Shuaa Falls After First-Half Loss, Lehman Writedown

By Arif Sharif

Oct. 19 (Bloomberg) -- Shuaa Capital PSC, the United Arab Emirates' biggest investment bank, fell 8.5 percent in Dubai trading after reporting a first-half loss and disclosing an unexpected exposure to bankrupt Lehman Brother Holdings Inc.

Shuaa dropped as much as 9.8 percent in early trading before recovering to close at 2.91 dirhams on the Dubai Financial Market. The benchmark index was up 0.4 percent.

Shuaa had a loss of 371.1 million dirhams ($101 million) in the six months to Sept. 30 compared with a profit of 128.6 million dirhams a year ago, it said Oct. 17. The Dubai-based company wrote down the value of its investments by 400.1 million dirhams due to the decline in global capital markets.

The company also had a write-down of 78.6 million dirhams on structured products and fixed-income securities that were exposed to Lehman Brothers, as well as a one-time provision of 45.8 million dirhams for its investments in brokerage services company Orion Holding Overseas SA, which it bought in February.

``We weren't expecting the exposure to Lehman Brothers and the provision for the Orion Holdings investment, and that was a negative surprise,'' Fadi al-Said, head of equities at ING Investment Management (Dubai) Ltd., said in a phone interview today. ``We know the size of their investment portfolio, and we were expecting the mark-to-market losses.''

Shuaa has equity of 3 billion dirhams and the reported loss can be absorbed within the company's retained earnings of 658 million dirhams, Iyad Duwaji, Shuaa's chief executive officer, said in the company's earnings statement. More than 75 percent of Shuaa's portfolio is invested in Gulf Arab countries and India and the performance of its portfolio outperformed the relevant indexes, it said.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net