Dubai, December 09: Share prices in the United Arab Emirates were battered again on Wednesday over Dubai’s worsening debt woes, as the Gulf country insisted it was coping with the global economic crisis.
The main index on the Dubai Financial Market shed 6.39 percent to finish at 1,533.36 points, while its counterpart on the Abu Dhabi Securities Exchange closed 2.82 percent lower at 2,467.04 points.
But, even as the brutal sell-off continued, the UAE president said his nation had successfully “contained” the negative impacts of the global financial meltdown on the back of its solid economy.
“We have been able to contain the negative impacts of the (global economic) crisis and overcome many of its results and consequences,” Sheikh Khalifa bin Zayed al-Nahayan told Kuwait’s KUNA news agency in an interview.
“We have the ability and determination to continue to work in this direction… to remove all obstacles that prevent strong development,” the president said.
The markets had opened slightly weaker but plunged after the first hour of trading following a Financial Times report that Dubai is struggling to halt the debt crisis from spreading.
“The credit downgrades of Dubai’s government-owned companies have triggered an accelerated payment clause on a 2.0-billion-dollar debt issued by the emirate’s utilities provider,” said a front-page report in the Financial Times.
“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” the most imminent part of the debt, it said.
The report was referring to a 3.5-billion-dollar Islamic bond debt, or sukuk, that real estate giant Nakheel is scheduled to repay next week.
The UAE exchanges have been in freefall since Nakheel, part of state-owned conglomerate Dubai World, sought a six-month freeze on the sukuk on November 25.
Dubai World, whose assets include ports around the world, is liable for 59 billion dollars, while the emirate’s overall debts are at least 80 billion dollars, with some estimates as high as 120 billion dollars.
Dubai’s stock market has now nosedived by 26.7 percent since the shock announcement, while its Abu Dhabi counterpart has plummeted 15.2 percent over the same period.
Making matters worse, Nakheel reported Wednesday a loss of 13.4 billion dirhams (3.64 billion dollar) for the first half of 2009 compared with the same period last year, after a large writedown of asset values.
Nakheel said revenues had plunged 78.1 percent in the six months to June 30 to 1.97 billion dirhams (537 million dollars) from 9.0 billion dirhams (2.45 billion dollars) a year earlier.
The developer of the Gulf emirate’s extravagant palm-shaped islands took 12.2 billion dirhams in “impairment losses” stemming from a writedown of land values as the property market in Dubai has plunged in the past year.
Also included are projects the company said would be delayed or scaled down.
“The management no longer considers these project costs to be fully recoverable,” it said.
And more bad news emerged for another division of Dubai World when its investment arm Istithmar World was forced to give up its W Hotel in New York in a foreclosure auction, according to the Wall Street Journal.
Dubai’s government has said it will not guarantee the debts of Dubai World or Nakheel.
Among the hardest-hit Dubai stocks on Wednesday was giant developer Emaar Properties, which shed 9.86 percent a day after losing 9.84 percent, again narrowly missing the maximum-allowed 10-percent drop.
—Agencies