Dubai Stocks Drop Most in 3 Weeks on Dubai World Interest Plan

Dubai Stocks Drop Most in 3 Weeks on Dubai World Interest Plan
April 18, 2010, 7:00 AM EDT
By Dana El Baltaji

April 18 (Bloomberg) -- Dubai’s stocks fell the most this month on concern Dubai World is offering creditors interest that is about a fifth of the market rate and after global markets slumped on fraud allegations at Goldman Sachs Group Inc.

Arabtec Holding PJSC slipped the most since February after a unit of the construction company won’t bid for a contract to build a 1.1 kilometer (0.68-mile) skyscraper in Saudi Arabia. Emaar Properties PJSC retreated 3.9 percent. The Dubai Financial Market General Index lost 2.3 percent, the biggest drop since March 29, to 1,775.56 at the close in Dubai. Saudi Arabia’s Tadawul All Share Index fell 0.9 percent at 1:48 p.m. in Riyadh.

Dubai World, the state-owned holding company restructuring $24.8 billion of debt, is offering to pay creditors 1 percent interest on new loans as part of a restructuring plan, a banker familiar with the plan said April 15. Banks are reluctant to accept the new rate presented on March 25 as it is lower than the market rate of about 5 percent and would force Dubai World’s creditors to book impairment provisions, two bankers said.

“A 1 percent interest on the restructured amount is not in the best interest of anyone,” said Marwan Shurrab, assistant fund manager and chief trader at Gulfmena Alternative Investments in Dubai. “It would hurt banks and force them to make more provisions, which will affect their results.”

A spokesman for Dubai World declined to comment when contacted on April 15.

Withdrawing Offer

U.S. stocks fell on April 16, halting the longest rally in a year, after allegations of fraud at Goldman heightened concern the government will crack down on Wall Street.

Arabtec Construction had planned to submit a proposal for Kingdom Tower with its South Korean partner Samsung Corp. this month, The National reported earlier.

Emaar, the developer of the world’s tallest tower in Dubai, fell to 3.90 dirhams. Dubai Islamic Bank PJSC, the United Arab Emirates’ biggest Islamic lender, retreated to the lowest level in a month, falling 3.8 percent to 2.29 dirhams.

Abu Dhabi’s measure declined 1 percent, the most in more than two weeks, on concern a cloud of ash from volcanic eruptions in Iceland will disrupt flights to and from Abu Dhabi ahead of a real estate exhibition in the emirate this week.

The number of people attending the property exhibition in Abu Dhabi is likely to drop because of flight cancelations, said Majed Azzam, a real estate analyst at Al-Futtaim HC Securities.

Aldar Properties PJSC, Abu Dhabi’s biggest real-estate developer, fell 4.8 percent, the most since Jan. 26, to 4.20 dirhams and Sorouh Real Estate Co. lost 2.9 percent to 2.38 dirhams.

Iceland’s Volcano

“There’s a lot of foreign ownership in Aldar and Sorouh,” Azzam said. “Whenever there is bad or good news globally, the stocks tend to overreact. Even though the property conference is directed more at Asian investors than the European market, the ash cloud doesn’t help sentiment.”

Northern and central Europe may remain closed to air traffic until April 22 as winds push ash from volcanic eruptions in Iceland across the continent, forecasters said. European airlines canceled more than 77 percent of their flights yesterday as airports from Dublin to Moscow closed.

The Muscat Securities Market 30 Index fell 0.4 percent and the Bahrain All Share Index retreated 0.3 percent. Qatar’s gauge declined 1 percent and Kuwait’s measure was little unchanged.