Transcripts For CNNW World Business Today 20110819

committed crimes against humanity. pope benedict xvi is visiting madrid, spain. the city expects a million or so people to attend. not everyone is happy to see the pontiff, however. some spaniards are protests over the cost to put on the event. those are the headlines from cnn, the world's news leader. i'm zain verjee and "world business today" starts now. good morning from cnn london. i'm nina dos santos. good afternoon from cnn hong kong. i'm andrew streechbs. you're watching "world business today." the top stories this friday, august 19th. many people are happy it is indeed a friday because the market sell-off continues to roll around the world as fear takes hold of global investors. bank of america announces plans to cut thousands of jobs. and the story of a small business that's thriving despite the tough economic environment. now, the stock market sell-off has made its way right around the world as andrew is saying, driven in particular by fierce of recession in the united states and spreading debt crisis in europe. markets have opened mainly lower, extending thursday's heavy losses. here is how we stand one hour into the trading day as andrew is saying, thankfully the final trading day of what has been a bloody week. the zurich s mvrnlths. starting to the tune of down 3%, already down 19% so far this year. cac 40 down in excess of 3%. the heaviest losses coming from the dax. that was one of the better performers until the start of this month among this main category of markets so far this year. it is down almost 19% as well. ftse performing slightly better, but still down 2.2%. that extends the loss already in excess of 3% just yesterday. let's get analysis on this. michael houston joins us from the trading floor of cmc markets. >> good morning. >> what a day. what do you make of these kind of selloffs. we're seeing trillions wiped off of global markets, michael. how long is it going to last? >> that's the million or trillion dollar question. at the beginning of the week we were sort of in the eye of the storm. markets were stabilized. yesterday we had a really strong selloff. that's continuing today. i think it boils down to the fact that markets have no confidence whatsoever of political leaders to get a handle on either the debt crisis in europe or the concerns about the american economy. >> gordon gecko in the film "wall street" said idealism and ideology kills everything in the market. is that what we're seeing, it doesn't match economic backdrop, particularly here in europe? >> i certainly think that is the case. german leaders, french leaders are wedded to the idea of this fiscal union. and when you've got so many differently fundamental economies trying to grow or contract at completely different rates, it's basically pulling the euro apart. that's what we're seeing at the moment. no confidence, the banking sector is falling quite aggressively at the moment, the mining sector, all the key economic indicators that would hopefully show that the economy is pulling out of recession are pointing in completely the wrong direction. >> and pointing very fast in that direction. now, this may be a tough call, but i must ask you, it feels like 2008 again. do you think it is? >> well, i don't think we really solved the problems that we dealt with in 2008. i think this is just an extension of those problems. a credit crisis which has now turned into a zef wrenity crisis as governments basically took over the liabilities of failing banks. unfortunately, if you then factor that in to the actual own debt problems within europe, it's basically filtered across and dominoed across. really what we're seeing now is an extension of the 2008 crisis. >> michael houston, joining us from cmc markets. many thanks for your time. have a great weekend. andrew? >> interesting you mentioning the great recession as it was known back in 2008-2009, that index was at its lowest level since march 2009. you remember that's when the u.s. was right in the middle of the recession. so that key manufacturing number in the u.s. is actually pointing at the same sort of recessionary circumstances last seen back in march of 2009. that was the real indicator that sparked the dips in the u.s. they certainly closed out the week in the red in asia, taking on a slew of negative data in the u.s. and europe. exports particularly hard hit. ramy inocencio has been watching the news for us. it's interesting. big falls today, but apart from south korea, it could have been worse. >> it could have been worse, but could have been much better. as we got closer to the markets' closing times, the selloff accelerated across the region. experts were the big way on the nikkei, closing 2.5%. nikkei, honda and sony between 3% and 4%. the hang seng closed 3.5%. one of the biggest losers, cosco pacific, one of the largest shipping operators, closing 6%. oil shares fell, too, following the price of oil. the shanghai composite in the mainland, that closed down almost 1%, following the region's losses. it was the least heard in the