Chronicle Journal - Stories -

Opinion Poll
A wind farm is proposed for the Nor‘Wester range south of Thunder Bay. What‘s your view on the proposal:
	In favour — green energy is the way to go
	No way, not in our backyard
	Well, it might spur much needed economic development
	Don't know — I hear many conflicting claims

More Links	tbayjobline	TbayWeddings	Play Games!	^New! eVents Calendar	Advertise with Us	Contact Us

Other Links	Movie Times	Airport	Bus Schedule	Road Conditions	Library	Weather

Dubai debt fears, dollar slide hit world markets hard
By THE ASSOCIATED PRESS
Thursday, November 26, 2009

Email this article
Printer friendly page

LONDON - World stock markets were rattled Thursday as uneasy investors fretted over debt problems at Dubai World, a government-owned investment company that wants permission to postpone payments on billions of dollars of debt.

The Dubai government has asked creditors for a debt standstill as it restructures Dubai World and affiliate property group Nakheel.

Dubai World is thought to have debts totalling around US$60 billion, so its request to postpone payments has stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets.

In Toronto the S&P/TSX composite index dropped 102.5 points to 11,534.4 early in Thursday trading, largely on the news out of Dubai. The decline was about one per cent, much less than what in some overseas markets.

Analysts in Canada say the Dubai news could be a surprise to confident investors who believed in the might of the wealthy emirate, although there also have been well-known concerns about Dubai World’s massive debt load.

"I think this was the ultimate house of cards that was at risk of tumbling," said Doug Porter, deputy chief economist at BMO Capital Markets.

"But I guess the broad opinion had been that somehow they would pull through, whether through support from Abu Dhabi or they might have the financial resources to get over this."

Porter noted however that Dubai was a special case and was not necessarily indicative of similar activity elsewhere. DP World, a Dubai World company that operates container terminals in Vancouver, is not included in the restructuring, according to reports quoting a statement by the Dubai government.

The major U.S. stock and financial markets are closed Thursday for the American Thanksgiving holiday, except for electronic trading.

Major markets in Hong Kong and Shanghai, which open and close before North American markets begin their trading days, were hit hard Thursday by the Dubai news.

The Shanghai index tanked 3.6 per cent, Hong Kong’s Hang Seng shed 1.8 per cent. Japan’s Nikkei 225 stock average fell a moderate 0.6 per cent.

In Europe, London’s FTSE 100 index fell 1.8 per cent and Frankfurt’s DAX dropped 1.77 per cent.

"Certainly the Dubai debt debacle and the uncertainty that it has created has had a severe knock-on effect," David Buik, markets analyst at BGC Partners, told The Associated Press.

Investors were also keeping a close eye on developments in the currency markets as the U.S. 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-morning London time, the American dollar had recouped some ground and was trading at 86.75 yen, down seven per cent on the day, while the euro was 0.3 per cent lower at $1.5094.

The relative weakness of the American dollar against other major currencies has a potential disruptive effect, affecting the competitiveness of other countries - including Canada, where the loonie has been edging towards parity with the greenback.

The Dubai government said Dubai World would ask all providers of financing to itself and Nakheel to extend maturities on debt until at least May 30 next year.

That would affect about $5.7 billion of debt due to mature before the end of May.

Dubai World’s financial restructuring will be lead by the Dubai Financial Support Fund and is already underway.

Dubai World is one of the emirate’s three big holding firms, along with Dubai Holding and Investment Corporation of Dubai.

Top of Page

Games!
Canadian Crossword
PlayFour!
Word Roundup