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SINGAPORE: The Monetary Authority of Singapore (MAS) said on Monday it has been closely monitoring developments of Dubai World and United Arab Emirates, and their impact on Singapore's financial sector.

MAS said Singapore's banking sector's total gross exposure to UAE, of which Dubai is one of seven emirates, is well below 1 per cent of total banking assets.

It added that it does not expect developments in Dubai to adversely affect Singapore's financial stability.

In Monday's trade, the Singapore market performed better than expected – sliding 1.09 per cent in comparison to a 2 to 3 per cent decline as forecast by analysts.

MAS said it continues to be in close contact with the financial institutions here, and with central banks and regulators in key jurisdictions.

Singapore's Prime Minister Lee Hsien Loong said: "The international financial markets are linked, this may change some of the sentiments and it may knock some of the air out of the stock markets which had risen very rapidly."

Last Wednesday, the Dubai government announced that it will seek a six-month payment freeze on debts of one of its biggest conglomerates, Dubai World, which owns real estate developer Nakheel and is estimated to have liabilities of around US$60 billion.

The news spooked markets globally amid concerns over exposure by lenders.