(JSE) was red all over on Friday as
investors cut their losses following
revelations about the magnitude
of debt problems in Dubai.
During mid-morning trading
on Friday, the JSE All-Share Index
was 2.16% down at 26,441 points.
The Financial 15 and Industrial 25
indices were down 2.21% and
The rand continued its downward
trend against the dollar,
trading at R7.60 to the
US currency from around
R7.50 on Thursday.
"All of a sudden the world seems
a much gloomier place as
investors start evaluating
the effect of what the Dubai
fallout would be," wrote traders
Jacobs Mellet (BJM) in a note
to clients on Friday.
Dubai, part of the oil-exporting
United Arab Emirates (UAE),
said on Wednesday it would
ask creditors of state-owned
to agree to a standstill on
billions of dollars of debt as
a first step towards restructuring.
Dubai World , the conglomerate
that led the emirate's expansion,
had $59bn of liabilities as
of August, most of Dubai's total
debt of $80bn. Nakheel was
the builder of three palm-shaped
This prompted ratings agency
Standard & Poor's (S&P) to place
four Dubai-based banks
on a negative credit watch.
"The rating actions reflect
the large exposure these banks
have to Dubai World and
Nakheel, and more generally
to Dubai-based government-related
entities, and the risks that the
standstill agreement would pose
to these banks," said Standard & Poor's
credit analyst Mohamed Damak.
Damak added that S&P expected
asset quality to continue to
deteriorate in the coming quarters
and that "this trend could be
exacerbated by the direct and
indirect impact of a debt
restructuring by Dubai World,
which represents a major
pillar of the Dubai economy."
Andrew Kinsey, Head of Risk at
said that the fallout from Dubai
could have far-reaching
consequences for investors
both internationally and locally.
"It highlights the fact there is
substantial overcapacity in just
about every market you care
to look at," said Kinsey.
Ernie Gruhn said investors may
only have a clearer picture on
Monday of the direction the markets
would take, as the US markets will
only trade for a half-day on
Friday due to the Thanksgiving holiday.
Sent from Kigali, Rwanda