REFILE-WRAPUP 2-Kuwait saves bank, Saudi extends credit
October 26th, 2008 | by admin |(Corrects to remove extraneous word in fourth paragraph)
(Adds new central bank move, Kuwait MP, analysts)
By Ulf Laessing
KUWAIT, Oct 26 (Reuters) - Kuwait moved to prop up one ofits banks and Saudi Arabia extended $2.7 billion in credit toneedy citizens on Sunday as the global financial crisis spreadto the Gulf Arab region, sending stocks into a tailspin.
The Kuwait central bank was forced to step in to supportGulf Bank (GBKK.KW: Quote, Profile, Research, Stock Buzz), which was hit by losses from trading incurrency derivatives after the dollar rose, prompting thegovernment to announce it would guarantee local bank deposits.
Saudi Arabia unveiled plans to deposit 10 billion riyals($2.67 billion) into the Saudi Credit Bank, which wasestablished to extend interest-free loans to low-income citizensto help them overcome financial difficulties.
The actions spooked investors.
Gulf markets tumbled to multi-month lows on Sunday. Qatar.QSI and Oman .MSI indices fell more than 8 percent, whileDubai .DFMGI sank 4.74 percent and Saudi Arabia’s index TASIslipped 3.77 percent after an 8.7 percent slide on Saturday.
The losses followed those on global markets on Friday asinvestors dumped risky assets.
The latest moves by Kuwait and Saudi Arabia come after anemergency meeting of Gulf finance ministers and central bankersin the Saudi capital on Saturday, which was aimed at bettercoordinating the region’s response to the global downturn.
Gulf Arab nations have so far adopted separate policyresponses to the crisis, which has frozen interbank lending andpanicked investors. Some Gulf states have guaranteed deposits,eased lending restrictions and invested in ailing stocks.
KUWAITI HEADACHE
The Kuwaiti government also set up a special task force onSunday headed by the central bank governor to deal with theimpact of the financial crisis.
“The market is looking for confidence-building measures.They shouldn’t take actions that damage another country’sdeposit base,” said John Sfakianakis, chief economist at SABBbank, HSBC’s Saudi affiliate.
“As they face this global uncertainty, the central banksneed to have a uniform position.”
