EFG-Hermes Holding SAE is holding on to Dubai bonds to capture the Middle East’s highest yields, betting that the sell-off of the indebted emirate’s assets triggered by Europe’s debt crisis is overdone.
The yield on Dubai Holding Commercial Operations’ 4.75 percent euro bond due in January 2014 jumped 653 basis points, or 6.53 percentage points, in the quarter that ended Sept. 30 to 16.2 percent, the highest among the 106 members of the HSBC/NASDAQ Dubai Middle East Conventional US Dollar Bond Index. State-owned Dubai Holding LLC is in talks with creditors to restructure more than $12 billion in debt as the emirate seeks to recover from a borrowing binge that sent it to the brink of default in 2009.
“We are, we have been and we shall continue to be bullish” on Dubai’s credit, said Rawad Hakme, the Dubai-based co-manager of fixed-income at EFG-Hermes, the largest publicly traded Arab investment bank. “In this current environment of global macro uncertainty idiosyncratic risks are largely overlooked, hence the indiscriminate selling off of high-yield papers.” EFG owns Dubai Holding bonds and “likes other” debt securities such as those of Emaar Properties PJSC, he said.
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