news and to a lesser extent Mashreqbank, NBAD (National Bank of Abu Dhabi) and FGB (First Gulf Bank) given their lower credit exposure to Dubai World."

Dubai's index climbed 4.3 percent to 1,845 points, its largest gain since Dec. 14.

In Qatar, Barwa Real Estate and Qatar Real Estate (Alaqaria) led Qatar gainers ahead of the pair's merger.

Barwa and Alaqaria added 2.7 and 2 percent respectively. Industries Qatar climbed 0.4 percent.

Banks were steady after falling the day before as investors cashed in recent gains. Lenders' stocks had surged following a central bank move last week to allow banks to trade stocks again. Qatar National Bank rose 0.5 percent.

"The rally in Qatar was sharp and fast so it is due for some profit taking," says Keith Edwards, head of asset management at Doha-based investment company The First Investor.

"Allowing banks to trade again will boost liquidity on the market, but it won't mean much in terms of banks' earnings growth."

The index climbed 0.5 percent to 7,406 points, a few points below Tuesday's 14-week high.

"Qatar is trading at a discount to other markets and so it still has upside potential, but catalysts to spark this are few and far between," added Edwards. (Reuters)

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