markets. it was a bit more at tuned to the china domestic markets rather than world markets. in australia, the asx closed down 3.3%, representing more than $40 billion wiped off the books in just a day. banks down to 4.5%: the worst performing index in this region was soles cos pee with a loss of more than 6.2%. for more of that, let's cross live to paula hancocks. why did south korean stocks take such a pounding today? >> reporter: at the beginning of the week we saw a good performance of kospi. as you say, down 6.22%. just to put that into context, it is the worst daily percentage loss since the end of 2008 when the global financial crisis happened. so it really has been a devastating day on the market. to put that into context year to date, the kospi is down 15.7%. a couple of the big shares we could look at ot the kospi, hyundai down 3.7% year to date which doesn't sound too bad until you realize since may it's lost about 50% of its value. samsung down about 29% year on date. it peaked in january and has fallen since then. these tech stocks, the car stocks, the nonessentials really are suffering here in korea. the reason for that is because it is a very export-driven economy. the economies of the u.s. and the european union, those markets account for about 22% of all korea's exports, that's almost a quarter of the export market. of course, trying to calm investors, the government is saying that that means more than 3/4 are not reliant on those two blocks. remi? >> paula hancocks, cnn seoul correspondent, thank you. most markets are closing in on the led for a fourth week in a row. nina, investors are looking for good data to cling to, but it seems like there's not much to cling to. >> that's exactly what michael houston was saying from cmc markets. taking a hard look at the closing numbers from thursday's trading session on the new york stock exchange, at the moment futures don't look as though we're seeing any signs of an uptick. those are the figures at the close of trading. as you can see, the nasdaq incurring losses in excess of 5.22%. as i was saying, futures at the moment indicating we may not see too much of a turn-around on this final session of the week. andrew, markets over here and where you are suffering today as well. we're in this negative spiral, bad news feeding on bad news. it's pretty nasty out there. look at that. that's what we're expecting the wall street numbers to look like at the open of the day. the dow down 1.5%. the nasdaq, another big fall. the nasdaq also another big fall. so looking at that, nina, you would have to say it's going to be a pretty nasty end to a pretty nasty week. with all that grim news coming from the world stock markets, the flight into safe haven assets has accelerated of late. the u.s. may have come close to a technical default earlier this month and suffered a humiliating debt downgrade by s&p. but it seems as those those factors haven't deterred investors who continue to plow into the debt. u.s. treasury bonds has hit a record low on thursday. let me show you what's happened to the yield on those benchmark u.s. treasuries since the global selloff got into full swing just two years ago. overall, a pretty steady decline as you can see from that chart. the dip of below 2%, the first time ever before a modest rise to the yield where it now stands at 2.07%. what it means is between the year 2000 and the beginning of the global financial crisis, the yield on u.s. treasuries was typically standing between 4% and 5%. this is what's been happening to another safe haven where people plow their money into during these turbulent times. gold, of course? this is how it performed since the latest market panic began. as you can see, it shot up at the start of the selloff. then it resumed an upwards climb as investors took flight, shattering more records along the way. this is where this particular commodity stands right at the moment, trading at more hand $1,867, up more than $41 today alone. just yesterday, andrew, it was already up 28% on the year. >> it's amazing, isn't it? one other key index which has been heading north the last couple weeks, that's the fear index. we've been talking about this, the vix. anything over a reading of 30 is considered to have a high fear factor in the markets. the vix standing around about 42, so well into the red zone. remember though it hit the 80s in 2008 during the panic then. coming back to gold, is this run in to gold and treasuries a wise move for investors? we put that question to pimco's bill gross. he is the manager of the world's largest bond fund. >> investors should recognize that there's limited room for price appreciation and, of course, the yields themselves are a half a percent to one percent and maybe 2% for a ten-year treasury. what i would do as an investor is basically depend upon a consistent stream of income going forward from high dividend stocks. talk of another global downturn has been affecting oil prices which have tumbled this week as investors look to sell off riskier assets. a weak economic performance by the world's top oil