Cooperation Council (GCC) countries' stock markets lost more than $16 billion in the past month of July, reaching a loss of $28 billion in the first half of the fiscal year 2011, Kuwait Asset Management Company (KAMCO) report said Wednesday. The report added that each GCC stock market has its own defining factors at play. For example, lack of liquidity in the Kuwait Stock Exchange (KSE) and the investors' anticipation in a new bourse legislative and organizational body led to a state of hiatus in the UAE markets. Things were made worse by the decision of raising the US debt ceiling to $14.3 trillion, which shook up the US dollar against major currencies and also affected the US sovereign debt since many countries have investments within the US treasury bonds and the US debt. GCC markets loss in value so far into 2011 reached $44 billion. The biggest loss was suffered by the Kuwaiti market, which shed $23 billion, while the Saudi market lost $13.8 billion to reach $340 billion of its market value. Losses were much less in the UAE and Qatar markets, which came to a combined $3 billion. Omani and Bahraini bourses suffered the least by $2.5 billion and $1.7 billion, respectively. GCC markets are not isolated by the growth and wealth in the region and rely on the global system adequately functioning. "Market sentiment will see an impact, regional investors look attentively at the US markets and take their cues from them. The more fundamental impact is the result of any concrete US fiscal cutbacks that seem unavoidable: If government spending is cut, the US economy will experience a continued drag for which the private sector cannot compensate. Therefore, we may expect anemic growth rates, continued high unemployment, and subdued demand for everything from cars to air travel to, importantly, oil," said Samer Sohl, managing director of Amwal Asset Management. In addition, there is a direct and unavoidable connection between the GCC and the US through the dollar, which has been losing ground against global currencies. "There's a deep loss of confidence in the US and the dollar. For decades, the Gulf relied on the strength and stability of the US economy in more ways than one: Pegging currencies to the dollar, selling oil denominated in dollars, investing sovereign wealth in US paper. Now, it doesn't look so stable and these governments can't suddenly unwind investment positions and policies that have been in place for decades," said Omar Abdullah, executive director at AT Capital Management.
