KUWAIT: Stock market suspended as investors panic over big losses
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
As the international financial crunch continues to hit Persian Gulf markets, trade at the Kuwait Stock Exchange was halted by a Kuwaiti court ruling today in an effort to curb the slump in the market’s slide, according to Kuwait’s official news agency KUNA.
The unprecedented ruling will be maintained until Nov. 17, when the court will review its decision aimed at preventing massive losses among small investors in this rich small emirate, which is the fourth-largest oil producer in the world.
In a first reaction, Kuwait’s finance minister, Mustafa Shimali, said that his government would uphold the ruling but he criticized the court’s decision as ‘dangerous,’ according to KUNA:
‘We respect the court ruling and as a government we only have to implement it.... The consequences of this ruling would be dire.... How will those who filed the suit shoulder the consequences?’
This comes amid pressing demands from Kuwaiti investors for the government to intervene and stop the big losses in the emirate’s stock market, the second largest in the region after that of Saudi Arabia.
The Kuwaiti bourse has been trading at 40-month lows. Last month, Kuwaiti investors demonstrated for four days in a row, calling for government intervention to stop the bleeding in the market, which has seen about $100 billion wiped off its value since late June, according to Agence France-Presse.
Observers say that investors in the gulf region are panicking because of the global financial crisis and the subsequent slump in oil prices.
Haitham Abo Shady, managing director of Dubai Financial Brokerage told the Los Angeles Times that the decision of the Kuwaiti judiciary shows a serious mismanagement of the crisis:
‘It is like fighting mosquitoes with a machine gun. This will only increase the panic among investors and is going against all the rules of free trading.... When the financial crisis hit the world, problems that were hidden in emerging markets suddenly came to the surface.... If action is not taken to solve problems within each system, government backup to the market will only prolong the agony of the drop.’
The court order came after lawyers filed a lawsuit against the Kuwaiti government demanding that “trade be halted till measures are taken to check losses at the exchange,” KUNA said.
The lawsuit was filed on behalf of a small Kuwaiti investor who claimed he incurred heavy losses on the Kuwait market over the past few weeks.
It was filed against the prime minister, the commerce minister, who heads the bourse committee, and the director-general of the bourse. They were criticized for mismanaging the current financial crisis in the emirate.
Arab satellite television reported that traders cheered upon the announcement of the court decision.
Meanwhile, the Kuwaiti government plans to buy up assets at a discount from investment firms hit by the global financial crisis, the central bank said.
The country’s fourth largest lender, Gulf Bank, was rescued by the central bank amid local reports of billions of dollars in losses due to the crisis.
Kuwait’s government has adopted several measures to boost the stock exchange but failed to stop the decline in the stock market.
The government spent hundreds of millions of dollars in buying stocks and the central bank pumped billions of dollars into local banks to shield the emirate’s finance institutions from the global crisis.
Other gulf markets are also witnessing a somber mood as their values continue to plunge.
-- Raed Rafei in Beirut
Kuwaiti traders celebrate after trading was halted at the Stock Exchange in Kuwait City today. Credit: YASSER AL-ZAYYAT/AFP/Getty Images
P.S. Get news from the Middle East in your mailbox every day. The Los Angeles Times distributes a free daily newsletter with the latest headlines from the Middle East, including the conflicts in Iraq and Afghanistan. You can subscribe by logging in at the website here, clicking on the box for ‘L.A. Times updates’ and then clicking on the ‘World: Mideast’ box.