consumer, the united states, has deepened fears about demand for these kind of commodities and those fears are being reflected in the numbers we're seeing at the moment. as you can see, nymex is currently seeing a drop of $2.80 on the barrel trading at $79.60. at the start of the trending day in london, brent crude also posted a drop of just over $1.00. it's trading at $105.50. a little support from a most unlikely area for the u.s. economy. despite the grim reports on the outlook for the global growth, the head of the bank of china showing a little optimism, lee lee hoye was asked whether he was concerned about the stability of the u.s. dollar and the u.s. debt situation. he said, quote, we are confident the u.s. government should be able to solve this problem. nina? >> andrew, there's also another big shakeup getting under way at a blue ship u.s. company and it's not pretty. the "wall street journal" is reporting that bank of america is planning to slash 3,50 jobs as a the company prepares for major restructuring to restore its battered stock price, making job cuts across all divisions including investment banking and also trading. those 3.5,000 lay-offs are expected to be made by the end of september and they may be just the start of a wide-ranging cutting program that could see at least 10,000 jobs actioned over the months ahead. they've already cut 2,50 jobs so far this year. it's the agency that angered the u.s. government when it downgraded the u.s. credit rating. now the u.s. government wants to know why standard & poor's gave its top ratings to those toxic mortgage loans that actually brought the u.s. economy to its knees. the investigation when we come back here on "world business today." let me tell you about a very important phone call i made. when i got my medicare card, i realized i needed an aarp... medicare supplement insurance card, too. medicare is one of the great things about turning 65, but it doesn't cover everything. in fact, it only pays up to 80% of your part b expenses. if you're already on or eligible for medicare, call now to find out how an aarp... medicare supplement insurance plan, insured by unitedhealthcare insurance company, helps cover some of the medical expenses... not paid by medicare part b. that can save you from paying up to thousands of dollars... out of your own pocket. these are the only medicare supplement insurance plans... exclusively endorsed by aarp. when you call now, you'll get this free information kit... with all you need to enroll. put their trust in aarp medicare supplement insurance. plus you'll get this free guide to understanding medicare. the prices are competitive. i can keep my own doctor. and i don't need a referral to see a specialist. call now to get a free information kit. plus you'll get this free guide to understanding medicare. and the advantages don't end there. choose from a range of medicare supplement plans... that are all competitively priced. we have a plan for almost everyone, so you can find one that fits your needs and budget. with all medicare supplement plans, there are virtually no claim forms to fill out. plus you can keep your own doctor and hospital that accepts medicare. and best of all, these plans are... the only medicare supplement plans endorsed by aarp. when they told me these plans were endorsed by aarp... i had only one thing to say... sign me up. call the number on your screen now... and find out about an aarp medicare supplement insurance plan. you'll get this free information kit... and guide to understanding medicare, to help you choose the plan that's right for you. as with all medicare supplement plans, you can keep your own doctor and hospital that accepts medicare, get help paying for what medicare doesn't... and save up to thousands of dollars. call this toll-free number now. european markets closed down between 4 and 5.5% yesterday. that's where they stand at the moment more than an hour in the day's trade. it's another tough day across europe. welcome back from cnn in london. you're watching "world business today." sources tell cnn the u.s. government has launched an investigation into the ratings agency standard & poor's. that is, of course, the agency that downgraded the u.s. credit rating earlier in the month. the government wants to know why s&p and also moody's overlooked the risk of mortgage-backed securities that brought the u.s. economy to its knees. alan chernoff explains. >> reporter: standard & poor's and moodies are under investigation regarding mortgage securities that went sour. attorneys from the department of justice and the securities and exchange commission have been digging into the rating agency's methodology. in particular, did executives veto credit analysts efforts to downgrade ratings so as not to lose business from the issuers of security paying to be rated. >> the credit rating agencies failed spectacularly in the years leading the the financial crisis. >> the rating companies have been getting slammed in congress and depositions given to federal investigators. one former credit analyst told cnn he had two