Gulf stocks stabilise after Dubai crisis

Dubai Debt Crisis

The panic that spread throughout the MENA region after the announcement that Dubai World would need a minimum of six months before repaying US$60 billion worth of debt, stock markets in the Gulf have shown signs of steadying.

The Kuwait Stock Exchange, which plunged 2.7 percent on Tuesday, fluctuated sharply at the opening of the market and then traded slightly lower despite a rise in the leading banking sector.

The Bahrain Stock Exchange, which reopened on Wednesday after a six-day holiday, eased 0.5 percent amid quiet trading.

Qatar's Doha Securities Market, the only other Gulf bourse open on Wednesday, was due to start trading later. The DSM index shed a massive 8.3 percent on its first day of trading on Tuesday since news broke of Dubai's debt problems.

Dubai market shed 12.5 percent

As of yet it is unclear whether the markets of Saudi Arabia and Oman have followed suit as they are still on holiday.

After the announcement last week regarding Dubai World's debt woes, the Dubai market shed 12.5 percent of its value and Abu Dhabi lost 11.5 percent in two days of trading.

Mixed signals are being sent from the area as the Dubai government has said it will not stand behind Dubai World, the holding company that asked for a delay in the payment of a US$3.5 billion bond due on 14 December. But it may be forced to change its position since it is the ultimate investor in the company.

Creditors are rushing to recover their money

Now creditors are rushing to Dubai in a fight to recover their money. Hordes of bankers, lawyers and accountants are arriving in Dubai mostly from London and the US, as the parties involved start complex negotiations that are likely to "take time," according a source involved in the talks.

However, regional analysts have played down the crisis in Dubai, accusing the international reaction of being "unjustified" and "exaggerated". And Yesterday international markets rallied as analysts played down the global impact of Dubai's debt moratorium and after assurances from the ruler of Dubai and from the president of the UAE.

Its impossible to tell if markets will continue to rally, or if creditors will succeed in recovering their cash because any sort of economic restructuring deal in the Middle East is uncharted waters.

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