When U.S. investors returned from a Thanksgiving break last month, they were greeted by chaos in Dubai, as the government moved to restructure Dubai World, its corporate flagship, and temporarily halt debt payments to certain creditors. The announcement threw up red flags around the world, with the most bearish of investors speculating that Dubai would be the first domino to fall, setting off a wave of crises in debt-laden emerging markets. Hardest hit were the stock markets in the UAE and the surrounding region, which plummeted as fear trumped reason and investors punished stocks and bonds alike as they raced to digest information and assess the potential damage.
In the weeks since the first announcement of a restructuring, the dust has settled and movements by Gulf states governments has put the minds of some investors at ease. Initially, outrage over Dubai’s assumption that its oil-rich neighbors would step in to plug any financial holes was rampant. But that is exactly what is now happening, as Abu Dhabi has stepped in to provide a $10 billion lifeline to Dubai, giving the state sufficient breathing room to fend off creditors who were reportedly prepared to push the entity into default. It was reported that the support came in the form of a five year bond charging an interest rate of only 4%, well below a market rate for a borrower on the verge of disaster.
Middle East ETF Recovery
After sliding by more than 10% as news of the pending disaster broke, Middle East ETFs have staged remarkable recoveries in recent sessions, clawing their way back to almost where they were before Thanksgiving:.............
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