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Economy worries hit Gulf shares

26 October 08 17:05 GMT

Shares in the oil-rich Gulf region have fallen back as investors worried about the impact of the global economic downturn on the region.

Kuwait said legislation to guarantee deposits held in its banks would be introduced, prompting concerns about the state of financial institutions.

It followed Kuwait's second largest lender, Gulf Bank, saying it had made losses on derivatives trading.

And Saudi Arabia said it was making cash available to low-income citizens.

The plan to put 10bn riyals ($2.7bn; £1.7bn) into the Saudi Credit Bank for interest-free loans to help people tackle financial difficulties intensified fears that the global financial crisis was extending to the Gulf region.

Oil factor

Kuwait's government said it was forming a task force to handle the impact of the global financial crisis.

Share prices on the Kuwait Stock Exchange - where traders had held another demonstration to urge more support for the financial sector - fell 3.5%.

Gulf Bank shares were suspended after its announcement, though the central bank said it "backs the bank and fully guarantees its deposits".

Dubai's main index lost 4.8% while the Saudi market, the largest stock exchange in the region, had fallen almost 4% having lost close to 9% on Saturday - the first day of its trading week.

Investors in the region have also been concerned about falling oil prices.

Despite Opec's efforts to steady prices by cutting output by 1.5 million barrels a day, US light sweet crude fell $3.69 to $64.15 on Friday while London Brent crude dropped $3.87 to $62.07.

In other developments:

Alternative investments

Global money markets have showed renewed signs of stress, despite the billions of dollars that central banks and governments have pumped into the markets in recent weeks.

Investors worldwide are worried about falling share prices and the possibility of companies defaulting on their debts.

As a result, they have been selling shares in markets across the globe and switching to less risky forms of investments, such as government securities.

On Friday, the Dow Jones Industrial Average closed 3.6% down having gone more than 5% lower in early trading while the Nasdaq index finished 3.2% down.

On European markets, London closed 5% lower, Frankfurt slid more than 5% and Paris was down more than 3.5%.

Asian shares tumbled, with Tokyo down 9.6%, Seoul plunging 10.6% and Hong Kong falling 8.3%. In Latin America, Brazil's main market fell 7% .

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