Saudis have been buying heavily in US mortgages and real estate, as well as other investments. US economic problems have directly affected Saudi markets because of that. Also a world wide depression or even recession means less oil being sold, and the Saudi riches are a direct result of oil. When Saudi Arabia and other Islamic nations suffer from their ties to Western markets, the Islamic world will blame the West for their woes, and become even more attached to the idea of a world wide Islamic caliphate. Likewise the weakening of the Gulf States will mean the strengthening of other ambitious states like Turkey and Iran. Iran is in an economic crisis of its own, due to the ayatollas’ obsession with the Islamic caliphate and building nuclear weapons and missiles, and generally deplorable economic and social policies. They are being bolstered economically and militarily by Europe and Russia, and may hobble along until they can be brought down after trying to wreak havoc on the world…or they may collapse before that can happen. It remains to be seen who will be left standing on two feet among the Mideast nations, but at this point it looks like Turkey will come out on top.
Arab News – JEDDAH: Many Saudi and Gulf investors suffered heavy losses after some American and Gulf banks used their funds to buy risky mortgage bonds just before the subprime mortgage crisis erupted in the US.
At least 35 Saudi investors are facing semi-bankruptcy as a result of purchasing US mortgage bonds, Al-Riyadh Arabic daily said quoting business sources.
However, the paper said it was not yet clear how much would be the total losses caused by the US economic crisis to Gulf banks. It also said that some Gulf banks had played the role of intermediaries for US banks and companies to sell high-risk mortgage bonds to Gulf investors in lieu of attractive commissions.
Saudi Arabian Monetary Agency (SAMA), the Kingdoms central bank, is silent about the losses suffered by commercial banks in the country, the paper said.
Fadl Saad Al-Bouainain, a Saudi economist, said many Gulf banks and investment companies had reached deals to purchase risky US bonds at the expense of their Saudi and other Gulf clients to realize their vested interests. He emphasized the important role being played by SAMA to protect local banks without being affected by regional and international crises.
Abdul Aziz Al-Owaishek, an economist, wondered why the US crisis had greater effect on Saudi and other Gulf capital markets than American markets, especially their economies have made substantial growth.
The Saudi stock market lost 30 percent of its value in 2008 while Dow Jones lost only 22 percent, he pointed out.
Ihsan Buhulaiga, a member of the Shoura Council, said the Saudi stock market has already been hit by the global crisis, adding that the Saudi banks are currently suffering from a lack of liquidity. Gulf economies are liable to foreign influence, Buhulaiga said, adding that government investments abroad and banks were the worst affected. Well know the extend of losses with the passage of time.
He expected a fall in oil demand as a result of global economic recession.
No Gulf countries have announced their link with US mortgage crisis, said Saud Al-Jelaidan, another economist.
I believe that most financial assets of Saudi banks are situated in local markets. There will be some shortages in liquidity as a result of SAMA measures to tackle inflation, he said.
Meanwhile, economists predicted that the Saudi stock market index would decline further as a result of the effect of global economic crisis. They said the Eid Al-Fitr holidays had saved stock dealers from major losses.
