Major markets have bounced back from their Dubai-induced swoon last week, which was prompted by a sudden request for a repayment standstill from Dubai World.
As banks and bondholders joined forces in response to Dubai World's plans to restructure $26bn of its debt, Dubai's ruler Sheikh Mohammed confirmed that the government would not stand behind Dubai World. He also accused the media of exaggerating Dubai's problems.
What the commentators said
A key lesson from this episode is that investors in Dubai clearly made a big mistake in assuming that companies close to the state would be backed by it.
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But you can hardly blame them, as the FT pointed out. Sheikh Mohammed may say that international investors "do not understand anything", but relationships between Dubai's institutions "are kept blurry and ambiguous".
There is no clear demarcation between the state, "parastatal bodies" and publicly-owned companies. The risk post-Dubai is that rattled investors "will rethink their exposure to a wide range of sovereign and quasi-sovereign entities", said Gillian Tett, also in the FT.
They may well demand a premium to compensate for the uncertainty meaning that borrowing costs will rise at a time when governments and quasi-sovereign companies "can ill afford it".
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