Work has been halted on the artificial islands
Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.
Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.
Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.
Although the scale of Dubai’s debts is comparatively modest at $80 billion (£48 billion), the uncertainty spooked the markets, with no one sure who its creditors are. Several banks rushed out statements to reassure investors that their exposure was small.
The FTSE 100 plunged by 171 points to 5,194 — its biggest one-day fall in eight months in one of the most jittery days in the financial markets since the depths of the banking crisis.
The Treasury, the Bank of England and the Financial Services Authority were monitoring events closely and are demanding figures from UK banks on their loan exposures to Dubai.
According to a senior government official, Dubai’s crisis is regarded as modest and manageable for Britain, but there were growing fears that Abu Dhabi, the oil-rich neighbouring emirate that has in the past given rescue loans, would leave Dubai to its fate.
Dubai World, the state-owned corporation that began the panic on Wednesday by demanding a standstill on its interest payments, worsened the mood when it postponed a teleconference for its bond holders, saying the phone lines were overwhelmed.
Gerard Lyons, chief economist with Standard Chartered, said: “The market reaction shows how vulnerable some economies are to the aftermath of the debt binge. This highlights how fragile confidence is.”
The Eid al-Adha religious holiday in the Middle East, and the closure of financial markets in the United States for Thanksgiving, exacerbated the sense of uncertainty in markets that were open for business.
A computer crash at the London Stock Exchange, which by coincidence is 21 per cent owned by the Dubai Government, left dealers unable to trade for three and a half hours.
Shares in HSBC slumped by 5 per cent, wiping £6.2 billion from its value. According to the United Arab Emirates Banks Association, HSBC has £11 billion of loans outstanding to the UAE, of which Dubai is one of seven emirates. HSBC declined to comment.
More than £2.6 billion was slashed from the value of Barclays, while Lloyds and Royal Bank of Scotland, both partly owned by the taxpayer, saw their values fall by £1.7 billion and £1.5 billion respectively.
One analyst said that the fears were overdone because Abu Dhabi would eventually come to the rescue to save the UAE from embarrassment. Dubai World has liabilities of £36 billion, about three quarters of Dubai’s total state debt. Its subsidiary Nakheel built The Palm Islands development, but the property bubble in the emirate burst a year ago, leaving buildings unfinished, debts unpaid and paper fortunes erased.
Saturday, November 28, 2009
Sreesanth wrecks Lanka on his return
FANTASTIC RETURN: Back in the Test side after a 19-month hiatus, S. Sreesanth breathed fire on the third day of the second Test in Kanpur on Thursday.
Kanpur: Banishing the demons from the past, S. Sreesanth whipped up a display of compelling swing bowling at Green Park here on Thursday.
At peace with himself and bowling with sustained hostility on a sub-continental track, Sreesanth posed searching questions to the batsmen. His mind and body were in harmony.
The comeback paceman’s five for 75 in the Sri Lankan first innings has put India on course for a comprehensive win in the second Test.
Wilting under pressure
Bowled out for 229 and following on, the visitors were tottering at 57 for four when bad light ended third day’s play. There was no devil in the pitch but the Sri Lankans wilted in the cauldron.
The dismissals of Mahela Jayawardene — skipper Kumar Sangakkara had set out for a non-existent single after playing Pragyan Ojha to mid-wicket — and Sangakkara — loose stroke outside off stump to Harbhajan Singh — in the dying moments summed up Sri Lanka’s day.
Skipper Dhoni led smartly and the Indian plans fell in place. The dismissals of Mahela and Tharanga Paranavitana are cases in point.
The fleet-footed Mahela danced down to debutant left-armer Ojha in the Sri Lankan first innings to loft the ball over the man at mid-on.
When Ojha returned for his next over, Sachin Tendulkar was moved to a deeper, wider mid-on; the bait was laid. Mahela, on 47, attempted the stroke again and Tendulkar accepted the offering gleefully. The experienced Mahela failed to notice the subtle change in the field.
Surprise move
When the Sri Lankans followed on, Dhoni surprised the visitors by introducing occasional off-spinner Virender Sehwag, who foxed the left-handed Paranavitana with a delivery that came in with the arm from round-the-wicket.
Earlier, Sreesanth opened the path for India, bowling with much heart and craft in a morning spell of 9-2-28-3. He returned for a crucial burst after lunch.
