Stuttgart  - Abu Dhabi state-owned Aabar Investments declined Monday to rule out boosting its stake in giant German carmaker Daimler AG after the fund emerged over the weekend as the biggest shareholder in the manufacturer of luxury Mercedes Benz autos.

"A possible increase in the holding will have to be examined later," said Aabar chairman Khadem Al Qubaisi at a joint press conference Monday in Stuttgart with Daimler chief Dieter Zetsche. "At the moment, we are satisfied with a 9.1-per-cent holding."

The news that Daimler had sold a more than 9-per-cent stake to the Abu Dhabi fund in the United Arab Emirates sparked a rally in the Stuttgart-based carmaker's shares, which jumped more than 6 per cent in early trading Monday before trimming back their gains to about 0.7 per cent during the afternoon.

Announced Sunday, Abu Dhabi's acquisition of 96.4 million newly-issued Shares means Aabar will replace the Kuwait Investment Authority as Daimler's largest stakeholder. Kuwait will hold a 6.9-per cent-Daimler stake.

"For us we gain an anchor investor," Zetsche said welcoming the Abu Dhabi move, adding that the fund's share purchase meant Daimler was better positioned to pursue investments in the future.

Aabar is to pay 1.95 billion euros (2.6 billion dollars) or 20.27 euros for the Daimler stake. Daimler's shares closed at 21.34 euros on Friday. Aabar's biggest investor is the Abu Dhabi government's International Petroleum Investment Co.

The investment fund's purchase is likely to help ease some of the pressure on Daimler as it faces up to the global car industry crisis.

"This is on a long term basis important because Daimler is the German carmaker with the most precarious share structure," said German car industry analyst Willi Diez. "The money will also be good for Daimler."

The move by Aabar Investments was seen by investors as an expression of confidence in Daimler, which has been hit by falling sales forcing it to cut production.

Daimler expects to record an operating loss for the first quarter after profits slumped by nearly two-thirds last year to 1.4 billion euros.

In early morning trading, Daimler shares had climbed more than 8 per cent to 23.10 euros. The state-controlled Aabar is paying 20.27 euros per Daimler share for its holding in the company.

German Chancellor Angela Merkel's government also welcomed Aabar's share deal with Daimler.

"The German Government sees it as a positive signal. As a result of the investment the long-term growth prospects and performance of the industry in German has been recognized," a spokesman in Berlin said.

Aabar's decision to purchase the Daimler stake is also a further sign of the Middle East investment funds diversifying away from a focus on energy industries.

For his part, Al Qubaisi paid tribute to Daimler's management saying Aabar trusted the car makers' management and said the fund was making the investment despite the upheaval taking hold in the global auto industry.

"Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide," said Al Qubaisi. dpa