Business | Markets
Brimming with confidence
Markets rebound after governments move to secure foreign and domestic bank deposits.
- By Babu Das Augustine, Banking Editor and Cleofe Maceda, Staff Reporter
- Published: 23:28 October 13, 2008
- Mohammad Ali Al Khoori and Khalid Ashoor at the Abu Dhabi stock exchange on Monday. Their smiles reflect the buoyant mood among investors worldwide as stock markets rebounded.
- Image Credit: Ahmed Kutty/Gulf News
Dubai: Share prices on the UAE and Gulf bourses surged on Monday as governments took decisive action to restore investor confidence in the markets and the financial system.
The UAE on Monday announced it would guarantee all bank deposits including those with foreign commercial banks that have significant retail operations in the country. The new announcement follows the decision on Sunday by the Cabinet to protect deposits with the local banks.
In a related development the Cabinet on Monday authorised market watchdog Emirates Securities and Commodities Authority (ESCA) to ease restrictions on share buybacks in an effort to boost stocks after weeks of decline.
Shoring up prices
The Cabinet's move was meant to shore up share prices that have been battered by the global financial crisis.
Companies listed on the UAE markets are now allowed to buy back up to 10 per cent of their shares but could previously not begin their purchases until after posting their results.
Both these developments along with the global market rally saw UAE shares making major gains yesterday.
The Dubai index ended with its biggest one-day gain ever, jumping 10.53 per cent. The Abu Dhabi index rose 6.92 per cent.
While most Gulf governments and central banks reassured investors, analysts said it was too early to call an end to the lengthy bear phase on the local and regional bourses.
"Markets are expected to see some more rises which will extend this corrective bounce and the immediate neckline resistance areas arrive at 3,740 levels where we can face another round of selling at higher levels," Shiv Prakash, Equity Investment Analyst - Technical with Mac Capital Advisors, said.
Overall, bankers, corporate CEOs and analysts said yesterday that efforts by the UAE government would boost market confidence.
"It is reflective of the government's strong guidance and will further help unlock liquidity," said Malcolm Wall Morris, CEO of DGCX.
"By recognising the situation and addressing the potential for trouble proactively, these preventive measures will inject confidence in an already strong economic environment," Salaam Al Shaksy, CEO of Dubai Bank, said.
In the Gulf, Qatar made the most dramatic move yet by announcing that the government would spend $5.3 billion (Dh19.4 billion) to buy 20 per cent of the shares of all listed banks in the country.
Qatar's decision had an almost instant positive impact on most Gulf markets as rumours spread on the UAE bourses that a similar move is likely here. Meanwhile, in Qatar, the market index rose 8.45 per cent.
The positive sentiment played out across all Gulf markets yesterday with the Saudi bourse, the Arab world's biggest, closing up 9.47 per cent. Oman gained 5.18 per cent and Bahrain edged up 0.82 per cent.
Analysts attributed the Saudi market gains to a rare repo rate cut by the kingdom's central bank, the Saudi Arabian Monetary Agency, on Sunday.
Global stock markets soared yesterday as governments across the world pumped billions of dollars into banks crippled by the credit crunch.
Wall Street shares skyrocketed at the opening, with the Dow up more than four per cent, and European markets jumped between five and eight per cent in afternoon deals. Hong Kong surged 10 per cent in earlier Asian trade.
Shopping: Jewellery loses shine
The global financial turmoil will likely cool off spending on jewellery and other luxury items not just in Dubai, but across the globe this year because people are becoming more cautious and are holding on to their money, international jewellery manufacturers and traders said.
Bookings and sales of luxury items are expected to slacken, but traders are hopeful they would be able to touch base with the affluent jewellery market in the GCC and build partnerships with local and foreign buyers.
"People keep saying they're isolated. That's not true. The falling US financial market will affect the whole world ... People who thought they were worth so much before are now worth 60 per cent of that.
"Their desire to spend is gone. There's a global fear cycle," Manish Sacheti, director of India-based Gehna Collections, told Gulf News.
How will the initiative taken by government across the world affect the markets? How do you see the future of the global financial crisis? What other recourse do you think could be taken?
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