Tuesday, 15 December 2009

After enduring weeks of its own bond-market pain, this city-state came to the rescue of its cash-strapped neighbor Dubai on Monday, a move that could be as good for Abu Dhabi in global markets as it is for Dubai.

On Monday Dubai said the government of Abu Dhabi would provide $10 billion to meet the debt obligations of Dubai World, which previously said it would restructure $26 billion in debt.Monday’s funding brings brings Abu Dhabi’s direct and indirect support for Dubai to $25 billion.That sent stock markets in both emirates soaring.

The two-city states are the biggest and richest of seven emirates that make up UAE Abu Dhabi, one of the world’s largest oil producers,provides the bulk of federation funding.

Middle Eastern stock markets surged on Monday’s announcement.The Dubai Financial Market’s benchmark index rallied 10% t0 1871.20 , its biggest single-day gain in more than a year.

Abu Dhabi officials denied that the latest cash injection was a targeted bailout of Dubai World and instead characterized the money as a loan