Dubai bourse cancels day's trade in bank

DUBAI - Dubai stock exchange said it had cancelled all US$2.6 billion ($3.8 billion) worth of trades on Dubai Islamic Bank (DIB) on Sunday after it said the record turnover was a result of manipulation by two investors.

"Dubai Financial Market saw that most transactions on DIB was from two investors who ... (manipulated) the share price," the bourse said in a statement.

"Therefore, Dubai Financial Market Authority ... has decided to cancel all transactions on DIB during Sunday's session," it said. It did not identify the suspected manipulators.

About 9.4 billion dirhams ($3.71 billion) of DIB shares changed hands and the stock hit a record high of 37.3 dirhams in early trading, before retreating to an adjusted close of 34.9 dirhams.

Analysts attributed the gains to investors' hopes the bank, worth about US$1 billion, would raise its capital.

Trading on the Dubai bourse hit a record turnover of 11.1 billion dirhams, compared to turnover of 51.1 billion dirhams for all of 2004 and 4 billion dirhams in 2003.

Shailesh Dash, head of research at Global Investment House in Kuwait, said it was encouraging that authorities acted promptly.

"If these types of practices are allowed to go unchecked, they can certainly undermine confidence in the market," he said.

"But the authorities appear to have acted quickly and that is a good thing, especially at a time when a lot of international investors are taking an interest in the Dubai market and in markets across the Gulf," he said.

DIB said in a statement on Sunday that "it does not plan to increase its capital for the time being", confirming a statement to the Dubai bourse last week.

DIB shares were up 7.4 per cent for the day, 24.3 per cent in the past week and 250 per cent for the year. The Dubai bourse index closed at 1,089 points -- down 0.7 per cent for the day and 0.6 per cent in the past week, but 148 per cent higher for the year.

- REUTERS