Joy, cautious optimism after markets rebound in GulfOctober 14th, 2008 - 4:33 pm ICT by IANS
Dubai, Oct 14 (IANS) Media and investors in the Gulf reacted with joy and cautious optimism after regional bourses rebounded Monday after a weeklong slump triggered by the global credit crunch.’Brimming with confidence,’ read the front page banner headline of the United Arab Emirates (UAE) daily Gulf News’ Tuesday edition, followed by the sub-headline: ‘Markets rebound after governments move to secure foreign and domestic bank deposits.’
‘Markets rejoice after UAE bank moves,’ read another headline in the Khaleej Times newspaper.
The Dubai Financial Market (DFM) led the regional resurgence Monday rising 10.53 percent from the previous day’s close.
The trend continued Tuesday morning with both the DFM and the Abu Dhabi Securities Exchange up 7 percent in early morning trading.
The key Kuwait Stock Exchange, the only one to have closed in the red after Monday’s trading, also rose by 0.91 percent in Tuesday’s early morning trade.
The resurgence came following a series of remedial measures announced by the region’s monetary authorities to restore investment confidence as key market indexes touched historical lows over the past week.
The central banks of the UAE, Kuwait, Bahrain and Saudi Arabia announced interested rate cuts and assurances of liquidity to banks.
While the UAE government has guaranteed that deposits in banks in the country would extend up to three years, Qatar’s sovereign wealth fund Qatar Investment Authority (QIA) announced that it would buy up to 20 percent of the shares of the country’s banks to ensure their stable foundation.
In an editorial titled ‘UAE moves on crisis,’ the Khaleej Times said: “The UAE government’s decision to safeguard bank deposits demonstrates an agility that cannot be said of international policymakers.”
It went on to say: “It has taken a long time for governments and central banks to wake up to the fact that a global financial solution.”
It warned that fixing the global financial system would be one thing, but fixing the global economy would be quite another.
“Lack of credit will soon filter down to shrinking trade between nations and that will have few beneficiaries. For all that China and to some extent India are two of them,” it added.
The Gulf News, in its editorial titled ‘Crisis reveals major global fault line,’ kept its fingers crossed over the market revival.
“Although the markets responded well, it is too early to draw a straightforward direction it is heading - up or down,” it said.
“The crisis in the global financial system is really deep-rooted and would require more than mere assurances for anyone to draw conclusions, something that the market and investors need.”
The action on the part of the regional central banks came in for praise from investors and experts.
“Measures taken by SAMA (Saudi Arabia Monetary Authority) and other regional central banks to safeguard financial soundness fuelled the rally in Saudi Arabia and other Gulf markets,” Saudi Arabia’s Arab News paper quoted John Sfakianakis, chief economist at the Saudi British Bank, as saying.
The Tadawul All-Share Index, the largest of the Gulf bourses, ended Monday 9.47 percent above the previous day’s close.
“In what is probably a more significant move, the reserve requirement cut (in Saudi Arabia) was the first since 1980. It is early to forecast a change in market direction in regional markets,” Sfakianakis said.
Lauding the UAE government’s move guaranteeing bank deposits, Malcolm Wall Morris, chief executive of Dubai Gold and Commodities Exchange, said: “The step is timely and positive. It is reflective of the government’s strong guidance and will further help unlock liquidity.”
Vyas Jayabhanu, head of Al Dhafra Financial Broker, told the Khaleej Times that the UAE government’s move would provide the much needed fillip to the markets.
“We witnessed certain buoyancy in the market after a very long time,” he said.
Tags: cautious optimism, dubai financial market, global credit crunch, international policymakers, investment confidence, khaleej times newspaper, kuwait stock exchange, regional bourses, uae government, united arab emirates