Investors recoiled from risky assets on Friday and dumped shares in Asian banks and builders,fearing a Dubai debt default could reignite the financial turmoil of the credit crisis. Stocks from Tokyo to Mumbai were haunted by suspicion of lenders' exposure to Dubai firms that built islands in the Gulf,planned cities from Pakistan to Africa and fashioned the financial hub of the world's biggest oil exporting region. "This an important reminder that the credit crisis is forgotten but not gone," Robert Rennie,strategist at Westpac Global Markets Group,said in a note. Asian banks,like their European peers,scrambled to distance themselves from Dubai,a desert emirate that emerged from dusty obscurity to invest in global lenders such as Standard Chartered and lure fund managers with the promise of a tax-free lifestyle. Dubai,part of the oil-exporting United Arab Emirates,said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring. Dubai World,the conglomerate that led the emirate's expansion,had $59 billion of liabilities as of August,most of Dubai's total debt of $80 billion. Nakheel was the builder of three palm-shaped islands off Dubai. The news shook markets recovering from the collapse of the U.S. housing bubble and contagion that threatened to rupture the global financial system last year. "The panic button's been hit again," said Francis Lun,general manager of Fulbright Securities in Hong Kong.
