UAE financial markets shoot up

Dubai: The Dubai Financial Market (DFM) index shot up 10.37 per cent on Monday after the Dubai Government said the Abu Dhabi Government agreed to provide $10 billion (Dh36.7 billion) to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations of Dubai World.

As a first action for the new fund, the Dubai Government authorised $4.1 billion to be used to pay the sukuk obligations of Nakheel, the Islamic bond that matured on Monday.

The remaining funds, the Dubai Government said, would provide for interest expenses of Dubai World and company working capital through April 30, 2010 — conditioned on the company being successful in negotiating a standstill with its creditors, as previously announced.

Positive development

Investors viewed yesterday's development as positive for the UAE markets and the stocks rallied.

The Dubai market over the last three trading days has risen an impressive 20.7 per cent.

The DFM index rose 3.33 per cent on Sunday and seven per cent on Thursday.

"Abu Dhabi's $10-billion support has given a breather to Dubai.

"But we need to know more details about this fund — whether it's a gift or a loan to Dubai from Abu Dhabi.

"If it's a loan, Dubai's problems don't really get solved as in that case, the Dubai Government is incurring more debts, which sooner or later, it will have to pay back," Mousa Haddad, head trader with the National Bank of Abu Dhabi Asset Management, told Gulf News.

"There is a growth potential in the Dubai market but its base is not very strong. We are optimistic, but cautious since we saw in 14 trading sessions the Dubai market wiping out all the gains made during the whole of the year," he added.

"The main positive of this event is that it removes the sharp uncertainty associated with Nakheel and also substantially limits systemic risk to the economy," said Fahd Iqbal, EFG-Hermes' GCC Strategist.

"However, there remain negative implications also. We believe that fundamentally, little has changed for Dubai's outlook.

"We continue to see risk of further debt problems emerging ... particularly from Dubai Holding [both its financial and property arms] and Istithmar and hence we are keeping our elevated equity risk premium," Iqbal added.

Rising stocks

Yesterday, the DFM index rose to 1,871.20 as the bulls outpaced the bears and market heavyweight Emaar's stock rose 14.97 per cent to Dh3.14.

The day also saw shares worth Dh83.91 million of AirArabia being traded.

Overall, as many as 338 million shares worth a combined Dh429.46 million changed hands in Dubai yesterday. The volume of trading however, was substantially lower than that on Sunday.

Of the 31 companies traded, as many as 28 rose, while three fell.

The top gainer was Emaar, which closed 14.97 per cent higher at Dh3.61. Arig was the top loser, closing 10 per cent lower at Dh1.89.

AirArabia was the most active share both in terms of value and volume.

The Abu Dhabi Securities Exchange (ADX) general index rose 7.93 per cent, tracking the rally in Dubai.

Abu Dhabi stability

"Abu Dhabi looks stronger than the Dubai market in terms of stability," Haddad told Gulf News.

Some market analysts say the Abu Dhabi market may soon be decoupling from Dubai.

The rally on the Abu Dhabi market was led by real estate, energy, telecommunications and banking stocks.

All sub-indices gained. The ADX general index rose to 2,821.11, though volume was below that of Sunday.

Yesterday, 56.96 million shares worth a combined Dh152.51 million traded on the ADX.

Of the 45 companies traded, 42 rose, two fell and one remained unchanged. First Gulf Bank was the top gainer, rising 10 per cent to close at Dh15.95.

National Bank of Fujairah was the top loser, down 9.94 per cent to close at Dh6.16.