interviews in the past six months with federal agents and had shared evidence of what he described as improper management influence in the ratings process. quote, they have plenty of ammunition, he said. there are plenty of people who will squeal on them. the sec has been on this issue for some time. a 2008 report quoted one e-mail from a credit analyst saying let's hope we are all wealthy and retired by the time this house of cards falters. a top credit analyst from moody's filed a comment that charged the goal of management is to mold analysts into pliable corporate citizens who cast their votes in line with the unchanging corporate credo of maximizing earnings. the sec said it would neither confirm or deny the existence of an investigation but added cases arising from the financial crisis are among the highest priorities of the enforcement division. the department of justice had no comment. a spokesperson for standard & poor's told cnn s&p has received several requests from different government agencies over the last few years relating to u.s. mortgage-backed securities. s&p has cooperated with these requests and will continue to cooperate. cnn asked moody's for comment but did not receive one by deadline. alan chernoff, cnn new york. you're watching "world business today" today on cnn. a player in the global business world is going from the sky to the football pitch. we'll explain when we come back. . but with 24-hour zyrtec®, i get prescription strength relief from my worst allergy symptoms. so lily and i are back on the road again. with zyrtec® i can love the air®. with aveeno nourish plus moisturize. active naturals wheat 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[ female announcer ] nourish plus. only from aveeno. time for today's big number, $57 million. that amounts to about 35 million pounds here in the uk. that is how much the air agency tony fernandes just shelled out for a stake in the queen's park football team. they're back in the premier league after a 15-year absence. the new owner will be hoping his boys perform as well on the pitch as his airline has done in the skies. >> absolutely. he's had a blinding run in business. fernandes' 66% state in qpr adds yet another element to his growing commercial empire. as he tells cnn's alex thomas, his latest purchase was a hard-headed business decision. >> you've got the tune group, air asia, lotus formula one, so many things to keep your eye on. why buy the queen's park rangers as well? >> people have really not seen the value of sports and branding. some do. air asia has gone from 200,000 passengers to 32 million in ten years. i don't think an airline has grown with so many obstacles put in front of it. we're building other brands. and we've grown this way because we've invested in sport, be it on referees, manchester united, formula one, et cetera. it's all kind of part of interacting and building a community. if you look at everything people need, hotels. they love sport, love entertainment, they get to fly places. there's a reason to everything we're doing, but i feel football is a fantastic branding platform for many of the things we're doing. >> are those two compatible? some worry that building sports and building brands is not compatible with keeping the fans happy? >> absolutely not. they're integrated. you need to build brands to be able to get the budgets for the fans, to get the players for them to have success. they're very interlinked unless you have a big sugar daddy. >> you're not that sugar daddy? >> i'm not a sugar daddy or mommy, maybe a sugar baby. i think 90% of the clubs out there have built good businesses. that's what we lope to do here. >> you say that and it's true that the premier league revenues increased year on year substantially, especially with the tv income. no one has yet to find a way to stop the costs from going up. do you think english premier league football is profitable? >> absolutely, otherwise we wouldn't have got involved. you have to have a sustainable business to get involved. even if there was a sugar daddy or sugar mamma, that would drop off. if you build a good infrastructure it doesn't matter who is leading the club, it will go forward. i think premier league reminds me so much of formula one. i got into formula one when the cost cutting came in and crazy budgets were slashed into much real profits. there's more income coming with more races and more television. formula one will be a very profitable business and on top of that a great branding exposure and ability to build a car company. i believe football, even if you look at the transfers, that the crazy money have come down a bit by one or two clubs, and it is so popular. anywhere you go in the world, someone knows an english premier club. it's going to be a profitable business. a harrowing week for investors with money in stocks, but all in all, how bad has this year actually been? we'll be putting things into context when we return. any questions? no. you know... ♪ we're not magicians ♪ we can't read your mind ♪ ♪ read your mind ♪ we need your questions ♪ each and every kind ♪ every kind ♪ will this react with my other medicine? ♪ ♪ hey, what are all these tests even for? ♪ ♪ questions are the answer ♪ yeah ♪ oh from cnn london, i'm nina dos santos. >> i'm andrew streechbs. welcome back. you're watching "world business today." without further ado let's go straight to see what's going on in the markets. here in europe markets have had quite a gloomy start to the day to say the least, not down as much as we saw at the close yesterday when some of the markets were down to the tune of 4% to 5%. some pretty heavy losses nonetheless for the dax currently down by 3.2%. heavy loss for switzerland. the ftse seems to be performing better. all these markets off the intraday lows. as you can see, still adding to double-digit declines so far this year, andrew. >> it's interesting. you point out something interesting there, off their lows at the moment. the volatility is back. so what's happening now can bear no resemblance to what could be happening in an hour or so on any of these markets at the moment. take a look at what happened on asia. this friday and tgif, and underline that twice. take a look at this. the nikkei down 2.5%. hong kong down more than 3%. that's the last market to have closed in this region. shanghai down by just under 1%. the australian market taking another big hit. australia very sensitive to expectations of global economic growth because it's so heavy staffed with resources, mining companies as you see there. not a lot of confidence about the state of the global economy if you look at the s&p numbers there, nina. >> it really is all about the economy and not at all about corporate earnings. wall street got socked on thursday as renewed concerns about the united states and other nation's economies once again sent major indices plunging and sent commodities like gold to record highs. from new york, alison kosik takes a look at what we can expect in the future. >> the united states and europe are dangerously close to recession. that's the headline from a note released thursday by morgan stanley. the investment bank says the u.s. is at risk of experiencing two consecutive quarters of negative growth over the next six to 12 months. morgan stanley went on to say it's not officially forecasting that will happen. it sees three reasons the country will probably avoid another recession. those reasons are the pile of cash that companies are sitting on, declining oil prices and the expectation that the u.s. federal reserve and the european central bank will intervene if the recovery continues to stumble. nonetheless, the note combined with additional worries about european growth and a handful of weak reports on the u.s. economy sparked another day of sharp selling on wall street. at the close the dow plunged 419 points ending at 10,990. the nasdaq lost more than 5%, and the s&p 500 fell almost 4.5%. gold closed above $1800 an ounce. the yield on the u.s. treasury bond fell below 2% for the first time ever as investors once again looked for shelter from the storm. meantime, one step forward, two steps back for the u.s. labor market. new claims for unemployment benefits jumped back above the 400,000 claims last week. it's sat above 400,000 for 18 of the last 19 weeks. most believe claims have to remain below that level to sustain the jobs market. it's alison kosik at the new york stock exchange. almost afraid to look, but we have to find out where the shorp losses leave us. here in europe, confidence have been undermined by fears of a debt crisis spreading throughout the eurozone region. let me shoep you what's been going on over the last few months. both the london ftse and german dax are deeply negative for much of the year. a lot of the losses coming at the month of july. the ftse is the chart in yellow. as you can see, it has really fallen off since just the last two weeks of july and the early part of august. that market is down to the tune of about 15%. the dax is actually a market that up until may was performing better than the ftse. that one has had a more precipitous decline, down more than 20% so far this year. this is a market that fell in excess of 4% yesterday andrew. >> interesting. the higher they flew, the harder their fell. take a look at two of asia's stock markets, also deep in negative territory, a similar story in this part of the world. this is the nikkei 225. it's lost more than 12.5% so far this year. you'll see this line here. obviously that happened with the tsunami and the nuclear issues back in march. it's now down to levels we saw right after that record earthquake. so all the gains since that particular disaster have virtually been wiped out. an equally grim picture here in hong kong. take a look at this chart. the hang seng index down more than 13% so far this year. nina, the question now really is how much of the markets have priced in as far as expectations of recession are concerned? do they think at these levels that there is going to be a recession, or are they skirting with it so it could see further faults? >> we had somebody on this very