Global Markets In Turmoil After Debt Bombshell

[webfact]

DUBAI DEBACLE

By THE NATION/AGENCIES

Published on November 28, 2009

Global markets in turmoil after debt bombshell

Panic spread around global financial markets yesterday as they took in the implications of Dubai World's request for a debt moratorium, but the Thai financial markets and companies have so far faced a limited impact from the roiling turmoil.

Capital Nomura Securities, indicated in a report yesterday that it did not foresee any major impact on the Thai market, unlike the fallout from last year's collapse of US financial institutions.

Thai stocks fell 0.78 per cent to close at 680.37, tracking regional losses after Dubai asked for a debt-repayment delay for a key state-owned firm. The baht fell against the dollar to close at 33.23-33.24, compared to Thursday's close of 33.16-33.17.

HSBC Holdings and Standard Chartered led declines in bank shares in Asia, and European stocks fell the most in seven months after Dubai World, with US$59 billion (Bt1.96 trillion) of liabilities, said it would seek a "standstill" agreement to delay repayment of its debt.

Royal Bank of Scotland Group, Lloyds Banking Group and Credit Suisse Group slumped on concern Dubai will rattle lenders recovering from the global credit freeze that has triggered $1.72 trillion in losses and write-downs.

Dubai World, controlled by the emirate's ruler, Sheikh Mohammed Bin Rashid al-Maktoum, borrowed from more than 70 lenders to buy assets ranging from stakes in Las Vegas casino company MGM Mirage to London-based Standard Chartered through Istithmar, a Dubai World investment arm. The request for a postponement includes $3.52 billion of bonds due on December 14 from Dubai World property unit Nakheel.

MAJOR EXPORT MARKET

The United Arab Emirates, in which Dubai is one of the seven sheikhdoms, is Thailand's most important export market in the Middle East. The UAE takes 28.6 per cent of Thai exports to the Middle East market of 15 countries, according to Capital Nomura Securities' report.

Major Thai export items to the UAE include cars and car parts, refrigerators and parts, gems and jewellery, iron and steel, radio and TV sets, computers, cloth, plastic pellets, chemicals and machinery.

The UAE also imports food products from Thailand such as rice, sugar, canned fruit, fresh and dry fruit, frozen seafood and wheat products, amounting to about $109 million annually.

Investors are concerned about the business exposure of Thai construction companies in the UAE. The shares of Italian-Thai Development, the Kingdom's biggest construction company, dropped 2.8 per cent yesterday to Bt2.80, the lowest close since August 21.

Italian-Thai has been investing in the construction sector in the UAE through two subsidies - ITD-NWR, in which it holds a 60-per-cent stake, and QINA Contracting, in which it holds 24 per cent. ITD-NWR was involved in the construction of the Palm Laguna in the UAE. In 2008, Italian-Thai booked about Bt278 million as earnings from the project. Power Line Engineering stock slumped 2.8 per cent to Bt1.38, its lowest close since May 18, while Syntec Construction fell 1.5 per cent to Bt0.66.

Italian-Thai, Power Line and Syntec will face a negative impact from their projects in Dubai after the state-owned company asked to postpone debt payments, DBS Vickers Securities (Thailand) said in a report yesterday.

Nawarat Patanakarn may see the highest impact, DBS Vickers wrote. The brokerage cut its rating on Nawarat to "fully valued" from "buy". It also cited Power Line and Syntec as having projects in Dubai. Other companies with exposure to the Middle East include Raimon Land, part of which is held by Istithmar Hotels FZE - an investment arm of Dubai World - and Ascon, which is holding joint-venture talks with Dubai.

The question arises as to the impact on Bumrungrad Hospital (BH), since it has investments in Dubai.

According to SCB Securities, BH should be completely unaffected since it sold its shares in Bumrungrad Hospital Dubai (BHD) back to Istithmar in the third quarter and cash has already been received by BIL, an international investment arm in which BH holds 31.5 per cent.

Istithmar World is an investment arm of Dubai World.

BHD was initially planned as a joint investment between BIL and Istithmar, but the plan was scrapped last year as Dubai's economic conditions were deemed unsuitable. BIL put only $2 million into BHD prior to the cancellation of the plan and made full provisions of Bt76 million in the final quarter of 2008. It then sold the shares back to Istithmar in the third quarter of this year and was paid in cash.

