Dubai, December 10: Dubai’s stock market surged 6.0 percent in volatile intra-day trading on Thursday after leading Emaar Properties called off a merger with state entities, distancing itself from the indebted government.
The Dubai Financial Market index opened slightly higher but plunged by more than four percent within less than half an hour.
At 0920 GMT, the Dubai Financial Market index was trading up 5.58 percent at 1,619.17 points, after it had slightly recovered by 0.4 percent at open.
That was the highest level for the market since Dubai’s debt crisis went public on November 25.
Wednesday’s losses brought with them a cumulative decline that erased all the gains made this year.
Emaar led the rally, shooting up by more than 12 percent after midday and following heavy fluctuation, amid a heavy exchange of the company’s securities.
Emaar said late on Wednesday that it has decided to cancel merger plans with the property arm of government-owned Dubai Holding. The Middle East’s larget property developer by market capitalisation appeared to be shying away from the heavily indebted government entities.
“We believe this is positive news for Emaar,” said regional investment bank EFG-Hermes in a statement.
“We have been positive on the stock due to the increasing diversification of its revenue mix — both operationally and geographically, its track record of delivery and execution and improving real estate market conditions in areas outside of Dubai such as Saudi Arabia, Egypt, and India,” it said.
“With this news that the planned merger has been called off, a large degree of uncertainty and overhang from this potential merger has dissipated,” it added.
It said, however, that cancelling the merger talks shows that a “distinction is being made between “good” and “bad” assets, as well as “corporate” and “sovereign” assets.”
“An area of uncertainty today is what will be the fate of the Dubai Holding property companies,” it added.
Talks had been ongoing to link Emaar and three Dubai Holding property units — Dubai Properties, Sama Dubai and Tatweer.
Meanwhile, the government utilities company refuted reports that its long-term debt might be redeemed earlier due to Dubai World debt problems.
“The news … has nothing to do with the truth. We don’t have any possibility of lenders asking for early payments nor are we planning to delay anything,” Emirates Business daily quoted top company official Abdullah al-Hajri as saying.
The Financial Times had reported on Wednesday that “Dubai Electricity and Water Authority’s 2.0-billion-dollar securitisation programme … originally maturing in 2036, may have to be redeemed in full on December 14 — the day Dubai World’s property developer, Nakheel, is due to redeem” its 3.5-billion-dollar sukuk bond.
In other Gulf markets, Abu Dhabi was down 1.33 percent in early trading, but recoverd 0.09 percent to 2,469.3 points.
Construction and real estate led the early drop by 3.06 percent and 2.94 percent, respectively. Construction reduced looses to just over one percent by midday while real estate recovered 0.79 percent.
Dubai’s debt woes were triggered by the government’s request to freeze debt repayments of its largest and most-indebted Dubai World group — liable for 59 billion dollars.
By Wednesday, Dubai’s DFM index had shed over 26 percent of its value since the debt standstill was announced, wiping out all gains made this year.
In Qatar, the stock market recovered Thursday by 1.22 percent after dropping 1.99 percent on Wednesday.
The Kuwait Stock Exchange was down 0.1 percent around midday, while the Saudi market is shut for the weekend.
—Agencies