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Monday, November 30, 2009

Morgan Stanley Says UAE Cost Of Capital To Rise

By Simon Kennedy

MarketWatch Pulse

LONDON -- Analysts at Morgan Stanley said the direct impact of Dubai World's troubles on European banks is modest, but that a more important issue is whether a broader range of credits should be re-examined in the United Arab Emirates and elsewhere. The broker said the cost of capital is likely to increase for some UAE borrowers, but the odds of credit problems in many parts of the UAE are still low, given very large sovereign reserves. Based on data from the UAE banking association, Morgan Stanley said the firms with the biggest local subsidiary exposures in the region include HSBC at $16 billion, Standard Chartered at $8 billion and Barclays with $4 billion. Another impact will likely be on trading revenue for the largest investment banks, including Barclays, Deutsche Bank , Credit Suisse and UBS , although Morgan Stanley said potentially lower revenues are now reflected in market expectations.

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