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Middle East markets take beating over fears of global slowdown

Beirut bourse spared fallout by central bank's ban on subprime issues

Persistent fears about the world economy battered global and Middle East stocks again Monday, although local investors appear to be incurring comparatively minor damage, traders told The Daily Star.

Equity markets in Europe and Asia fell sharply with the pan-European FTSEurofirst 300 down around 2 percent, taking January's losses alone to more than 13 percent. Japan's Nikkei dropped nearly 4 percent on worries that the US economy was already dragging Japan's down into recession. China's market dropped 7 percent.

The Saudi Tadawul All-Shares Index (TASI) shed 4.1 percent to finish on 9,389.52 points. It has lost 16 percent since the start of the year.

The Dubai Financial Market Index dropped 3.84 percent to close on 5,451.05 points. It has lost 8.1 percent this year.

The Abu Dhabi Securities Market was down 1.14 percent at 4,630.20 points, while Qatar's Doha Securities Market lost 0.31 percent. The Kuwait Stock Exchange Market dropped 1.5 points. Two smaller Gulf exchanges - the Muscat Securities Market and the Bahrain Stock Market - rose slightly.

"People remain pretty nervous. We haven't seen the full extent of the fall-out of subprime," said Jan Smedts, deputy head of equities for Dexia Group, referring to losses and turmoil in the US mortgage sector.

Monday's losses on equity markets came despite efforts last week by US authorities to stop that country's economic downturn, which is exacerbated by subprime losses and credit market worries.

Meanwhile, the Beirut Stock Exchange saw only minimal trading Monday and traders said Lebanese investing here and abroad had been cushioned from much of the subprime fallout and market plunges.

"It's not at all a crisis," said Toufic Karam, head of capital markets at Beirut's Financial Funds Advisers (FFA). Although he does not know all the holdings of his Lebanese clients, he said their positions with FFA had suffered minimally compared to investors elsewhere.

For example, one client had shares of Citigroup, the American banking colossus slammed by the subprime mess, but the same client also had shares of a hedge fund which was on the rise. Another client had shares of Apple, which were down, but also had invested in the euro, which was up.

The plummeting markets delivered "no big injuries" to the Lebanese clients of a Lebanese financial adviser working in Dubai, who spoke on condition of anonymity. "In the past we used to be affected much more - this time, we're laughing. Our exposure was limited to one or two stocks."

With markets surging for more than a year, the adviser had been expecting a correction, although not the subprime disaster specifically nor the dramatic drops it kicked off, he said.

"On a macro level, we knew the markets were quite high," he said. "For the last few months, we were astonished to see the markets going up higher."

He had advised his clients for the last year to purchase fixed-income instruments and avoid long-term equity positions.

The Lebanese financial sector should escape any aftershocks of the ongoing market crisis, partly because the central bank had prohibited domestic banks from buying certain securities backed by the subprime mortgages - the securities which collapsed first and precipitated much of the ensuing bear market, he added.

The central bank's measure was "the best thing that happened to Lebanon," the adviser said. "Maybe we have to be thankful to the central bank of Lebanon, which forbade us to deal with such instruments"

"The Lebanese banks are quite safe," he added. "I'm not expecting any big writeoffs."

Marseille,02 01 2008
Redaction
The Daily Star
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