Virgil
11-20-2008, 08:08 PM
http://www.reuters.com/article/reutersEdge/idUSTRE4AJ65C20081120
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Thu Nov 20, 2008 11:25am EST
By Thomas Atkins - Analysis
DUBAI (Reuters) - The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and the government pondered wider steps to rescue banks.
Dubai -- self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall -- has gone pear-shaped.
"It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "a full-scale frenzy in which speculation went largely unchecked until it was very late."
The result may be a new business model for the emirate, one based less on debt and speculation.
Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.
Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.
"Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance," Nomura said.
Now, investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion, according to estimates by ratings agency Fitch.
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Thu Nov 20, 2008 11:25am EST
By Thomas Atkins - Analysis
DUBAI (Reuters) - The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and the government pondered wider steps to rescue banks.
Dubai -- self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall -- has gone pear-shaped.
"It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "a full-scale frenzy in which speculation went largely unchecked until it was very late."
The result may be a new business model for the emirate, one based less on debt and speculation.
Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.
Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.
"Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance," Nomura said.
Now, investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion, according to estimates by ratings agency Fitch.
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