Irish bank shares creep up despite default fears Investors confident Dubai crisis will not send shockwaves across the world
The Jumeirah Lake Towers district and all of its unfinished projects.
Saturday November 28 2009
INVESTORS in the two main Irish banks joined their counterparts in other European countries yesterday by shrugging off fears that a brewing financial crisis in Dubai could unhinge wider economic recovery prospects.
The drubbing that shares in Allied Irish Banks (AIB) received on Thursday was partly reversed yesterday as investors bet that concerns on the fallout from a potential sovereign credit default in the Middle East emirate are overcooked.
Exposure
Having sank by almost 8pc on Thursday following fears over its possible exposure to the unfolding crisis, shares in AIB gained 2.5pc yesterday in Dublin to close at €1.64. Bank of Ireland's stock, which had slid 2pc on Thursday, managed to remain in positive territory at the end of yesterday's session.
But the unfolding of events in Dubai, where the government's Dubai World investment vehicle has said it wants to delay repayments on its $54bn (€36bn) debt pile, did little to quell concerns in other sectors of the financial world.
Ratings agency Moody's has already said it will consider Dubai World to have defaulted on its bonds if creditors agree to its request to stall repayments.
That would rank the default as the biggest in the world since Argentina suspended repayments on $132bn of debt, sending the country into a spiral of rioting and a sharp economic contraction that saw its gross national product sink almost 11pc in 2002.
Dubai gambled on a massive construction boom that relied on foreign investors -- including many from Ireland -- to help prop up its house of cards.
Two Bank of America (BoA) strategists warned yesterday that a default by Dubai could sever capital flows to emerging markets and could escalate into a "major sovereign default problem that would resonate across global emerging markets".
The strategists also cautioned that a default would be a "major step back" for a recovery of the global economic and financial crisis.
A White House spokeswoman said it was "monitoring closely" the events in Dubai.
Even as Irish and other banking shares returned to positive territory yesterday, wider emerging market indices fell reflecting concerns echoed by BoA. Commodity prices, including that of oil, also fell yesterday. Crude oil prices were down as much as 7pc at one point.
Earlier this year chairman of Dubai World, Sultan Ahmed Bin Sulayem, said the global economic crisis offered Dubai's emerging generation of corporate executives an opportunity to "study and understand the complexities of crisis management and decision-making".
- John Mulligan
Irish Independent