Asian banks have limited exposure to Dubai World compared to other world banks.

-- The Nation 2009/11/28

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[trogers]

I wonder about the real value of MBAs. We probably have more people with MBAs in this last decade then the total number in the 20th century. Yet we are seeing financial crisis after financial crisis.

[H2oDunc]

An American pastor called Linsey Williams who used to work in the oil fields of Alaska was on a talk radio show in July of last year. On it he said that the real people who control the price of oil will bring it down to $50 a barrel by the end of the year and keep it that way for months. This is when the price of oil was $140 a barrel and everyone was predicting it would hit $200 a barrel. He said the intention was to keep it at $50 till they bankrupted Dubai and to remind OPEC just who was running the show. He was laughed at by nearly everyone. He turned out to be correct in nearly everything he predicted. His " Non oil crisis " documentary also makes good viewing. I fully believe this whole crisis was managed to great effect and saw the biggest transfer of wealth in history.

[basjke]

From yahoo finance today:

The latest news is at the very least a wake-up call to investors, analysts say.

"Dubai's current problems are a long overdue consequence of the bursting of the global property bubble rather than the start of a new financial crisis," analysts at Capital Economics concluded in a research note Friday.

Analysts said they were troubled by Dubai's apparent determination to downplay its financial predicament.

Dubai's ruler, Sheik Mohammed bin Rashid Al-Maktoum, had continually dismissed concerns over the city-state's liquidity and denied for months that the economic downturn even touched the glitzy city-state. Two months ago, he told Dubai's critics to "shut up."

So for now Thailand must be the only real estate market in the world that is untouched by the economic crisis as even Dubai where the super rich invested is infested.How long before the bomb explodes in Thailand?

Edited November 28, 2009 by basjke

[Orion76]

An American pastor called Linsey Williams who used to work in the oil fields of Alaska was on a talk radio show in July of last year. On it he said that the real people who control the price of oil will bring it down to $50 a barrel by the end of the year and keep it that way for months. This is when the price of oil was $140 a barrel and everyone was predicting it would hit $200 a barrel. He said the intention was to keep it at $50 till they bankrupted Dubai and to remind OPEC just who was running the show. He was laughed at by nearly everyone. He turned out to be correct in nearly everything he predicted. His " Non oil crisis " documentary also makes good viewing. I fully believe this whole crisis was managed to great effect and saw the biggest transfer of wealth in history.

Some moron makes a ridiculous prediction every day.

Then when something happens that is compatible with the moron's prediction, people believe the moron is a guru... dismissing all the other inaccurate nonsense he spouted.

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

[Naam]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

[webfact]

Economic ministers closely monitor impact from Dubai debt

BANGKOK, Nov 28 (TNA) -- Thai Prime Minister Abhisit Vejjajiva said Saturday that economic ministers are monitoring the impact, if any, from the recent Dubai debt crisis and Vietnam's devaluation of the dong currency on the Thai economy and will send results to him next week.

Mr Abhisit said the economic ministers would report to him on any impact which could result from the two issues next Wednesday.

There is still no need to adjust measures on Thailand's exports because exports in the past few months performed positively, he said.

However, concerned officials must closely watch Thai goods which are "exported and compete directly" with Vietnam, as that country will have a competitive edge over Thailand after it has devalued its currency, said Mr Abhisit.

On the fallout from the Dubai's debt crisis which has raised concerns over the new financial turmoil in the world, Mr Abhisit said, the problem had already affected global trade and investment markets and, therefore, is necessary to map out measures to prevent the problem from getting out of hand.

If the problems do not become worse, their effects will be minimal on Thailand, he added.

The city-state's main investment arm, Dubai World, disclosed earlier this week that it was asking for at least a six-month delay on paying back its US$60 billion debt. Several credit agencies have slashed the debt ratings on Dubai's state companies as they consider the plan as a recognition of dd default.

The State Bank of Vietnam (SBV) set the interbank exchange rate at 17,961 dong to one US dollar from Thursday, against 17,034 Wednesday, effective Thursday.