Operating to a telling line around the off-stump, Sreesanth set the batsmen up by denying width and room, and gradually dragged them wider for the fatal inside-edge or the outside nick.
The Sri Lankans were sucked into the trap. Paranavitana (38), Sangakkara (44), Thilan Samaraweera (2) and Prasanna Jayawardene (39) were all dismissed attempting extravagant strokes with limited footwork.
Sreesanth switched his line to the right and the left-handers effectively. And he varied his pace cleverly.
A gem
When the Sri Lankans batted a second time, the paceman prised out Tillakaratne Dilshan with a gem. The ball pitched on off, moved and lifted to find the edge.
A wonderful wrist and seam position makes Sreesanth an engaging swing bowler. The cocking of the wrist that is held straight is the key to his bowling.
Sreesanth generated impressive speeds and generally bowled a fuller length that is mandatory for swing.
He mixed the one leaving the batsman with the delivery either swinging or angling in. The short-pitched delivery and the yorkers were effective variations.
Pace bowling is much about rhythm and Sreesanth was running in smoothly, his action blending with release.
He harried Paranavitana in the morning and hit the left-hander on the helmet with a sharp bouncer to set up a soft dismissal; Dhoni took a low diving catch.
After ending the threatening association between the Jayawardenes — Prassana appeared to have got a thin nick chasing a widish delivery — Sreesanth bowled the left-handed Rangana Herath with a peach of a delivery that pitched on middle and hit off. It was his fifth strike.
Spinners impress
There was some encouragement for the spinners and Harbhajan and Ojha performed their roles. Delivering from wide of the crease, Harbhajan breached Angelo Mathews’s forward defence with a well-flighted ball that angled into the right-hander.
The off-spinner consistently got the ball to straighten when the batsmen played for turn. Ojha was steady and stuck to his task.
Catching was the only area of disappointment for the Indians. Mahela was let off thrice. In the first innings, he edged Sreesanth between first slip and the ’keeper; both failed to move. And Harbhajan saw Rahul Dravid at slip put down Mahela in either innings. Both were sharp chances.
Kanpur: Banishing the demons from the past, S. Sreesanth whipped up a display of compelling swing bowling at Green Park here on Thursday.
At peace with himself and bowling with sustained hostility on a sub-continental track, Sreesanth posed searching questions to the batsmen. His mind and body were in harmony.
The comeback paceman’s five for 75 in the Sri Lankan first innings has put India on course for a comprehensive win in the second Test.
Wilting under pressure
Bowled out for 229 and following on, the visitors were tottering at 57 for four when bad light ended third day’s play. There was no devil in the pitch but the Sri Lankans wilted in the cauldron.
The dismissals of Mahela Jayawardene — skipper Kumar Sangakkara had set out for a non-existent single after playing Pragyan Ojha to mid-wicket — and Sangakkara — loose stroke outside off stump to Harbhajan Singh — in the dying moments summed up Sri Lanka’s day.
Skipper Dhoni led smartly and the Indian plans fell in place. The dismissals of Mahela and Tharanga Paranavitana are cases in point.
The fleet-footed Mahela danced down to debutant left-armer Ojha in the Sri Lankan first innings to loft the ball over the man at mid-on.
When Ojha returned for his next over, Sachin Tendulkar was moved to a deeper, wider mid-on; the bait was laid. Mahela, on 47, attempted the stroke again and Tendulkar accepted the offering gleefully. The experienced Mahela failed to notice the subtle change in the field.
Surprise move
When the Sri Lankans followed on, Dhoni surprised the visitors by introducing occasional off-spinner Virender Sehwag, who foxed the left-handed Paranavitana with a delivery that came in with the arm from round-the-wicket.
Earlier, Sreesanth opened the path for India, bowling with much heart and craft in a morning spell of 9-2-28-3. He returned for a crucial burst after lunch.
Operating to a telling line around the off-stump, Sreesanth set the batsmen up by denying width and room, and gradually dragged them wider for the fatal inside-edge or the outside nick.
The Sri Lankans were sucked into the trap. Paranavitana (38), Sangakkara (44), Thilan Samaraweera (2) and Prasanna Jayawardene (39) were all dismissed attempting extravagant strokes with limited footwork.
Sreesanth switched his line to the right and the left-handers effectively. And he varied his pace cleverly.
A gem
When the Sri Lankans batted a second time, the paceman prised out Tillakaratne Dilshan with a gem. The ball pitched on off, moved and lifted to find the edge.
