Arab funds leave U.S. as marts fall

The gloomy performance by U.S. markets, not politics or fear, led to the much-publicised withdrawal of some Arab funds from the U.S., according to a senior HSBC Investment Bank plc official.

David Bloom, London-based currency strategist, who says investors, Arab and non-Arab, have been exiting U.S. markets, expects the trend to continue as the U.S. economy remains under pressure.

"It is a sensible move, I expect more. We have had one movement, and I would expect another of the same size," he said.

He said the much-touted $200 million was totally arbitrary. "We in our bank looked and found it very difficult to determine how much money has moved. How can anybody outside the banking system throw up a figure?"

Meanwhile, Gulf currencies are expected to lose up to 10 per cent over a year, if the award-winning strategist is to be believed.

Bloom is pessimistic and puts up a strong argument for a rather depressing global economic outlook; and recent events look like proving his viewpoint.

He also predicts that the Federal Reserve will cut rates by 100 basis points with the Euro-pean Central Bank following with a 75 basis point cut in a year. Consequently, he says fixed income instruments such as bonds are the best for investors over the next year.

"When the heartbeat of capitalism is strong, nothing beats the dollar. But the dollar has declined by about 10 per cent and I expect another fall of 10 per cent over the next year or so. The decline would not be dramatic, but the dollar would be under persistent pressure," Bloom said.

With it would be the GCC currencies, which are pegged to the greenback.