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UAE stocks drop amid mounting virus concerns

UAE stocks drop amid mounting virus concerns

Dubai’s main index fell 3.6 per cent as of 10.42 am local time

Shares in Dubai and Abu Dhabi fell despite the United Arab Emirates’ announcement of a Dhs100bn ($27.2bn) package to support the economy from coronavirus- and oil-related shocks.

The main index in Dubai fell 3.6 per cent as of 10.42 am local time, after rising as much as 2.9 per cent at the open. Abu Dhabi’s gauge lost 1 per cent after initially increasing 1.4 per cent.

The Targeted Economic Support Scheme includes Dhs50bn of zero-interest, collateralized loans for banks. In addition, banks will be allowed to reduce their capital buffers, which will inject Dhs50bn dirhams in liquidity.

“These stimulus packages are likely to ease some pressure on businesses,” said Edmond Christou, a financials analyst with Bloomberg Intelligence.

“However, that largely depends on the depth and persistence of the coronavirus spread, as well as banks appetite to deploy this liquidity into credit growth.”

The UAE’s stimulus follows that of other Middle Eastern nations. Saudi Arabia’s central bank unveiled a 50bn riyal ($13.3bn) package to support private businesses and Egypt said it will allocate 100bn pounds ($6.4bn) to combat the virus.

While the measures should provide relief to small and mid-size enterprises, “what makes the current situation a bit more challenging is the simultaneous hit to both supply and demand,” said Ali Taqi, the head of equities at Rasmala Investment Bank in Dubai, in an interview to Bloomberg TV.

Dubai’s biggest bank, Emirates NBD, fell 8.3 per cent, adding to a 24 per cent slump last week. First Abu Dhabi Bank, the UAE’s biggest lender, fell 1.5 per cent, extending losses this month to 25 per cent.

“These nascent stimulus measures are commendable, sizable and timely for lenders and borrowers to navigate the hit to economic activity caused by the coronavirus,” said Ehsan Khoman, the head of research for the Middle East and North Africa at MUFG Bank.

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