So much so has been talked about Dubai’s crisis. Below jumping into panic selling, let’s look at what happened in Dubai.
Dubai is one of the seven emirates of the United Arab Emirates (UAE). It is located south of the Persian Gulf on the Arabian Peninsula. The Dubai Municipality is sometimes called Dubai state to distinguish it from the emirate.
The emirate’s main revenues are from tourism, real estate and financial services.Although Dubai’s economy was originally built on the oil industry, revenues from petroleum and natural gas currently contribute less than 6% of the emirate’s US$ 80 billion economy. Real estate and construction contributed 22.6% to the economy in 2005, before the current large-scale construction boom.
Dubai has attracted attention through its real estate projects and sports events. (Look at the fantastic pictures below). However, in 2008 financial crisis, the asset value of Dubai dropped half. While billions have been pumped into the sector and having problem selling all these assets, the cash flow problem triggered the so called “credit default”
However, in my personal opinion, for Dubai, the situation is rather the willingness than the ability to pay the debt. having all the tangible assets in hand, it is very different from Lehman Brother’s collapse where the assets are intangible.
Dubai is not too big to fail, but by forcing Dubai to liquidate their assets to re-pay the loan will only impair the value of the assets and hurt every creditor at the end of the day.
What are the impacts to Singapore Investors
In Singapore, there are probably only two funds having direct exposure to Dubai, namely.
- SGAM Oasis MENA Fund SGD
- Schroder ISF Middle East SGD A Acc
The news has dragged down the global stock markets by 3-5% last Friday but we’ve seen most gaining some fields back today. In fact, there might be a golden opportunity for the fund managers to get some cheap bargains throughout the crisis. Always remember, buy on fear, sell on greed. And we all know this is Easy to say than Done.