A wonderful wrist and seam position makes Sreesanth an engaging swing bowler. The cocking of the wrist that is held straight is the key to his bowling.
Sreesanth generated impressive speeds and generally bowled a fuller length that is mandatory for swing.
He mixed the one leaving the batsman with the delivery either swinging or angling in. The short-pitched delivery and the yorkers were effective variations.
Pace bowling is much about rhythm and Sreesanth was running in smoothly, his action blending with release.
He harried Paranavitana in the morning and hit the left-hander on the helmet with a sharp bouncer to set up a soft dismissal; Dhoni took a low diving catch.
After ending the threatening association between the Jayawardenes — Prassana appeared to have got a thin nick chasing a widish delivery — Sreesanth bowled the left-handed Rangana Herath with a peach of a delivery that pitched on middle and hit off. It was his fifth strike.
Spinners impress
There was some encouragement for the spinners and Harbhajan and Ojha performed their roles. Delivering from wide of the crease, Harbhajan breached Angelo Mathews’s forward defence with a well-flighted ball that angled into the right-hander.
The off-spinner consistently got the ball to straighten when the batsmen played for turn. Ojha was steady and stuck to his task.
Catching was the only area of disappointment for the Indians. Mahela was let off thrice. In the first innings, he edged Sreesanth between first slip and the ’keeper; both failed to move. And Harbhajan saw Rahul Dravid at slip put down Mahela in either innings. Both were sharp chances.
India Inc, banks play down Dubai blues
November 28, 2009
Analysts say the crisis may discourage realty firms from venturing into that market
The stock markets skidded today as Dubai’s debt woes sparked fears over corporate and bank exposure to a key trading partner. But Indian companies and banks played down the impact, saying the exposure was not significant and they had already pulled out or stopped taking work in Dubai since the slowdown last year.
The banking regulator and the government also tried to calm sentiments by saying the impact looked marginal. The central bank, however, has asked for data from Indian banks on their exposure to Dubai World, the centre of the crisis.
On Wednesday, the Dubai government said it would ask creditors of two of its companies, Dubai World and real estate developer Nakheel, for a standstill on debt worth billions of dollars as a first step towards restructuring.
A host of Indian companies such as L&T, Nagarjuna Construction, Omaxe, Afcons Infrastructure and Country Club of India said they were reviewing their options in Dubai.
A M Naik, chairman of construction and engineering giant L&T, said, “Dubai does not have any prospects and we are concentrating on other emirates such as Oman, Qatar, Abu Dhabi and so on.” The company has a total exposure of Rs 100 crore in Dubai projects and has already recovered 90 per cent of dues from its projects there.
Delhi-based realty developer Omaxe, which had bought two plots from Nakheel, a Dubai World company, for around Rs 450 crore and paid Rs 45 crore as the first instalment, is yet to get development rights from Nakheel and is said to be exploring exit options. "Nakheel has put the project on hold and has not handed over the plots. We are asking for refund for the project,'' said Rohtas Goel, chairman of Omaxe.
Though around $55 billion of deals were announced between companies in India and the UAE, many have not seen the light of the day. For instance, the joint venture between L&T and Dubai Aluminium (Dubal) to set up a three-million tonne alumina refinery in Orissa is still in limbo even after four years, according to brokerage CLSA.
The joint ventures between DLF, the country's largest developer, and Dubai World companies — Nakheel and Limitless — did not take off as the JV partners did not go ahead with the projects.
Analysts said the Dubai crisis could discourage both realty and construction companies from venturing into that market.
"There will be a negative impact, since this is a situation where prices are expected to come down in Dubai. These players would have acquired projects to sell them at a particular price. With pricing taking a beating, the profitability of these projects reduces. Construction firms, which had gone to Dubai to carry on contract jobs, would also be affected, since payments would get delayed and project sizes will be curtailed, thereby affecting their bottom line. Commitments from Dubai-based companies into India will also reduce,'' said Anuj Puri, chairman of international property consultant Jones Lang LaSalle Meghraj.
The importance of the Indian link to Dubai and the UAE, of which Dubai is a part, can be gauged from the fact that Indians constitute 40 per cent of its population, forming 10-12 per cent of India's inward remittances. Thirty one per cent of the 5.3 million Indians in the Gulf region are in the UAE, CLSA said.
