United Arab Emirates (UAE) consists of seven states or emirates, which are Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah, and Fujairah. These emirates have separate ruling families and budgets. UAE has the world's sixth largest oil reserves but the emirate of Dubai lacks oil wealth, it has to tap fund from credits markets for its spectacular growth.
Dubai's debt problem is not a new crisis, it is an anticipated problem as its building boom collapsed in the current world financial crisis, one of the many outcomes.
Abu Dhabi, which sits on 95% of UAE's oil reserves and the royal families with a wealth estimated at $33 trillions, has bought $15 billions of Dubai's bonds in the last several months, Abu Dhabi could easily bail out Dubai that has a total debts of about $80 billions. But the latest news from Reuters is that Abu Dhabi will not bail out Dubai, it will "pick and choose" how to assist its neighbour. But whatever method Abu Dhabi may use, it will not let Dubai fall as the repercussion will definitely affect UAE.
I expect those Asia Pacific markets that have over reacted and were badly beaten on Friday such as Hong Kong, Australia, Japan and Korea to rebound and recoup parts of their losses next Monday. After that, for Hang Seng, I expect the market to zig-zag downwards to complete the major (IV)
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