Dubai Shares Fall, Led by Developers After 8% House Price Slump

By Zainab Fattah

Jan. 13 (Bloomberg) -- Dubai shares dropped after Colliers CRE Plc said house prices fell 8 percent in the emirate, fueling concern the global credit crisis will further hurt the property industry after forcing two mortgage lenders to merge.

Arabtec Holding PJSC, the construction company building the world’s tallest tower in Dubai, retreated to the lowest in three weeks after HSBC Holdings Plc cut its recommendation. Emaar Properties PJSC, the United Arab Emirates’ biggest developer, extended declines after losing 85 percent last year. Markets in the region also declined as oil fell for a sixth day.

The Dubai Financial Market General Index lost 2.8 percent to 1,708.53, its lowest close this year. The Dubai Financial Market Real Estate Index declined 4.9 percent. The Abu Dhabi Securities Exchange General Index retreated 1.2 percent.

“Obviously Collier’s report doesn’t bode well for the U.A.E. markets,” Ali Khan, head of cash equity trading at Dubai- based Arqaam Capital Ltd., said in a phone interview today.

Mortgage lenders Amlak Finance PJSC and Tamweel PJSC were taken over last year by a U.A.E.-owned bank after the global credit crisis reduced access to new funding, causing their shares to plummet more than 80 percent. Dubai’s index was among the 10 worst-performing benchmarks of 90 tracked globally by Bloomberg. The DFM Real Estate Index tumbled 83 percent in 2008.

House Prices

Dubai apartment prices dropped 11 percent on average, while villa prices fell 3 percent in the fourth quarter from the previous three months as banks restricted mortgage lending, Colliers said today.

Arabtec slid 8.9 percent to 1.84 dirhams, its lowest close since Dec. 24. HSBC cut the recommendation on the stock to “neutral” from “overweight.”

Emaar dropped 4.8 percent to 2.36 dirhams. Deyaar Development PJSC slipped 1.8 percent to 0.54 dirham, after the shares of the property company tumbled 83 percent last year.

“On the flip side, we’ve already seen substantial corrections in the real-estate market and the indexes have already corrected in 2008, so one can argue that we are well on our way to pricing in a lot of the concerns in the housing market,” said Arqaam Capital’s Khan.

The Kuwait Stock Exchange Index declined 0.7 percent, retreating for a fifth day.

Kuwait will reduce spending in the fiscal year starting April as the deepening global financial crisis reaches the third- largest oil producer in the Organization of Petroleum Exporting Countries.

Lower Spending

“Overall, spending in the next fiscal year’s budget will be lower,” Finance Minister Mustafa al-Shimali told reporters late yesterday in Kuwait City. Spending on wages for government employees and capital spending for projects will increase, he said.

Crude oil for February delivery fell as much as 4 percent to $36.10 a barrel in electronic trading on the New York Mercantile Exchange. Prices are down about 25 percent in the past six days and dropped to a four-year low of $32.40 on Dec. 19.

Saudi Arabia’s Tadawul lost 0.8 percent to 5,110.35 at 2:44 p.m. in Riyadh. Oman’s Muscat Securities Market 30 Index declined 1.6 percent, bringing the two-day drop to 3 percent. Qatar’s Doha Securities Market Index fell 2 percent, slipping for a third day. The Bahrain All Share Index decreased 0.6 percent.

Yanbu Cement Co. rose 4.3 percent to 43.8 riyals. The Saudi cement maker said fourth-quarter profit advanced 9 percent to 120.2 million riyals ($32.1 million).

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net