Dubai's move last week to try to delay repaying the debt of its flagship company, Dubai World, hit investors globally like a camel kick to the gut.

And it is likely that other entities in boom-to-bust Dubai also won't be able to meet their obligations, says Claudia Calich, who runs about $750 million for Invesco emerging-market debt funds.

Few Emerging Problems

That's the bad news. The good news is that the Gulf emirate's woes should not cause or foreshadow similar problems in other emerging markets, say investors who spoke to IBD on Monday. But heavily indebted developed markets like Greece are at risk.

"We are not seeing any massive currency depreciation or fallout from Dubai in other emerging markets," said Calich, who has less than $4 million at work in Dubai and none in the currently troubled companies.

Dubai shares dived 7.3% in their first trading since the emirate said it wanted to freeze Dubai World debt payments for six months. Neighboring Abu Dhabi's stock index fell 8.3%.

The iShares MSCI Emerging Markets ETF sank 3.8% Friday on Dubai-driven global selling. But it rebounded 1% on Monday.

U.S. markets rose modestly Monday, helped late by news from Dubai World that it was in "constructive" talks with lenders. The S&P 500 rose 0.4%, the Dow 0.3%.

Industrywide, some mutual fund shareholders have asked if emerging markets with prominent sovereign wealth funds are potential trouble spots. Reality is the opposite, Calich says.

"In Dubai it is mostly corporate entities that are having troubles," she said. "They are heavily invested in by the emirate. But the debts are not the emirate's."

She noted that in 2001, 100% state-owned Argentine entities defaulted on $100 billion in sovereign funds.

Debt's Trojan Horse?

This time, shaky developed markets may be at greater risk, big investors say.

"If declining value of collateral is behind Dubai's problem, then you have to expect similar things in countries where there is too much debt and asset values are falling," said Simon Hallett, who runs the $1.6 billion Harding Loevner Emerging Markets FundHLEMX.

Greece was cited by several investors as highly vulnerable.

"Government deficits have reached levels considered unsustainable by financial markets," Hallett said. "The government is trying to cut excessive spending. But it has hit a political brick wall. There is widespread, serious unrest, strikes in certain sectors."

The costs of insuring against sovereign Greek default have quadrupled in recent weeks, Hallett says.

"It's not caused by the difficulties in Dubai," Hallett said. "But Dubai has made investors much more acutely aware of Greece's problem."

Ireland, Italy and to a much lesser extent Japan are cited as other potential problem spots.

In Dubai, Dubai World and its real estate development unit, Nakheel, are in the most danger of default, says Jason Brady, co-manager of the $3.8 billion Thornburg Investment Income Builder (NASDAQ:TIBAX - News) and the $163 million Strategic Income (NASDAQ:TSIAX - News) funds.

Sand City Unique

Elsewhere in the Gulf, even in sister states of the United Arab Emirates, the fundamentals are stronger than Dubai's. "It's not the same bubble to the same extent," Calich said.

"Dubai," Brady said, "has little oil wealth. Abu Dhabi has a ton. Qatar has a lot. That makes them far more liquid."

Brady adds that investors were shocked by Dubai's debt warning in large part because they wrongly assumed that Emirates rulers, fellow investors in the now-troubled companies, or their governments would guarantee debts of the companies.

Global creditors hold $80 billion to $100 billion in Dubai corporate debt, Calich says, with only a fraction of that likely to end up restructured. Separately, Dubai World announced Monday afternoon that it was in talks to rework $26 billion in debt.

"Suppose restructuring results in 40 cents on the dollar on $6 billion of write-downs," Calich said. "If that is spread among several regional banks, bondholders and foreigners, the impact would be far less than Argentina's."

In Ukraine's recent restructuring of its natural gas entity, investors got 80 cents on the dollar, she says.