Sydinvest calm on UAE, awaits Dubai World plan

COPENHAGEN (Reuters) - Dubai's debt problems need to worsen before Sydinvest fund manager Anders Ronnebaek would consider shifting to "underweight" on the United Arab Emirates in his Africa & Middle East equities mutual fund.

Ronnebaek cut his UAE exposure to "neutral" in November by reducing financial sector holdings after Dubai shocked investors by requesting a standstill on $26 billion of debts linked to state-owned holding company Dubai World and two of its property units.

Unfazed by the recent surge in Dubai debt default insurance costs, the Denmark-based fund manager has kept the fund's UAE exposure at 10 percent of its $41 million assets under management.

Within the UAE allocation, Ronnebaek's focus is more on stable, oil-rich Abu Dhabi than on Dubai, whose banking, property and tourism industries until late last year sucked up foreign capital, positioning the fast-growing, glitzy city as the Gulf region's foremost financial hub.

Another reason for staying put was the low rate of flows in the fund, signaling investors were satisfied with its year-to-date return of 9 percent, he said.

The MSCI Emerging Markets index <.MSCIEF> is down 6.5 percent.

"If they can't find a solution for Dubai World, if all the debt issues worsen, I could go underweight (UAE)," Ronnebaek told Reuters in a brief telephone interview.

"I'm waiting for a plan for Dubai World."

British Business Secretary Peter Mandelson said on Sunday the emirate's handling of the Dubai World crisis would affect future investments.

PROPERTY EARNINGS

The Sydinvest Africa & Middle East fund's biggest UAE holding is Emaar Properties , accounting for just over 3 percent of assets.

Ronnebaek said Emaar's fourth-quarter results were "okay" but the report from another holding, Aldar Properties , less so.

Other UAE holdings include National Bank of Abu Dhabi , First Gulf Bank and port operator DP World .

Ronnebaek said recent volumes on UAE stock exchanges had been below pre-crisis levels and that it might be difficult to pick up bargains if the news flow were to turn positive.

Dubai's benchmark index <.DFMGI> has fallen 25 percent in the past three months. The Abu Dhabi equities benchmark <.ADI> is down 9 percent.

"If there's some good news everyone will be limit-up and nobody will sell," Ronnebaek said.

(editing by John Stonestreet)

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