Dubai government bonds rally after ruler orders bank takeover

Markets Update: Markets rally and Dubai government bond yields fall as Emirates NBD is ordered to take control of Dubai Bank, a troubled Islamic lender. Watch video

Dubai's government bonds rallied after the emirate's government ordered Emirates NBD to take control of Dubai Bank, adding to a bounce on international exchanges which boosted stocks in early trading.

Video: Market Minute, October 11, 2011

Gregor Hunter discusses the Emirates NBD bank takeover. Watch full screen

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The Dubai Financial Market General Index rose 0.6 per cent to 1398.24, while stocks on the Abu Dhabi Securities Exchange General Index increased 0.2 per cent to 2,503.85.

Yields on Dubai's ten-year government bonds fell 42 basis points to 5.86 per cent, while yields on Dubai Holding Commercial Operations Group's five year bonds fell 22 basis points to 16.83 per cent.

Dubai Holding previously indirectly held a 70 per cent stake in Dubai Bank. Bond yields move in the opposite direction from prices.

Emirates NBD was the biggest mover on Dubai's market, with shares in the UAE's biggest bank falling 0.7 per cent to Dh3.77 each. However, gains for companies including Arabtec, Emaar Properties and Tamweel pushed the broader Dubai index into positive territory.

Local stocks followed a rally seen on Asian markets in the early hours of the morning, with Chinese stocks surging after a state-owned investment company bought stakes in four of the country's biggest banks.

The Hang Seng Index increased 2.3 per cent to 18,130.25, while Japan's Nikkei 225 index rose 1.9 per cent to 8,773.68.

Despite the brightening global outlook, oil prices fell in early trading. Brent crude futures declined $1.26 to $107.36 per contract.