The SBV is to raise rates to 8.0 per cent from December 1 to "contribute to macroeconomic stabilisation, control inflation and maintain sustainable economic growth in 2010", according to the bank's online statement.

The Vietnamese government wants to keep its 2009 annual inflation at 7.0 per cent, after reaching 23 per cent in 2008. (TNA)

-- TNA 2009/11/28

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[trogers]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Problem is the financial men who earned commissions and bonuses tied to deals they closed, and promoting the ideas of easy get rich schemes using borrowed money.

[neil324]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Ok was the oil price in 2008 down only to supply and demand?

[Orion76]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Ok was the oil price in 2008 down only to supply and demand?

It was down due to more sellers than buyers of oil futures contracts.

[chiang mai]

Oil and gas represents only about 5% of Dubai's GDP, just before people start to go down the wrong road here.

[trogers]

So for now Thailand must be the only real estate market in the world that is untouched by the economic crisis as even Dubai where the super rich invested is infested.How long before the bomb explodes in Thailand?

Who says Thailand has been untouched? You only need to see the number of no-shows during transfer of titles in newly completed projects to know how badly flippers have been hit since the beginning of 2009.

Take Millennium Residence - flipped prices hit Bt140k/m2. Now the investor who bought one of the building is releasing his units at less than Bt100k/m2.

And I just drove past an ad of LPN...booking fees for a unit is set at Bt999. Developers here are getting desperate to achieve rosy booking numbers...LOL

Edited November 28, 2009 by trogers

[Naam]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Ok was the oil price in 2008 down only to supply and demand?

this question is irrelevant as far as the Dubai moratorium of corporate debt is concerned, all of them are corporations which have no bearing or any relation with the oil and gas industry.

[Naam]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Problem is the financial men who earned commissions and bonuses tied to deals they closed, and promoting the ideas of easy get rich schemes using borrowed money.

that is an incorrect conclusion. the problem is that the corporations who are asking for a debt moratorium couldn't find buyers for their outrageously priced construction objects. what was going on was "let's buy on monday and sell with a profit of 15-20% on friday". the global financial crisis and the risk aversion of investors caused by the crisis made the cardhouse collapse.

in 2005, before we selected Thailand my wife and me shortlisted Dubai to spend our retirement years. at that time no construction company was willing to build a house for us according to our design. we then considered buying a penthouse and took a look at some which were offered as shells as well as in a finished state. one unit which we liked was priced at USD 1.65m and we shook our heads. 2½ years later in 2007 the asking price for an identical unit was USD 3.15m and only a few months ago the latter unit was offered to us for USD 1.99m which of course we politely declined

[trogers]

that is an incorrect conclusion. the problem is that the corporations who are asking for a debt moratorium couldn't find buyers for their outrageously priced construction objects. what was going on was "let's buy on monday and sell with a profit of 15-20% on friday". the global financial crisis and the risk aversion of investors caused by the crisis made the cardhouse collapse.

The keyword is DEBT - for without this, there will not be uncontrollable flipping, geometric price increases, and a House of Cards...

And it is the financial men who promoted the investment models and the financial grease to get the whole thing moving...till it CRASSHH!

[sibeymai]

I suspect the Chinese will be taking a lot of interest in this given that they are 1. cashed up, and 2. need oil. The current economic problem in the world are nothing but opportunity for countries like China.

[OriginalPoster]

An American pastor called Linsey Williams who used to work in the oil fields of Alaska was on a talk radio show in July of last year. On it he said that the real people who control the price of oil will bring it down to $50 a barrel by the end of the year and keep it that way for months. This is when the price of oil was $140 a barrel and everyone was predicting it would hit $200 a barrel. He said the intention was to keep it at $50 till they bankrupted Dubai and to remind OPEC just who was running the show. He was laughed at by nearly everyone. He turned out to be correct in nearly everything he predicted. His " Non oil crisis " documentary also makes good viewing. I fully believe this whole crisis was managed to great effect and saw the biggest transfer of wealth in history.

That's interesting considering the price action that has gone on since then, but it comes off a bit sterile in that he didn't names of the real people that control the price of oil. Without knowing their identity, how can their culpability be proven or disproven?

