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UAE Freezones Biz News Updates
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Dubai credit risk lowest in four years
Five-year credit default swaps for the city dropped 62 basis points this
quarter
Dubai’s credit risk fell to a four-year low this month as a revival in the
real estate and tourism industries sends positive signals to investors.
Five-year credit default swaps for the city dropped 62 basis points this
quarter to 292 on September 24, according to data provider CMA, outpacing
the 39 basis-point decline in the average for contracts in the Middle East
and North Africa. Dubai’s debt has rallied, with the yield on its 6.7 per
cent bonds due October 2015 falling to 2.99 per cent on September 12, the
lowest on record.
Real estate and business services are rebounding from effects of the global
financial crisis. Emaar said on Monday that it sold out all the units
offered in a project located near Burj Khalifa in a single day.
“Dubai has passed its crisis, and there has been development in numerous
aspects of its economy, from tourism to real estate,” said Samer Mardini,
vice president of fixed- income and Islamic finance products at Dubai-based
SJS Markets Ltd. “There is no doubt that Dubai’s economy is improving.”
Credit default swaps for Dubai fell to 265 basis points on September 14, the
lowest since October 2008, according to CMA, which is owned by McGraw-Hill
Cos. and compiles prices quoted by dealers in the privately negotiated
market.
The average price for mid-range villas soared in August to the highest since
March 2010, according to Cluttons LLC data compiled by Bloomberg.
The economy, which grew about 3 per cent last year, may expand 4 per cent in
2012 and more than that next year, Abdul Rahman Al Saleh, Director-General
of Dubai’s finance department, told Al Bayan newspaper last week. Tourism
increased 6 per cent during the first half of the year, exports and re-
exports rose 13 per cent and air cargo expanded 5.6 per cent, he said.
Dubai and its entities have $15 billion of debt maturing this year,
according to International Monetary Fund estimates. Jebel Ali Free Zone FZE
and DIFC Investments LLC repaid loans in June, helping to boost confidence
in Dubai’s commitment to meet its financial obligations.
The emirate’s airport, the world’s fourth busiest for international
passengers and cargo, saw passenger traffic rise to a record 5 million
people in July. It fell to 4.8 million last month due to the Holy Month of
Ramadan, Dubai Airports data show.
“Today, as a safe haven for investments, there is strong investor interest
from across the Middle East, Africa and other overseas markets, which
further drives the growth of the property sector,” Emaar said.
While Dubai’s benchmark stock index has gained 9.6 per cent so far this
quarter, compared with a 4.9 per cent gain for the Bloomberg GCC 200 Index
of the region’s top 200 stocks in the period, the measure is still down 81
per cent from a high of 8,484.63 in November 2005.
“We’re seeing a little inflow that’s dominated by regional institutions
rather than international money flow,” given Europe’s ongoing debt crisis,
Yazan Abdeen, who helps oversee about $250 million as ING Investment
Management’s Middle East and North Africa fund manager in Dubai, said by
e-mail.
The emirate is benefiting from the UAE Central Bank’s monetary policy, which
has kept repurchase rates at 1 per cent since February 2009 compared with 3
per cent in March 2008, according to central bank data compiled by
Bloomberg. The government body also fully subscribed to Dubai’s $10 billion
due February 2014.
“The central bank’s support for local banks, which includes keeping repo
rates low to encourage more borrowing and bailing out businesses, helped the
UAE move forward at an impressive pace,” Hakim Azaiez, London- based head of
Middle East and North African capital markets at Dinosaur Capital
Management, said.
Loans and advances rose to Dh1.09 trillion in June, the highest since at
least March 2010, central bank data compiled by Bloomberg show.
“There is both economic and political stability in Dubai,” Mardini said.
“People want to invest here.” |
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Courtesy Al Nisr Publishing LLC
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