“The amount is purely notional – in no way does it cover the extent of the Dubai banking losses,” says Jeff Chowdhry, head of emerging market equities at F&C Investments. “The banking sector is a house of cards that could come down due to the real estate market.”
According to the central bank, UAE banks had assets of nearly $400bn in January. Much of it is tied to the property sector in some form, either as direct property investment or as loans to contractors, developers and homeowners.
Given the parlous state of the real estate market and the phenomenon of redundant expatriates absconding from consumer loans, banks in the UAE could be sitting on a mountain of losses, most of it in Dubai, says Mr Chowdhry.The second one is a comment piece by a former Reuters hack in the Middle East:
News of Dubai’s death has been greatly exaggerated. Its fundamentals as a regional hub of shipping, services, people, trade and capital have not changed. “Disneyland Dubai has crashed,” as one Dubai-based banker put it, referring to headline-grabbing property projects, “but the core business model of Dubai remains sound.”
Dubai’s property bubble popped. Its hubris also (thankfully) popped. Its core business model, however, did not. Property corrections and over-leveraged state entities can be fixed. Becoming a poor environment for trade would be far more dangerous. When the world growth engine restarts, city-states such as Dubai will flourish. In the meantime, Dubai will serve as a vital, if somewhat clogged, artery in world trade. The battered but still battling hub city will rise again.