Bloomberg News

Abu Dhabi Shares Sink to Two-Year Low Led by Property Developers

October 17, 2011

Oct. 17 (Bloomberg) -- Abu Dhabi’s benchmark stock index slumped to the lowest in more than two years as real-estate companies declined amid concern about an oversupply of properties in the Persian Gulf emirate.

Aldar Properties PJSC, the Abu Dhabi developer that’s had three chief executive officers in four years, and Sorouh Real Estate Co. tumbled to the lowest since their listing. The benchmark ADX General Index dropped 0.7 percent to 2,453.97, the lowest since April 2009, at the 2 p.m. close in Abu Dhabi. The ADX Real Estate Index, down 2.9 percent today, is the worst performer of nine groups in the benchmark this year after losing 49 percent. About 47 million shares traded in Abu Dhabi, compared with this year’s daily average of 67 million shares.

“There’s a lack of foreign and local interest judging by the low volumes,” said Haissam Arabi, chief executive officer at Gulfmena Investments in Dubai. “The real-estate sector is still an overhang. We are looking at a situation where there is oversupply now and more to come.”

Abu Dhabi will continue to have excess of most types of properties, leading to a further decline in rental and sale prices, Jones Lang LaSalle said in a research report yesterday. Vacancies in office and residential units will persist as supply increases, the U.S. property broker said. As many as 11,000 residential units and 150,000 square meters of office space may be delivered in the fourth quarter, it said.

Falling Rents

Rents in Abu Dhabi have fallen 40 percent since the market’s peak as many foreigners left, leaving a number of properties without tenants, according to estimates from Jones Lang LaSalle. Aldar, down 60 percent over the past year, was the first company in the emirate to receive a junk rating from Moody’s Investors Service.

The developer’s shares declined 3.9 percent to 1 dirham, the lowest since the company listed in April 2005. Aldar, which is expected to announce third-quarter results Nov. 9, reported a second-quarter profit that missed analysts’ estimates following a year-earlier loss.

Sorouh, Abu Dhabi’s second-biggest property company by market value, slumped 3.2 percent to 91 fils, also the lowest since listing in 2005. The company has no short-term financing needs and expects to win several government projects in 2012, Managing Director Abubaker al Khouri said in Abu Dhabi today. Sorouh is expected to announce third-quarter results on Nov. 1.

‘Margin Calls’

“The losses are being driven by margin calls at banks,” said Mohammed Ali Yasin, chief investment officer at Abu Dhabi- based financial services company CAPM Investments PJSC. “Many have decided to start cleaning up before the end of year results.”

A margin call is a broker’s demand that a customer provide additional cash or securities to satisfy requirements for the purchase or short sale of securities or to cover an adverse price movement.

Dubai’s DFM General Index decreased 0.6 percent and Saudi Arabia’s Tadawul All Share Index fell less than 0.1 percent. Kuwait’s measure was little changed and Bahrain’s BB All Share Index lost 0.2 percent. Oman’s MSM30 Index and Qatar’s QE Index rose 0.4 percent.

--Editors: Claudia Maedler, Shaji Mathew

To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net; Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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