Dubai Property Firm Is Hurt
By U.S. Mortgage Worries
DUBAI, United Arab Emirates -- Shares in Dubai's Emaar Properties PJSC tumbled to a 28-month low yesterday as foreign investors seeking safer assets sold the stock, fearing mortgage defaults would hurt its operations in the U.S.
Emaar dropped 1.9% to 10.30 dirhams ($2.80), its weakest close since April 13, 2005. It also touched a 28-month low of 10 dirhams during the session.
Emaar's U.S. home-building subsidiary, John Laing Homes, represented 16% of Emaar's revenue in the second quarter. The slowing U.S. housing market was one of the reasons the Dubai developer missed analysts' profit forecasts.
That was before the rising defaults on subprime, or high-risk, mortgages in the U.S. spilled into global credit markets last month, driving up borrowing costs and triggering a flight from risky assets.
Although shares in other Gulf companies courting foreign investors also have tumbled in the past week, much of the selling focused on Emaar, the largest Arab property developer by market value.
"Emaar operates in key U.S. markets that have been directly affected by subprime-market weakness," said Mohammad Kamal, real-estate and construction sector analyst at Deutsche Bank in Dubai.
"As a result, Emaar will likely reflect the issues with the U.S. housing market in its financials," Mr. Kamal said.
"The rising level of foreign institutional ownership in Emaar's stock may strengthen the link between the stock's performance and the health of the U.S. housing industry," he said.
Foreign investors have been cashing out of shares in the Gulf in the past week in a global flight from risky assets, triggered by concern that credit for companies and households could dry up because of U.S. mortgage defaults.
Dubai's benchmark index ended down 1.35% to 4140.86 points, its lowest close in more than 13 weeks.
Foreign selling also hit markets in Qatar and Abu Dhabi.
Abu Dhabi's index fell 0.89% to 3406.51 points, its lowest close since May 22.
"The bulk of the upside this year has been on the back of foreign investors' buying. Some of the hedge funds that came in are selling out now, and this is creating pressure," said Haissam Arabi, managing director of asset management at Dubai-based investment bank Shuaa Capital.
Aldar Properties PJSC, which almost doubled in value to the end of the July after allowing foreigners to buy its shares in March, dropped 2.1%.
Qatar's index decreased 0.77% to 7340.06 points, its lowest close in more than seven weeks.
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