Even DP World, part of Dubai World, runs five container terminals in India, accounting for 40 per cent of India's container traffic.
Indian companies had already become cautious in taking up projects in Dubai since the economic slowdown last year. "We do not take up any projects in Dubai unless funding is secured there. But we will work in other emirates,'' said a senior executive from Afcons Infrastructure which is executing the Rs 700-crore Dubai Race Course Connectivity Project.
Real estate giants DLF and Unitech said they had zero exposure in Dubai’s realty markets.
Dharmendra Raichura, managing director of BSEL Infrastructure, which is building a waterfront project and six towers in Emirates City in the nearby emirate of Ajman at a cost of Rs 1,762 crore, said he expected the turnover to fall by 10 to 15 per cent and defaults by 8 to 10 per cent in the project. "But it is nothing new. Sales have been down 10 to 12 per cent since the last 12 months,'' Raichura said.
Hyderabad-based Nagarjuna Construction Company Limited (NCCL), which is executing two projects in Dubai, has completed 45 per cent of a pipeline project and sold one tower in a realty project. ''We will study the market and start construction of the second tower if the market improves", said Y D Murthy, executive vice-president, finance, at NCCL.
Bank of Baroda, which had an exposure of around $200 million (Rs 928 crore at today’s rates) to Dubai World, said the amount was due for repayment only after 2011. "It is paying interest and there are no overdues. So, we have absolutely no immediate concern,” a senior bank executive said.
However, talking about the bank’s total loan book, Bank of Baroda Chairman and Managing Director M D Mallya told PTI: “We have only 7-8 per cent of our total loan book in the entire Gulf region, which amounts to Rs 10,000 crore. These accounts are well-maintained and unlikely to cause any kind of impact on the balance sheet.” Out of the total Gulf loan exposure, Dubai constitutes nearly half of the loan book, which comes to less than Rs 5,000 crore, Mallya said, adding that the industry needed to wait a few more days to get a clearer picture of the crisis.
Other banks said the impact on their operations was marginal. State Bank of India officials said the bank has only a $50- million exposure to Dubai World and there was no reason to worry over the "low" exposure.
Some analysts played down the impact on the markets, saying the money involved was not as big as in other cases in the past. However, valuations of some real estate initial public offerings set to hit the market may come under pressure
Analysts say the crisis may discourage realty firms from venturing into that market
The stock markets skidded today as Dubai’s debt woes sparked fears over corporate and bank exposure to a key trading partner. But Indian companies and banks played down the impact, saying the exposure was not significant and they had already pulled out or stopped taking work in Dubai since the slowdown last year.
The banking regulator and the government also tried to calm sentiments by saying the impact looked marginal. The central bank, however, has asked for data from Indian banks on their exposure to Dubai World, the centre of the crisis.
On Wednesday, the Dubai government said it would ask creditors of two of its companies, Dubai World and real estate developer Nakheel, for a standstill on debt worth billions of dollars as a first step towards restructuring.
A host of Indian companies such as L&T, Nagarjuna Construction, Omaxe, Afcons Infrastructure and Country Club of India said they were reviewing their options in Dubai.
A M Naik, chairman of construction and engineering giant L&T, said, “Dubai does not have any prospects and we are concentrating on other emirates such as Oman, Qatar, Abu Dhabi and so on.” The company has a total exposure of Rs 100 crore in Dubai projects and has already recovered 90 per cent of dues from its projects there.
Delhi-based realty developer Omaxe, which had bought two plots from Nakheel, a Dubai World company, for around Rs 450 crore and paid Rs 45 crore as the first instalment, is yet to get development rights from Nakheel and is said to be exploring exit options. "Nakheel has put the project on hold and has not handed over the plots. We are asking for refund for the project,'' said Rohtas Goel, chairman of Omaxe.
Though around $55 billion of deals were announced between companies in India and the UAE, many have not seen the light of the day. For instance, the joint venture between L&T and Dubai Aluminium (Dubal) to set up a three-million tonne alumina refinery in Orissa is still in limbo even after four years, according to brokerage CLSA.
The joint ventures between DLF, the country's largest developer, and Dubai World companies — Nakheel and Limitless — did not take off as the JV partners did not go ahead with the projects.
Analysts said the Dubai crisis could discourage both realty and construction companies from venturing into that market.
