DUBAI, (Reuters) – Gulf stock markets extended their decline on Wednesday as global financial turmoil torpedoed investor confidence, prompting Kuwait to slash interest rates.
The dramatic rate cut helped stem the red tide on the Kuwaiti stock exchange somewhat, helping the index to recoup some losses but it still ended 1.41 percent lower.
Kuwait cut its benchmark discount rate to 4.50 percent from 5.75 percent, one of its biggest ever rate cuts, and lowered the repo rate to 2.50 percent from 3.50 percent. A number of western central banks including the U.S. Federal Reserve later announced surprise rate cuts.
Other Gulf markets sank. The Qatar index . fell almost 9 percent, Oman’s main index .MSI slumped 7.21 percent while both the Saudi .TASI and Dubai .DFMGI indices shed more than 8 percent. The Bahrain index .BAX edged down 2.7 percent. Markets have tumbled around the world as the upheaval that began on Wall Street spreads, effectively shutting down interbank and other loan markets.
Gulf real estate and banking stocks led the slide, as investors worried that the economies of the world’s top oil-exporting region are not shielded from the global turmoil, despite official assurances to the contrary.
“Any objective analyst looking at the number of firms, especially the main ones, in the Saudi economy and the Saudi bourse cannot understand this major agitation that has happened with prices,” Muhammed al-Jasser, Saudi central bank vice governor, said in comments carried by the state news agency SPA.
The comments, which followed on the heels of similar ones by officials from Kuwait, Qatar and Oman on Tuesday, did little to ease investor sentiment.
“It’s still the same panic frenzy,” said Haissam Arabi, managing director of asset management at Dubai-based Shuaa Capital.
“(Gulf) markets are plagued by the same panic as in world markets. Investors don’t make a difference between outside and inside anymore.”
Among individual stocks, Emaar Properties fell as much as 12 percent after sliding to its lowest level in almost four years while Industries Qatar slid 9.11 percent. Emirates Telecommunications (Etisalat) shares ended at their lowest level since April 2007.
Gulf central bankers have tried to reassure investors about the financial system. Officials have also indicated they stood ready to act to inject liquidity in the market, with Saudi Arabia being the latest to outline efforts to bolster markets.
The Saudi central bank said financial institutions already held about 200 billion riyals ($53.33 billion) in government papers with the option to borrow up to 75 percent of the value of the securities. None had so far chosen to exercise this option.
Six Saudi banks launched a concerted effort to restore confidence on Tuesday, saying they had no direct exposure to toxic mortgages as shares plunged on fears about the impact of the global financial crisis.