Dubai debt fears hit world markets hard

[links]

The Dubai government backed investment company are stucked in financial trouble.....they are not able to pay the islamic bonds (sukuk) and loan from overseas bank now.

The oil production country could be over spent and need to restructure their finance now after the serious market decline in their property market and investment in the overseas...

http://finance.yahoo.com/news/Dubai-debt-fears-hit-world-apf-3624614071.html?x=0&sec=topStories&pos=main&asset=&ccode=


I think malaysia might also got affected since we are the second largest islamic financial center with a lot of islamic financial services to middle east...

 

[tonytony]

Dubai is affected. Not its oil rich neighbor Abu Dhabi which finances itself by selling oil. If any of our local ringgit bond is sold to the middle east, it would be to Abu Dhabi investors looking for returns on its cash stockpiles.

Dubai sells bonds..they dont buy. And we also dont buy Dubai bonds. We send out contractors there to earn their Dirham.

 

[links]

So the islamic bonds which dubai world going to defer does not bought by any financial institutes in malaysia? Some major European banks have loans and holding some bonds on dubai world.....like HSBC, Lyold, RBS and they expect the industry might need to wirte off 60billion USD if Dubai world is down. There were also saying that financial insitutes in Singapore will also suffer because they have investments in islamic finance.The impact of malaysian financial institutions are yet to be told.

After talking to a few friends in investment bank, they said that Dubai government is stay away from the Dubai world now because its main investments in property market was too badly hit by the economy down turn.

Generally the oil production countries are still cash rich but conspiracy theory saying US wanna show middle east some color because the oil production countries were rumoured to working on linked currency structure which will replace US dollar as the trading currency for oil. If the oil and commodities trading market dump US dollar, it will be the end of day for american dreams...

 

[mizunori77]

Dubai's combined (govt and corporate) debt stands at USD80 billion vs their GDP of USD 82 billion so it isn't surprising they are in deep shit. Actually this has been going on since the financial tsunami hit last year. We will see more countries going into bankruptcy (some European countries already have debts larger than their GDP) and Asia is also not far away. This is the problem of spending money that 'doesn't really belong to you' because if you don't see it as your own money, you will be more daring in taking greater risks by approving mega projects. Japan's economy memang koyak more than a decade ago, China's economy is overheating and is becoming another bubble, not sure about South Korea though.

The USD has lost its value long time ago. It took 200 years for US to reach a money supply of USD 1.5 trillion in 1980. When Bush took over, US printed another USD 1.5 trillion throughout 2000-2004. This meant that during his term of 4-5 years, he printed out USD 1.5 trillion. We all don't need a PhD in Economics to know that too much of something means its worthless. And we are still pegged to a USD currency that is worth less than toilet paper.

If i remember correctly, oil from OPEC was first traded in ICE (Intercontinental Exchange) in London and they were 'contemplating the idea' of trading oil in Euros and gradually extending it to other goods. What happens when everything is traded in Euros? USD currency becomes worth less than dust. Many economists and also conspiracy theorists have identified this as the MAIN REASON for the invasion of IRAQ. With US so 'aggressively' defending its USD, other countries are forced to continue trading in USD. US Allies (UK and Europe) have to 'pretend' they didn't wanna change trading currencies to Euro while the Middle Eastern countries (Arab and Kuwait) have to continue supporting the US or risk invasion also. US just cant afford to 'lose' in this case and war was the only 'answer'.

If you can remember, Tun Dr Mahathir proposed the Gold Dinar to replace the USD as a world currency back in the 1990s. This was to provide a 'stable' means of value-ing a currency and also serve as a monetary reserve instead of just holding another country's currency (USD) as a reserve. Obviously, this didn't happen as no one is willing to risk invasion by the US.

At the end of the day. We as a civilization in the 21st century is no different from the barbaric neanderthals millions of years ago. To protect our own interests, we will crush anyone who so much as threatens our existence, even if it means killing our own kind.

By the way, we should be looking closer to home. In Jan to May this year, our FDI was ONLY RM 4.2 billion compared to last year (same period of Jan to May) of RM 46 billion. Exports have dropped by 24% September this year as compared to same period last year. CIMB just announced yesterday that they had a HUGE RM 8.4 billion NPL (Non-performing loans). If such a huge bank as CIMB is in such deep shit, what about the other banks? What was Bank Negara doing when they were monitoring all this while? And what will Bank Negara be doing to 'solve' this issue?

Many financial analysts have predicted a gloomy 2010 for the whole world. Is Malaysia so 'unique' that we can achieve growth as what our ministers tell us in the news?

