Dubai Stocks Tank after Debt Revelation

(AP)  Updated at 8:18 a.m. Eastern.

Dubai's main stock exchange dropped more than 7 percent and Abu Dhabi markets slid more than 8 percent on the first day of trading since officials went public with the city-state's huge debt crisis.

Shares of DP World, a profitable port operating division of the debt-ridden Dubai World, were off nearly 15 percent in early trading Monday when the market opened.

The drop mirrored the turmoil on world markets after Dubai officials last Wednesday announced that Dubai World, the emirate's investment and development engine, would seek a six-month delay in paying creditors on nearly $60 billion in debt.

A top Dubai finance official said the heavily indebted Dubai World is not guaranteed by the emirate's government.

Abdulrahman al-Saleh, director general of Dubai's Finance Department, says lenders to the conglomerate bear some responsibility for the current crisis. He says they lent money based on the viability of the firm's projects, not because of government guarantees.

Al-Saleh said while Dubai owns Dubai World, it has been known since the conglomerate was established that it was independent and that it "is not guaranteed by the government."

CBS MoneyWatch: Dubai's Serious, but not Lethal

In an effort to calm the regional markets that have closed since last week due to an Islamic holiday, the United Arab Emirates central bank on Sunday pledged to stand behind foreign and domestic banks in the country and offered additional money.

Asian stock markets rebounded Monday from their steep fall last week after the United Arab Emirates moved to contain the fallout from Dubai's debt crisis.

Major markets jumped by 2 percent or more after tumbling on Friday amid fears Dubai's debt problems could lead to more financial instability and were a sign of hidden troubles elsewhere in the still weak world economy.

Once-booming Dubai has become the main victim of the global recession in the Gulf.

In a statement Sunday, the UAE's central bank said it had sent notice to Emirati banks and foreign banks with branches in the country making clear they would have access to "a special additional liquidity facility."

The UAE has been guaranteeing bank deposits since October 2008, but the pledge for new help at generous terms stems from concern that UAE banks have some of the biggest exposure to Dubai World's debt. Several have been downgraded by international ratings agencies or been placed on review for downgrades.

[LtSmily]

Hello melch, nice to see a sane voice in the wilderness. I agree with everything you say in one way or another, and I apologize if I inferred that I wanted manufacturing jobs back. Working at a large multinational heathcare provider that makes specific medical instruments on lines (that aren't fully robotic yet) that are run by hourly union wage earners, I get blasted daily about manufacturing jobs going "offshore". These are the same people, however, that will complain all day long about jobs leaving the US, but run to the big box discounters to buy the cheapest items they can find, which are not made in America (unless protected by onerous tariffs).

You bring up great points, if the dollar were equal to other currencies then what incentive would manufacturers have to off shore. Imagine if China had the same labor and wage laws we have in the States with an upwardly (or at least level) mobile middle class (which they do have now). There would be no incentive to build factories there because then any myriad of other expenses would come into play (shipping anyone?) The Asian Tiger is where America was after WWII, and will continue to be as long as there is a public willing to consume.

Which is another good point you bring up, America leads by innovation, then the Asian nations makes it smaller and in mass quantities (I know, generalizations but we have word contraints). The day of the US factory worker is dying a painful death, which ties into the need for better education for our children (not more government spending into the NEA blackhole) and a greater appreciation by American children of other cultures and practices. We can retain our American greatness while assimilating what is best from others. Globalization is more than "outsourcing".

Which comes back to the story at hand and the how and why Dubai is failing. Even with shining skyscrapers and modern cities the majority of Middle Eastern nations are living in the 12th century because of a political system (Islam, I don't believe it's really a religion after studying it for several years) that was forced upon them, literally, at the point of a sword. Precisely because they are stuck in the past is the reason they don't "produce" anything except oil, that and the fact they are ruled by either theocracies or malevolent dictatorships. Their markets depend on the US and Asian nations to build, build, build, and use as much oil as possible to get there, so this mini crash in Dubai is no real surprise to anyone watching what is happening. But with instant on communications in our modern world, market crashes will become more and more of a self fullfilling prophecy.

[maistir]

As a sage philosopher once said, "If you want a guarantee, buy a toaster."

Why should anyone rescue speculators who put their money into an investment such as Dubai World? Let it fail. The markets must be allowed to punish excess.

[LtSmily]

Since we are off topic, what's worse, Republicans selling us down the river monetarily or Democrats giving us up to Islamic warriors at top positions in Homeland Security (to start with). It's ironic Republicans create the bureaucracies, and Democrats fill them with our enemies (or at a minimum America haters). Meanwhile all the paper economies of the world are still collapsing and "experts" are wondering why the American consumer won't SPEND money to keep their faux economy running.

