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Crisis at Dubai Flagship Roils World Markets

In surprise, government takes over Dubai World; bank stocks pounded

By Will McCahill,  Newser Staff

Posted Nov 26, 2009 8:22 PM CST
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(Newser) – A move today by the government of Dubai to take over its flagship company, Dubai World, caused ripples of panic throughout the region, and translated into a selloff in bank stocks in Europe and Asia. The government also aims to delay payments on $60 billion in debt, a request that caused the price of insuring debt in emerging economies to soar, the Wall Street Journal reports.

The opaque nature of the both Dubai World and the emirate’s government itself didn’t help matters, traders tell the Financial Times—which could mean long-term trouble ahead. “In the absence of definitive information it’s hard to see the market treating this as an isolated one-off,” one notes. Nonetheless, a Dubai official called the move a “sensible business decision … (to) ensure long-term commercial success,” and promised more information next week.

Investors worried about the opacity of Dubai's government and of Dubai World.
Investors worried about the opacity of Dubai's government and of Dubai World.   (Wikimedia Commons)
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COMMENTS
Showing 3 of 6 comments
Yourself
Nov 28, 2009 6:51 AM CST
Abu Dhabi is notmuch better off. the whole thing is a financial charade of money games, kind of like the ones the banks in the US played. Dubai is, no pun intented, a mirage-in-the-desert. it looks good, it looks like it's there, but it's just a big-fat mind playing dream of illusions. In the end, it's an empty belief. a huge chunk of the buildings they're putting up stay empty for years on end. part of the "if you build it they will come"
cochiserocks
Nov 27, 2009 10:45 AM CST
Had a chat with a friend who is in finance out there the other day - he said Dubai was pretty much bankrupt. Abu Dhabi is going to have to bail them out big time. Mind you, a 17.9% growth rate and 168% growth in GDP (Gulf News) was always going to be unsustainable when the only resource you have is sand, water, greed and hope. (oil is due to run out in under 20 years) I suppose it would be a sort of staging post between China and the rest of the world, but they did kind of over egg it a bit. Went recently and it reminded me of Las Vegas - without the fun. Looks like the bubble is really starting to burst over there now - check this out. http://proactiveinvestors.co.u...
cementhead
Nov 27, 2009 9:04 AM CST
Such a brilliant comment. I, for one, am shocked at the depth of your understanding.
World • Money

 
debt • Dubai • United Arab Emirates • Asian markets • European markets • Dubai World • financial crisis • creditor • debt insurance

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