Kuwait, Saudi bourse down on war fears

The Gulf's two largest stock markets ended the week in negative territory as war worries caught up with both markets.

In Kuwait the Kuwait Stock Exchange index fell by 5.8% to close at 1,934.8 points. This large drop was partly explained by the sudden withdrawal by the government of the National Real Estate firm's license to manage and operate the free trade zone, and the suspension of its shares.

Another local dispute surrounded the election of a new board for the Bank of Kuwait and the Middle East which hit shares in Kuwait Projects which is one of the two main groups struggling to control the bank.

But traders said the market was really looking for any excuse to mark down shares. They said confidence had been rattled by government comments about the possibility of chemical attacks from Iraq in the event of hostilities with the United States.

The KSE lost 10.7% of its value in the third quarter of this year, but is still 13% up so far in 2002. Brokers said a strong bounce back would follow any resolution of the US-Iraq situation, as liquidity remains very high.

Next door in Saudi Arabia shares lost ground for a second week in a row, and the Tadawul All-Shares Index closed 11 points lower at 2,646.59. Again war fears led the market lower, although the death of a German national in a bomb blast in Riyadh last Sunday appeared to have little impact.

These are nervous times for Gulf stock markets, but oil revenues are rising strongly, and boosting local liquidity which will underpin valuations.