15 December, 2007

WSJ: Dubai's Debt Cloud

Friday the Wall Street Journal ran an article about market concerns over the level of sovereign in Dubai. An ungated copy of the article is here. Among other things the article points out that big investors want more transparency such as access to Dubai government's books.

The UAE student blog Broadcasters of Tomorrow astutely observes: "In the end, if Dubai gets into financial trouble it would take its neighbours with it. Or perhaps they're counting on a regional bailout."

Similarly, for the Emirates Economist (shameless plug) the money quote from the WSJ article is this one: "The assumption is that Sheikh Mohammed or his government will come to the rescue in a pinch. And if Dubai gets overextended, analysts expect the emirate's much-richer cousins in Abu Dhabi will lend a hand."

With that attitude you've got the same element that fueled the savings and loan real estate scandals in the US in the 1980s - removal of downside risk.

So what do you think? Would Abu Dhabi do a bailout? Are Dubai's investors counting on it? And if so, what can Abu Dhabi do about it now?

UPDATE - Marginal Revolution links here and writes "sell short."

3 comments:

Editor said...
This comment has been removed by the author.
Editor said...

The post doesn't make much sense. It's an old topic..........

Already half of the investors in Dubai are from Abu Dhabi. What should we expect?

Besides, the current trend in the property market is to buy in Abu Dhabi, but not in Dubai.
You may not believe it, but even Dubai based developers are buying heavily off plan in Abi Dhabi.

aakash said...

The Wall Street Journal ran an article about market concerns over the level of sovereign in Dubai.
The assumption is that Sheikh Mohammed or his government will come to the rescue in a pinch. And if Dubai gets overextended, analysts expect the emirate's much-richer cousins in Abu Dhabi will lend a hand.
akkirocks
Debt Consolidation

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