Abu Dhabi shares jump 2.15% following rate cut

Abu Dhabi: The UAE markets reported a mixed performance on Wednesday reflecting contrasting investor sentiment in Dubai, where the market fell 0.7 per cent to 5,578.19, and Abu Dhabi, where the general index leaped 2.15 per cent to 4,676.47.

The central bank's decision to cut the repurchase rate on certificates of deposits by 75 points dragged the key interest rate down to 2.25 per cent from three per cent, a move that is expected to induce more liquidity in the markets.

"The direct impact of reducing the interest rate is increasing the liquidity, and that does not come as a reason of lower cost of borrowing, as the lending rates do not change, only the Repo rate. Rather the negative real interest rate make it more costly to keep money in the banks," said Rami Sidani, senior associate partner at Shuaa Capital.

With inflation above 10 per cent, and the interest rate at 2.25 per cent, investors are tempted to place their funds in the equities market or real estate according to Sidani.

In Dubai most of the leading shares recorded marginal declines, as the market shrugged off the limited gains recorded on Tuesday. In the real estate sector, Emaar Properties, the largest listed developer in terms of market value, fell 0.87 per cent to Dh11.35, while Deyaar Development, Dubai Islamic Bank's (DIB) real estate arm, retreated 1.24 per cent to Dh2.39. DIB itself dropped 1.8 per cent to Dh9.81.

In contrast, shares in Abu Dhabi recorded tangible gains, with etisalat recovering by 1.71 per cent to Dh23.80 and the National Bank of Abu Dhabi gaining 1.77 per cent to close at Dh22.95. In the real estate sector, Aldar Properties surged 4.48 per cent to Dh10.50, followed by Sorouh Real Estate which retrieved 1.93 per cent to close at Dh10.05.