show, didn't we, andrew, just yesterday afternoon saying that the united states is perhaps in a slightly better position than other places around the world. given the kind of stock market performances we've been talking about, we want to show you how relative all of this is because you were just showing us how things are down in the double digits in asia. i was showing how some of the markets in europe are down more than 20% this year. it has been a volatile month so far for the dow jones industrial average which ended down again yesterday. it's actually a market that is faring slightly better than its counterparts, only down about 5% on the year. with recession fears creeping back into the markets, it has been suffering. the s&p 50 is down almost twice as much as the dow jones industrial average, nevertheless down to the tune of about 9% is not significant in comparison to the 20% declines we're seeing in europe. the nasdaq it seems is in even worse shape. that market is down to the tune of 10%. with all this recession and market turmoil talk, we thought we'd leave you with something a little more up lifting. despite the current market conditions that of course remain tough, one u.s. business is enjoying the sweet taste of success as felicia taylor now reports. >> reporter: it started as a simple bakery on acquaint street in new york city's greenwich village. then a few years later magnolia bakery was featured in one episode of the tv show "sex and the city" on hbo which like cnn is owned by time warner. it was that appearance that helped start a cupcake craze and turned this local business into a phenomenon. now 15 years on, magnolia is going global, selling franchises internationally. owner steve abrams took over the company in 2007 and expanded the business with seven other company-owned branches in united states and one store in dubai. the dubai magnolia is run under a different type agreement but will soon fall under the franchise umbrella. >> why now do you want to open up the business to franchisees? >> we anti want to bring it throughout the world, we can't geographically and culturally go around the world and make this happen. it's impossible to be in dubai or korea or spain and understand the nuances of each culture. about a thousand franchise requests in the k i have about 20 on going negotiations going on. >> reporter: this man represents a franchisee in qatar, expected to be the first to open in january 2012. he says the bakery is the perfect fit for his region of the world. >> the qatari people and people in the middle east, new york is one of their favorite destinations. they come here quite often. the name magnolia bakery is familiar to everyone. >> reporter: not only do new yorkers come to magnolia bakery for the incredible desserts and cupcakes, but people from around the world, brazil, spain, italy, korea and even a couple from texas and montana. so "sex and the city" may have actually put this on the map, but the owner is making it a global brand. >> there are a lot of markets coming into wealth. when you come into wealth, the growing middle class, upper middle class, you get people trying to come into the luxury market, whether it's at her sid december benz. we're the ferrari of brakeries. >> reporter: abrams is sure franchising his so-called ferrari of bakeries will keep him on the road to even greater success. >> not fair that felicia ends on that, makes us all hungry. felicia taylor with a little food for the soul. don't forget you can get in touch with the whole team on our facebook page. all you have to do is go to facebook.com/cnnwbt. that's it for this edition of "world business today." i'm andrew stevens in hong kong. >> i'm nina dos santos in london. you're watching cnn, the world's news leader. let me tell you about a very important phone call i made. when i got my medicare card, i realized i needed an aarp... medicare supplement insurance card, too. medicare is one of the great things about turning 65, but it doesn't cover everything. in fact, it only pays up to 80% of your part b expenses. if you're already on or eligible for medicare, call now to find out how an aarp... medicare supplement insurance plan, insured by unitedhealthcare insurance company, helps cover some of the medical expenses... not paid by medicare part b. that can save you from paying up to thousands of dollars... out of your own pocket. these are the only medicare supplement insurance plans... exclusively endorsed by aarp. when you call now, you'll get this free information kit... with all you need to enroll. put their trust in aarp medicare supplement insurance. plus you'll get this free guide to understanding medicare. the prices are competitive. i can keep my own doctor. and i don't need a referral to see a specialist. call now to get a free information kit. plus you'll get this free guide to understanding medicare. and the advantages don't end there. choose from a range of medicare supplement plans... that are all competitively priced. we have a plan for almost everyone, so you can find one that fits your needs and