Blackrock Global Funds and Ashmore are the two largest holders of the Nakheel issue, according to data compiled by Bloomberg. Ashmore Investment Management owns 1.09 per cent of the bond, the data show. Ashmore, which started its first fund in 1992, invests in currencies, debt and special situations.

Rating firms have downgraded Dubai state-owned companies on concerns the emirate may not have sufficient funds to support its struggling entities. The credit crisis ended a four-year real-estate boom in Dubai and forced the United Arab Emirates government to bail out the two biggest mortgage lenders. The crisis wiped 50 per cent off real-estate prices from their October peak, according to Deutsche Bank AG.

“At stake is the reputation of the government here. The likelihood here is that the bond will pay,” Jerome Booth, head of research at Ashmore in London, which manages $25 billion of emerging-market assets, said by telephone. “The point is that you can’t default a little bit. You either lose your credibility or you don’t. So for the Dubai government, it’s a huge issue.”

Standard & Poor’s said in April that Dubai World, the government-owned investment group that controls Nakheel, is considering all options “in dealing with outstanding liabilities,” including a restructuring.

“That’s the concern of the market, and I think it’s not true,” Booth said, noting that the issue is whether something is or isn’t treated as a sovereign. “It’s kind of clear that this one is within the net.”

Nakheel’s three-year Islamic bond due December 14 traded at 93 cents to the dollar at in early afternoon trading in Dubai, according to RBS Financial Markets data provided to Bloomberg. The price plunged to 82.5 cents on July 14 and has tumbled from a 12-month high of 103.95 cents on speculations that Dubai is contemplating restructuring the bond. —