By John Irish and Inal Ersan

DUBAI (Reuters) - Dubai ring-fenced prized assets such as Emirates airline <EMIRA.UL> from the $26 billion debt restructuring of Dubai World, denting fragile investor sentiment and raising questions on slated assets.

The move came before the troubled state-owned conglomerate's meeting with main bank creditors on Monday to discuss a request to delay repayments that has shaken global markets and damaged the reputation of the Gulf's business hub.

Top officials in the region downplayed the emirate's debt woes. Bahrain's central bank governor said the kingdom's exposure to Dubai World <DBWLD.UL> was limited to $281 million, while the biggest lender in Qatar and Deutsche Bank both said they had no exposure.

Qatar's prime minister, whose country is one of the region's biggest investors, blamed exaggeration by the media for amplifying the impact of Dubai's debt.

London-listed Standard Chartered <STAN.L>, HSBC <HSBA.L>, Lloyds <LLOY.L> and Royal Bank of Scotland <RBS.L> will attend the meeting, along with United Arab Emirates lenders Abu Dhabi Commercial Bank <ADCB.AD> and Emirates NBD <ENBD.DU>, an Abu Dhabi bank executive said last week.

Dubai's finance chief said that Dubai World might sell some assets to finance its commitments, but that the emirate's government would not chip in with any disposals of its own.

"There is confusion in the media that the government plans to sell assets," Abdulrahman al-Saleh, director general of Dubai's department of finance, said in an interview with Al Jazeera television. "The company has foreign investments and real estate investments abroad. There is nothing to prevent selling these assets.

His comments reiterated the government and Dubai World were not the same, ensuring the emirate's most valuable firms like Emirates, Dubai Aluminum (DUBAL) or even its 21 percent London Stock Exchange <LSE.L> stake would not be in any firesale.

MARKET JITTERS

Saleh's comments sent the Dubai bourse tumbling almost 6 percent to a 20-week low, reversing gains made on Sunday with DP World, the flagship unit of Dubai World, slumping 5.5 percent.

The cost of insuring Dubai's debt against restructuring or default rose on Monday to 496 from 485.5 points. The $3.5 billion sukuk bond for Nakheel, maturing this month, one of the issues to be restructured, fell 1 point to 53 points, while property stocks were all trading limit down.

"(The market) did not react well to the Dubai government news, which again cast a cloud of doubt," said Ayman el-Saheb, Darahem Financial Brokerage's director of operations.