Four Gulf states tried to lend verbal support to faltering stock markets on Tuesday, saying their financial institutions were sound despite the global credit crisis. Officials from Saudi Arabia, Kuwait, Qatar and Oman moved to reassure investors that the decline on regional markets was merely temporary and said their economies were strong.
The verbal interventions came as Middle East stock markets slumped to multi-year lows on Tuesday as speculation intensified that a five-year property boom in the region was over. "The financial situation in the country is safe and sound and liquidity at banks is available and exceeds billions," Kuwaiti Deputy Prime Minister and Minister of State for Cabinet Affairs Faisal al-Hajji told state news agency KUNA.
Kuwait's commerce and industry minister Ahmad Baqer also spoke out, saying the market decline was due to global panic and urged companies to buy back shares to support the market. Earlier, a Kuwait newspaper quoted the country's central bank governor, Sheikh Salem Abdul-Aziz al-Sabah, as saying that local banks were not affected at all by the crisis.
In Saudi Arabia, central bank economist Fadi Alajaji admitted the kingdom faced difficulty in managing liquidity but said Saudi banks were unlikely to go bankrupt or collapse. He also pinned the market retreat to a crisis of investor confidence. Gulf Arab economies have been booming on windfall oil revenue after crude prices peaked at around seven times their 2002 levels earlier this year.
The Gulf's oil-fuelled boom has so far protected the region from the major upheavals that have shaken the financial and property sectors in the United States and Europe. But regional officials are keeping a close eye on markets, standing ready to pour in money to prop up liquidity.
Alajaji told Reuters that Saudi Arabia may even lower the benchmark lending rate - untouched at 5.5 percent since February 2007 - if convinced the monetary system is running out of cash. In Oman, the benchmark index fell 7.29 percent as a downward trend swept the region in reaction to the global economic woes despite the US approval of $700 billion Wall Street bailout.
"I'd like to assure foreign investors as well as local (investors), that the international credit crisis does not have any negative impact on the Omani economy," Ahmad bin Abdul-Nabi Mekki, the minister managing the oil exporter's economy, told Reuters.
"The Muscat Securities Market decline now is due to speculation from investors with a short-term outlook," he said, expressing confidence the bourse would pick up after what he expected to be improved company financial results for the third and fourth quarters.
Mekki brushed aside rumours that the non-Opec Gulf Arab oil exporter could cancel $3 billion worth of infrastructure projects planned for 2008 because of the credit crunch. Governments around the region have pumped billions of dollars into infrastructure and real estate projects, but the credit crunch raised hconcern that many companies would have difficulties raising funds for their projects.
Meanwhile, Qatar's deputy central bank governor said the financial situation of banks in the country was "safe and stable". "The central bank will spare no effort to provide all the liquidity that banks need if necessary," Sheikh Fahd al-Thani said in comments to the state news agency.
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