banken crises
QATAR yesterday launched a $5.3bn plan to buy bank shares in the most dramatic move to date by Gulf Arab states to shore up confidence in their banks, sending stocks across the region soaring.
Middle Eastern policymakers have joined Europe and the US in combating a financial crisis that has battered bank stocks and threatened a five-year boom, and more moves by the cash-rich states to fortify capital defences are likely.
It also marks an acceleration by sovereign wealth funds – the state-run investment agencies that control trillions of dollars – to invest at home instead of abroad, a sour turn for Westerners who had once counted on rich Gulf investors to bail them out of the financial crisis.
In the plan, the Qatar Investment Authority (QIA), the state’s sovereign wealth fund, will buy 10% to 20% of banks’ listed capital on the Doha bourse based on Sunday’s closing share prices, the state news agency QNA said.
Khalid al-Khater, director of economic policies at the central bank, said the move came although the “economy is in a very strong position ... and can withstand more than the possible ramifications of the (global) crisis”.
“What the QIA did is in harmony with the general global trend towards increasing the role of the state in the national economy,” he added.
The announcement sent shares rocketing across the Gulf, with Dubai’s main index DFMGI marking a 10.5% gain – its biggest ever. Qatar’s QSI leading index rose 8.5%.
“People are starting to have confidence in the market,” said Adel Nasr, a local brokerage manager at United Securities, in Muscat.
Governments around the world bet hundreds of billions of dollars to rescue failing banks yesterday, sending world stocks soaring and giving Wall Street its biggest one-day gain ever. US stocks surged more than 11%, with the Dow index registering its biggest point gain ever.
The Dow Jones Industrial Average soared 936.42 points, or 11.08 %, to 9,387.61.
It was the blue-chip Dow’s biggest point gain on record and the sharpest percentage rise since 1933.
In another sign of relief in the Gulf region, credit tensions eased in the UAE and Saudi Arabia, where the interbank lending rates in both countries edged lower.
The easing comes one day after the UAE said it would guarantee bank deposits. It clarified its position yesterday, saying it would cover deposits for three years, including those with foreign banks with core operations in the state.
“That was a very strong message sent by the government to reassure banks and depositors. We should see the markets easing and returning to normal soon,” said Walter Pompliano, head of treasury at Abu Dhabi Commercial Bank.
Kuwait is the only other Middle Eastern state to say point blank that its sovereign wealth unit would buy local shares to support prices with the view that the local bourse had suffered too much due to an investor exodus from developing markets.
Qatar’s purchase plan and the UAE’s guarantee come in a busy week for Gulf policymakers struggling to prevent contagion from the West’s financial crisis from spreading.
Saudi Arabia on Sunday slashed its benchmark repo rate by 50 basis points in a surprise move to restore confidence.
The plans reflect a multi-pronged approach by Gulf policymakers and more moves by other Gulf states are likely in the coming days, said banking analyst Raj Medha at investment bank EFG-Hermes in Dubai.
Further measures might include placing sovereign deposits directly with commercial banks, recapitalising banks with weak capital bases, and flooding the interbank lending market with cheap liquidity to keep the banks lending to each other.
The combined market capitalisation of the top six Doha-listed banks at Sunday closing prices was $26.4bn, meaning the QIA plan would be worth $2.2bn to $5.3bn. – Reuters
Middle Eastern policymakers have joined Europe and the US in combating a financial crisis that has battered bank stocks and threatened a five-year boom, and more moves by the cash-rich states to fortify capital defences are likely.
It also marks an acceleration by sovereign wealth funds – the state-run investment agencies that control trillions of dollars – to invest at home instead of abroad, a sour turn for Westerners who had once counted on rich Gulf investors to bail them out of the financial crisis.
In the plan, the Qatar Investment Authority (QIA), the state’s sovereign wealth fund, will buy 10% to 20% of banks’ listed capital on the Doha bourse based on Sunday’s closing share prices, the state news agency QNA said.
Khalid al-Khater, director of economic policies at the central bank, said the move came although the “economy is in a very strong position ... and can withstand more than the possible ramifications of the (global) crisis”.
“What the QIA did is in harmony with the general global trend towards increasing the role of the state in the national economy,” he added.
The announcement sent shares rocketing across the Gulf, with Dubai’s main index DFMGI marking a 10.5% gain – its biggest ever. Qatar’s QSI leading index rose 8.5%.
“People are starting to have confidence in the market,” said Adel Nasr, a local brokerage manager at United Securities, in Muscat.
Governments around the world bet hundreds of billions of dollars to rescue failing banks yesterday, sending world stocks soaring and giving Wall Street its biggest one-day gain ever. US stocks surged more than 11%, with the Dow index registering its biggest point gain ever.
The Dow Jones Industrial Average soared 936.42 points, or 11.08 %, to 9,387.61.
It was the blue-chip Dow’s biggest point gain on record and the sharpest percentage rise since 1933.
In another sign of relief in the Gulf region, credit tensions eased in the UAE and Saudi Arabia, where the interbank lending rates in both countries edged lower.
The easing comes one day after the UAE said it would guarantee bank deposits. It clarified its position yesterday, saying it would cover deposits for three years, including those with foreign banks with core operations in the state.
“That was a very strong message sent by the government to reassure banks and depositors. We should see the markets easing and returning to normal soon,” said Walter Pompliano, head of treasury at Abu Dhabi Commercial Bank.
Kuwait is the only other Middle Eastern state to say point blank that its sovereign wealth unit would buy local shares to support prices with the view that the local bourse had suffered too much due to an investor exodus from developing markets.
Qatar’s purchase plan and the UAE’s guarantee come in a busy week for Gulf policymakers struggling to prevent contagion from the West’s financial crisis from spreading.
Saudi Arabia on Sunday slashed its benchmark repo rate by 50 basis points in a surprise move to restore confidence.
The plans reflect a multi-pronged approach by Gulf policymakers and more moves by other Gulf states are likely in the coming days, said banking analyst Raj Medha at investment bank EFG-Hermes in Dubai.
Further measures might include placing sovereign deposits directly with commercial banks, recapitalising banks with weak capital bases, and flooding the interbank lending market with cheap liquidity to keep the banks lending to each other.
The combined market capitalisation of the top six Doha-listed banks at Sunday closing prices was $26.4bn, meaning the QIA plan would be worth $2.2bn to $5.3bn. – Reuters
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