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Tue 30 Dec 2008 07:08 AM

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Credit woes to continue, says senior Middle East trader

Banks in the Gulf set to continue to tighten lending rules during 2009 - EFG Hermes.

Credit in the Gulf will remain scarce in 2009 with banks tightening their lending, a senior trader at Egypt’s largest investment bank has said.

“The availability of credit and the ability to refinance has also been a major story for 2008 and looks set to carry over into 2009 as banks will be much more careful about their lending and exposure to certain markets," Matthew Wakeman, managing director for cash and equity linked trading at EFG Hermes told Arabian Business.

Credit has largely evaporated in the Gulf over the last few months mainly due to a regional liquidity squeeze triggered by foreign funds pulling out after wrongly betting local currencies would be revalued and equity investors fleeing turbulent markets.

As a result, developers are struggling to finance big real estate projects with some being cancelled or delayed.

The fall in oil prices has also prompted a more cautious outlook on future infrastructure projects in the Gulf, Wakeman said.

“The fall in oil prices from highs of nearly $150 down to $40 has been a major reason for negative sentiment in the region and raised questions about infrastructure spending and projects in the region,” he added.

Wakeman predicted a surge in consolidation across all sectors next year as the credit squeeze bites.

“Industry consolidation is a natural and necessary phenomenon in cyclical downturns and companies seek to manage their cost base and maximise returns. Therefore, it is likely that there will be some consolidation but the extent and speed of it is unknown.”

While declining to call the bottom of the market, Wakeman stressed the Gulf was ‘well placed to emerge strongly from the current global downturn’.

EFG-Hermes is currently valued at around $1.16bn and employs 880 people worldwide.

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