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

The total gross exposure of Singapore's banking sector to the UAE is way under one percent of the total banking assets, MAS said.

It also added that developments in Dubai are not expected to adversely affect the financial stability of Singapore.

The Singapore market performed better than expected in Monday's trade, sliding 1.09 percent compared to analysts’ forecasts of a 2 to 3 percent decline.

According to MAS, it will continue to be in close contact with central banks and regulators in key jurisdictions as well as with the financial institutions in the country.

“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,” said Prime Minister Lee Hsien Loong.

The government of Dubai announced last Wednesday that it would seek a six month payment freeze on debts of Dubai World, one of its largest conglomerates, which owns real estate developer Nakheel. It has an estimated liability of about US$60 billion.