Nervousness is growing in the markets. The focus is on the Dubai Emirate and its debts

Last week he brought some good things first from the United States and Europe. Two traders in the continued smooth recovery recovered strongly undermined the negative first of Dubai.

The emirate of Dubai is leading the deferral of debt payments with two government-owned companies (Dubai World and Nakheel), which in the past financed costly development projects, including an artificially built palm-shaped island full of luxury hotels.

The situation is very high, especially in the case of Dubai World, which reported problems with debt settlement totaling $ 22 billion. Therefore, the company filed for a postponement of the installment and by May of the first year, I was very unpleasantly surprised by creditors, including a number of European and especially British banks. The next installment of more than 3.5 billion dollars was supposed to take place on December 14, and its deferral should make the banks a fat hand over the budget.

Dubai World’s own problems shed a very negative light not only on the entire Dubai emirate, which has debts of more than $ 80 billion, but on all the region’s own sovereign wealth funds, their liquidity has not yet been doubted, given the high levels of Arab oil sales. .

After last week, however, the situation has changed rapidly, as evidenced by the price of credit swaps (CDS), through which traders can insure bonds against the risk of default. The price of CDS just for the Dubai Emirate last week rose for ptiletch bond by 226b. at 543b. and CDS prices on bonds of surrounding countries, such as Bahrain (+ 44b.), Qatar (+ 20b.), or so far very safe Saudi Arabia (+35 b.), have seen a sharp rise.

The consequences that the growing problems with the debt of the emirate and the surrounding Arab countries could have are far-reaching. The risks would not be limited to banks. In the past, Arab sovereign wealth funds have been very active in buying lucrative real estate in the world’s largest metropolises, as well as in a number of large European and American companies. If they were forced to sell under the pressure of financial problems of their assets, the price of these assets would come under no pressure.

The situation around the Emirate of Dubai should not be underestimated, as clearly indicated by the reaction of traders from last week. European stocks responded to the demand of the Dubai government with a massive sell-off, when only the value of the German stock exchange index DAX fell by 3.25 percent on Thursday, which was the largest one-day sale in the last seven months. The main financial stocks came under pressure, so only the shares of the British Royal Bank of Scotland depreciated by more than seven percent.

Even in the new week, Dubai will initially have a decisive influence on trading in the financial markets, even though the fundamentals, such as the ECB’s decision on annual rates, or the highly expected results of the US labor market will be made public.

At the same time, the attention of traders will be focused mainly on how to propose to freeze the debt of the figures of the European bank. If they have enough of the problem, the turbulent situation on the financial markets from last week, it will be very easy for me to do so in the coming days.

Related Posts