UAE investors fear worse from global market crisis

October 1st, 2008 - 4:44 pm ICT by IANS  

Lehman BrothersDubai, Oct 1 (IANS) The fallout of the market crisis in the United Arab Emirates (UAE) could very well be much worse than can be seen on the surface, the Khaleej Times reported Wednesday quoting financial analysts.As reports of losses sustained by investors are coming to light in increasing number banks selling derivative products and notes from Lehman Brothers have declined to comment while some of them said they need more time to assess the damage.

But losses sustained by individual and corporate investors in the country following the collapse of Lehman Brothers could be phenomenal and could be known only when financial institutions disclose their exposures to the crisis, analysts said.

A spokesman of Citibank confirmed that a limited number of customers in the UAE had been affected by Lehman’s bankruptcy.

He said his bank acted as a distributor for notes issued by certain Lehman Brothers subsidiaries and guaranteed by Lehman Brothers Holdings Inc., which is now subject to a bankruptcy proceeding in the United States.

“Citi is working globally with governments, regulators and other industry leaders to turn to an orderly market environment. We are proactively providing information to our clients who bought these notes to keep them up to date with market developments.” he said.

One analyst, who requested anonymity, said the banks which sold Lehman products had started issuing margin calls on borrowers whose investments could no longer cover loans.

“While there is a sure loss to the investors, the loss to lending banks cannot be ruled out,” an analyst said.

In cases where investments are far below the face value, banks will find it hard to recover the loan from borrowers, he said.

Zaid Al Nafoosi, stock broker for Al Sharhan Stock Centre, described the news on the Lehman’s bankruptcy as a “shockwave” through the region.

“We don’t know the depth of the problem with Lehman Brothers… We don’t know their investments in our market, and we don’t know our investments in that bank,” Al Nafoosi told Arabian Business.

Abdul Kadir Hussain, CEO of Mashreq Capital, said unravelling the region’s exposure to Lehman “has only just begun and will continue for a quite a while”.

“Lehman did active business in this region and I would suspect most financial institutions here would have some exposure to them across various asset classes including rates, credit and structured products,” Hussain said.

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