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HONG KONG - Jittery investors Friday dumped shares of two foreign banks with the heaviest exposure to Dubai -- HSBC and Standard Chartered -- as ripples from a feared debt default spread worldwide.
Analysts played down fears of major problems at the two London-based banks, which are heavyweight players on the Hong Kong stock exchange with huge operations in the Middle East and Asia.
But their share prices bore the brunt following Dubai's shock announcement that it wants creditors to give a six-month breathing space on debts owed by flagship conglomerate Dubai World.
Hong Kong's benchmark Hang Seng Index fell 1,075.91 points, or 4.84 percent, to 21,134.50 -- its biggest tumble this year.
HSBC dropped 7.6 percent to 87.00 Hong Kong dollars (11 US dollars) and Standard Chartered fell 8.6 percent to 185.90 Hong Kong dollars.
Hong Kong Financial Secretary John Tsang said loans extended by the city's banks to Dubai World and the United Arab Emirates overall amounted to less than 0.4 percent of their total portfolio.
"The financial problems of Dubai World will not pose any systemic risk to Hong Kong's banking system," he told reporters.
But Louis Tse, director of Value Convergence CEF, said the two banks should have known about problems in Dubai for some time after the emirate's debt-fuelled binge on infrastructure spending in recent years.
"Silence may be golden for the banks. But it is definitely not the case for investors," he told AFP.
HSBC's Middle East arm was by far the single biggest foreign lender in the UAE with outstanding loans of 17 billion US dollars at the end of last year, according to the Emirates Banks Association.
Standard Chartered was next with 7.8 billion US dollars owed at the end of 2008. Britain's Barclays Bank was third with 3.6 billion US dollars, while India's Bank of Baroda was seventh on 1.8 billion.
Bank of Baroda economist Rupa Rege Nitsure said it had "no exposure to Nakheel", the crisis-hit property arm of Dubai World.
Nevertheless the Indian bank's shares plummeted 4.64 percent to 521.4 rupees (11.2 US dollars) in Mumbai trade.
India's central bank asked banks to report their exposure to Dubai World but Commerce Minister Anand Sharma said the country's "resilient" economy would shrug off the market ructions.
Both HSBC and Standard Chartered Bank declined to comment on their specific exposure to Dubai World, which is seeking a moratorium on almost 60 billion US dollars worth of debt.
"We are fully aware of our disclosure obligations, and would make a statement in the event that we had anything material to disclose," Standard Chartered said in a statement.
In a research note, Goldman Sachs said the banks' "status as the largest and second-largest foreign banks in the UAE would all suggest some level of exposure to Dubai World and other similar entities".
But it added: "Our first stab at potential worst-case loss estimates suggests a manageable impact."
Ben Potter, analyst at IG Markets in Sydney, said Dubai was not a big
enough player in the global economy to merit panic selling, "especially given what financials have been through over the last 18 months".
But Asia-Pacific selling extended to banks in Japan and Australia.
Potter said that given the lack of Australian exposure, "we were mainly down in sympathy".
Two of Japan's largest banks, Mitsubishi UFJ Financial and Sumitomo Mitsui, are among a consortium of 11 creditors that have lent to Dubai World, analysts at Citigroup said.
At the Tokyo Stock Exchange, MUFJ shares closed down 2.20 percent at 444 yen, while Sumitomo Mitsui fell 3.67 percent to 2,620. Overall, Tokyo's Nikkei index slumped 3.22 percent to 9,081.52.
- AFP/ir
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