Dubai stocks tumble 6 per cent in debt crisis
Updated on 30 November 2009
Stock markets in Europe rally in early trading while shares dive in Dubai and Abu Dhabi in response to the Dubai World debt crisis.
The falls came after property trader Nakheel asked for some trading of its Islamic bonds to be suspended.
Shares are trading for the first time since government-owned Dubai World asked for a debt extension.
Stock markets across Europe and Asia rebounded today as fears of a Dubai crash subsided. London's FTSE 100 opened higher as investors judged the fallout would not derail the global economy.
Liz Martins, of the analysts Business Monitor International, told Channel 4 News: "I think the carnage this morning is limited to the Middle East markets and those that are open. So UAE, Abu Dhabi - and Egypt is also down about 4 per cent.
"Global markets, interestingly, have stabilised. They seem to be accepting that this is more the UAE's problem.
"Now, we’ll find out over the coming days, when we hear more about the restructuring of Dubai World’s debt, whether that is in fact the case or whether this is a problem for global markets as well.
"I think the global economy can bounce back. The markets have stabilised this morning, so it is looking like it will be contained to the Middle East region."
Yesterday the United Arab Emirates offered banks emergency support in the first steps to ease fears that debt in Dubai's flagship firms could derail the global economy.
But the move to inject liquidity into Dubai's banks by the central bank of the Gulf Arab state, together with promises by neighbouring city-state Abu Dhabi to provide selective support to Dubai companies was seen as by analysts as the bare minimum.
The International Monetary Fund said it welcomed a move by Dubai's central bank to offer emergency support to banks, and said it would continue to monitor the debt situation.
"The United Arab Emirates is a strong resource-based economy and we welcome today's announcement by the Central Bank of the UAE making available to banks a special additional liquidity facility," the IMF said in a statement on Sunday.
"We look forward to further clarification by the authorities towards a cooperative mechanism to address the issues between these debtors and their creditors."
The crisis began on last week when Dubai, part of the United Arab Emirates federation, asked to delay payment on billions of dollars of debt issued by conglomerate Dubai World and its main property subsidiary Nakheel, developer of three palm shaped islands that has attracted celebrities and the super-rich.
Dubai World had $59bn of liabilities as of August, most of Dubai's total debt of $80bn.
Investors are especially keen to discover whether the six-month "standstill" on debt repayments to Dubai World and Nakheel will be voluntary or involuntary. If creditors are not given a choice, the restructuring will be viewed as a default.
