Dubai’s debt debacle
Authorities in Dubai claim the media over-hyped the emirate’s announcement of a six-month debt standstill for two of its major companies. But international bodies are still monitoring the situation.
November 30, 2009 3:35 by Aarti Nagraj
The UAE stock markets crashed after opening on Monday-the first time they opened since Dubai announced on Wednesday that it would ask creditors for a six-month debt standstill for two of its major companies – Dubai World and Nakheel Properties. Fourteen out of 32 companies in Dubai and 17 out of 60 firms in Abu Dhabi opened in red on Monday, with some companies seeing their stocks falling by around 10 percent.
But while the country’s stock markets are nose diving, global indexes seem to be picking up. According to Bloomberg, the MSCI Asia Pacific Index in Tokyo rose 3.5 percent on Monday, South Korea’s Kospi Index gained 2.4 percent, the main index in China increased 2.5 percent and the Taiex index in Taiwan also gained 1.2 percent.
“The market over-reacted on Friday,” Phillips Securities analyst Rock Lam told Reuters. “Over the weekend, UAE has showed support to Dubai’s debt issue so the market is quieting down and shares are rebounding.”
“Although Dubai World is extending its repayment period, it will not pose an impact on banks’ earnings,” he said.
The UAE Central Bank also announced on Sunday that it would “stand behind” local and international banks operating in the country. The bank said that it would provide them “a special additional liquidity facility linked to their current accounts at the Central Bank,” reported official news agency WAM.
The Central Bank also added that the country’s banking system was “more sound and liquid than a year ago.”