budget. with all medicare supplement plans, there are virtually no claim forms to fill out. plus you can keep your own doctor and hospital that accepts medicare. and best of all, these plans are... the only medicare supplement plans endorsed by aarp. when they told me these plans were endorsed by aarp... i had only one thing to say... sign me up. call the number on your screen now... and find out about an aarp medicare supplement insurance plan. you'll get this free information kit... and guide to understanding medicare, to help you choose the plan that's right for you. as with all medicare supplement plans, you can keep your own doctor and hospital that accepts medicare, get help paying for what medicare doesn't... and save up to thousands of dollars. call this toll-free number now. man on tv: two outs with a runner on first base. now the big guy comes up to bat, hitting .342 with 92 rbis and 36 homers. [fans whirring] [ding] announcer: chill raw and prepared foods promptly. one in 6 americans will get sick from food poisoning this year. keep your family safer. check your steps at foodsafety.gov. this week on ""marketplace middle east"," an uphill struggle. markets have another turbulent week as underlying concerns for the global economy persist. plus the road to statehood. as the palestinian authority prepares to call for a sovereign state, we take a look at whether the economy is ready for independence. i'm max foster in for john deaf fair yos. concerns still remain the world markets could be heading south the way they did when the global recession first hit. dubai suffered during that downturn, caught with having to restructure about $25 billion of debt, just as property prices dropped. some real estate in the emirates saw its value plunge 50%. the government hopes to prevent that from happening again as leo nacarni found out. >> reporter: in its heyday there was plenty of money to be made and spent in dubai's lucrative property market. real estate was one of the corner stones of the emirates economy. two years ago after the global financial crisis took its toll, it all came tumbling down. property prices fell sharply and one of dubai's main developers were near default on a multi billion loan. the government has since taken steps to revive the embattled real estate sector, most recently extending a new visa law. investors who send a certain amount of money on property here are are eligible for the three-year visa, the problem is te dals of the law are still unclear and for those who really want residency, there are other options. you can set up a business, get similar benefits and it could be a cheaper alternative. still property agents say the visa can spur some interest. >> it will be a contributing factors towards consumer confidence more than anything else, that along with the lending becoming more available becomes more appealing to the investor. one of the main concerns is there's still too much supply in the real estate market, even though the pace of construction slowed abruptly after the financial crisis hit. >> although there are a number of official cancellations, that hasn't actually impacted the supply pipeline so much. what impacts the supply pipeline more is delays in existing projects. over the next three years we still expect to see about 50,000 units coming on. that represents about 15% of the existing supply. >> reporter: that would also keep the pressure on property prices which have already fallen 40% to 60% from their 2008 peak in some places. >> we anticipate there will still be further price declines in certain areas, again, the areas outside the main strip of dubai, the nonestablished areas, noncommunity areas. >> reporter: there are still bargains to be had. many agents say they're seeing a rise in the number of buyers. with the instability in the middle east, dubai is still seen as a stable haven in the region. market watchers say buyers are unlikely to come back in the same numbers as dubai's glory days. leony lack carney for ""marketplace middle east."" more concerns over israel's settlement policies. 277 housing units were approved to be built in a west bank settlement. the expansion comes as palestinian president mahmoud abbas prepares to head to the united nations to request official recognition of a palestinian state. kevin flower has more on that story. >> reporter: for the palestinian authority, these are the sights and sounds of statehood. here the start of construction on a new $34 million west bank housing development is celebrated by prime minister salam fiat. it is countless examples of palestinian readiness for an independent state. >> that state is on the ground. the reality is on the ground. what we need now is actually to ensure that that state is sovereign. >> reporter: it is to that end that the palestinian authority is seeking international recognition of an independent palestinian state in lou of resuming more talks with israel. for palestinians it is a strategy been of frustration and one fraught with risk. the frustration, what is seen as israel's refusal to halt unilateral action