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Interested in Emaar IPO But Short of Cash? Take a Loan

“Interested in Emaar IPO but short
of cash?” asks a text message from a United Arab Emirates
lender to customers. If so, there’s good news: local banks are
making it easier to borrow money and invest in shares.

Mashreqbank PSC (MASQ), Dubai’s third-largest lender, is offering
account holders loans of about $2,700 to take part in the
initial public offering by the retail division of Emaar
Properties PJSC (EMAAR)
, the country’s largest IPO since 2007. Emirates
NBD, the second-biggest bank, greets customers with a message
encouraging them to buy shares in the IPO through its automated
teller machines or when they log in to their accounts online.

Emaar Malls Group PJSC is seeking to raise as much as $1.58
billion, with orders received for all the stock allocated to
institutional investors within two days of the sale starting.
Individuals can buy as much as 30 percent of the shares, giving
them the chance to bet on the world’s second-best performing
stock market this year, according to data compiled by Bloomberg.

“Retail banks have always been involved in lending to
invest in the stock market, but that willingness has definitely
been improving this year,” said Taher Safieddine, an analyst at
Shuaa Capital Psc in Dubai. “The risky part is margin lending
and putting additional debt burdens on retail clients.”

Photographer: Charles Crowell/Bloomberg

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United Arab Emirates. The mall features an aquarium and underwater zoo, the world’s most expensive gold-sheeted cupcakes and attracted 75 million visitors last year. Close

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United… Read More

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OpenPhotographer: Charles Crowell/Bloomberg

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United Arab Emirates. The mall features an aquarium and underwater zoo, the world’s most expensive gold-sheeted cupcakes and attracted 75 million visitors last year.

The share sale began on Sept. 14 and ends on Sept. 24 for
individual investors and Sept. 26 for institutional investors.

Underwater Zoo

Bank customers who respond to the marketing by borrowing
money are in line for shares in the company behind the world’s
largest shopping mall. Dubai Mall features an aquarium and
underwater zoo, the world’s most expensive gold-sheeted cupcakes
and attracted 75 million visitors last year.

The share sale for a listing on the Dubai Financial Market
is the largest in the U.A.E. since investors bought $4.96
billion of port operator DP World Ltd.’s stock seven years ago.

Dubai’s benchmark stock index has advanced 48 percent this
year, lagging behind only Argentina’s Merval Index. Shares trade
at an average of 21 times past earnings in Dubai, compared with
13 times for members of the MSCI Emerging Markets Index.

“We don’t think it’s a bubble in the U.A.E., in fact we
think valuations are some of the most attractive in the
region,” Jaap Meijer, Arqaam Capital Ltd.’s director of equity
research in Dubai, said by phone.

Property Gains

The U.A.E.’s exchanges began trading as emerging markets in
June after index provider MSCI Inc. reclassified them in June
2013. Dubai’s gauge more than doubled almost a year after the
upgrade on bets the change will lure investors. The benchmark
tumbled 23 percent from June 5 to June 30 amid concerns the
market’s property-led gains were overdone.

Photographer: Charles Crowell/Bloomberg

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC, towers over the skyline in Dubai, United Arab Emirates. Close

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC,… Read More

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OpenPhotographer: Charles Crowell/Bloomberg

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC, towers over the skyline in Dubai, United Arab Emirates.

In March, Emirates Reit, the first U.A.E-based real estate
investment trust, raised 500 million dirhams ($136 million) in
the first IPO in Dubai in at least five years. Last year the DFM
was the best-performing stock market in the world after losing
17 percent in 2011.

For the banks, lending to customers to buy stock is a way
to put their ample supplies of cash to work. The combined loans-to-deposit ratio of the U.A.E.’s 51 banks, a measure of
liquidity, was 95 percent at the end of July compared with 101
percent at the end of 2012, data compiled by Bloomberg shows.

Banks’ surplus cash helped push the three-month Emirates
interbank offered rate, a benchmark used by banks to price some
loans, to 0.71 percent, near the lowest since at least 2006 when
Bloomberg began collecting the data.

Plans by other U.A.E. companies to raise funds by selling
stock to investors make it important that Emaar Malls IPO goes
well.

“Having another bubble now will send the wrong message,”
said Safieddine at Shuaa. “Especially as the market is getting
ready for a new wave of IPOs.”

To contact the reporter on this story:
Matthew Martin in Dubai at
mmartin128@bloomberg.net

To contact the editors responsible for this story:
Dale Crofts at
dcrofts@bloomberg.net
John Viljoen

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Interested in Emaar IPO But Short of Cash? Take a Loan

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