Investors are "softening" their views about Dubai's debt woes, the emirate's finance chief said yesterday as he attacked the media for spreading "blind panic" over the financial crisis that has engulfed the city-state.
"Of course, the reaction by the global markets was psychological, and came strongly," said Abdul Rahman Al Saleh, director-general of the Department of Finance. "However, the reaction is now softening as investors became more informed about what happened."
The emirate has been under fire from international investors since it emerged last month that the state-owned Dubai World conglomerate was seeking to freeze repayment of $26bn of debt. The news shook the world's markets and battered shares in Gulf businesses, amid fears that the problems were not limited to Dubai World.
Dubai has faced a backlash over the past few weeks, with investors and the media criticising the lack of clarity and transparency about how the emirate will restructure its debt pile.
Mr Saleh acknowledged some of these criticisms yesterday, saying: "Let me admit, in Dubai we are not good in publicising what we are doing as much as we are in doing it. It was a misunderstanding of the status of Dubai, which indeed is a centre of trade and economic activity. It was lack of knowledge of how much debt was the subject of the announcement and how it is related to the government debt."
His comments helped Dubai's stock market, which had fallen by 26 per cent since 26 November, to bounce back yesterday. It gained 7 per cent to close at 1,641 points.
Dubai has positioned itself as the Middle East's financial hub and is known for grandiose construction projects, including the world's tallest building – the 206-storey Burj Dubai – and three artificial Palm island resorts, which proved popular with Premiership footballers.
Dubai's apparent fall from grace has led to speculation about the effect on banks that lend in the region, notably Royal Bank of Scotland and Standard Chartered. Neither has been willing to quantify their potential exposures to the emirate, although Standard Chartered sought to reassure investors with a trading statement on Wednesday.
It said commercial property made up only a small proportion of its lending in Dubai, and it did not believe the fallout from the "developing situation" would materially affect it.Reuse content