"There will be a negative impact, since this is a situation where prices are expected to come down in Dubai. These players would have acquired projects to sell them at a particular price. With pricing taking a beating, the profitability of these projects reduces. Construction firms, which had gone to Dubai to carry on contract jobs, would also be affected, since payments would get delayed and project sizes will be curtailed, thereby affecting their bottom line. Commitments from Dubai-based companies into India will also reduce,'' said Anuj Puri, chairman of international property consultant Jones Lang LaSalle Meghraj.
The importance of the Indian link to Dubai and the UAE, of which Dubai is a part, can be gauged from the fact that Indians constitute 40 per cent of its population, forming 10-12 per cent of India's inward remittances. Thirty one per cent of the 5.3 million Indians in the Gulf region are in the UAE, CLSA said.
Even DP World, part of Dubai World, runs five container terminals in India, accounting for 40 per cent of India's container traffic.
Indian companies had already become cautious in taking up projects in Dubai since the economic slowdown last year. "We do not take up any projects in Dubai unless funding is secured there. But we will work in other emirates,'' said a senior executive from Afcons Infrastructure which is executing the Rs 700-crore Dubai Race Course Connectivity Project.
Real estate giants DLF and Unitech said they had zero exposure in Dubai’s realty markets.
Dharmendra Raichura, managing director of BSEL Infrastructure, which is building a waterfront project and six towers in Emirates City in the nearby emirate of Ajman at a cost of Rs 1,762 crore, said he expected the turnover to fall by 10 to 15 per cent and defaults by 8 to 10 per cent in the project. "But it is nothing new. Sales have been down 10 to 12 per cent since the last 12 months,'' Raichura said.
Hyderabad-based Nagarjuna Construction Company Limited (NCCL), which is executing two projects in Dubai, has completed 45 per cent of a pipeline project and sold one tower in a realty project. ''We will study the market and start construction of the second tower if the market improves", said Y D Murthy, executive vice-president, finance, at NCCL.
Bank of Baroda, which had an exposure of around $200 million (Rs 928 crore at today’s rates) to Dubai World, said the amount was due for repayment only after 2011. "It is paying interest and there are no overdues. So, we have absolutely no immediate concern,” a senior bank executive said.
However, talking about the bank’s total loan book, Bank of Baroda Chairman and Managing Director M D Mallya told PTI: “We have only 7-8 per cent of our total loan book in the entire Gulf region, which amounts to Rs 10,000 crore. These accounts are well-maintained and unlikely to cause any kind of impact on the balance sheet.” Out of the total Gulf loan exposure, Dubai constitutes nearly half of the loan book, which comes to less than Rs 5,000 crore, Mallya said, adding that the industry needed to wait a few more days to get a clearer picture of the crisis.
Other banks said the impact on their operations was marginal. State Bank of India officials said the bank has only a $50- million exposure to Dubai World and there was no reason to worry over the "low" exposure.
Some analysts played down the impact on the markets, saying the money involved was not as big as in other cases in the past. However, valuations of some real estate initial public offerings set to hit the market may come under pressure
Friday, November 27, 2009
Asian markets feel impact of Dubai crisis
HK Shares End Sharply Down On Dubai; Biggest Points Drop This Year
Hong Kong shares fall almost 5 per cent as Middle East crisis looms
Wall Street Poised For Sharp Decline On Dubai World Crisis
Dubai debt shakes world markets
Dubai shock! Why it happened, how it hits India
Europe Options Signal Concern Stocks May Drop Further on Dubai
11/27/2009
Taiwan's stock market felt the shockwaves from the Dubai debt crisis on Friday, as did other markets in the region. The weighted index of the Taiwan stock exchange fell by 3.21% with financial stocks leading the decline. Solar energy was one of the few stocks to buck the trend and stand firm.
The market on Friday opened already 124 points down on yesterday's closing figure. By close of trade that loss had doubled, with the index shedding 248 points to finish the day at 7,490.91.
Markets in Taiwan, Hong Kong and South Korea proved a huge drag on the MSCI index of Asia-Pacific banking shares traded outside Japan. The MSCI dropped 4%, reflecting widespread fears that Dubai's debt could create another world financial crisis.
Hong Kong shares fall almost 5 per cent as Middle East crisis looms
Wall Street Poised For Sharp Decline On Dubai World Crisis
Dubai debt shakes world markets
Dubai shock! Why it happened, how it hits India
Europe Options Signal Concern Stocks May Drop Further on Dubai
11/27/2009
Taiwan's stock market felt the shockwaves from the Dubai debt crisis on Friday, as did other markets in the region. The weighted index of the Taiwan stock exchange fell by 3.21% with financial stocks leading the decline. Solar energy was one of the few stocks to buck the trend and stand firm.