[melchg07]

"and "experts" are wondering why the American consumer won't SPEND money to keep their faux economy running. "

----------

Its called globalization and it isn't gonna change anytime real soon.

We can move back the manufacturing jobs, but only if consumers are willing to spend that amount extra for the goods produced.....and that's not to even say that those jobs would be "high paying" as most US consumers would be a wise shopper and choose the best deal.

Face it, you take the good with the bad on globalization. We get cheaper goods, but lose a lot of jobs, however we get to spend the extra money we saved on other goods. All in all its most likely a wash, but in the end you have competition on a global scale and that pushes innovation faster and prices down more quickly on new technologies.

Until other currencies get closer to the dollar or the cost of importing them rises, you won't see those jobs coming back here....nor should we really want them.....what we should want is more jobs in newer technologies that other countries can't compete with.

[wyodutch]

The most highly compensated people in the world produce nothing. They shuffle papers.
.
What a bizarre world we have created.

[lovenpeace1]

by wyodutch November 30, 2009 9:11 AM EST
The most highly compensated people in the world produce nothing. They shuffle papers.
.
What a bizarre world we have created.

*****************************

Hey wyodutch,

Sounds like exactly where the USA is heading soon.

Beside Hand Guns and Military Hardware, what got the 'Made in USA' label?

[pensacola8-2009]

I have been waiting for news from Dubai for over a year. I could not see how the rest of the world markets faced losses while Dubai remained unaffected. Nearly all world markets are connected. So the markets do suffer there, as well.

In a meeting with my congressman yesterday, it was reported that stimulus money from the famous stimulus bill of 2008 is just being released into my area of Florida.

It is strange that while financial shock waves are still being transmitted around the world over a year later, so is the stimulus cash to recover from the market damages.

[bubbadubba]

"Crude oil traded above $76 a barrel as the United Arab Emirates central bank said it would back lenders against a possible default by Dubai World."

So Dubai is in trouble and oil prices GO UP?
But of course there is no price manipulation.
LOL

[Marc_1986]

@bubbadubba

Heard of economics? Instability causes price increases. Not to mention that Saudi Arabia, Iraq, etc. are much larger exporters of oil than Dubai.

[sean71z]

Dubai will file a chapter of bankruptcy for each of their financial institutions in the national court. After discharge, the debt will radically reduce. OPEC should quick sell petroleum and raise cash to pay Dubai's bills. The American consumer gets a bargain on gasoline and diesel.

[nextgenman09]

Good old Dubai. Home to the torture prince that the US ignores. I guess as long as we love a dictatorship that tortures is OK.

[ibsteve2u]

Good old Dubai World. They own...what? 80% of Dubai Ports World?

Remember them? Old George W. Bush wanted them to manage some 22 of our ports...pretty much everything east of the Mississippi.

Wanna read something funny? http://www.correntewire.com/bush_family_dubai_ports_world_and_the_carlyle_group_more_incest_than_a_village_in_appalachia

[bq]
The Lou Dobbs show, CNN, 2/22/06:

CHRISTINE ROMANS, CNN CORRESPONDENT (voice over): The oil-rich United Arab Emirates is a major investor in The Carlyle Group, the private equity investment firm where President Bush's father once served as senior adviser and is a who's who of former high-level government officials. Just last year, Dubai International Capital, a government-backed buyout firm, invested in an $8 billion Carlyle fund.

But there's much more:

Another family connection, the president's brother, Neil Bush, has reportedly received funding for his educational software company from the UAE investors. A call to his company was not returned.

Snow: Who knew?

Then there is the cabinet connection. Treasury Secretary John Snow was chairman of railroad company CSX/. After he left the company for the White House, CSX sold its international port operations to Dubai Ports World for more than a billion dollars.

In Connecticut today, Snow told reporters he had no knowledge of that CSX sale. "I learned of this transaction probably the same way members of the Senate did, by reading about it in the newspapers."

It just doesn't stop:

Another administration connection, President Bush chose a Dubai Ports World executive to head the U.S. Maritime Administration. David Sanborn, the former director of Dubai Ports' European and Latin American operations, he was tapped just last month to lead the agency that oversees U.S. port operations.
[eq]

lollllllllll.........

You can trust a Republican to make a lot of money putting a hurtin' on America - and that's about it.

[wyodutch]

There's always the old-fashioned solution...
.
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness."