Dubai’s stocks fall to two-month low on Saudi’s debt downgrade

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 per cent owned by the Dubai government, dropped as much as 4.4 per cent, before paring its slide to 1.6 per cent at the close, the biggest contributor to the DFM General Index’s 0.5 per cent 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.”

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 per cent 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 per cent 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.”