By Zainab Fattah
Feb. 3 (Bloomberg) -- United Arab Emirates shares declined, sending Dubai’s index to its lowest in 4 1/2 years, after Morgan Stanley said property prices “fell off a cliff” as banks cut lending and speculators withdrew from the market because of the global economic crisis.
Emaar Properties PJSC, the country’s biggest real-estate company, dropped to its lowest in almost five years, Sorouh Real Estate PJSC slid for a fourth day and Aldar Properties PJSC closed at a record low. Property prices in Dubai have slumped 25 percent from the market’s peak in September, while Abu Dhabi prices have declined 20 percent, Morgan Stanley said in a report received yesterday. National Bank of Abu Dhabi PJSC fell after reporting a 34 percent drop in quarterly profit.
The Dubai Financial Market General Index retreated 1.3 percent to 1,454.33, its lowest close since June 2004. The Abu Dhabi Securities Exchange General Index lost 2.2 percent, bringing the four-day retreat to 5.1 percent.
“There was a lot of borrowing to finance real-estate developments and infrastructure projects,” said Eric Swats, head of asset management at Rasmala Investments, which has $1.2 billion under management. “That combined with a drop of revenue for the governments through the decline in oil prices is having a knock-on effect which is making it worse than it is in other parts of the world.”
Real-Estate Prices
Crude oil for March traded at $40.08 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Prices are down 55 percent in the past 12 months. Oil and gas contributed 37 percent to the U.A.E.’s gross domestic product in 2006, according to data compiled by Bloomberg.
Moody’s Investors Service placed six government-owned companies in Dubai, including Emaar and DP World Ltd., under review for possible rating downgrades as the economy slows.
Emaar dropped 5.9 percent to 1.77 dirhams, its lowest since May 2004. The developer will be most affected by the drop in property prices because two of its projects, Burj Dubai and Old Town, have “taken the biggest hit since the peak,” the Morgan Stanley report said.
Sorouh, Abu Dhabi’s largest developer by market value, lost 7.8 percent, dropping to a February 2007 low of 2.37 dirhams, and Aldar, the emirate’s No. 2, retreated 6.9 percent to 2.17 dirhams, the lowest close on record.
Earnings Drop
Abu Dhabi’s housing shortage hasn’t helped sustain prices as speculators exited the market and financing became scares, Morgan Stanley said. Banks including HSBC Holdings Plc and Lloyds TSB Group Plc clamped down on mortgages in the last quarter.
National Bank of Abu Dhabi slid 5.5 percent to 7.6 dirhams, bringing the three-day decline to 12 percent. The U.A.E.’s second- biggest bank by assets said fourth-quarter profit fell to 492 million dirhams ($134 million) as it boosted provisions for possible loan defaults and said it expects a “difficult” 2009.
DP World, the world’s fourth-biggest port operator, lost 4.2 percent to 23 cents, its lowest close since listing in 2007.
Kuwait’s benchmark index advanced after the cabinet approved the “principles” of a stimulus package to bolster the country’s financial institutions.
The Kuwait Stock Exchange Index increased 1.9 percent to 6,957.7, its biggest gain since Dec. 23. The Kuwait Banking Index rose 2.2 percent, bringing the advance in February to 3 percent.
Kuwait’s Climb
“The talk of the bailout plan is driving the market,” said Ali Taqi, director of asset management at AT Capital Management Ltd. in Dubai. “But its scope and terms will determine the actual impact it may have on troubled investment companies.”
The cabinet “asked its economic team to present the bill in its final form in light of the remarks and the amendments that were discussed,” a government statement said. No other details were provided and the statement did not say what the amendments were.
Boubyan Bank KSC added 6.8 percent to 395 fils. The Kuwaiti Islamic lender announced the resignation of its board, effective once a new board has been selected. Global Investment House KSCC, Kuwait’s biggest investment bank by assets, climbed 8.2 percent, the most since December 2006, to 106 fils. Gulf Finance House EC, Bahrain’s biggest Islamic investment bank by market value, jumped 7.4 percent to 290 fils.
Saudi Arabia’s Tadawul All Share Index added 1.3 percent, ending two days of declines. Oman’s Muscat Securities Market 30 Index lost 2 percent and Qatar’s Doha Securities Market Index decreased 1.1 percent. The Bahrain All Share Index slipped 0.7 percent.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net
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