Skip to main content

How Dubai is affecting global markets

Catching up with some news today. The main theme in my Twitter stream yesterday and into this morning has been Dubai.

Specifically, markets around the world have been moving on news of Dubai World's debt restructuring (possible delay of debt repayments) and what that could mean for Middle Eastern and emerging markets in a larger sense.

More from Financial Times, "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...

With trading volumes low because of the Eid holiday and US Thanksgiving, investors moved into safer assets, pushing up prices of traditional havens such as government bonds...

Investors said that the lack of information about the debt standstill, announced on Wednesday, was the key factor sparking the wider turmoil. "

Adding to our earlier theme of sovereign debt default, Bloomberg notes that Dubai's debt problems may trigger a major sovereign default if the problems are not contained within the emirate's corporate sector.

"Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.

“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote..."

Of course, this seems to be analysts' worst-case scenario for debt markets and emerging markets, but it seems all eyes are currently on Abu Dhabi to determine if there will be some sort of bailout for its neighboring emirate, Dubai.

Related articles and posts:

1. Dubai Debacle (linkfest) - MarketNut.

2. Investors to leave Dubai for Abu Dhabi, Egypt - Reuters.

3. Mobius says Dubai may trigger mkt correction - Bloomberg.

Popular posts from this blog

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi