UAE attempts to allay fears as markets slide

An HSBC bank at Media City in Dubai, United Arab Emirates, yesterday. The UAE's top officials were bidding to allay concerns over Dubai World's US$60 billion debt, stressing the strength of Dubai and the UAE's economies.

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THE United Arab Emirates' top officials looked to allay concern over Dubai World's US$60 billion debts yesterday, stressing the strength of Dubai and the UAE's economies even as regional markets tumbled for a second day.

Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, said his emirate's economy was "strong" and "solid." The comments were his first public statement about Dubai World since his government announced last Wednesday that the conglomerate - the emirate's chief engine for growth - was restructuring and wanted a six-month minimum delay in its debt payments.

The news roiled Dubai and Abu Dhabi's markets for a second day yesterday as the UAE's two biggest bourses as well as others in the Gulf Arab region played catch-up with global markets that had digested the bad news late last week.

The Dubai Financial Market closed down 5.61 percent after slightly paring an earlier slide of about 6 percent. Abu Dhabi's bourse fell 3.57 percent by closing, after losing about 5 percent earlier in the day. On Monday, both markets registered record falls.

Sheik Mohammed attributed the reaction in the market as an indication of "a lack of understanding about what is happening in Dubai."

Earlier, the UAE's president was quoted by the state-run news agency as saying the country's economy was healthy and the international financial crisis "despite being very harsh, will not push us toward despair."

The remarks were clear attempts to calm investors scrambling to get a clear understanding of how Dubai would deal the conglomerate's debts. On Monday, Dubai officials indicated they had washed their hands of Dubai World's debts, arguing it was an independent company that happened to be owned by the city-state.

The news rattled investors and raised more questions about whether neighboring Abu Dhabi, the oil-rich seat of the UAE's federal government, would step in with a bailout and what that would mean for Dubai.

Partial answers emerged early yesterday when Dubai World announced it had begun "constructive" discussions with creditors over US$26 billion of the debts.

It said restructuring would include about US$6 billion in Islamic bonds issued by Nakheel PJSC, the company behind Dubai's iconic palm-shaped man-made islands.

Qatar's bourse fell 8.27 percent while Kuwait's was off 2.71 percent.

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