 

[crystal haze]

The Dubai government backed investment company are stucked in financial trouble.....they are not able to pay the islamic bonds (sukuk) and loan from overseas bank now.

The oil production country could be over spent and need to restructure their finance now after the serious market decline in their property market and investment in the overseas...

http://finance.yahoo.com/news/Dubai-debt-fears-hit-world-apf-3624614071.html?x=0&sec=topStories&pos=main&asset=&ccode=


I think malaysia might also got affected since we are the second largest islamic financial center with a lot of islamic financial services to middle east...

dubai is not an oil producing country...

 

[links]

There is no propelling power for 2010, even china itself are struggling despite they achieve pretty grow of 8% GDP this year, but most of their growth coming from domestic infrastructure and investment spendings. The export infact a falling for the last 3Q for this year. Also china trying to use loosen money policy to push the banks to lend more money which created asset bubble now as property in shenzhen and shanghai raised as much as 90% over the past 1 year. Banks were now tied with the mortgage of these loans which stucked in property bubble and it may cause problem later when eventually the market fail to pass on the ever rising property to next hand and the default will come so banks in china will be in deep shit.

 

[zac]

Finance has become the biggest scheme nowadays with over leveraged products, and pretty sure individual investor will not learn from mistake. Situation that US is facing now will soon be experienced by china then india/brazil if there is no proper control from government, in fact these countries are repeating their step as japan before it's koyak decade, but i dun think japan will be down forever, it act as pioneer actually, to me it's hibernating now, will be recovered but dunno when : ) One thing for sure our stock market will not follow global trend as it's controlled by government using kwsp and reserve fund, it's not a fair game...

As for US, i still wonder how other country will agree to use a new currency replacing dollars since most of the country reserve is in usd, if no one will absorb trillion usd then no one will take it out from pocket to exchange...

 

[tonytony]

To me, the new currency for trading of oil will not materialize in the next 20 years (at the minimum) simply because America will still be the No. 1 economy in the world and largest trading partner for most countries (BRIC nations included) and will also continue to be he No 1 net importer of most goods produced in the world (raw, intermediate & capital). In addition, the trading relationship between the worlds' 1st and 2nd economies (America and Japan) is so closely interlinked that if ever that would be an alternative currency for world/oil trading then it should be the Japanese Yen. Euro will not be in the picture at all. Hence, USD will still be prevalent.

Malaysia is fortunate that our local FIs did not have the 'foresight' to invest into Middle Eastern bonds & other exotic financial instruments. Whilst I was in IB line, we were in fact trying to lure Middle Eastern cash to our shores instead of the other way around. Hence, our country is partly mitigated by the direct and high impact financial meltdown. SGP on the other hand was more adventurous in her quest to chase higher yields on its investment - hence had purchased and participated in many of the exotic financial instruments i.e. MBOs, CLOs, CitiGroup and most likely Dubairian bonds as well. It wouldn't surprise me at all that she would catch the cold again this time...for the second time.

On the downside, we are a net exporter nation (most intermediate goods are sold either to Euro or America), whilst China is MY's largest buyer of CPO. Hence, our manufacturers + factories are generally suffering from slowdown in world business. Whilst unfortunate, this is of course a normal business cycle and all business people would/should understand this and would/should have planned out its businesses to ride unforeseen storms.

CIMB's NPL arose mainly from its recent acquisition of CIMB Thai (ex-Lippo) which unsurprisingly would have carried lots of low credit assets. In assessing CIMB's financial health, it is important to read the full context of its BS/PL/CashFlow statements (http://www.klse.com.my/website/bm/listed_companies/company_announcements/announcements/index.jsp). In fact, a 3% NPL ratio prior to the kitchen sinking exercise is quite the market level among local backs, and also considering that the group had actually aggressively acquired new assets (loans) during a supposedly economic downturn - some of which may have also inevitably included low credit assets too. When fully analyzed, the group's financial health is actually quite OK for our 2nd largest lender and bearing in mind RAM had also upgraded CIMB Group to AAA (from AA2).

As our BNM governor had mentioned at the onslaught of the financial crises earlier, our economy will have to learn how to depend less on export earnings, but the Malaysian economic recovery will HAVE to be domestically driven i.e. local consumption. Sounds very ambitious, considering that perhaps only 1/8 of our estimated 27 mil population has the financial capacity to spend comfortably. However, what is the alternative? In my books, there simply isn't an export market out there at the moment that can drive Malaysia out of the doldrums. So, without too much of an alternative we must thus do our individual parts, however small or big.