The market on Friday opened already 124 points down on yesterday's closing figure. By close of trade that loss had doubled, with the index shedding 248 points to finish the day at 7,490.91.
Markets in Taiwan, Hong Kong and South Korea proved a huge drag on the MSCI index of Asia-Pacific banking shares traded outside Japan. The MSCI dropped 4%, reflecting widespread fears that Dubai's debt could create another world financial crisis.
Dubai crisis?What impact will this have on the global economy?
Concern over Dubai’s debt problems has driven down Europe’s share markets for the second day running. What impact will this have on the global economy?
Earlier, the state-owned Dubai World announced that it would delay repaying some of its debt.
The biggest underlying fear is that Dubai's problems could reignite the financial turmoil of the credit crisis, lowering global demand for a whole range of commodities, including oil.
The Gulf state, which has less oil money than many of its neighbours, has grown to rely on trading and tourism.
Has development in Dubai been too swift? Will Dubai manage to keep afloat? Could this reignite the financial turmoil? Have you invested or are you working in Dubai? Have you been affected?
Earlier, the state-owned Dubai World announced that it would delay repaying some of its debt.
The biggest underlying fear is that Dubai's problems could reignite the financial turmoil of the credit crisis, lowering global demand for a whole range of commodities, including oil.
The Gulf state, which has less oil money than many of its neighbours, has grown to rely on trading and tourism.
Has development in Dubai been too swift? Will Dubai manage to keep afloat? Could this reignite the financial turmoil? Have you invested or are you working in Dubai? Have you been affected?
Dow futures at 6 a.m.: down 234.
November 27, 2009
Dubai's sovereign-wealth woes could mean U.S. market correction, 'firesale of prime properties from London to New York'
CNBC’s “Squawk Box” opens at 6 a.m. by warning of “reigniting worries of a global financial turmoil,” and the possibility of big “downdraft” in U.S. markets.
Reuters, DUBAI/TOKYO: “Investors recoiled from risky assets on Friday and dumped shares in Asian banks and builders, fearing a Dubai debt default could reignite the financial turmoil of the credit crisis. Stocks from Tokyo to Mumbai were haunted by suspicion of lenders' exposure to Dubai firms that built islands in the Gulf, planned cities from Pakistan to Africa and fashioned the financial hub of the world's biggest oil exporting region. Dubai, part of the oil-exporting United Arab Emirates, said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step toward restructuring.”
Good Friday morning. It could be Black Friday for more than retailers. While we were focused on turkey and football, markets around the world took a licking following Wednesday’s announcement by Dubai that it couldn’t pay debts of Dubai World, one of the globe’s biggest sovereign wealth funds. The possibility of default created panic in markets, with many sell-offs around 3%. The story sneaked up on many revelers in the U.S., buried on page B3 of the Thanksgiving Day New York Times “(Dubai Asks for Stay on Debt Payments”). Now, Treasury, the West Wing and the Street are paying close attention to the potential fallout.
TRADERS FEAR THIS IS MORE OF A DOMINO THAN A BLIP. The concern is less the size of the potential default than the specter of global credit contagion. The reaction shows that despite early signs of global recovery, the markets suspect there’s another shoe to drop. Here’s a speed read of the coverage as Americans head out to door-buster sales:
THE PSYCHOLOGY -- FT banner – “Dubai sends markets into turmoil”: “Stock markets around the world were convulsed yesterday as investors scrambled to understand the implications of Dubai World’s restructuring and unexpected debt standstill. The lack of information about Dubai’s flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt. ‘In the absence of definitive information, it’s hard to see the market treating this as an isolated one-off,’ said one trader.”
THE FRENZY -- DRUDGE banner, with photo of Dubai’s palm islands: “DUBAI IN DEEP WATER.” The (London) Times banner: “Dubai in deep water”: “Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill. According to a senior government official, Dubai’s crisis is regarded as modest and manageable for Britain, but there were growing fears that Abu Dhabi, the oil-rich neighbouring emirate that has in the past given rescue loans, would leave Dubai to its fate.”
