UK/UNITED ARAB EMIRATES - Fund managers have sought to downplay the potential fallout from the Dubai debt crisis on both their holdings and the global economic recovery.
Aberdeen Asset Management's Brett Diment says the debt standstill of the $3.52bn Nakheel sukuk had not impacted his portfolio.
The manager of the £205m (US$338m) Emerging Markets Bond fund says none of his debt portfolio held the bonds.
However, he says: "We do have indirect exposure to the region via some of our holdings that have investments or operations there. Many global financial institutions have exposure to debt issued by Dubai state-owned entities.
"Most pertinent for us is Standard Chartered Bank (which is also held across our Asia Pacific, Pan-European, Global and UK portfolios) has cross-border loans to the United Arab Emirates, which comprises of seven emirates including Dubai, totalling $12.3bn."
Diment says he is also mindful of how the situation may affect other economies. For instance, Dubai has attracted a huge number of foreign workers from countries like India, who send large amounts of money back to their families in their home countries.
He says while some information is coming out, it is too early to quantify the implications of the news.
He adds the Aberdeen GEM small cap fund has a couple of regional holdings, like Bank Muscat and Qatar Insurance.
Ghadir Abu Leil-Cooper, head of EMEA equities at Baring Asset Management says:
"Dubai's problems, although insufficient in scale to have much impact on the course of global growth, have served to remind investors that an equity rally and large dose of monetary and fiscal stimulus from emerging and developed governments alike have not eradicated debt-service difficulties."
She adds: "In late 2008 it became clear that the credit crunch was having a severe impact on Dubai. Since this time, the expectation has been that Abu Dhabi would provide assistance to Dubai but that this assistance would probably have strings attached. So whilst yesterday's announcement was a surprise, and how the situation is going to be resolved is unclear at this stage, the problems facing the Emirate are widely recognised by the investment community."
Meanwhile F&C's director of UK strategy Ted Scott says: "Although the markets collapsed on the news, on its own, it was an overreaction to the problems of Dubai."
"The Dubai debt story is a welcome reality check for equities and, while shares still represent a preferred asset class, within the market there remains better value in good quality defensive and growth companies. Despite their recent outperformance this should continue while the market consolidates and corrects and most of these companies have relatively limited direct or indirect exposure to of semi-sovereign states and their contagion."
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