World markets shot higher after Dubai announced it received US$10 billion in emergency funds to cover its massive debts, relieving investor worries about the potential fallout of a major default.
Asian stocks rebounded from early losses, European bourses opened stronger and hard-hit Middle East markets surged on the news.
The Dubai government said the financing, supplied by the emirate’s oil-rich neighbor Abu Dhabi, would help pay off US$4.1 billion in debt owed by struggling Dubai World’s property division and due yesterday. The rest would go toward bills and expenses through April.
The news cheered investors, who had feared the consequences of Dubai World defaulting. Since the state-owned company announced its intention last month to delay payment on its US$60 billion in debt, investors have braced for more financial turmoil and been forced to re-evaluate their assumptions about government promises to make good on debts.
“The Dubai news is a big surprise to the market,” said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong.
“We were preparing for a lack of payment today and now they’re saying they will pay. This is definitely positive for investor confidence,” he said.
European markets followed Asia higher, with benchmarks in the UK, Germany and France rising about 1 percent each. The Dubai Financial Market’s main index vaulted 10.1 percent in early trading.
Abu Dhabi’s stock market jumped 7.4 percent.
The news also saw the Dubai Financial Market index gaining 171 points at opening to 1,866.80, with all sectors in the green and property giant Emaar surging by a full 15 percent, the maximum allowed in a session.
Most Asian markets put on modest gains after recouping their early losses.
But Tokyo’s NIKKEI 225 stock average was little changed, down 2.19 points at 10,105.68 after corporate Japan’s continued reluctance to invest in new factories or workers overshadowed an improvement in business confidence.
Hong Kong’ Hang Seng rose 183.64 points, or 0.8 percent, to 22,085.75 and South Korea’s KOSPI added 7.87 points, or 0.5 percent, to 1,664.77. Elsewhere, Australia’s benchmark added 0.4 percent and China’s Shanghai’s index was up 1.7 percent.
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