Large, diversified financial institutions provide significant value to our economy, by meeting the needs of large, globally active firms which spurs job creation and growth. www.financialservicesforum.org.
REAL-ESTATE FALLOUT – FT p.1: “Real-estate investors are preparing for a firesale of prime properties from London to New York should Dubai decide to raise cash by selling liquid assets held by its investment companies … Istithmar, the investment arm of Dubai World, was one of the busiest investors in ‘trophy’ properties during the global property boom. Its investments range from the Adelphi in Strand, London, and Grand Buildings in Trafalgar Square to the Mandarin Oriental hotel in New York.”
“US MARKETS BRACING FOR SELLOFF ON WORRIES ABOUT DUBAI’S DEBT” CNBC. “Market Insider” column, by Patti Domm: “US markets are bracing for a shakeup Friday after investors fled risk assets globally on concerns about Dubai's debt rescheduling. Markets worldwide reacted to concerns about bank exposure to the debt, particularly in Europe, and fears it is a signal of greater problems in emerging markets. The news comes as investors are closing out the year, many with sharp gains. It also comes at a time when there's been heavy buying by funds and others seeking the comfort of US treasurys. The Dubai story was the topic of concern Wednesday but many traders made an early exit ahead of the holiday and stocks traded quietly.”
Dubai's sovereign-wealth woes could mean U.S. market correction, 'firesale of prime properties from London to New York'
CNBC’s “Squawk Box” opens at 6 a.m. by warning of “reigniting worries of a global financial turmoil,” and the possibility of big “downdraft” in U.S. markets.
Reuters, DUBAI/TOKYO: “Investors recoiled from risky assets on Friday and dumped shares in Asian banks and builders, fearing a Dubai debt default could reignite the financial turmoil of the credit crisis. Stocks from Tokyo to Mumbai were haunted by suspicion of lenders' exposure to Dubai firms that built islands in the Gulf, planned cities from Pakistan to Africa and fashioned the financial hub of the world's biggest oil exporting region. Dubai, part of the oil-exporting United Arab Emirates, said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step toward restructuring.”
Good Friday morning. It could be Black Friday for more than retailers. While we were focused on turkey and football, markets around the world took a licking following Wednesday’s announcement by Dubai that it couldn’t pay debts of Dubai World, one of the globe’s biggest sovereign wealth funds. The possibility of default created panic in markets, with many sell-offs around 3%. The story sneaked up on many revelers in the U.S., buried on page B3 of the Thanksgiving Day New York Times “(Dubai Asks for Stay on Debt Payments”). Now, Treasury, the West Wing and the Street are paying close attention to the potential fallout.
TRADERS FEAR THIS IS MORE OF A DOMINO THAN A BLIP. The concern is less the size of the potential default than the specter of global credit contagion. The reaction shows that despite early signs of global recovery, the markets suspect there’s another shoe to drop. Here’s a speed read of the coverage as Americans head out to door-buster sales:
THE PSYCHOLOGY -- FT banner – “Dubai sends markets into turmoil”: “Stock markets around the world were convulsed yesterday as investors scrambled to understand the implications of Dubai World’s restructuring and unexpected debt standstill. The lack of information about Dubai’s flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt. ‘In the absence of definitive information, it’s hard to see the market treating this as an isolated one-off,’ said one trader.”
THE FRENZY -- DRUDGE banner, with photo of Dubai’s palm islands: “DUBAI IN DEEP WATER.” The (London) Times banner: “Dubai in deep water”: “Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill. According to a senior government official, Dubai’s crisis is regarded as modest and manageable for Britain, but there were growing fears that Abu Dhabi, the oil-rich neighbouring emirate that has in the past given rescue loans, would leave Dubai to its fate.”
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REAL-ESTATE FALLOUT – FT p.1: “Real-estate investors are preparing for a firesale of prime properties from London to New York should Dubai decide to raise cash by selling liquid assets held by its investment companies … Istithmar, the investment arm of Dubai World, was one of the busiest investors in ‘trophy’ properties during the global property boom. Its investments range from the Adelphi in Strand, London, and Grand Buildings in Trafalgar Square to the Mandarin Oriental hotel in New York.”
