WRAPUP 1-Kuwait saves bank, Saudi extends credit as crisis bites
October 26th, 2008 | by admin |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 derivatives tradinglosses, prompting the government to announce it would guaranteedeposits at local banks.
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 lit a fuse to simmering investor concerns aboutthe impact of the global credit crunch on the region.
Gulf markets tumbled to multi-month lows on Sunday. Both theQatar .QSI and Oman .MSI indices fell more than 8 percent,while Dubai .DFMGI sank 5.53 percent and Saudi Arabia’s indexTASI slipped 1.83 percent after an 8.7 percent slide onSaturday.
The losses followed those on global markets on Friday asinvestors dumped risky assets.
“WORRIED ABOUT MONEY”
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 bankdeposits, eased lending restrictions and invested in ailingstocks.
“People are worried about their money,” Mohammed Yasin,managing director of Dubai-based Shuaa Securities, said.
“A lot of investors had exposure to U.S. markets throughinvestment funds and those got wiped out. You need to give themsecurity that their money is safe in the banks.
“The whole GCC should guarantee deposits. That is the basisfrom which investors can move forward and start investing.”
The Gulf Cooperation Council (GCC) consists of Saudi Arabia,the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.
Adding to the negative sentiment, oil prices dropped nearly$4 a barrel in New York on Friday, despite an OPEC agreement tocut output by 1.5 million barrels a day, amid concerns about aglobal recession and slowing fuel demand.
