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Default Fears Hammer Kuwait Shares for Fifth Day

KUWAIT - Kuwaiti shares declined for a fifth day on concern some financial companies may default on debt, pushing the index to its worst yearly performance since 1998.

Global Investment House KSCC, the investment bank that earlier this month hired HSBC Holdings Plc to help renegotiate loans owed to foreign lenders, dropped the most since Bloomberg started tracking the shares in 2003.

Kipco Asset Management Co. fell for the first time in three days. Kuwait Food Co. also slipped. The Kuwait Stock Exchange Index lost 2.7 per cent to 7,782.6, bringing its fall for the year to 38 per cent.

“The confidence in Kuwaiti financial institutions is much lower than in others in the Gulf,” Mohammed Ali Yasin, the managing director of Shuaa Securities in Dubai, said in a telephone interview. “They are heavily leveraged and some may default, which is putting the financial sector on shaky ground.”

Kuwaiti banks are suffering from the worst global financial crisis since the great depression, with Gulf Bank KSC, Kuwait’s second-biggest bank by assets, in October announcing losses of 375 million dinars ($1.4 billion) from derivatives trading that sparked panic deposit withdrawals.

That pushed the Kuwaiti government to guarantee deposits of all banks.

Global Investment House tumbled 21 per cent to 192 fils, its lowest close since March 2004.

Global has outstanding short-term liabilities of $2.47 billion, according to Bloomberg data compiled from the September 2008 results.

Most of this was incurred for leveraged buyouts.

The bank said on December 4 it sold its 14.7 per cent stake in Bahraini bank BBK at a loss of 18 million dinars ($65 million).