DUBAI’S stock exchange suffered sharp falls today on the first day of trading since last week’s revelations over its debt crisis.
The city’s main stock exchange tumbled more than 7% and Abu Dhabi markets slid 8% in reaction to a request by state-backed investment firm Dubai World to delay payments on its 60 billion dollar (£36.8 billion) debts.
News of the city’s woes sent ripples of fear across world markets on Thursday as investors worried about a new credit crisis.
In an effort to ease concerns, the United Arab Emirates’ central bank has vowed to give emergency support for any foreign or local bank facing losses from a potential default in Dubai.
Trading in the region, which resumed today following the Islamic holiday of Eid, saw shares of DP World - the port operating division of Dubai World - slump nearly 15% after markets opened.
In London the FTSE 100 Index was down around 0.4%, as the crisis continued to weigh on banking stocks.
But this followed rises on Asian markets overnight, suggesting some markets are feeling more optimistic after last week’s hefty falls.
London shares tumbled 3% on Thursday, wiping almost £44 billion off the Footsie in its worst session since March, although shares clawed back some of the losses on Friday.
In early trading today Royal Bank of Scotland and Lloyds Banking Group were the market’s chief fallers, both down almost 3%.
Other fallers included London Stock Exchange itself, which is 22% owned by Borse Dubai. Its shares fell more than 1%.
Dubai World’s investments range from Scotland’s historic Turnberry golf course to Nakheel, the developer behind Dubai’s luxurious Palm man-made islands.
Other assets included in Dubai’s network of sovereign wealth and investment firms include the QE2 cruise liner, the Emirates airline and the Travelodge budget hotel chain.
Deloitte has been appointed as an adviser to Dubai World to help it restructure the company’s huge debts.
The firm had a 3.5 billion US dollar (£2.1 billion) bond payment due in December and wants breathing space on all debt repayments falling due until the end of next May.
According to the latest figures from the Bank for International Settlements, UK banks had a 50.2 billion US dollar exposure (£30.5 billion) to the United Arab Emirates at the end of June, although individual figures for Dubai are not available.