Gulf sharemarkets rebound as Dubai debt default fears ease

United Arab Emirates sharemarkets hit by the Dubai debt crisis have rebounded as trading resumed on Sunday from the extended national day holiday.

Abu Dhabi shares gained the most since March and Dubai’s index rose for the first time in three days on investor speculation last week’s drop was overdone.

Etisalat, the Emirates telecommunications operator, soared the most in more than eight months. Aldar Properties and Sorouh Real Estate Co, the two largest developers in Abu Dhabi, gained after they were rated a “buy” in new coverage by a local sharebroker.

Abu Dhabi’s index climbed 3.9%, the most since March 24, to 2673.12. The index tumbled 12% last week. Dubai’s DFM General Index added 1.2% after retreating 13% last week.

Official statements say efforts by Dubai World, the state-run investment company with $US59 billion of liabilities, to tackle its debts are on track.

Financial and property stocks slumped last week after Dubai World requested a “standstill” agreement on all its debt payments. Nakheel, the property unit of Dubai World, has a $US3.52 billion Islamic bond maturing on December 14.

Meanwhile, the Kuwait Investment Authority, the nation’s sovereign-wealth fund, has pocketed a $US1.1 billion profit from selling its stake in Citigroup for $US4.1 billion after helping the US bank boost capital at the height of the credit crunch.

The authority had paid $US3 billion for preferred securities, which it converted into shares that have since been sold.

The transaction “will be a confidence-booster,” said M.R. Raghu, head of research at Kuwait Financial Center, a Kuwait- based investment bank, in a telephone interview. “It looks to be good news, making a profit in these times.”

Sovereign wealth funds are selling investments in financial stocks as they seek to reduce risk and address domestic criticism over investment priorities.

Singapore’s Temasek Holdings and the China Investment Corporation are among other sovereign funds that helped US investment banks replenish more than $US200 billion of capital.