Kuwait saves bank

FT: "The Kuwait central bank stepped in to support Gulf Bank, which was hit by losses from trading in currency derivatives after the dollar rose, prompting the government to announce it would guarantee local bank deposits."

The dollar has risen.

Wall Street Journal:

The Kuwait intervention is the first bank rescue in the oil-rich Gulf, which until now had seemed relatively immune to the current crisis. It came as local markets across the region continued their steep selloffs. With oil prices down more than 50% from their July highs, the explosive, petroleum-fueled growth of the Gulf now looks suddenly vulnerable at the same time as international and local investors are pulling back sharply.

Kuwaiti investors follow the indicator boards showing the downturn of shares prices at Kuwait Stock Exchange on Sunday.

...And in Dubai, real-estate brokers in the Mideast boomtown said they are seeing signs of price weakness for the first time in years, as financing dries up and speculators bow out of the once red-hot market.... A significant property-market correction in Dubai could crimp government finances, slowing or halting the debt-fueled economic expansion.
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"Given the overriding paternalism of the public sector, it seems unlikely that governments are yet ready to tolerate high-profile bankruptcies or defaults," says Tristan Cooper, vice president for Moody's Investor Services in Dubai.
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The sudden softening could be an early warning of deeper problems for Dubai, which has fueled its recent supercharged growth through debt. Amid today's financial crisis, overseas borrowing and refinancing are much more difficult, raising questions about Dubai's ability to pay back its loans.

Government and private corporations here have invested heavily in the property sector. Fitch Ratings estimates that government-owned or partially government-owned developers control some 50% of new property development due to hit the market in coming years. Meanwhile, banks, many of them partly government-owned themselves, have been lending heavily to developers and investors.

If home prices here tumble, that would further strain revenue and finances for a handful of government-controlled entities increasingly reliant on hard-to-come-by overseas borrowing.
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Analysts have been forecasting a downturn in prices for months. Earlier this month, property consulting firm Colliers International said Dubai property prices rose 16% in the second quarter. That was much slower than the 42% price rise in the first quarter. Regional bank EFG-Hermes said last month that it expects prices to peak next year and fall -- as much as a cumulative 20% -- by 2011.

Bashar Al Natoor, a Fitch analyst in Dubai, warned in a report in July that the fresh supply of new property may exceed demand and weigh on the market starting in 2009. Now, he says, the ramifications of the global financial crisis are also likely to take a toll, as would-be buyers scramble for financing.
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"Nobody wants to buy," says Lillian Gold, a property consultant at Blue Horizon Real Estate in Dubai. "Everyone wants to sell."