Dubai Shock Rocks World Stock Markets

The declaration of a debt moratorium by Dubai World, a state-run company in the United Arab Emirates, has sent stock markets plummeting in Korea and Asia as well as Europe.

Experts say a double-dip global recession is a possibility due to the Dubai shock, which could rekindle the financial crunch that resurfaced following the global financial crisis last year.

The benchmark Korean stock market index KOSPI tumbled 75.02 points (4.69 percent) to close at 1,524.50 yesterday, the biggest drop since a fall of 89.28 points on Nov. 6 last year. The value of the Korean won fell to 20.2 won (1.75 percent) from Thursday to close at 1,175.5.

The Japanese financial market also fluctuated due to the strong yen and the aftershocks of the Dubai crisis. The Nikkei average shed 301.72 points (3.22 percent) to close at 9,081.52.

In the Tokyo forex market, the yen-dollar rate momentarily tumbled to 84 in the afternoon but the Japanese currency’s depreciation was limited by verbal intervention by government authorities. The Shanghai Stock Exchange fell 74.15 points (2.36 percent) to end at 3,096.26.

Earlier, European stocks fell sharply en masse Thursday, with the U.K.’s FTSE 100 index (minus 3.18 percent), Germany’s DAX (minus 3.25 percent), and France’s CAC40 (minus 3.41 percent) all tumbling.

European stocks opened 1.5 to three percent lower in early trading yesterday. The U.S. stock market closed Thursday due to the Thanksgiving Day holiday.

higgledy@donga.com artemes@donga.com