Debt Crisis In Dubai.
What to make of the negative news from the gulf. . . And in which way to sell the dubai bailout
Dubai spends like it’s got 90% of the oil in the cohesive arab emirates.
Yet it only has 5%.
Abu dhabi really develops 9 out of each 10 barrels that comes out of the uae, but that city-state is a bastion of financial obligation.
So now that dubai’s $59 billion debt mess is being mopped up by the abu dhabi-based central bank, how do you invest with the gulf’s financial future in mind?
Here’s the story and how you may play it.
A tale of two emirates
Dubai fancies itself a rising world leader in almost everything. From financial exchanges to tennis tournaments, and from rotating skyscrapers to manmade islands, dubai appears to be a city established on a sentiment of inevitable greatness.
Fate has its price, though, and for dubai to convince everybody internationally that the former fishing village is a will have to-see destination where laying out money is easy and lucrative, the emirate had to take on mountains of debt.
Dubai world group is the state-owned keeping company that many americans know from the political uproar surrounding its department dubai ports (dp) world in early 2006. As dp world adopted the british firm that handled strategically-located ports in places like new orleans, miami and baltimore, its sister company nakheel was fueling a property boom at home.
With alien laborers doing all the lifting, dubai world’s nakheel development company furnished the construction of business and residential skyscrapers whose parking garages would be filled with ferraris. Then lehman brothers collapsed, bringing the international financial crisis to the forefront of each moneymaker’s mind and putting the brakes on dubai’s high-octane dream.
By the time every thing is said and done, swiss financial group ubs (nyse: ubs) and germany’s deutsche bank (nyse: db) both say home prices in dubai could be down to only 20% of what they were worth in the third quarter of 2008. That means trouble for nakheel, which asked last week for a break in marketing on the bonds that furnished its boom.
On monday, november 30, gulf financial markets saw their original light since the islamic eid al-adha holiday, which held markets closed after dubai world and nakheel’s request for a reprieve mid-week.
Dubai’s stock market dropped by 7. 3% on the re-opening. Abu dhabi, where the central bank has said it will stand behind deposits at local and alien banks operating in the uae, was rewarded for its role in restoring calm with a wallop from investors – the abu dhabi interchange sank by 8. 3% on monday.
Long story short: dubai’s indoor ski palaces and electronic marketing platforms aren’t impressive enough to counterbalance declining faith in the value of its economical basic principles.
But abu dhabi, with its uae-leading sovereign wealth fund worth around $700 billion and oil revenue, has invested in resources both new and old, including clean energy.
Abu dhabi’s $15 billion clean energy bet
Reuters reports that national fund directors in deep-pocketed states like abu dhabi and china are pushing tens of billions of dollars into natural resources and energy as the international economy recovers.
Riskier financial organization shares and hyperinflated property speculation have fallen out of favor, and there has been well-publicized movement away from dollar-denominated holdings, though u. S. Treasury bills stay beautiful.
The monarchy has arrange the abu dhabi future energy company, whose primary task is developing a sustainable city for 14,000 humans to live in by 2016. The city, called masdar (arabic for “source”), is a joint project amid adfec, exploration institutions like massachusetts institute of engineering science (mit), and a select few international companies whose merchandise will be employed to make masdar city carbon-neutral and waste-free.
At masdar, a fact or actuality-life laboratory for clean energy engineering science, smart grid connectivity, and bountiful desert solar power resources could make abu dhabi a patent machine. In point of fact, ceo dr. Sultan ahmed al jaber says that abu dhabi is already well on the way to patenting and exporting cleantech merchandise and schemes.
Back in march, abu dhabi had just bailed out dubai to the tune of $10 billion in guaranteed bond purchases.
Rather, dubai continued to opt for opulence, and it’s up debt creek again with abu dhabi becoming its own paddle knocked in the water.
Publicly-swopped companies like original solar (nasdaq: fslr) are already viewing masdar as the bright side of the uae’s tricky, interlinked economy. As we look on international markets react to dubai’s debt mismanagement, we have a different opportunity to check in on neighbors like abu dhabi that are getting development right.
There’s much more to the masdar story, rest assured. You might not have listened much about it, but gulf governments are clamoring to secure their peaking oil production for export, instead of use at home. That means harnessing energy consumption and utilising oil wealth to finance a fresh energy boom that will produce long-lasting economical gains.
Stay tuned for a full report on masdar later this week from green chip international, the premier international clean energy laying out money service.
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