Singapore Stock Market Blog 30 november 2009

The biggest news that has happened over the past few days would have to be that of Dubai World (Dubai government controlled holding company), which is something like Khazanah in Malaysia or Temasek and GIC in Singapore, requesting for delay in loan payment amounting to USD59 billion dollars. On a broader scale it is estimated that the Dubai government may have debts of up to USD80 billion.

Global financial markets reacted swiftly as there were some uncertainties initially as to the potential ramification. Asian stock markets fell between 3-5% last Friday while Singapore, Malaysia and Indonesia markets were closed for public holiday so they will have to play "catch up" today when market resume trading.

The million or billion dollar question is whether this incident may trigger another round of financial melt down similar to those caused by US financial giants not so long ago. So far, most market commentators believe the Dubai incident will most likely be a more contained incident since Dubai has the wealthy cousins of Abu Dhabi sitting on USD500 billion of sovereign wealth funds. It is also more likely that rather than a default occurring, the loans will eventually be re-structured and perhaps with a hair-cut as well. And finally, Dubai does have assets estimated worth USD90 billion.

I recall when the potential loan bubble first surfaced in US, market commentators keep saying everything have been revealed and the worst over....and it took about 18 months for the worst to be over. Hopefully we will not have to go through another round of 18 months market correction.