Gulf states move to calm markets as stocks plunge
Despairing: An Emirati investor reacts to the movement of stock prices at the Dubai Financial Market yesterday. Stock markets in Gulf states opened the week's trading yesterday sharply down with the Dubai bourse shedding six per cent. Picture: AFP
Monday, October 13, 2008
GULF Arab states took emergency measures to boost confidence in the financial system yesterday, including a rare cut by Saudi Arabia of its benchmark repo rate and a vow by the United Arab Emirates to protect national banks and guarantee deposits.
The moves came as Gulf stock markets extended weeks of declines as investors fretted about the global financial crisis. Officials escalated efforts to shore up markets after verbal support last week did little to lift negative investor sentiment. Saudi Arabia, which is expected to deploy other measures such as allowing share buybacks, cut its benchmark repurchase rate for the first time in nearly two years yesterday, signalling its desire to reduce lending rates.
It cut the repo rate to five per cent from 5.5 per cent for the first time since February, 2007. It also cut reserve requirements to 10 per cent from 13 per cent, bankers said, citing a memo sent to their treasuries.
"Sentiment will be better but actual liquidity will not improve until the promised money comes," said an Emirates Bank treasury manager. "The Saudi move is good because they reduced the reserve requirements so that will put some money into the system.
The Saudi exchange, the Arab world's worst performing stock market, closed at its lowest level in more than four years on Saturday amid concerns over the global financial crisis.
The main index rose just 0.3 per cent yesterday.
In the United Arab Emirates, the government promised to protect banks from credit risks and to guarantee bank deposits, the official WAM news agency said yesterday. The government also agreed it would pump sufficient liquidity into the system if needed and facilitate interbank lending.
Despite last week's coordinated rate cuts by global central banks, including those of Kuwait and the UAE, world markets have not regained their footing as investors fret about the worsening financial turmoil.
In the Gulf, Dubai's index dropped 5.92 per cent, Qatar was down more than six per cent, Oman shed 5.67 per cent and Kuwait dipped one per cent.
The latest market declines come on the heels of weeks of similar losses prompting officials to roll out a slew of measures. Reuters
The moves came as Gulf stock markets extended weeks of declines as investors fretted about the global financial crisis. Officials escalated efforts to shore up markets after verbal support last week did little to lift negative investor sentiment. Saudi Arabia, which is expected to deploy other measures such as allowing share buybacks, cut its benchmark repurchase rate for the first time in nearly two years yesterday, signalling its desire to reduce lending rates.
It cut the repo rate to five per cent from 5.5 per cent for the first time since February, 2007. It also cut reserve requirements to 10 per cent from 13 per cent, bankers said, citing a memo sent to their treasuries.
"Sentiment will be better but actual liquidity will not improve until the promised money comes," said an Emirates Bank treasury manager. "The Saudi move is good because they reduced the reserve requirements so that will put some money into the system.
The Saudi exchange, the Arab world's worst performing stock market, closed at its lowest level in more than four years on Saturday amid concerns over the global financial crisis.
The main index rose just 0.3 per cent yesterday.
In the United Arab Emirates, the government promised to protect banks from credit risks and to guarantee bank deposits, the official WAM news agency said yesterday. The government also agreed it would pump sufficient liquidity into the system if needed and facilitate interbank lending.
Despite last week's coordinated rate cuts by global central banks, including those of Kuwait and the UAE, world markets have not regained their footing as investors fret about the worsening financial turmoil.
In the Gulf, Dubai's index dropped 5.92 per cent, Qatar was down more than six per cent, Oman shed 5.67 per cent and Kuwait dipped one per cent.
The latest market declines come on the heels of weeks of similar losses prompting officials to roll out a slew of measures. Reuters
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