Dubai World, the largest government owned company in Dubai, has requested a debt standstill of their lenders. This suggest they have financial problems and won't be able to pay back their debts in time. When this news reached the western countries on thursday the stock markets took a big dive. This is mainly because most of the investors and lenders are in Europe and the United States. The Dow Jones did not move because it was closed due to Thanksgiving day, but major European markets like the FTSE 100 and the CAC 40 went down at first. This was a first reaction until an official reaction of neighbour state Abu Dhabi or the United Arab Emirates federation. But this wasn't possible before the weekend. The situation continues to be very tense as everybody is waiting for an announcement on monday.
In my opinion this isn't a good situation. As Dubai World is the largest government owned company and at the center of all major building projects in Dubai, but one does not have to panic all to quickly. Dubai is part of the wealthy United Arab Emirate federation as is the wealthy neighbour Abu Dhabi. The federation has been trying to prove to the rest of the world that they aren't as far behind like everyone thinks. This to me seems like a perfect situation to prove it. I'm very confident that either Abu Dhabi or the federation itself will help Dubai so it doesn't have to default on its debts. If not then it would make a huge mistake and will suffer a hit in their reputation. I totally understand the markets reaction but don't see a need to write off Dubai immediately.
Source:
http://www.ft.com/cms/s/0/7896cac2-db93-11de-9424-00144feabdc0.html?nclick_check=1
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