Abu Dhabi lifeline spurs recovery in Asian markets
News that neighboring emirate Abu Dhabi will supply $10 billion to help Dubai pay off debts, which have rattled investors who fear that the enormity of the desert kingdom's debt would create a second wave of financial turmoil, sent shares in Dubai investors higher. Hong Kong-listed HSBC (HBC), a major lender to Dubai World, surged 1.7%. Standard Chartered (SCBFF), which Bloomberg reports has made $18 billion of loans in the Middle East, shot up 3.9%.
In other sectors, Hong Kong-listed Foxconn (FXCNY), major mobile phone maker added another 2.9% to last week's gains. The company is getting a major boost from rumors that it will be the maker of the next Apple iPhone and from new reports that its Taiwanese parent company, Hon Hai, is expected to become the world's largest LCD TV producer during the course of 2010, shipping 11 million units throughout the world.
In China, news of Abu Dhabi's lifeline seemed to reinvigorate investors, calming fears of another global meltdown. China Petroleum & Chemical (SNP), Asia's largest oil refiner affectionately known as Sinopec, soared 8.4% and oil company PetroChina (PTR) climbed 3.6%. Qingdao Haier, maker of major appliances like air-conditioners and refrigerators, also scored in China today, gaining 1.9%.
Chinese banking shares surged today sending Bank of China (BACHY) 3.1% higher. Industrial & Commercial Bank of China (IDCBF) gained 1.7 percent and Bank of Communications (BKCFC) advanced 2%. Even smaller banks like Bank of Beijing rose, gaining 4.6%.
In Tokyo, news of the rescue had a more muted effect, stemming earlier losses for companies with direct connections to Dubai World and its real estate investment arm, Nakheel. After tumbling 5.9%, Obayashi, one of the companies commissioned to build the Dubai rail system and reportedly owed $7.5 billion by the Dubai government, ended the day down 1.6%. Mitsubishi Heavy Industries (MHVYF), another partner on the rail project gained 0.3 and Kajima Corp. (KAJMF), notable builder of Japan's flagship Apple Store and another Dubai builder added 1.1%.
Abu Dhabi and Dubai are both part of the United Arab Emirates, and today's bailout makes it seem that they really are united.