Dubai crisis to have limited impact on mkts: Karl-Thomson

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With Dubai World, Dubai's largest corporate entity asking creditors for a six-month standstill on debt repayment obligations, the announcement has sent shock waves through global markets. It is learnt that exposure to Dubai World could be in the region of USD 12 billion in loans.With dark clouds looming large, corporate India, which has begun spreading its wings globally in recent years is feeling some of the impact here.

In an interview with CNBC-TV18, Patrick Shum, Chief Strategist, Karl-Thomson Securities spoke about the possible impact the Dubai World crisis would have on Indian and global markets.

Here is a verbatim transcript of the exclusive interview with Patrick Shum on CNBC-TV18. Also watch the accompanying video.

Q: Beyond the default itself from Dubai what does it do to risk appetite for emerging markets which is what was driving some of these markets and do you believe we could have a much sharper correction from this point onwards just because those who are putting money here basically don't want to take a risk with another emerging market?

A: Today we can see that investors prefer to be in cash first and then sell the stock after the Dubai World event. But I don't think the event will become a crisis because learning from the collapse of Lehman Brothers, it is unlikely. The major countries, maybe the US and also the European countries are unlikely to let Dubai World collapse.

So they may have some rescue plan early next week to save Dubai World. So in the near term we may see some selling pressure. But if we take a longer-term view, I don't think it will be a crisis.

Q: How are you looking at the impact on the Indian markets for instance, along with other Asian markets, this market is also down about 3.5%. Would you therefore say - according to you the impact is limited - this is a buying opportunity?

A: We need to wait for some time to see what will happen after the event last night. And also in India I think the major concern is coming from inflation because the central bank might tighten the interest rate early next year. And this will affect investment sentiment.

So, I think in the Indian market in the near-term we may see some downside because of the Dubai event. But from 2010, I think the focus will shift to the monetary policy. So at this moment if the markets go down maybe about 4-5% more we can have some bargain hunting. But in the longer term we need to see what happens in the monetary policy.