Post Reply 
 
Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
UAE pumps liquidity into banking sector to ease concerns
11-30-2009, 10:00 AM
Post: #1
UAE pumps liquidity into banking sector to ease concerns
DUBAI: The United Arab Emirates central bank on Sunday pumped more liquidity into its banking sector amid fears that local stock markets may plunge after debt-laden Dubai asked to suspend debt payments.

The intervention is seen as a step to soothe investors and bank depositors after the shock announcement that state-controlled Dubai World wants to halt payments to creditors until at least May next year.

‘This is a step aimed to calm investors... Markets should be calmer (than feared) tomorrow,’ said Emirati financial analyst Nasser bin Gaith.

‘This means that banks will be on the safe side,’ a UAE official who requested anonymity told AFP.

The central bank’s move came just before the the stock markets in Dubai and neighbouring emirate Abu Dhabi have their first chance on Monday to react to the disclosure of the debt difficulties, which were unveiled just before the start of a four-day holiday for the Muslim holiday of Eidul Azha.

The central bank said in a statement, unusually issued during a holiday, that it was providing banks with extra liquidity, stressing its support to the banking sector.

But bin Gaith expects the decision to have no real immediate impact on Dubai’s debt problem, pointing out that Dubai World is largely indebted to foreign banks.

‘On practical level,there is no direct impact... Local banks have limited exposure to Dubai World, unlike foreign banks,’ he said.

British banks reportedly have a total exposure of 30 billion dollars to Dubai World.

And until the UAE stock exchanges reopen on Monday it is uncertain to what extent investors will be reassured by the central bank’s statement.

‘I expect to see a drop in Dubai’s market when it opens Monday... a minimum of two-three per cent,’ Saudi financial analyst Ali Daqaq told AFP. Dubai stock market rules limit the index to a change of 10 per cent in one day.

‘The banking sector will be the hardest hit, due to exposure to loans, and the danger of default on this debt,’ he said, speaking before the central bank pledged support for banks.

The central bank said the UAE banking sector stands stronger and more liquid than a year ago and that it enjoys a ‘strong base of stable deposits.’

Other Gulf stock markets have also been on holiday since Thursday for Eidul Azha, sparing them an immediate impact from Dubai’s announcement.

However, the news sent jitters throughout Asian and European stock markets on Thursday and the US market on Friday as investors feared a possible default by Dubai and its state-owned businesses, which together owe 80 billion dollars.

Some economists say the delay in the reaction by Gulf markets because of Eid might reduce the severe impact on those bourses.

‘Market fundamentals say that the local market should be negatively affected by the announcement, especially banks and real estate stocks,’ bin Ghaith told AFP before the central bank announcement.

‘The reaction by the global markets was psychological, and came strongly. I expect the reaction here to be less hard because the first shock was absorbed by the global markets,’ he said.

Dubai and Abu Dhabi will be the only Gulf stock markets to open on Monday, while Kuwait follows on Tuesday. Saudi Arabia’s financial market, the largest Arab bourse in capitalisation, will remain on holiday until Saturday.

The markets of Dubai and Abu Dhabi will have only two days of trading before they go again on holiday until Sunday December 6, for the national day.

Gulf investors outside the UAE are worried about contagion from Dubai’s problems.

‘Even here in Saudi Arabia people are talking about withdrawing from the market when it opens (next) Saturday in fear of the impact of the banks’ exposure to Dubai’s debt,’ Daqaq said.

Saudi economist Abdulwahab Abu-Dahesh expects a crash in the region’s markets. ‘I expect Gulf bourses to dive like the September crash last year,’following Lehman Brothers bankruptcy, he said.

Dubai does not have big oil reserves, unlike Abu Dhabi which sits on around 95 per cent of the UAE’s crude deposits.

But doubts have been growing about Abu Dhabi’s commitment to buoy Dubai, despite a full subscription by two Abu Dhabi-controlled banks to Dubai bonds worth five billion dollars, announced a few hours before Dubai hinted at debt default.

The once-rapidly-booming economy of Dubai came to a screeching halt — most noticeably in its real estate sector, after being hit by financing shortage due to the global financial crisis.

