(MENAFN - Khaleej Times) Dubai Financial Market rallied to a new five-year high on Wednesday with Emaar Properties gaining after its board approved a bond-to-share conversion.
Emaar board has decided to issue 18.7 million new shares as part of a bond-to-share conversion programme, the property developer said on Wednesday.
The developer said in a statement that its board approved the issuance of new shares to note-holders who requested it and will "approve all similar conversion requests that may be received by the company in the future."
Emaar's 500 million bond due in 2015 will be exchanged at a price of Dh4.38. The conversion of all the bonds would lead to the creation of around 420 million new shares, representing a six per cent to eight per cent dilution of existing holders. The developer, which has built Burj Khalifa, the world's tallest structure, and Dubai Mall, the world's largest shopping mall, currently has 6.09 billion shares outstanding, according to Thomson Reuters data.
Following the bond-to-share conversion, investors who bought Emaar's convertible bonds three years ago are expected to generate returns of more than 70 per cent. Emaar climbed 2.3 per cent to Dh7.25, halting a two-session drop, and was the main support for the market. With the latest rise, Emaar shares have gained 91 per cent this year.
Driven by Emaar and other real estate stocks, Dubai's benchmark DFM index closed more than two per cent higher on Wednesday, led by banks and real estate while Abu Dhabi's ADX fell 0.22 per cent.
The Dubai index closed at 3.207.70 points, the highest since October 2008, with property major Deyaar rising 10.66 per cent to Dh0.903.
Earlier this month, Emaar share surged to a 63-month high after the developer announced a joint-venture project near the emirate's 2020 World Expo site. Emaar's project with Dubai World Central (DWC) includes hotels, malls and golf course communities.
Amid positive implications of the recent emerging market upgrade by both S&P and MSCI, the UAE has emerged as the world's second-best performing market, according to Bank of America Merrill Lynch.
With an upgrade status to emerging market in 2014, local stock markets are expected to benefit from increased capital flows over the next five to six years leading up to 2020.
BofA Merrill Lynch has predicted that the UAE's GDP would grow on winning the Expo 2020 bid by 0.5 per cent in 2016 and 2019 and by two per cent in 2020 and 2021 on the back of expectations that the government, visitor and participant spending will reach Dh84 billion between 2015 and 2021.
According to Rashid Al Baloushi, chief executive officer of the Abu Dhabi Securities Exchange, the UAE stock markets are projected to attract Dh1 billion worth in long-term investments after the MCSI upgrade. He expects the investment inflows to rise as the MCSI upgrade has added value to the stocks and the economy on a rebound mode. The corporate performance has already improved with the cash dividends growing to Dh17 billion in 2012.