Persian Gulf Shares Fall on Liquidity Concern, Led by Banks

By Zainab Fattah

Sept. 23 (Bloomberg) -- Persian Gulf shares declined on concern the U.S. financial-industry bailout won't prevent a recession and that banks in the region may face difficultly accessing funds for their day-to-day operations.

Emirates NBD PJSC, the United Arab Emirates biggest bank by assets, led financial stocks lower, losing 3.4 percent. First Gulf Bank PJSC slid 6.6 percent even after saying it had ``minimum indirect exposure'' to Lehman Brothers Holdings Inc.'s bankruptcy. Emirates Telecommunications Corp. and Commercial Bank of Kuwait SAK also fell.

The United Arab Emirates central bank set up a 50 billion- dirham ($14 billion) fund for banks to ease liquidity constraints caused by the seizure of global credit markets. Kuwait said it was studying a similar move.

``Investors worry the rescue plan in the U.S. may not be enough and see the 50 billion dirhams pumped into the U.A.E. banking system as a negative,'' Fadi Mansour, sales manager at Al-Futtaim HC Securities in Dubai, said in a telephone interview. ``It means the banks may have a liquidity problem and may be too exposed to real estate.''

The Dubai Financial Market General Index fell 3.6 percent to 4,051.02. In the past two days, the measure has erased more than half of the 9.9 percent surge on Sept. 21. The Abu Dhabi Securities Exchange General Index lost 2.8 percent, while the Kuwait Stock Exchange Index retreated 2 percent.

Emaar Drops

Interbank lending in the U.A.E. has been hit by ``liquidity constraints in international money markets,'' the Abu Dhabi-based central bank said in an e-mailed statement yesterday. The central bank said it has also considered additional resources to further support banks operating in the U.A.E.

The Standard & Poor's 500 Index lost 3.8 percent yesterday, erasing almost half of its rally over the previous two days.

Emirates NBD slid 3.4 percent to 8.83 dirhams, ending two- days of gains. Dubai Islamic Bank PJSC dropped 4 percent to 5.76 dirhams, bringing the two-day loss for the United Arab Emirates' biggest bank complying with Muslim banking rules to 8 percent.

First Gulf Bank slumped 6.6 percent to 15.7 dirhams, ending a two-day rally. The ``minimum indirect exposure through derivatives'' to Lehman will have ``no impact'' on First Gulf's profit and loss, it said today in an e-mailed statement.

Emirates Telecommunications, known as Etisalat, fell 2 percent to 16.85 dirhams. The Arab world's second-largest telephone company has agreed to buy a 45 percent stake in Swan Telecom, which has acquired licenses to offer telephone services in India, for up to $900 million.

Commercial Bank

Commercial Bank of Kuwait declined 1.6 percent to 1,220 fils. The country's second-largest lender by market value set up an investment-banking unit, CBK Capital, with 15 million dinars ($56 million) of equity.

Kuwait Investment Authority said it is committed to investing more than 100 million dinars ($374.6 million) in shares listed on Kuwait's stock exchange. The sovereign wealth fund aims to become a long-term investor in the market because it sees ``opportunities,'' its Managing Director Bader al-Saad told Al Arabiya Television today.

Oman's Muscat Securities Market 30 Index decreased 1.2 percent. The Bahrain All Share Index declined 1.5 percent, while Qatar's Doha Securities Market Index added less than 0.1 percent, bringing the three-day advance to 10 percent. Saudi Arabia's market is closed today for public holiday.

The Qatari market will be closed for the Eid holiday between Sept. 30 and Oct. 2, according to the exchange's Web site.

The following stocks also rose or fell in the region. Stock symbols are in parentheses after company names:

Barwa Real Estate Co. (BRES QD) rose 1.2 percent to 61.6 riyals, bringing the three-day rally to 15 percent. The Qatar- based property developer said its international unit has increased its contribution to the equity of a joint venture hotel project by 2 1/2 times.

Dubai Investments PJSC (DIC UH) dropped 5.4 percent to 2.99 dirhams. The company said it sold a 40 percent stake in its private equity unit M'Sharie LLC for 400 million dirhams ($109 million) to help boost growth.

Emirates Integrated Telecommunications Co. (DU UH) fell 0.8 percent to 4.91 dirhams. The United Arab Emirates' second-biggest mobile-phone company signed an agreement with Zain Saudi Arabia to exempt their subscribers from roaming fees when traveling between the U.A.E. and Saudi Arabia, according to a statement on the Saudi bourse Web site.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.