[trogers]

An American pastor called Linsey Williams who used to work in the oil fields of Alaska was on a talk radio show in July of last year. On it he said that the real people who control the price of oil will bring it down to $50 a barrel by the end of the year and keep it that way for months. This is when the price of oil was $140 a barrel and everyone was predicting it would hit $200 a barrel. He said the intention was to keep it at $50 till they bankrupted Dubai and to remind OPEC just who was running the show. He was laughed at by nearly everyone. He turned out to be correct in nearly everything he predicted. His " Non oil crisis " documentary also makes good viewing. I fully believe this whole crisis was managed to great effect and saw the biggest transfer of wealth in history.

And the next even bigger transfer of wealth - price of GOLD...

[Naam]

I suspect the Chinese will be taking a lot of interest in this given that they are 1. cashed up, and 2. need oil. The current economic problem in the world are nothing but opportunity for countries like China.

Dear Sibey,

China's daily crude consumption exceeds 6 million barrels. Dubai is pumping approximately 160,000 barrels daily equivalent to 45 minutes of chinese demand. therefore ah sez... "China case closed".

next!

[Orion76]

that is an incorrect conclusion. the problem is that the corporations who are asking for a debt moratorium couldn't find buyers for their outrageously priced construction objects. what was going on was "let's buy on monday and sell with a profit of 15-20% on friday". the global financial crisis and the risk aversion of investors caused by the crisis made the cardhouse collapse.

The keyword is DEBT - for without this, there will not be uncontrollable flipping, geometric price increases, and a House of Cards...

And without oxygen we couldn't breathe on this planet?

What's your point?

[trogers]

that is an incorrect conclusion. the problem is that the corporations who are asking for a debt moratorium couldn't find buyers for their outrageously priced construction objects. what was going on was "let's buy on monday and sell with a profit of 15-20% on friday". the global financial crisis and the risk aversion of investors caused by the crisis made the cardhouse collapse.

The keyword is DEBT - for without this, there will not be uncontrollable flipping, geometric price increases, and a House of Cards...

And without oxygen we couldn't breathe on this planet?

What's your point?

Too much oxygen is poisonous to living tissues!

[Orion76]

Too much oxygen is poisonous to living tissues!

Fair enough

And along the same lines, without enough buyers of debt the whole world would turn into Zimbabwe.

[trogers]

Too much oxygen is poisonous to living tissues!

Fair enough

And along the same lines, without enough buyers of debt the whole world would turn into Zimbabwe.

Perhaps human values have transformed in the last couple of decades. I was brought up to treasure savings, and not treasure debts.

People and enterprises deemed creditworthy are those who do not need much of it, not those who have high temporary incomes...and pledge future income to borrow and speculate. The first stepping stone down this path is margin trading, and then the next, and the next...

The same with enterprises - high leveraged ventures and using short term debt to finance long term liabilities.

[sorensen]

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

Problem is the financial men who earned commissions and bonuses tied to deals they closed, and promoting the ideas of easy get rich schemes using borrowed money.

that is an incorrect conclusion. the problem is that the corporations who are asking for a debt moratorium couldn't find buyers for their outrageously priced construction objects. what was going on was "let's buy on monday and sell with a profit of 15-20% on friday". the global financial crisis and the risk aversion of investors caused by the crisis made the cardhouse collapse.

in 2005, before we selected Thailand my wife and me shortlisted Dubai to spend our retirement years. at that time no construction company was willing to build a house for us according to our design. we then considered buying a penthouse and took a look at some which were offered as shells as well as in a finished state. one unit which we liked was priced at USD 1.65m and we shook our heads. 2½ years later in 2007 the asking price for an identical unit was USD 3.15m and only a few months ago the latter unit was offered to us for USD 1.99m which of course we politely declined

That sound like Thailand if you replace 2007 with 1997 and USD with Thai Baht. Not that two crisis will ever be the same, but Thai CBD real-estate kept falling in price from 1997-2001 and bottomed out early 2002, so Dubai have a long and very hard road ahead.

[metisdead]

I was hoping Abu Dhabi would step in and now it looks like they will, maybe the markets can get back to "normal".

Nov. 28 (Bloomberg) -- Abu Dhabi, Dubai’s oil-rich neighbor, will “pick and choose” which of Dubai’s assets to underwrite, Reuters reported, citing an unidentified Abu Dhabi official.

