Dubai Shares Climb to 3-Month High on $24.9 Billion Dubai World Debt Deal
Dubai’s benchmark stock index rose to the highest in more than three months after Dubai World received approval from creditors to change the terms on $24.9 billion of debt payments.
Emirates NBD PJSC, the United Arab Emirates’ biggest bank and one of Dubai World’s main lenders, jumped the most in more than two years. Emaar Properties PJSC, the developer of the world’s tallest skyscraper, gained for a sixth day. The DFM General Index advanced 2.4 percent to 1,630.85, the highest close since May 24. The measure has gained 9.9 percent in September. Credit-default swaps tied to Dubai narrowed.
“Investors like the certainty that the deal brings,” said Dubai-based Tariq Qaqish who helps manage around $100 million at Al Mal Capital PSC. “Now they will be able to better predict issues with provisioning levels or earnings going forward.”
Dubai World, one of the three main state-owned holding companies, got approval from 99 percent of creditors, it said in an e-mailed statement Sept. 10. The company in November sent emerging market stocks tumbling after it sought to delay loan payments.
Dubai racked up $109.3 billion of debt as it transformed itself into a financial-services and tourism hub, with about $15.5 billion due this year, the International Monetary Fund estimates. Dubai Holding LLC, another of the three holding companies owned by the emirate’s ruler Sheikh Mohammed Bin Rashid Al Maktoum, is delaying repayment on part of $1.8 billion in loans due this month.
Shares in Dubai’s DFM General Index trade at an average estimated price to earnings ratio of 6.2. That compares with 12.5 for the MSCI Emerging Market Index, according to data compiled by Bloomberg.
“Valuations are cheap and compelling, and some investors may say this is one cloud out of the way even though there are still a lot of issues left,” Kamran Butt, head of Middle East equity research for Credit Suisse’s private bank, said yesterday. For the rally to be sustained, “we need some other catalysts mainly some quarterly result, and a positive and less volatile global market backdrop,” he said.
Emerging-market stocks rose, with the MSCI EM Index entering a so-called bull market, after data on China’s industrial production, retail sales and lending eased concern the global economic recovery will falter. The measure added 1.9 percent at 6:06 p.m. in Dubai, taking the gauge’s rebound from its recent low to 20 percent, the level considered by some analysts as signifying a bull market.
Emirates NBD surged 5 percent, the biggest gain since December 2007, to 2.75 dirhams. Emaar increase 2.7 percent to 3.78 dirhams. Abu Dhabi’s gauge increased 1.4 percent.
Credit-default swaps tied to Dubai government debt dropped 8 basis points to 451, according to CMA prices. They reached the highest close this year of 627.4 on Feb. 12, CMA data show. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
The yield on the Dubai Department of Finance’s 6.396 percent Islamic notes due in November 2014 were little changed at 6.56 percent after declining 6 basis points on Sept. 10, according to data compiled by Bloomberg. The yield on Nakheel’s 2.75 percent $750 million Islamic notes due in January 2011 advanced 23 basis points.
RAK Properties PJSC, the developer that built Ras Al Khaimah’s first man-made islands, gained 5.1 percent, the most since Dec. 14, to 41 fils. The company’s board of directors approved an early partial settlement of a government loan by paying back $45 million.
Dubai and Abu Dhabi’s markets are the only Gulf bourses open today. Exchanges in Saudi Arabia, Kuwait, Qatar, Oman and Bahrain remain closed for the Muslim holiday that marks the end of Ramadan.