The United Arab Emirates central bank stepped in yesterday to head off pressure on banks and any potential capital flight as federal authorities tried to counter concerns over Dubai's debt problems.
The central bank set up an emergency liquidity facility but investors remained nervous about the short-term impact on local markets as regional traders digested the global sell-off caused by the announcement that one of Dubai's flagship entities – Dubai World – was seeking a standstill agreement with creditors until May.
Due to an Islamic holiday, stock markets in Dubai and Abu Dhabi open today for the first time since Dubai World's shock statement on Wednesday. Some brokers are now predicting that stocks in Dubai and Abu Dhabi will drop to their limits, with banks likely to be hard hit.