such as continued settlement construction in the occupied west bank. among the many risks, falsely raising the hopes of palestinians and alienating deep-pocketed donors like the u.s. and some european union countries who want to see an immediate return to negotiations. seeking un recognition does not inspire confidence for some palestinians who have lost faith in the process of peace. >> they're trying to get membership or recognition in order to enhance their hand at negotiates. so it's not that they're doing this for an independent strategy of perhaps then taking israel to court or trying to pursue international mechanisms that would halt israel's occupation. it's instead going back to the same old tired strategy of negotiations, negotiations. >> reporter: israel for its part says the plan will only jeopardize peace and only make things harder on a palestinian economy that has been growing. few palestinians agree with that economic assessment. >> i see economy that depends on foreign aid. i see economy that it's shattered. i see checkpoints. i see gaza being completely surrounded and blockade. >> reporter: a prom meant palestinian businessman and politician acknowledges the difficulties a palestinian city would phases, they believe it's a step in the right direction. >> the time is now. even for israel the time is now. it's the whole thing needs solution, and it has to come, the state of mind. >> reporter: whether palestinians and israels have the state of mind or not, a more immediate question being asked here is what exactly comes after a un vote that could recognize a palestinian state? kevin flower, cnn, jerusalem. up next, she's dressed for royalty and "a list" celebrities, but her brand has only been available in the united states. now lebanese designer ream acura is hitting the streets of beirut in a bid to beat the financial downturn. reem acra is one of the hottest names in fashion in the middle east. her designs are worn by celebrities both on and off the red carpet. with a brand developed in the united states, acra is branching out and opening her first franchise in the region. brent sadler took a look when he visited the new store in beirut. >> reporter: a contented bride-to-bewares the gown she add doors. >> happy with the price? >> yes. >> happy with the price? >> yes. this is actually a very reasonably priced dress. >> reporter: the wedding industry worldwide has been hit hard by plunging bridal budgets. >> we are trying all to figure out what is happening with the bride, you know pricewise, she dropped down. that's for sure. >> reporter: lebanese-born designer ream ak kra is famed for her collection of expensive, high-end couture bridal wear. her business is based in new york city where she is a celebrity in her own right, dressing some of hollywood's most gorgeous stars. >> reem acra. >> reem acra. >> fame doesn't always bring recess. and as the recession swept through the fashion industry, ream ak kra took the decision to branch out into a new market, franchising her brand for the first time in the middle east in downtown beirut. the franchise was acquired by amal berry the business minded daughter of one of lebanon's politicians. >> the society is not as busy as here. you have more events here. you need to always look nice, to wear nice, to look the best. so people keep spending and keep buying. >> reporter: even though lebanon is politically unstable and is often caught between war and peace, its boutiques attract a wealthy regional market. it seems an anomaly when you see these top brands around your store here all doing business. >> all doing business and all opening sometimes at the bad times. if you wait for the good times here, you will never do anything and never open anything. >> yes, it is not new york. you have to understand each country has a different dna. lebanon is very special. downtown beirut makes also what lebanon is today as far as shopping and business. you can feel it. >> reporter: this display of acra designed wedding gowns sells for between three and $20,000. >> the ready-to-wear bridal in the middle east hasn't happened before. it's brand new. >> and it's getting more popular. >> reporter: customer interest is soaring they say in a still lucrative middle east market where one special wedding dress stays hidden in this cupboard along with its high dollar price tag. >> it's a beautiful dress. >> reporter: the price? >> around $40,000. that's the most exclusively expensive piece here. >> reporter: is there a buyer for that dress here? >> i'm sure there will be. >> reporter: reem acra says her business plans are adapting to changed market finances and evolving fashion trends in a highly competitive world. hoping success for her business as well as her brides will both come true. bret sadler, cnn beirut. >> for more about the program, visit our website, cnn.com/mme. you can check out our web page in air rick at arabic.cnn.com/mme. that's it for this edition. i'm max foster. thank you for watching. -- captions by vitac -- www.vitac.com

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