Dubai - Stock markets in Dubai and Abu Dhabi closed sharply lower on
Monday, shedding 7.3% and 8.3% respectively amid a
lack of buyers after Dubai World's shock proposal to suspend debt
payments.
Dubai's benchmark DFM Index closed at 1 940.36 points, down
152.80 points from its close on Wednesday, just before the Dubai
government's shock announcement it wants to freeze debt repayments
by its mighty Dubai World conglomerate for at least six months.
Leading securities, including construction and finance, plunged
almost by the maximum-allowed limit of 10% after the bourse
reopened on Monday following a four-day holiday.
The financial market of the oil-rich Abu Dhabi also reacted
negatively to the debt woes of neighbouring Dubai, dropping 8.31% to 2 668.23 points in midday deals.
The two markets have shed around $10bn of their
market capitalisation.
Trading almost froze in both markets amid high offers to sell
and negligible offers to buy.
The Dubai market registered only 37.5 million dirhams ($10.2m) in turnover - around 10% of the average
daily trade this year.
"This was expected because markets have panicked over
exaggerated reports in the Western media," Al-Fajr Securities
analyst Hamam al-Shamaa told AFP.
"We expect to see many foreign portfolios withdrawing from the
market. Their exit obviously terrifies local investors," he said,
adding that the drop will continue on Tuesday.
"I do not expect investors to enter the market. Tomorrow will
most likely be a similar day," he added, pointing out however that
the markets go into another four-day holiday starting Wednesday.
But he expected local markets to bounce back when they reopen
after the break. "I expect good news during the holiday," he said.
Meanwhile, Dubai World property unit Nakheel, builder of the
iconic Palm Jumeirah artificial island, added to the gloom by
asking on Monday to suspend trading of its sukuks, or Islamic
bonds, listed on the Dubai-based NasdaqDubai exchange.
One of the key loans affected by Dubai World's planned debt
moratorium is a Nakheel issue of $3.5bn of Islamic
bonds or sukuks, scheduled to mature on December 14.
Securities listed by port operator DP World, part of Dubai
World, on NasdaqDubai exchange dropped by 14.88%, and were
the most active stock on the market, according to NasdaqDubai
website.
Investors failed to draw reassurance from the UAE central bank's
announcement on Sunday that it was providing additional liquidity
to the UAE banks.
Dubai's shock announcement sent shock waves around the world on
Thursday and Friday as investors feared a possible default by Dubai
and its state-owned businesses, which together owe $80bn.
Asia rallies
Asian markets however rallied on Monday, with Hong Kong surging
3.25% and Tokyo soaring 2.91%.
The European markets remained edgy with Frankfurt falling 0.45%, London sliding 0.53% and Paris shedding 0.65% in value late morning, with all three markets reversing
opening gains in highly volatile trade.
The Egypt Stock Exchange too was buffeted, dropping 6.78%
in just over an hour, with a stockbroker describing the slide as
"the most serious drop recorded in a long time".
Dubai and Abu Dhabi are the only Gulf stock markets open on
Monday. Kuwait follows on Tuesday and Saudi Arabia's financial
market, the largest Arab bourse in capitalisation, will remain on
holiday until Saturday.
Dubai does not have big oil reserves, unlike Abu Dhabi which
sits on around 95 percent of the UAE's crude deposits and runs the
world's largest sovereign wealth fund valued by analysts at $400bn to
$500bn.
Two Abu Dhabi-controlled banks subscribed to Dubai bonds worth
five billion dollars in a deal announced a few hours before Dubai
revealed its debt problems.
But doubts have been growing about Abu Dhabi's commitment to
buoy Dubai, whose growth came to a screeching halt amid the global
credit crunch before going into reverse gear.
Property prices in the once-booming desert city have slumped by
50% from their peak.
- Sapa