As expected, the Abu Dhabi and Dubai stock exchanges have been hit with a wave of selling on their first day open since the Dubai debacle broke.
But with brokers having predicted the indices to be suspended limit down, the surprise here is that they have not fallen further. Although, the introduction of a special additional liquidity facility by the UAE central bank may have helped steady nerves.
Interestingly, the Abu Dhabi stock index has fallen further than Dubai’s.
This could be simply a matter of liquidity and/or different distributions of foreign investors. Or the market is recognising the fact that Abu Dhabi is on the hook for Dubai’s debts ahead of a crunch week for relations between the two emirates. Indeed, shares in National Bank of Abu Dhabi, which has exposure to Dubai World, were recently down around 10 per cent.
Meanwhile, DP World, which controls of Dubai’ maritime interests but is not part of the restructuring of Dubai World, has fallen 15 per cent, and Nakheel, developer of the infamous man made islands, has asked for three of its listed Islamic bonds, or sukuk, to be suspended.
Related links:
UAE push to head off debts damage – FT
The intrinsic unimportance of Dubai World and the important wider message it conveys – Willem Buiter