World stocks continue sharp falls

Global stock markets continue their downwards spiral on fears of further bank losses and a looming global recession.

Stock markets around the world continued their downwards spiral yesterday on fears of further bank losses and a looming global recession. Asian markets led the rout, with the Philippines index falling by 12.3 per cent and the Japanese Nikkei closing at a 26-year low. However, both the Middle Eastern and European markets were also badly hit before Europe's markets recovered on a positive opening on Wall Street.

Currencies around the world also suffered, with only the dollar and yen emerging unscathed. The Group of Seven (G7) industrialised nations issued a statement warning that the strength of the yen was a threat to economic stability. Stocks suffered losses across all Gulf bourses. In an attempt to alleviate the crisis, world leaders called for further measures to shore up the global economy and called on the Gulf for help. Gordon Brown, the British prime minister, said that sovereign wealth funds should be used to help fuel growth in the UK and other countries facing recession.

"My view of sovereign wealth funds is that they want to operate commercially," he said. "They've been put into business, not to gain political power. Oil revenues have been very high and should be recycled in part into non-oil energy sources. That gives the oil countries a hedge against the price of oil." The prime minister said other countries must play a part fighting the slowdown. "This is a global financial recession and we're fighting it every way we know how," he said.The financial turmoil is leading some investors to call for further government intervention. Yesterday Kuwaiti stock traders marched from the floor of the emirate's stock exchange to the ruler's office a kilometre away to demand that the government halt the decline in share prices.

About 50 traders walked to the Seif Palace, where the Kuwaiti cabinet sits, to request a meeting with the emir, Sheikh Sabah Al Ahmad Al Sabah. "This is a big national disaster," said Mohammed al Dosari, a day trader involved in the protest. "We don't want the market to go up. We just want to stop this panic." The emir's head of security told the traders in front of the palace that they would not be meeting the country's head of state.

The Kuwait stock exchange has lost 23 per cent of its value this month on concerns that the global credit crisis may hit banks and listed companies. Gulf Bank, the country's fourth-biggest lender by market value, said some customers had withdrawn funds due to concern over derivative losses. Trading in the bank's shares has been halted until further notice. The Kuwaiti benchmark index dropped 2.2 per cent yesterday to 9,889.3, its lowest since March 11 last year. "Kuwait helps other countries, and we are in crisis and it doesn't help us," said Abdullah al Ajmi, a Kuwaiti day trader. "If the government doesn't intervene the economy will collapse."

Saudi Arabia's stock market, the largest in the Arab world, opened slightly higher but then immediately went into the red, dropping 4.6 per cent. The Tadawul All Shares Index (TASI), which shed about 11 per cent in the past two days, closed at 5,338.68 points, its lowest level since 2004. Dubai's stock markets yesterday also crashed, closing below the 3,000 level for the first time in more than three years.

The Dubai Financial Market's index fell 5.8 per cent and closed at a level not seen since Feb 2005. The index has now lost more than 50 per cent of its value this year. The Abu Dhabi Securities Exchange's index also fell by 2.01 per cent, taking its total loss this year to 27 per cent. Leading losers included First Gulf Bank, Aldar and National Bank of Abu Dhabi. Muscat's exchange fell 7.45 per cent, Doha's 1.46 per cent and Bahrain's was down 2.9 per cent.

"It's a crisis of confidence which is hitting the regional markets," said Sunil Dhall, the vice president at Gulf Baader Capital Markets. "Falling oil prices and the liquidity squeeze are the things which are going to affect places like Dubai and Kuwait." * with agencies and additional reporting by Andrew Foxwell [e-mail]