It would be a mistake to use government funds to inject into the stock markets which have lost Dh432 billion (US$117.61bn) in value this year, Sultan bin Saeed al Mansouri, the Minister of Economy, said yesterday. Abu Dhabi share prices surged for a second consecutive day on Tuesday on perceptions of government support for the emirate's blue-chip holdings, while Dubai fell 5.1 per cent.
Asked if the Government was considering using its funds to prop up ailing stock markets, Mr Mansouri said: "We are not considering it. We are a free market and we are going to keep it open. We are not going to make the same mistakes that other economies have done." The central bank governor of Kuwait yesterday called on its government to use sovereign funds to prop up its ailing stock market. Brokers in Abu Dhabi reported a big rise in interest in certain stocks, such as Aldar, Sorouh, Etisalat and several banks, which are central to "brand Abu Dhabi". Mohammed Ali Yasin, the chief executive of broker Shuaa Securities, said there were perceptions that government-linked funds were behind the orders.
Officials in Abu Dhabi, however, attributed the rise to the fundamental strength of companies such as Aldar and Sorouh which have secure backing, ample reserves, and which are central to its development plans. HSBC, in a report last week, said Aldar would offer "the best shelter for investors, while providing good appreciation potential". The Abu Dhabi Securities Exchange (ADX) added 1.3 per cent yesterday, taking the week's gain to 4.29 per cent after a fall of 16.74 per cent last week. In contrast, the Dubai Financial Market (DFM) continued to drift, falling 5.1 per cent yesterday after losing 25 per cent last week.
"The belief the government is coming in is the only reason I can see for the market being up," said Vyas Jayabhanu, the head of Al Dhafa Financial Broker in Abu Dhabi. "We have seen a lot of orders today to buy Abu Dhabi shares. The rumour is that the government is buying heavily in the market," he said. "There is a lot of new money coming into ADX, especially for Abu Dhabi property companies such as Aldar and Sorouh."
Aldar and Sorouh, two large Abu Dhabi-based property companies, were up 15.8 per cent and 17.67 per cent respectively this week. Abu Dhabi Commercial Bank was up 15.14 per cent and Ras Al Khaimah Properties, which is listed on the ADX, was up 12 per cent. Yesterday, Aldar rose 7.56 per cent to close at Dh4.98 and Sorouh climbed 6.46 per cent to close at Dh3.13. A meeting has been scheduled today in Abu Dhabi between the Emirates Securities and Commodities Authority, the regulatory body that covers local stock exchanges, and brokers and investors. It comes in response to a request from Al Brooge, a brokerage. Together with investors, they had been calling on the authorities to act to stem the declines, and were hoping for a Kuwait-style bailout.
Yesterday, Kuwait continued to try to stabilise its market, with the country's central bank governor calling on the government to set up a stabilisation fund. It comes after several days of a court-ordered market closure following days of demonstrations by investors. The Kuwait market ended up 0.36 per cent, along with Doha which gained 2.84 per cent and Muscat which put on 1.43 per cent. The Saudi Tadawul fell 3.93 per cent of its value, while Bahrain lost 0.09 per cent.
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