A long and winding month for UAE markets

Dubai: The turkeys were bought, the sweet pecan stuffing prepared and most Wall Street traders were looking forward to their traditional Thanksgiving off day.

With a light half-day's trading on Friday, 27 November, junior partners could look after the low volumes — most senior partners would be staying in the Hamptons for the long weekend.

Little was expected to move markets as the worst of the financial storm had been weathered. The US GDP figures were in, the economy growing, and stocks had largely recovered to the pre-crash levels. Normal and stable, just the way brokers — and investors — like it.

In the Middle East, even less would be happening.

The Dubai and Abu Dhabi markets would be closed from 2pm on Wednesday through to Monday, November 30. It was, after all, the Eid Al Adha holiday, the biggest celebration on the Muslim calendar.

In Dubai, the malls were crowded with last-minute shoppers and most offices had emptied out for the extended holiday. But in the fifth floor office in the Convention Tower at the World Trade Centre overlooking Shaikh Zayed Road, a finger pressed the enter key on a computer.

The statement from the Media Office of the Government of Dubai would reach all the way to those vacation homes on Long Island. "The Government of Dubai, acting through the Supreme Fiscal Committee (SFC), has authorised the Dubai Financial Support Fund (DFSF) to spearhead the restructuring of Dubai World with immediate effect," the statement, issued to news outlets said.

In addition, it announced the appointment of Aidan Birkett, Managing Partner, Corporate Finance at Deloitte as Chief Restructuring Officer (CRO) to "oversee the restructuring process and ensure the continuity of Dubai World's operations".

"The DFSF, working with the CRO, will start to assess and evaluate the extent of the restructuring required. As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to "stand still" and extend maturities until at least May 30, 2010."

BlackBerrys and cellphones began to hum in the deepest and most senior financial pockets around the world.

A little over two weeks before, some of those with ringing phones had been in Dubai, gathered when the Bank of America Merrill Lynch organised the MENA and Frontiers Conference.

The brokers should have listened more closely.

At the five-star Raffles Hotel on Monday, November 9, Sultan Ahmad Bin Sulayem, Chairman of Dubai World, had talked up a storm. "We believe that the economic fundamentals of Dubai are strong and through the excellent leadership of Shaikh Mohammad, Dubai will continue to grow," he told those gathered.

"Dubai World is part of the long-term vision, creating a world-class destination for living, business and tourism."

And at the same meeting, Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, gave short-shrift publicly to Dubai's detractors: "I tell those who speak about Abu Dhabi and Dubai as two separate entities running in opposite directions to shut up and not to speak of something that is completely against the reality."

Along with the communiqué from the Government of Dubai on Dubai World came a second announcement: it successfully raised a further $5 billion (Dh18.3 billion) from two Abu Dhabi banks — Al Hilal Bank and the National Bank of Abu Dhabi — as part of its $20 billion long-term bond programme launched at the beginning of the year.

Al Hilal's CEO, Mohammad J. Berro, said $500 million was released to Dubai from his bank.

"The remainder will follow," he said. "We have subscribed to sukuk worth $2.5 billion because Dubai has come strongly out of the financial crisis," Berro explained.

"The tenure is five years and the coupon rate is four per cent, which is a good return."

But investors around the world were taking a different view, with global markets falling sharply on concerns about Dubai debt and tighter lending conditions in China.

By mid-afternoon, London's FTSE index shed 1.95 per cent. Frankfurt sank 1.91 per cent and Paris plunged 2.04 per cent. In Asia, the news was similar: Shanghai nosedived 3.62 per cent, Tokyo fell 0.62 per cent and Hong Kong closed 1.78 per cent lower. But New York markets were closed.

Clearly, the rest of the world was panicking.

Secure and calm

In Dubai, however, the message was one of security and calmness.

Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and Chief Executive of Emirates Airline and Group issued a statement on Thursday night in his capacity as Chairman of the Supreme Fiscal Committee, reassuring investors around the world.

Shaikh Ahmad said the government's intervention in Dubai World was carefully planned and reflected its specific financial position. The Government is spearheading the restructuring of this commercial operation with full knowledge of how the markets would react.

"We understand the concerns of the market and the creditors in particular," Shaikh Ahmad said. "However we have had to intervene because of the need to take decisive action to address its particular debt burden."

"We want to ensure resources are deployed in the full knowledge that they are used to enhance the businesses of the Dubai World Group, build on the restructuring that has already been taking place and ensure long-term commercial success." But the foreign press wasn't buying it, instead fuelling frenzied speculation.

Emirates Group Vice-Chairman Maurice Flanagan, however, put it bluntly.

"It has been a ‘hate Dubai week' — I hate to say, especially the way the international press has portrayed the emirate," Flanagan said.

"I'm confident that Dubai will steer out of the situation soon and there will be more sensible news coverage in European, especially the British, press."

When Dubai and Abu Dhabi markets finally opened, the foreign money fled, pummeling the local markets.Other captains of industry were joining the chorus against the Dubai bashing.

Riad Kamal, chief executive of Arabtec: "Dubai should be given time to restructure its debt. I'm not going to lose sleep over this issue."

On the phone, Khalaf Al Habtoor, chairman of Al Habtoor Group, was a happy camper. "I am very relaxed. Dubai has never defaulted and it will not default. ... I am confident the government will meet its commitments and help the companies."

Tim Clarke, the president of Emirates airline, told London's Sunday Telegraph in an interview that "Dubai will navigate itself out of this, as will we."

Michael Geoghegan, HSBC Group chief executive, said he was "confident that the leadership of Dubai and the UAE will overcome any short-term issues they face, which appear to have been somewhat sensationalised, and continue to lay the foundations for sustainable growth."

A statement from the Dubai Financial Support Fund said that the government of Abu Dhabi and the UAE Central Bank had provided $10b in support. And Dubai Government is also expected to announce legal steps which will allow Dubai World to restructure completely. Brokers in New York can look forward to a quiet Christmas in the Hamptons.