Thursday, October 09, 2008

What are the chances Dubai will default?

“Investors are now pricing in a real estate crash, that the banking sector is in trouble and that Dubai will default,” says Mohieddine Kronfol, managing director of Algebra Capital.

This from an article in today's Financial Times. More:
Shares in Emaar, a Dubai government-controlled developer, have fallen by more than 60 per cent this year, wiping Dh56.4bn ($15.3bn) off its market capitalisation.
Meanwhile:
Defying the world credit crunch, one of the Persian Gulf's leading developers pledged Sunday to keep taking the boom city of Dubai up and up -- announcing plans for a skyscraper that would be the world's tallest, at two-thirds of a mile high.
...
Economists estimate that property prices in the United Arab Emirates will fall 10 to 20 percent over the next two years.
Yet:
Gulf Arab property firms launched $100 billion of new projects on Monday, but the news failed to restore investor confidence as fears grew that the global credit crunch is biting and the local real estate market overheating.

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1 Comments:

Anonymous Mohieddine Kronfol said...

Its true that the market is pricing systemic risk as well as default scenarios however this view does not reflect the strong liquidity position of the UAE, policy tools available at the sovereign level, a sound banking system as well as a favourable macroeconomic backdrop. We maintain that funding needs can be matched internally, especially with the support of the central bank and government.

7:55 PM  

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