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Dubai debt issue rears its head again

Despite the Dubai authorities recently attempting to convince the investment markets that the potential debt default by properly outfit Nakheel would not impact upon other government backed ventures, there is growing concern about the short to medium term outlook. It has also been revealed that Dubai World, another institution closely associated with the Dubai authorities, is looking to restructure its $26 billion debt pile and there may be a possibility that the company will fall behind on repayments in the short term.

The bond markets appear to have caught wind of potential problems in other areas of the Dubai economy and today we saw a number of prominent bonds marked down as investors decided to review their positions. One of the problems with the Dubai economy is the fact that the Dubai authorities have their "fingers in many pies" and it is difficult to actually ascertain who is backing which company and who is potentially liable for the debts. This is obviously a complication which the debt markets would rather not have to unravel!

While there is no doubt that eventually the mess which is the Dubai economy will be clarified and hopefully sorted out, until then the markets are susceptible to rumours and counter rumours and concerns about the short to medium term outlook.

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