UEMLand Dives on Dubai Debt

 The tallest tower in the world
Burj Dubai.


Despite the assurances given, Malaysian investors are not taking chances against  stocks having exposure to the Dubai World which is currently freezing repayment on its massive loan. Properties in partneship with the Dubai conglomerate to develop the Iskandar region is hardest hit so far. A few weeks ago UEMLand was trading at 1.77, when last checked this afternoon  it was at 1.43 with a day low of 1.39.

According to newspaper reports Malaysian construction companies have limited exposure to Dubai financial activities but what is the quantum of the limitation? I suppose Dubai  World will eventually recover through restructuring of its loans and perhaps via a kind of bailout by its cash-rich brother emirate, Abu Dhabi. This then might be an opportune  time to buy UEMLand but how many  retail investors  want to try their luck? I for one, am not game. Moreover affected big western investors are issuing warning that they might not raise any more loans in the future for Dubai , particularly, should the company default on the repayment.

I am glad I disposed  this stock last September at a slight profit, not because I predicted the Dubai crisis but because I wanted to buy Maxis as the potential is more predictable. UEMLand was more speculative in nature and under current cash-strapped scenario, I do not think it is a good idea to hold on to this kind of stock.

I have more luck though with  the Sarawak-based construction company HSL whose shares  I bought at 0.89 and is now doing modestly well. Only government-linked companies, it seems to me,  would go all out for mega projects. Just look at the Dubai World, most people thought that it belonged or at least linked to the emirate that was why they invested happily (greedily?), now we know better. In time of boom  they share your good fortune, in time of bust, they keep a distance and call on investors to look at the fine prints! Who would want to invest in such a country?

People should visit Dubai World's website to check on the exposure of other Malaysian companies.