UAE stocks tumble as Arabtec, Aldar spook traders

11/01/2011 00:00 AST

The stocks in the UAE plummetted on Tuesday after two property companies unveiled financing plans likely to be dilutive to minority shareholders, with Dubai's index making its largest drop in two months.

Abu Dhabi's Aldar Properties slid 4.6 per cent after the indebted developer said it wants to issue a convertible bond and sell assets.

Dubai builder Arabtec fell three per cent to a two-week low. It is planning a $108.5 million rights issue and $150 million convertible bond.

'These are signals that both companies have a need for cash and a rights issue or convertible bond will both be dilutive to minority shareholders,' said Mohammed Yasin, CAPM Investment chief investment officer.

'The UAE property market is still going through a correction and companies can't find any other source of funding - they can't sell new projects or borrow more money from banks.'

'So the only option is to go to shareholders, either old shareholders through a rights issue or new shareholders through a convertible bond,' Yasin said.

Dubai's index fell 1.5 per cent in its biggest decline since November 8 and Abu Dhabi slunk to a 2011 low.

'Aldar and Arabtec affected the whole UAE market today, but I doubt this will affect other stocks in the longer term,' said Mohamed Khaled, Prime Emirates relationship manager.


Reuters

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