The Dubai and Abu Dhabi stock markets recovered amid an apparent return of confidence, closing up more than one and almost four per cent respectively, after heavy losses over Dubai’s debt woes.
After a four-day break, Dubai’s DFM Index, which dropped 12.5 per cent in two days of trading last week, closed at 1,853.13 points, 1.18 per cent up from its closing on Tuesday, in a session of heavy fluctuations.
Abu Dhabi Securities Exchange, which shed 11.6 per cent of its capitalisation last week, closed 3.89 per cent up at 2,673.12 points.
But as Abu Dhabi stocks firmed up, Dubai stocks appeared volatile, with the index fluctuating from a 2.4 per cent rise in the morning to a drop of around two per cent into the red before recovering ahead of the close.
“The market did not expect this quick a recovery in Dubai … This shows that many investors are now convinced the media campaign (about Dubai’s debts) was exaggerated,” al-Fajr Securities financial analyst Humam al-Shamaa said.
Fears of a Dubai default over its mountain of debt have grown since the government of the emirate asked on November 25 for a freeze of payments on the debt of its largest conglomerate, Dubai World — liable for $US59 billion ($A63.63 billion).
The announcement sent jitters throughout global markets in the following days, while the United Arab Emirates and other Arab stock markets in the Gulf reacted negatively last week after returning from Muslim holidays.
But Sunday’s trading appears to indicate that UAE markets are stabilising and investors returning.
The total value of DFM trading reached 836 million dirhams ($A245.88 million), compared to a volume of only 37.5 million dirhams ($A11.0 million) on Monday.
The shares of Dubai’s giant property developer, Emaar, which led the losers last week, dropping by almost the maximum-allowed 10 per cent, increased 3.5 per cent in morning trade.
But it later went into the red, dropping by nearly three per cent at midday, before it finally closed 3.55 per cent up.
“There are those who are trying to make a quick profit … We saw offers to sell after the surge in Dubai. This is to avoid losses,” Shamaa told AFP, explaining the fluctuation in Emaar’s share price.
“The market is stronger and confidence is returning to it,” he said.
All Dubai’s indices for trading sectors were in the green at opening, except for banking which was down more than 1.4 per cent. But by midday, banks had dropped further by over 2.4 per cent, while real estate had gone 2.7 per cent into the red.
Only banks stayed in the red at the close, at down 1.56 per cent. In Abu Dhabi, the indices rose in all sectors on Sunday.
“Abu Dhabi has passed the difficult stage … Dubai may still face a state of uncertainty,” Shamaa said. “It seems that foreign investors, who were the main reason for the drop in Abu Dhabi, have withdrawn their offers to sell,” he added.
In Riyadh, stocks traded slightly higher on the region’s largest exchange after a one per cent drop on Saturday in the market’s first session since Dubai World revealed its debt problems. The main TASI index closed 0.33 per cent up.
The central bank said on Friday that Saudi commercial banks have minimal exposure to Dubai’s problems.
The Kuwait Stock Exchange was also stable following the weekend, and closed 0.5 per cent up.
The KSE index had lost 2.7 per cent on Monday and 1.4 per cent on Tuesday over a feared impact of the Dubai debt crisis on Kuwaiti banks.
However, it recovered 0.71 per cent on Wednesday. Qatar stocks also closed up 0.34 per cent on Sunday.