The Saudi stock market rose Sunday for the first time in two weeks after the central bank cut the repurchase (repo) rate by a half percentage point to five percent in a move to free up credit and prevent the Saudi market from being sucked into the global financial crisis. SAMA also reduced from 13 percent to 10 percent the compulsory reserves Saudi commercial banks are asked to maintain on deposits, thus giving them more freedom to lend. The Tadawul All-Shares Index (TASI) finished up 0.34 percent at 5,814.60 points, spurred by the banking and petrochemicals sectors. The TASI had shed almost six percent on the week's opening day Saturday after oil prices dropped below $80 on Friday. The TASI has shed more than 23 percent since the start of last week on concerns from the global financial meltdown. It is still down 47.3 percent on the year. Mohammad Al-Jasser, deputy governor of the Saudi Arabian Monetary Agency (SAMA), the central bank, said the rate cut was made after inflation eased slightly in August to 10.9 percent compared to 11.1 percent in July. The consumer price index (CPI) reached 117.9 points in August compared to 106.3 points a year earlier, SAMA reported. The increase was mainly spurred by an 18.5 percent year-on-year rise in rents and the water index and a 15.8 percent increase in foodstuffs and beverages. The index of other commodities and services increased by 13.4 percent while health care, transportation and education rose slightly. Last month, SAMA Governor Hamad al-Sayari said inflation represented the biggest challenge to the Kingdom. He blamed inflation on an increase in shipping costs and insurance premiums around the world. UAE protects bank deposits Elsewhere in the Gulf, the United Arab Emirates said Sunday it will guarantee deposits and savings in local banks to protect depositors in face of the global financial turmoil, state WAM news agency reported. The UAE cabinet also decided to ensure that no local bank will be exposed to credits risks and to guarantee inter-bank lending among all banks operating in the country, WAM said. The UAE, the first Gulf country to take drastic measures to protect depositors from the global financial meltdown, will also pump the necessary liquidity into the banking system if required, WAM said. The UAE Central Bank chief said the country's financial institutions remain strong.
