Abu Dhabi's Aldar Properties tumbled to a five-month low on Sunday after the indebted developer said it planned to take $2.9 billion in impairments and issue a $760 million convertible bond.
These are part of a restructuring plan for the state-linked firm, which has made losses for four straight quarters and faces an estimated $3 billion funding gap in 2011. Abu Dhabi's government will pay Aldar $4.5 billion for various assets.
"Equity holders suffer immediate equity impairment and future dilution, but solvency is now assured," Nomura wrote in a research note. "The stock now looks expensive relative to its peers and that will likely take some time to correct."
Aldar fell 7.1 percent to its lowest close since August 12. The firm's sukuk holders, plus local bank and trade creditors were the winners from Aldar's restructuring, said Akram Annous, MENA strategist at Al Mal Capital.
"There is a good reason most banks and real estate companies trade at huge discounts to book," said Annous. "Their financials don't reflect reality. Nobody believes them. After this restructuring, you won't be able to say that about Aldar. I expect the equity market to slowly warm to this news."
Abu's Dhabi's index fell 0.9 percent, while Dubai slumped to a four-month low as property stocks headed losers. "Aldar is a drag on sentiment - it's not always rational, but this is how the market operates," said Tarik Lotfy, Arqaam Capital Head of MENA equities. Kuwait's Zain ended flat, with investors little moved by a delay in a $12 billion stake sale to Abu Dhabi's Etisalat. The latter fell 0.9 percent.
"Etisalat has made a generous offer and has the ability to finance the transaction, so for minority shareholders it's worth waiting for," said Irfan Ellam, Vice President, and Al Mal Capital telecoms analyst.
Egypt's main index dropped 1 percent as the ousting of Tunisia's president spurred fears of instability in other Arab countries. Citadel Capital fell 2.1 percent and SODIC dropped 1.6 percent.
"It has really affected the political risk in the region," said Youssef Kamal of Naeem Brokerage. Saudi Arabia's bank index rose 0.3 percent to a 15-week high after more above-forecast results from lenders.
"Banks' Q4 results have come in better than expected, but that's because they've taken less provisions, not because operating profits have increased," said a Riyadh-based trader who asked not to be identified. "Banks will have to take more provisions sooner or later, so it's not really good news and I don't think we'll see bank shares taking off because people know there's more pain to come."
Saudi Investment Bank rose 2.2 percent after it swung into profit in the fourth-quarter, but SABB dipped 1 percent. The latter made a quarterly profit of 397 million riyals ($106 million), but operating income fell.
Qatar's index edged up to a new 27-month high, with foreigners now net buyers on the bourse for 14 weeks running, said Hani Girgis, assistant chief dealer at Dlala brokerage. These investors are likely to hold onto positions at least until companies make dividend payouts for 2010, he added.