Asia Market Report (27th November 2009)

Asia: Dubai debt sparks panic

Dubai’s decision to delay payment on some of its $59bn debt pile has sent shock waves through global markets, hammering share prices and sinking weaker currencies.

Asian markets felt the impact, with Japan’s Nikkei down 301 points to 9,081, a new four-month closing low. Banks were bashed on worries about the financial sector’s exposure to a debt default by Dubai World.

The state-owned Dubai business asked creditors if it can delay debt repayments due next month until May of next year. Mitsubishi UFJ Financial Group was among the casualties in Tokyo.

A surge in the value of the yen also panicked investors, sending Canon, Sony, Honda and other exporters sharply lower. The Japanese currency leapt to a 14-year high against the dollar.

Hong Kong fell over 1,000 points as big banks like HSBC tumbled on fears about the situation in the Gulf state. There are serious concerns that the country will be forced to sell stakes to raise capital.

The leading index plunged 1,075 points to 21,134 as a dive in commodity prices convinced investors to start dumping resource stocks which have rallied recently on gold’s record rally.

Traders predict a slump in demand for oil and other resources if Dubai sparks another global financial crisis. Crude has plunged by 7% and gold by more than 3%.

It’s not the welcome back US traders were expecting. Those Americans who do decide to brave it into the office rather than extend their Thanksgiving break will be dealing will sharply lower stock prices.

Futures markets are currently indicating a slump of over 300 points for the Dow Jones and 42 points for the broader S&P 500 when trading begins later.