UAE's stock markets plummet on debt fears

STOCK exchanges in Abu Dhabi and Dubai suffered record one-day losses yesterday on the first day of trading since Dubai World asked for a six-month delay in repaying its &pound;36bn debt.<br /><br />Abu Dhabi&rsquo;s Securities Exchange suffered the largest one-day loss in its history, ending the session down 8.3 per cent yesterday.<br /><br />Dubai dropped 7.3 per cent, the biggest one-day fall since October last year.<br /><br />Dubai World timed last week&rsquo;s announcement on debt repayments for the eve of the four-day Eid holiday. This meant yesterday was the first day the United Arab Emirate&rsquo;s markets could react to the news.<br /><br />UK investors also remained jittery about the exposure of banks to Dubai&rsquo;s debt and the FTSE 100 Index closed 55.05 points down at 5,109.68.<br /><br />Nakheel, the Dubai World subsidiary responsible for the sheikhdom&rsquo;s palm-shaped islands, added to the confusion by asking for a suspension in trading of three of its Sukuks? ?&ndash; Islamic bonds &ndash; until it is in a position to inform the market more fully.<br /><br />The request briefly stalled but did not stop trading in the bonds, which are exchanged over the counter and not on the bourse, where the listing is regarded as a technicality.<br /><br />And Dubai&rsquo;s finance minister Abdulrahman al-Saleh sparked further fears about how a restructuring would work by stating that the government was not responsible for Dubai World&rsquo;s debt. <br /><br />Analysts said it was mostly foreign investors who had pulled their money out of the UAE while local investors have decided to weather the storm. There are fears that once international investment leaves it will not come back.<br /><br />Contagion for Abu Dhabi from the restructuring of Dubai World debt will be &ldquo;unavoidable&rdquo;, ratings agency Moody&rsquo;s said, and could lead to downgrades for UAE bank ratings.<br /><br />Moody&rsquo;s said the potential default of Dubai World &ldquo;changes long-held market assumptions regarding implicit government support of local credits&rdquo;.<br /><br />Aidan Birkett, the Deloitte partner&nbsp; who is to lead the restructuring at Dubai World, was yesterday poring over the books. Dubai World&rsquo;s management team were locked in frantic talks over their next move.