(2nd LD) Dubai crisis to have limited impact on local markets: analysts

(ATTN: UPDATES with comments from government officials in paras 5-9)
By Nam Kwang-sik
SEOUL, Nov. 27 (Yonhap) -- Concerns over Dubai's debt problems swayed South
Korean financial markets Friday, but the impact will be limited as the country's
exposure to Dubai's financial sector is small, analysts and government officials
said.

South Korean financial institutions' exposure to Dubai stood at $88 million,
taking up 0.4 percent of all external credit of $52.8 billion as of the end of
September, with exposure to Dubai World estimated at $32 million, according to
data released by the Financial Supervisory Service.
On Wednesday, Dubai World, a Dubai government investment fund, called for a
six-month repayment moratorium on debts of around US$60 billion.
"The Dubai crisis won't hurt the fundamental of local financial institutions, as
South Korea turned into a net creditor in the third quarter of the year. That
means that the country will not face foreign currency liquidity shortages as it
did last year," said Chun Chong-woo, an analyst at Samsung Securities Co.
This view was broadly echoed by officials at the Ministry of Strategy and
Finance, who stressed that the Dubai World incident should not be interpreted as
another Lehman Brothers debacle, which triggered last year's global financial
crisis.
"There was always a risk of some fallout occurring as the worldwide economy
struggled to make a comeback," said Deputy Finance Minister Noh Dae-lae, hinting
that most financial experts anticipated some problems in the road to recovery.
Others policymakers concurred, saying troubles in Dubai will have limited impact
on the global economy.
"The world is effectively linked financially, so there may be a need to look at
how this develops, but since a relatively small amount of money was invested in
Dubai, the fallout should be limited," a finance ministry official said.
The official also said that the market had been receiving warning signs to some
extent, and hinted there could be a silver lining down the road.
The country's net external credit reached $2.98 billion as of the end of
September, a turnaround from a net external debt of $6.43 billion three months
earlier, according to the Bank of Korea.
The South Korean won, however, is expected to fall temporarily against the U.S.
dollar due to increased costs of foreign currency borrowing from European banks
that face potential losses on about $40 billion in exposure to Dubai, Chun said.
The impact of the crisis also will have a marginal effect on the fundamentals of
South Korean builders, as they have mainly won orders from Abu Dhabi and the UAE
in recent years, not Dubai, analysts said.
"Only Samsung C&T Corp. has been operating in Dubai. As for local builders, the
main market is not Dubai, but Abu Dhabi," Park Yong-do, an analyst at LIG
Investment Securities Co. said in a report.
Major local builders, including Daewoo Engineering & Construction Co. and Hyundai
Engineering & Construction Co., have won orders worth nearly $14 billion from Abu
Dhabi, with those from Dubai tallied at about US$2 billion from 2004-2009,
according to data by LIG Investment Securities.
Shares of local builders were pummeled by worries over the negative impact that
the Dubai debt crisis would touch off, while Seoul stocks plunged 4.7 percent,
hitting their lowest level in four months.
Top builder Hyundai Engineering & Construction closed down 6.86 percent to 63,800
won, and Samsung C&T plunged 8.14 percent to finish at 43,450 won on the Seoul
bourse.
The South Korean won tumbled against the greenback, closing at 1,175.50 won, down
20.20 won from Thursday's close as jitters over the Dubai crisis prompted foreign
investors to dump the local currency.
(END)