Luxury Hotel Blaze Weighs on Emaar as Dubai Stocks Retreat

  • Investors fret New Year's Eve fire may curb developer's profit
  • Qatari stocks sink second day as Omani gauge advances

Emaar Properties PJSC led the decline in Dubai stocks three days after a fire ripped through one of its hotels on New Year’s Eve. Abu Dhabi shares also fell.

Emaar, which is about 30 percent owned by the Dubai government, dropped as much as 4.4 percent, before paring its slide to 1.6 percent at the close, the biggest contributor to the DFM General Index’s 0.5 percent loss. The fire is covered by insurance and Emaar sees “no material impact" because of the blaze, the company said on Sunday. The developer appointed Dutco Group to restore the hotel.

“Emaar’s statement helped halt some of the panic selling we saw at the beginning of the session, but investors still have questions,” said Dubai-based Samer Al-Jaouni, the head of institutional business at Menacorp, one of the biggest brokerages in the United Arab Emirates. “The company needs to clarify the amount and percentage of cash flow that this hotel was contributing to Emaar’s hotel portfolio.”

Real Estate Index Highly Correlated to Main Dubai Gauge

A score close to 1 indicates a high degree of correlation.
A score close to 1 indicates a high degree of correlation.
Bloomberg.

The Address Downtown Dubai hotel, which Emaar developed, owned and operated, caught fire Thursday as the city prepared for its annual year-end fireworks display. The blaze capped a challenging year for the emirate’s real estate industry, which is struggling with falling property prices amid a slump in oil, just as the dirham’s peg to the dollar makes purchases more expensive for overseas buyers.

Dubai’s real estate and business services accounted for 14 percent of the emirate’s gross domestic product in the first quarter of 2015, according to the latest government data.

Real Estate Index

The DFM Real Estate Index retreated as much as 2.8 percent, the most in two weeks, before trading 0.6 percent lower. The gauge sank 25 percent last year, the most since 2008. Emaar Malls Group PJSC, which is about 85 percent owned by Emaar Properties, fell 0.4 percent on Sunday.

Emaar’s hospitality unity could suffer a "substantial" blow to its revenue in the last four months of Dubai’s high season, which runs from October through April, Mahmoud Ibrahim, a senior equity analyst at Mubasher International, wrote in a note to clients on Saturday. The fire could cost Emaar Hospitality about 370 million dirhams ($101 million) in lost revenue this year, he said.

Fifteen people sustained light to moderate injuries at the hotel, while one person suffered a heart attack, the Dubai media office said on Thursday. The blaze comes almost a year after a fire at the Dubai Marina Torch, one of the world’s tallest residential buildings. In 2012, the Tamweel tower in the Jumeirah Lake Towers district neighboring the marina was wrecked by fire.

"The longer term issue would be to look at safety of skyscrapers in general," said Abu Dhabi-based Sachin Mohindra, a money manager at Invest AD Asset Management. “This is an industry wide issue and has been discussed since the fire at the Tamweel Tower in JLT."

Saudi Stocks Rise

Saudi Arabia’s Tadawul All Share Index rose 0.6 percent, led by Al Rajhi Bank’s 2.1 percent gain. The Saudi Stock Exchange - Tadawul, the Arab world’s largest bourse, on Thursday disclosed plans to sell shares in an initial public offering in 2018.

Etihad Etisalat Co. climbed 0.4 percent. The Saudi stocks regulator referred unnamed executives from the telecommunications company known as Mobily to prosecutors for allegedly providing incorrect or deceptive statements about financial assets, according to a statement to the bourse on Thursday.

Abu Dhabi’s ADX General Index retreated 0.8 percent. First Gulf Bank PJSC led Abu Dhabi gauge’s retreat with a 1.2 percent drop. Qatar’s QE Index lost 1.1 percent, while Oman’s MSM30 Index added 0.1 percent. Jordan’s ASE General Index slid 0.9 percent, the most since Nov. 15. 

Egypt’s EGX 30 Index rose 1.2 percent to the highest level since Nov. 9, led by Commercial International Bank Egypt SAE’s 2.5 percent advance.

The government has prepared an economic program to submit to parliament, which includes a proposal to ask the International Monetary Fund for a loan of as much as $6 billion, the state-run Akhbar Al Youm newspaper reported on Saturday, citing officials it didn’t identify.

Israel Gains

Israel’s benchmark TA-25 Index advanced 0.8 percent as of the close in Tel Aviv, led by Delek Group Ltd.’s 3.2 percent gain. Delek shares advanced for a seventh day, the longest winning streak since Nov. 2012.

Elbit Systems Ltd. rose 2.3 percent. Local website Calcalist reported that two competitors have walked away from a tender for Israel Military Industries Ltd., increasing Elbit’s chances of winning, Ilanit Sherf, the head of research at Psagot Investment House Ltd., said by phone.

Israel’s local currency debt due August 2025 rose for a second day, with the yield declining two basis points to 2.07 percent on Sunday.

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