Global Investment caught up in fallout

Markets Update: Global Investment House has a host of its own problems related to the global financial crisis, but the Kuwaiti investment bank will have to prepare itself amid a gloomier global economic outlook.

Global Investment House (GIH) has a host of problems related to the fallout from the global financial crisis.

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But the Kuwaiti investment bank will have to prepare itself for further turbulence amid an even gloomier economic outlook.

GIH yesterday said third-quarter losses widened to 15.5 million Kuwaiti dinars compared with 11.8m dinars in the same period last year because of fair valuation adjustments on equity assets and portfolio cost of funding. The quarterly loss wiped out 3.3m dinars of operating income generated by its asset management, investment banking and brokerage operations, the company said in a statement to the Kuwait bourse.

Some of Kuwait's almost 100 investment companies defaulted following the credit crisis as the value of their assets collapsed and frozen debt markets prevented them from raising new loans. In September, GIH requested a delay to principle repayments on debt due next month to allow for a renegotiation of the US$1.7 billion debt restructuring plan it agreed in 2009. At the end of September, Global had repaid $232.8m of the total debt amount, the bank said.

Economic growth in Kuwait has been the slowest in the GCC over the past five years, according to IMF data.

GDP expanded an average 2.6 per cent a year, compared with 4.2 per cent in the UAE, 5.7 per cent in Bahrain and 18 per cent in Qatar.

Making matters worse, Kuwait's economy is struggling with "three imbalances" including an overly dominant public sector and a state budget dependent on oil revenue, Sheikh Salem Abdulaziz Al Sabah, the central bank governor, said in July.

The coming days are expected to be as tough for investment banks in the region as they are elsewhere in the world.

Abroad, data published so far has shown the global economy is losing steam.

In Europe, jobless figures are worse than expected, GDP is substantially lower than in August, while the cost of insurance against sovereign default have both increased.