Thursday, October 26, 2006

IMF asks UAE to stop propping up stocks :: Gulf News

Quote:
Some analysts said government-backed funds and institutions bought shares during the decline to help the market and restore investor confidence.

"That [a government intervention] would have created a real moral hazard, since investors would then expect the government to intervene each time the markets fell," Khan told Gulf News in an interview. "It is the investors who must bear the risk of pouring money into stock markets," he added.
Via The Business of America is Business.

Related:
High inflation and the possibility of defaults on the expanding personal and home loan portfolios of banks are key risks facing the UAE economy, the National Bank of Dubai said yesterday.

In a UAE Focus report, the country's fourth biggest bank by assets, estimated domestic inflation at between 12 and 15 per cent in 2006 and said it was the single largest risk to the UAE economy.

The possibility of defaults on personal and home loan repayments to banks was also a threat, it added.

Central Bank figures show personal loans in the UAE surged 64 per cent in 2005 to Dh97.7 billion and by a further 37 per cent in the first quarter of 2006 to Dh133.5 billion.

Personal loans as a percentage of total credit had risen to 27.7 per cent in 2005 from 24.1 per cent in 2004.

NBD said loans disbursed by several UAE banks were beyond healthy levels and it was worried about the lenient lending policies of many banks. "Given that at least some part of the wealth of the middle class could have been battered by the bearish equity market, the customer's ability to service such loans is a risk in the current inflationary environment," the report said.

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