Issue No 283 - 15 Sep 2008
Dubai property shares slump exposes investor doubts

Leading Dubai property shares plunged to new lows on Wednesday laying bare the doubts surrounding this previously booming sector, with analysts uncertain over how much further it could still fall.

Investors have fled the emirate's real estate sector in recent weeks, spooked by corruption probes, tightening regulations designed to limit speculation, and talk of a looming over-supply in the market.

Shares in Emaar Properties, developer of the world's tallest building in Dubai, on Wednesday closed down 3 percent at 7.85 dirhams, their lowest level in 41 months, making it one of the worst-hit stocks in the sector.

"We are definitely going through tough times," says Rami Sidani, head of MENA investment at Schroder’s Investment Management.
"It's a combination of bad news coming at the same time with investigations, concerns over the real estate market and extra supply coming to the market."

"It's hard to assess the market going forward. We need more insight into the real estate sector, either from the government or from the large developers," Sidani said.

Mortgage lender Tamweel tried to reassure investors on Wednesday with a statement after its shares dropped 4 percent to say that the detention of its deputy chief executive by Dubai police would not affect its operations or financial performance.

Overall negative sentiment in UAE markets makes it trickier to call the bottom. The main Dubai index has fallen more than 25 percent this year, after gaining over 43 percent in 2007.

"We don't know how bad it can get," said Sana Kapadia, equity research analyst at EFG-Hermes.

"The market has been through a crash before but overall everything is languishing. The corrections we see on some days are not enough to make up for the losses." Property shares have fallen so low that some experts are calling them a bargain.

"It's a great time to get into the market...but it is now driven by the sentiment rather than by valuations," said Bikash Rout, senior financial analyst at Global Investment House.

Emaar has fallen over 26 percent since the beginning of August, leaving it with a forward price-earnings (PE) ratio of 7.54, well below that of rival Union Properties at 11.13 and Abu Dhabi firm Sorouh Real Estate at 9.18.

Union Properties plummeted over 8 percent on Wednesday while Sorouh Real Estate fell over 5 percent. "Stocks are looking especially attractive -- it's a great buying opportunity, but interest has been limited," Kapadia said.

Source: Trade Arabia News

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