UAE markets seen “limit down” on Monday open
UAE markets will face intense selling pressure when they reopen on Monday in the first post-holiday trading after Dubai shocked global markets last week by seeking a debt standstill for two flagship firms.
Banks, property and construction firms will stand in the line of fire as investors weigh up the damage caused by the surprise move to restructure government-controlled Dubai World and its property arm Nakheel.
“We are probably going to see limit down, unless some sort of clarification of a plan or anything that would elevate investor concerns comes out in the morning,” said Haissam Al Arabi, head of hedge fund Gulfmena Alternative Investments. “Dubai will take Abu Dhabi down with it.”
Moves by the UAE central bank to allay concerns by setting up an emergency liquidity facility was viewed as a necessary albeit minimal policy response.
“It might support the market a little bit but I don’t think it is enough,” said Shawkut Raslan, head of brokerage at Prime Emirates brokerage.
“This is the absolute minimum they could have done and suggests they won’t be making another announcement before tomorrow morning, which is a little disappointing,” said Raj Madha, banking analyst at EFG-Hermes.
Equity markets came under severe pressure on Thursday after news that Dubai World, the government investment company burdened by $59 billion in liabilities, sought to delay repayment of some debt.
UAE markets open at 0600 GMT on Monday after closing for the Eid al-Adha holiday on November 26.
Regional investors are eager for any sort of guidance from the central bank or government ahead of the market open as rumors about the scope and origin of the crisis run rampant.
Arabtec, the largest construction firm in the Middle East, is likely to suffer on doubts about contract payments from Nakheel. The two projects are worth 1.4 billion dirhams, according to a Cheuvreux report.
With storm clouds over the real estate market, Emaar and Union Properties will suffer as well. Dubai’s woes will likely drag regional listed firms such as Abu Dhabi-based Aldar and Sorouh lower as well.
Saud Masud, UBS’ head of research and senior real estate analyst for the Middle East and North Africa, said the crisis will weigh heavily on real estate prices as well.
“The news plays on investor psyche and house prices may slide a further 20-30 percent earlier than our existing view of second half of 2011,” he said.
BANKS IN SPOTLIGHT
Banks will face pressure as investors measure damage to earnings or a threat to the smooth-functioning system.
Filed under: money by Wolf