“US MARKETS BRACING FOR SELLOFF ON WORRIES ABOUT DUBAI’S DEBT” CNBC. “Market Insider” column, by Patti Domm: “US markets are bracing for a shakeup Friday after investors fled risk assets globally on concerns about Dubai's debt rescheduling. Markets worldwide reacted to concerns about bank exposure to the debt, particularly in Europe, and fears it is a signal of greater problems in emerging markets. The news comes as investors are closing out the year, many with sharp gains. It also comes at a time when there's been heavy buying by funds and others seeking the comfort of US treasurys. The Dubai story was the topic of concern Wednesday but many traders made an early exit ahead of the holiday and stocks traded quietly.”
Dubai debt fears hit world markets hard
27 Nov 2009, AGENCIES
LONDON: World stock markets tumbled on Thursday as investors fretted over the debt problems at Dubai World, a government investment company, and the continuing slide in the dollar, which earlier fell to a 14-year low against the yen.
Markets are usually relatively quiet when Wall Street is closed for a holiday, as it is Thursday for Thanksgiving Day. Not so today, as the rest of the world digested the stunning news from Dubai that the government's flagship investment company was in financial trouble.
European markets followed Asia lower with the FTSE 100 index of leading British shares closing down 170.68 points, or 3.2 per cent, at 5,194.13, having been out of action earlier for over three hours because of technical problems.
Germany's DAX fell 188.85 points, or 3.2 per cent, to 5,614.17 while the CAC-40 in France was 129.93 points, or 3.4 per cent, lower at 3,679.23.
Sentiment in stocks was dented by the news that Dubai World, which is thought to have debts totaling around $60 billion, has asked creditors if it can postpone its forthcoming payments until May. That stoked fears of a potential default and contagion around the global financial system, particularly in banks and emerging markets.
"Fear of sovereign default in the Middle East rattled the markets," said Jane Foley, research director at Forex.com.
Banks bore the brunt of the selling in Europe, amid fears of potential exposure to Dubai. In London, Royal Bank of Scotland PLC was down nearly 8 per cent, making it the biggest faller on the FTSE. In Germany, Deutsche Bank was the biggest faller on the DAX, down around 6 per cent.
Investors were also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 86.27 yen, while the euro pushed up to a fresh 15-month high of $1.5141.
By late afternoon London time, the dollar had recouped some ground and was trading at 86.55 yen, down 0.9 per cent on the day, while the euro was 1 per cent lower at $1.4988.
The continued appreciation in the value of the yen continued to dent Japanese stocks as investors worry that the rising currency will have a detrimental effect on the country's exports. Japan's Nikkei 225 stock average fell 58.40 points, or 0.6 per cent, to 9,383.24.
LONDON: World stock markets tumbled on Thursday as investors fretted over the debt problems at Dubai World, a government investment company, and the continuing slide in the dollar, which earlier fell to a 14-year low against the yen.
Markets are usually relatively quiet when Wall Street is closed for a holiday, as it is Thursday for Thanksgiving Day. Not so today, as the rest of the world digested the stunning news from Dubai that the government's flagship investment company was in financial trouble.
European markets followed Asia lower with the FTSE 100 index of leading British shares closing down 170.68 points, or 3.2 per cent, at 5,194.13, having been out of action earlier for over three hours because of technical problems.
Germany's DAX fell 188.85 points, or 3.2 per cent, to 5,614.17 while the CAC-40 in France was 129.93 points, or 3.4 per cent, lower at 3,679.23.
Sentiment in stocks was dented by the news that Dubai World, which is thought to have debts totaling around $60 billion, has asked creditors if it can postpone its forthcoming payments until May. That stoked fears of a potential default and contagion around the global financial system, particularly in banks and emerging markets.
"Fear of sovereign default in the Middle East rattled the markets," said Jane Foley, research director at Forex.com.
Banks bore the brunt of the selling in Europe, amid fears of potential exposure to Dubai. In London, Royal Bank of Scotland PLC was down nearly 8 per cent, making it the biggest faller on the FTSE. In Germany, Deutsche Bank was the biggest faller on the DAX, down around 6 per cent.
Investors were also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 86.27 yen, while the euro pushed up to a fresh 15-month high of $1.5141.
By late afternoon London time, the dollar had recouped some ground and was trading at 86.55 yen, down 0.9 per cent on the day, while the euro was 1 per cent lower at $1.4988.
The continued appreciation in the value of the yen continued to dent Japanese stocks as investors worry that the rising currency will have a detrimental effect on the country's exports. Japan's Nikkei 225 stock average fell 58.40 points, or 0.6 per cent, to 9,383.24.
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