Saturday, November 28, 2009

Asian's Banks Exposure to Dubai and the Middle East

As many of you all might have realized, Dubai is asking for 6 more months to pay back its debt. This somehow has caused the whole world's economy to go into panic.

But as quickly as the news came out, many companies/banks/brokerage houses are coming out with reports and statistics to help assure the general public and investors.

Firstly, here is the actual news (Taken from The Straits Times 1 ) :

Dubai's government investment firm Dubai World shocked markets on Thursday when it asked for a six-month delay in repaying a US$59 billion (S$81 billion) tranche of its total debt of US$80 billion.

Next, according to another report by The Straits Times 2:

Local firms like Property group City Developments (CDL) which have links with companies in Dubai come up to assure the public that their investments are safe. In the case of CDL, if Dubai chooses to default on it payments, CDL will just invest more capital but will thus end up with a greater share of the investment.

Now comes the reports by brokerage houses. Here are some facts and figures done by Citibank:

Source: Citi Investment Research and Kinner's Dealogic file

  • Asian Banks have little, if any exposure to Dubai
  • Dubai's exposure to the world's banks is actually $22 Billion out of the $80 Billion debt
  • Main 2 banks are Standard Charted and HSBC due to their operations in the middle east
  1. Standard Charted ( US$14bn at 1H09, equal to 7.6% of group loans and 60% of equity), but this refers to the WHOLE of middle east, not only Dubai
  2. HSBC (US$15.9bn at 1H09, equal to 1.7% of group loans and 13% of equity), but this refer to the UAE, not only Dubai
  • Below are some bank exposure to Dubai
As you can see, actually there is not much need for alarm. Just that it proves to show that even oil rich countries can be in debt.

In my opinion, unless something major actually happens, this news is actually exaggerated by the media and thus indirectly causing mass panic among investors. Thus, this might actually be a good opportunity to invest in some of the bank stocks which will/might be beaten down due to the general bad market sentiments. Especially for those who have totally no exposure to the Middle East at all.

If any of you want the actual report on the Asian Banks by Citibank, do drop me an email at

1 comment:


I have my reservations about buying banks with middle east exposure.