JEDDAH/LONDON: World stock markets sprinted ahead for the second straight day yesterday on sustained investor confidence in government moves to shore up shaky banks and keep credit flowing.
Asia and Europe made solid gains but Wall Street turned lower yesterday as investors were pleased with the government’s plans to spend $250 billion to buy stock in private banks but still collected profits from the previous day’s massive advance.
The Dow Jones Industrial Average fell 77.10 points (0.82 percent) to 9,310.51 just after the closing bell, giving back a portion of a record 936-point gain on Monday. The Nasdaq fell 65.24 points (3.54 percent) to 1,779.01 reflecting worries about profits in the tech sector.
The broad Standard & Poor’s 500 index dipped 5.47 points (0.55 percent) to a preliminary close of 997.88.
Gulf Arab bourses rallied yesterday as investors took heart from a surge in stock markets around the world and from further government moves to protect the region’s banking system from the global financial crisis.
In Saudi Arabia, the Tadawul All-Share Index (TASI) ended up 7.29 percent or 463.73 points to 6,828.96, with Al-Rajhi Bank and Saudi Basic Industries Corp. (SABIC), the two top heavyweight gainers of the session, jumping 7.61 percent and 5.91 percent respectively.
The index is still down over 38 percent so far this year compared to last year.
The market turnover was SR10.45 billion yesterday compared to SR8 billion on Monday.
While commenting on the recent developments in the Saudi stock market, Faisal H. Alsayrafi, president and CEO of the Jeddah-based Financial Transaction House (FTH), said the market is affected by recent global trends. “There is no credit crisis or liquidity problems in Saudi Arabia,” he said.
“The SAMA’s (Saudi Arabian Monetary Agency’s) decision to cut the repo rate to 5 percent from 5.5 percent and reserve requirements to 10 percent from 13 percent has helped boost the market confidence,” Alsayrafi said.
“There is a lot of activity going on in the market. We must have seen short-term bottom but the market will strengthen in the long-term as fundamentals are very strong and the Saudi economy is doing well.”
About regional markets, Alsayrafi said that in the Gulf, stock markets were also down to technically very unsold levels. The GCC (Gulf Cooperation Council) governments have supported the markets by injecting funds into the banking system. “This will increase liquidity in the market and encourage some investors in order to maintain reasonable liquidity in the market.”
Meanwhile, a study conducted by the Ministry of Economy and Planning said Saudi Arabia would benefit from the current economic crisis in terms of fall in prices of foodstuffs, construction materials and other consumer goods and decrease in inflation rates.
The ministry also noted the Kingdom’s financial and banking policies. “The banking practices followed in the Kingdom are distinguished for their objectivity and balance,” it said and underscored the steady economic growth achieved by the country during the past five years.
Dubai’s main index posted its biggest one-day gain ever for the second session in a row, while Qatar’s benchmark recorded its sharpest rise in more than eight years. The Dubai index soared 10.76 percent to 3,703 points and the Doha benchmark ended 9.88 percent higher at 8,377 points.
The Abu Dhabi index ended 7.53 percent higher at 3,602 points, with real estate and banks leading gains.
The United Arab Emirates more than doubled its emergency bank funding plan to 120 billion dirhams ($32.67 billion) yesterday, after promising this week to protect all national banks from credit risks, to provide sufficient liquidity for interbank lending and to guarantee bank deposits.
On Sept. 22, the central bank set up a $13.6 billion facility to help banks cope with the crisis and said it might make more money available if needed.
The government on Sunday said it will guarantee deposits and savings in local banks to protect depositors in the face of the global financial turmoil. The move also covers foreign banks with “significant operations” in the country.
Last week, the UAE central bank also slashed its lending rate to banks to three percent and its benchmark rate by 0.5 percentage points to 1.5 percent in a move to boost market liquidity.
“Government actions are giving investors confidence that liquidity might return to the banking system. Global recessionary fears are on the backburner for now as people focused on the banks,” said Matthew Wakeman, managing director of cash and equity linked trading at EFG-Hermes.
Kuwait was the only market to buck the upward trend in the Gulf Arab region, with the benchmark index ending 0.28 percent lower as the country’s banking sector was hit by disappointing third-quarter results. The main index ended 0.26 percent lower at 11,795 points.
In Oman, the stock index ended yesterday 8.37 percent higher at 7,717 points, having lost 18 percent last week, its largest weekly loss in its lifetime, according to Reuters data.
In Bahrain, the index rose 1.77 percent to 2,371 points.
Tokyo earlier in the day closed up by a record 14.15 percent as Japan unveiled fresh market-stabilizing measures.
London had closed more than eight percent higher Monday as Britain pumped billions of fresh dollars into credit-starved money markets and bought stakes in some of the nation’s biggest commercial banks. In London yesterday the FTSE 100 index of leading shares rose 3.23 percent to close at 4,394.21 while in Paris the CAC-40, which on Monday gained more than 11 percent, added 2.75 percent to finish at 3,628.52 points. The Frankfurt DAX, which had also eclipsed 11 percent on Monday, finished at 5,199.19, a gain of 2.70 percent.
Elsewhere there were gains of 2.70 percent in Madrid, 5.10 percent on the Swiss Market Index and 3.66 percent in Milan. The market was down 0.27 percent at the close in Amsterdam.
The Belgian exchange closed with a loss of 4.77 percent. Hong Kong closed up 3.2 percent yesterday, Singapore gained 2.5 percent, Seoul climbed 6.1 percent and Sydney surged 3.7.
Russia’s stock markets closed up more than nine percent, tracking steep rises worldwide on growing investor confidence about government measures to counter global financial turmoil.
The headline index on the ruble-denominated MICEX bourse rocketed by 13.33 percent to end at 755.22 points, while its dollar-denominated RTS counterpart added 9.90 percent to reach 869.51.
The dollar fell against a basket of major currencies, with the US Dollar Index down 0.27 percent at 81.308. Against the yen, the dollar rose 0.19 percent at 102.18.
The euro rose 0.54 percent at $1.3664, off a session peak of $1.3769.
US light sweet crude oil rose slightly, up 28 cents to $81.47 a barrel after earlier hitting $84.83.
Gold prices retreated, then rose slightly. Spot gold prices rose $10.75 to $841.55 an ounce.
— With input from K.T. Abdurabb and agencies
