Stockholm falls as Dubai shocks global markets

The Stockholm stock exchange fell by 3.1 percent on Thursday in response to an announcement that Dubai World has requested deferment on its $59 billion mountain of debt.

The shockwaves reverberated across the globe with the British pound and UK banks taking a big hit in afternoon trading.

Insurance premiums on Dubai-related debt spiralled on Thursday in response to the announcement that the emirate’s holding company, behind much of the spectacular property boom in the territory in recent years, was having trouble meeting debt payments.

Insurance on a five-year $10 million loan to Dubai is now running at over $500,000 per annum, Reuters reports.

While Swedish banks are not overly exposed to Dubai and Middle Eastern markets the emirate’s financial tentacles extend to the Stockholm exchange.

Dubai’s holding firm Borse Dubai owns for example a fifth of Nasdaq OMX, the firm which operates the Stockholm exchange.

“This is nothing that affects either Nasdaq OMX or the Stockholm exchange,” said Carl Norell, a spokesperson for the exchange, to news agency TT.

Asian markets also felt the financial chill from Dubai overnight with the Nikkei 225 down 3.2 percent, the China Shanghai Composite down 2.2 percent and the Hong Kong Hang Seng dropping 4.3 percent.

With the US exchanges closed for the Thanksgiving Day holiday it was difficult to gauge Wall Street’s reaction to the news.

Dubai World has asked its creditors for respite until May 30th 2010 in order to restructure its balance sheet.

An eventual bankruptcy would have extensive consequences, the UK Financial Times warned on Thursday. The total debts accumulated by Dubai are thought to exceed $80 billion.

The head of Sweden’s Riksbanken, Stefan Ingves, said on Thursday that it is too early to judge the situation.

“Swedish banks are not that big in that part of the world, so it will hardly be a great concern for Swedish banks,” he said.

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Sweden joins ‘The World’ in Dubai project

Sweden is set to become an island in Dubai, complete with Viking longship-roofed villas, a floating restaurant and the chance to celebrate Midsummer with little risk of the customary rain spoiling the party.

Sweden joins 'The World' in Dubai project
The Heart of Europe project in Dubai. Photo: TT

The "Swedish" development is part of the Heart of Europe tourism development which is located off the coast of Dubai. The development is part of "The World" – an artificial archipelago of small islands connected in the shape of a map of the globe.

"The World" project in Dubai. Photo: NASA/Jesse Allen

The luxury villas on the "Swedish" island will each feature seven bedrooms and a private beach. They will furthermore resemble the upturned hull of Viking longships and will be serviced by a floating restaurant modelled on the Saluhall Market place in central Stockholm. The restaurant will serve a slew of traditional Swedish delicacies such as herring, meatballs and toast Skagen.

"The island will not only be home to the finest Swedish architecture and design, but it will also bring the best of Swedish culture and lifestyle to Dubai," Josef Kelindienst, CEO of the developers the Kleindienst Group told website.

Construction of the some 300 islands began in 2003 but the project was derailed by the finance crunch. The heart of Europe project was launched in January 2014 and will feature six man-made islands each displaying a version of European life.