Property prices in the once-booming desert city have slumped by 50 per cent.

The latest edition of Britain’s Sunday Times newspaper was barred from news-stands in Dubai because of a graphic showing the emirate’s ruler Sheikh Mohammad bin Rashed al-Maktoum sinking in a sea of debt.

‘The Sunday Times was not distributed today,’ an official from the UAE national media council told AFP, requesting anonymity.

‘We cannot accept a personal insult. It is against our traditions,’ he said. —AFP


http://www.dawn.com/wps/wcm/connect/dawn...ns--szh-03
Find all posts by this user
Quote this message in a reply
Post Reply 


Possibly Related Threads...
Thread: Author Replies: Views: Last Post
  Banking system assets grow by 8% to Rs 7.7tr in Jan-June 2011 Salman 0 2,575 12-10-2011 12:11 PM
Last Post: Salman
  Banking court issues non-bailable warrants against 8 bank defaulters Lahore_Real_Estate 0 2,498 09-12-2011 12:23 PM
Last Post: Lahore_Real_Estate
  Pakistan ease to seven-wicket win over Zimbabwe Lahore_Real_Estate 0 1,483 09-06-2011 01:32 PM
Last Post: Lahore_Real_Estate
  Kalma Chowk: Underpass on hold over mass transit concerns Lahore_Real_Estate 0 1,924 06-06-2011 02:31 PM
Last Post: Lahore_Real_Estate
  SCB launches ‘Priority Banking’ in Lahore Lahore_Real_Estate 0 1,991 04-16-2011 12:37 PM
Last Post: Lahore_Real_Estate
  141 petrol pumps in Punjab have expired leases Lahore_Real_Estate 0 1,950 12-23-2010 01:49 PM
Last Post: Lahore_Real_Estate
  PPDA protests auctioning of petrol pumps leased out by LDA Lahore_Real_Estate 0 2,124 12-23-2010 01:37 PM
Last Post: Lahore_Real_Estate
  Police arrest 19 over online banking fraud Lahore_Real_Estate 0 2,068 10-01-2010 12:16 PM
Last Post: Lahore_Real_Estate
  Petrol crunch to ease today Lahore_Real_Estate 0 2,063 09-20-2010 02:09 PM
Last Post: Lahore_Real_Estate
  Banking companies: Senate body urged to rationalise BCO amendment bill Lahore_Real_Estate 0 2,235 05-08-2010 12:00 PM
Last Post: Lahore_Real_Estate
  Banking Companies (Amend) Bill 2010: Senate body okays bill with certain changes Lahore_Real_Estate 0 2,124 05-07-2010 01:08 PM
Last Post: Lahore_Real_Estate
  ‘Islamic banking has potential in Pakistan’ Lahore_Real_Estate 0 1,749 04-20-2010 11:25 AM
Last Post: Lahore_Real_Estate
  India conveys to US concerns over Pakistan Lahore_Real_Estate 0 1,870 04-12-2010 01:09 PM
Last Post: Lahore_Real_Estate
  US aims to ease Pakistan-India tension: report Lahore_Real_Estate 0 1,962 04-05-2010 11:10 AM
Last Post: Lahore_Real_Estate
  Barclays Bank for corporate banking Lahore_Real_Estate 0 1,694 04-01-2010 02:56 PM
Last Post: Lahore_Real_Estate
  Banking & Telecom Sector Ready for Mobile Banking LRE 0 1,478 03-20-2010 01:48 AM
Last Post: LRE
  Regulatory framework for mobile banking to be finalised soon Lahore_Real_Estate 0 1,712 03-19-2010 01:40 PM
Last Post: Lahore_Real_Estate
  Shaukat Tarin, Conflict Of Interest & Pak Banking Sector LRE 0 2,242 02-22-2010 10:31 PM
Last Post: LRE
  Banking spreads rose 19 bps to 7.47% in 2009 LahoreEstate 0 1,964 02-03-2010 09:16 AM
Last Post: LahoreEstate
  How to ease insomia (sleeplessness) Naveed Yaseen 0 1,857 12-01-2009 07:41 AM
Last Post: Naveed Yaseen

Forum Jump:


User(s) browsing this thread: 1 Guest(s)