UAE markets plunge again on Dubai debt
Emirati stock markets plunged for a second day on Tuesday after the
Dubai government ruled out a guarantee for debt-ridden Dubai World and
as the conglomerate unveiled a major restructuring plan.
The Dubai bourse closed 5.6 percent lower, swelling its total drop to
12.5 percent since local markets reopened on Monday, while the index in
Abu Dhabi lost another 3.5 percent for an 11.6-percent plunge in just
two days.
"Foreign portfolios are still pushing to exit the markets. Those who
tried to pull out on Tuesday and did not manage to do so (because of a
lack of buyers) are still trying today," said Al-Fajr Securities analyst
Humam al-Shamaa.
"I believe that those investors will still push for an exit" when
markets open again next Monday, after national holidays which run until
Saturday, Shamaa told AFP.
Investors were alarmed by the head of the finance department chief's
comments on television that the government never intended to guarantee
Dubai World's $ 59 billion in debt, the lion's share of the city state's
$ 80 billion of borrowings.
The market was also digesting an overnight announcement from Dubai
World that it wants to change the repayment terms of $ 26 billion in
debt and restructure the operations which owe the money.
Statements on Tuesday from the United Arab Emirates (UAE) president
and from Dubai's ruler failed to provide much reassurance.
Dubai's leading real estate sector fell by 9.2 percent, near the
one-day maximum allowed drop of 10 percent, while the finance and
investments sector shed 7.5 percent of its value.
Abu Dhabi's real estate sector plummeted 9.8 percent, while banking
fell 5.6 percent.
Dubai Department of Finance head Abdulrahman al-Saleh said on state
television: "As the firm has several activities and is exposed to
different sorts of risks, the decision was from the day of its
establishment that the company would not be guaranteed by the
government." The emirate's ruler, Sheikh Mohammad bin Rashed al-Maktoum,
backed Saleh, warning in his first public statement on the crisis that
it is "wrong" to put the government and debt-laden Dubai World into the
same basket.
Dubai's economy is now "one of the world's most solid and stable"
because of its diversity, its resources and strategic planning, he said.
Sheikh Mohammad nevertheless asked his people to "roll up their
sleeves" to help the economy.
Dubai World's overnight press release said the debt review and
business restructuring will affect several divisions, including Nakheel
World and Limitless World, though Infinity World, Isthithmar World and
the conglomerate's extensive international ports activities would remain
intact. AFP
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