Abu Dhabi won’t fund all of Dubai’s debt, the official said, according to Reuters.

Markets around the world have been roiled since Dubai World, with $59 billion of liabilities, said Nov. 25 it was seeking to delay debt payments.

[sorensen]

I suspect the Chinese will be taking a lot of interest in this given that they are 1. cashed up, and 2. need oil. The current economic problem in the world are nothing but opportunity for countries like China.

Dear Sibey,

China's daily crude consumption exceeds 6 million barrels. Dubai is pumping approximately 160,000 barrels daily equivalent to 45 minutes of chinese demand. therefore ah sez... "China case closed".

next!

China has been importing unusual big volumes of oil since July (2009), upwards to 9 million bbl/day, so I am sure they are paying interest of what is going on in UAE.

[basjke]

So for now Thailand must be the only real estate market in the world that is untouched by the economic crisis as even Dubai where the super rich invested is infested.How long before the bomb explodes in Thailand?

Who says Thailand has been untouched? You only need to see the number of no-shows during transfer of titles in newly completed projects to know how badly flippers have been hit since the beginning of 2009.

Take Millennium Residence - flipped prices hit Bt140k/m2. Now the investor who bought one of the building is releasing his units at less than Bt100k/m2.

And I just drove past an ad of LPN...booking fees for a unit is set at Bt999. Developers here are getting desperate to achieve rosy booking numbers...LOL

Actually it was a bit sarcastic that line.I only tried to reflect what I read in the papers overhere every day in those articles "sponsored" by raimon land and consortiums.Why you think I highlighted that line about the sheiks comments.

[AlexLah]

Supply and demand controls the price of oil, a

bingo!

Again you are wrong.

[LaoPo]

Supply and demand controls the price of oil, a

bingo!

Again you are wrong.

It's not my style to interfere with someone else's posts and comments but yours is very unfair since you're taking the sentence and reaction COMPLETELY out of context!

That's not Gentleman's alike and you are wrong!

The CORRECT and COMPLETE sentence, written by member Orion76, was this (and with which sentence and comment by Naam I completely agree):

Supply and demand controls the price of oil, and Dubai's oil revenues are negligible. The price of oil has little to do with Dubai's current problems.

bingo!

http://www.thaivisa.com/forum/Global-Marke...93#entry3169893 Post 6

http://www.thaivisa.com/forum/Global-Marke...98#entry3169798 Post 5

Your behavior is childish and "not done" Mr. Alex Lah !

LaoPo

[Abrak]

So for now Thailand must be the only real estate market in the world that is untouched by the economic crisis as even Dubai where the super rich invested is infested.How long before the bomb explodes in Thailand?

Who says Thailand has been untouched? You only need to see the number of no-shows during transfer of titles in newly completed projects to know how badly flippers have been hit since the beginning of 2009.

Take Millennium Residence - flipped prices hit Bt140k/m2. Now the investor who bought one of the building is releasing his units at less than Bt100k/m2.

And I just drove past an ad of LPN...booking fees for a unit is set at Bt999. Developers here are getting desperate to achieve rosy booking numbers...LOL

Actually it was a bit sarcastic that line.I only tried to reflect what I read in the papers overhere every day in those articles "sponsored" by raimon land and consortiums.Why you think I highlighted that line about the sheiks comments.

I wouldnt get too excited about LPN booking fees and them being 'desperate to achieve rosy booking numbers'. They launched 2 projects last weekend for a total of 3,700 condo units. They achieved 2,000 bookings for those units in two days. On average they have about a 90% conversion of bookings into sales. One of the projects launched last weekend Lumpiniville Ladprao Soi 4 consisting of 1020 units is already marked on their website as 'sold out' ('see you next project'). www.lpn.co.th

Now you might regard this all as a scam. So why dont you ring them up and ask to buy a place there. Afterall they launched it a week ago, so presumably there are still some units for sale.

(Please note I am not trying to imply that all is rosy in the Thai property market. LPN is selling units from Bt1.1m or Bt3,999 per month. This will not buy you even a toilet in Millennium Residence.)

Edited November 28, 2009 by Abrak