Dubai The sell-off on international stock exchanges on Friday after Dubai said it is restructuring its largest holding company Dubai World has been interpreted by a range of money managers and analysts as an overreaction.
The global reaction to Dubai's announcement has to a large extent overshadowed the main message: the government is taking a closer look "to ensure its commercial success".
"The standstill period for negotiating debt and restructuring of Dubai World and Nakheel could potentially leave the Dubai government in a better position to support its other government-related companies," John Tofarides, banking analyst at Moody's, said.
Strategic position
Kristian Overend, partner of advisory stockbroking firm Killik & Co, said, "Dubai now accepts it has problems and will have to go through a period of pain before it can recover, but measures are starting to be taken and the emirate will continue to be a strategic trading hub between East and West."
Philipp Lotter, senior vice-president for the corporate finance group at Moody's, said: "The Government's decision to restructure highlights the Government's intention to strictly adhere to its stated policy of supporting only those companies with viable long-term business prospects, which implies that support for distressed or weaker companies may be less forthcoming." See also Page 26
vote of confidence
HSBC salutes ‘dynamism'
HSBC's chief executive officer said the bank is "confident" Dubai and the UAE "will overcome any short-term issues they face".
"Operating in the Middle East for over a century, and present in 15 countries, we're proud to have witnessed the remarkable development and dynamism of the region first hand," said Michael Geoghegan, HSBC Group CEO. "Although our business on the ground in the Middle East represents only two per cent of the group's balance sheet, it's an important and high-potential part of HSBC's international business mix and a region we are completely committed to. I am 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."
HSBC, Europe's biggest bank, has the "largest absolute exposure" in the UAE with $17 billion (Dh62 billion) of loans in 2008, JPMorgan said, citing the Emirates Banks Association.
Simon Cooper, CEO, Middle East region, added, "HSBC, as the longest-established bank in Dubai, has a unique relationship with the Government of Dubai and its Government-related entities. The bank has been at the forefront of the emergence of Dubai as a global economy, and continues to maintain deep and solid relationships with all parts of the Emirate. HSBC continues to be supportive of Dubai, continues to believe in Dubai's long-term future prosperity, and continues to offer its support to the Government of Dubai in coming to a workable resolution of its short-term problems."
— Staff report with inputs from Bloomberg
