Sell-out at UAE markets continues
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Stock markets in the United Arab Emirates (UAE) failed to shrug off worries about a possible bankruptcy of state-owned Dubai World holding Monday, as government-related entities (GREs) were downgraded to "junk" status.
A meeting with Dubai World's creditor banks is scheduled for this week regarding the restructuring of its 26-billion-U.S. dollar debt, of which a 3.5-billion-dollar Islamic security, or Sukuk, is due next Monday.
The Dubai Financial Market (DFM) closed at a 20-week-low, down 5.84 percent at 1,744.83 points. Real estate developer and DFM-heavyweight Emaar Properties dragged the index down by plummeting 10 percent, the maximum a share can drop on a limit-down.
Meanwhile, leading rating agency Standard and Poor's lowered the rating of GREs in Dubai to junk status. Among them are Dubai Ports (DP) World, DIFC Investments, Jebel Ali Free Zone, Dubai Multi Commodities Center (DMCC) Authority, Dubai Holding Commercial Operations Group and Emaar. DIFC Investments holds a 2.2 percent share at Deutsche Bank AG, Germany's biggest lender.
Rumors came up recently that the Dubai government might sell assets abroad in order to cover its debt obligations at home.
The Abu Dhabi Securities Exchange (ADX) ended at 2,626.95 points, 1.73 percent lower. While investors mostly sold real estate and energy share, consumer and industrial stocks bucked the trend.
Trading volumes at both markets increased, but remained relatively low. According to industry sources, foreign investors in particular sold their stocks in Dubai, as Monday was the first day during the week when Asian and Western markets had the opportunity to trade again.
At Nasdaq Dubai, the only international stock market in the Middle East, shares of DP World fell by 7.75 percent, closing at 0.345 U.S. dollar.
DP World, the world's fourth largest port operator, is part of the disputed Dubai World group. However, DP World will not be part of the debt restructuring, as Dubai World announced last week.
Earlier in the day, Abdul Rahman Al Saleh, director general of Dubai Finance Department, said the Dubai government is capable of honoring and meeting its commitments inside and outside the UAE.
The restructuring of Dubai World, one of Dubai's largest and most important conglomerates, is a natural procedure that can happen in many countries and companies, Al Saleh told al-Jazeera TV.
He reiterated the Dubai government's announcement that it would not guarantee debts of the group.
"Articles of association of Dubai World stipulates that the emirate's government shall not guarantee its debts," Al Saleh said.
However, he did not rule out the possibility of selling some assets of the group in Dubai or abroad.
"Selling of some assets is a natural act in order to bolster the financial situation of the group in such circumstances," he said.
The official described Dubai World as "active" in many sectors, saying only its real estate sector was hit by the international financial crisis.
