1) Wednesday’s unexpected decision by Dubai World, the Gulf emirate’s largest state-owned conglomerate, to impose a six-month debt standstill has foreign creditors up in arms. Earlier this month, Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum publicly pledged his support for the group and its obligations.
The consequences of the standstill, and possible eventual default, are far-ranging. The repayment of Dubai World’s $4bn Nakheel bond was seen as a litmus test for the emirate’s ability to deal with the $80bn owed by the sovereign and its state-controlled companies. The emirate’s willingness to do this is now in doubt, especially as only an hour earlier it raised $5bn from two state-controlled banks in Abu Dhabi. This was only half what had been expected, but followed $10bn of earlier support from the kingdom’s richer neighbor.
For more, go here.
2) Vietnam announced a 5 percent devaluation of its tightly controlled currency Wednesday, succumbing to pressure for a weaker dong as foreign reserves dwindle.
It was the third devaluation of the dong in less than two years and suggests Vietnam's large trade deficit is making it difficult for officials to keep the currency stable.
For more, go here.
A few Malaysian construction companies have construction projects in Dubai and property development & construction projects in Vietnam. The above development may impact their bottom-line. We have seen some of these stocks being sold off yesterday & today. Gamuda broke below its uptrend line at RM3.00 yesterday (see Chart 1) & IJM broke its uptrend line support at RM4.50 today.
Chart 1: Gamuda's daily chart as at Nov 26, 2009_4.45pm (Source: Quickcharts)
Chart 2: IJM's daily chart as at Nov 25, 2009 (Source: Tradesignum)
7 comments:
Hi Alex
How do you view this Dubai World crisis? A few global market see their largest 1 day decline this year. HSI and FTSE100 testing their 50sma now. The start of a long expecting big correction coming?
ya I hv the same question as John pointed out.
How long do you think this correction will last? Will be just an excuse for investors to take profit and rebound soon?
Or it will be a long correction for months?
Hi Alex,
I am not sure if Mudahjaya has any exposures in Dubai. Do I need to take profit at this price? (RM4.36)I bought it at RM3.40
Appreciate your feedback.
This piece of news is not new and have been in the international market for at least 3 months. I viewed this for an excuse for the fund manager to take some profit.
Well again, when it is a fire in the cinema and everyone try to exit the same time, it might be a stampede.
Stay away. Alex, do you have the same thinking over there?
Hi guys,
Dubai World debt overhang of USD59 billion is huge and accounts for nearly 75% of Dubai's outstanding total debts of USD80 billion. I think it can be resolved with support from Abu Dhabi. We are however at the negotiating stage between the creditor banks on the one hand & Dubai World & its backers on the other hand. This game of brinkmanship will go on for a while but no body is interested to re-ignite the flickering ember of the just concluded financial crisis. So, I believe that it will be amicably settled.
However, what had just happened will sound a warning to investors- that there are still some Dubai Worlds out there & one shouldn't throw caution to the wind. Will this end the party? Maybe not. Than again, some parties ended, not because your neighbor called in the cops; they ended because the party-goers had had their fill of dancing & boozing.
How do u think the construction in the coming days ?
It seems that Due to Dubai World's debt has standstill call.I think that the construction sector should not come to such worst situation.
Thanks,
Portable Storage,
http://www.moveablecubicle.com
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