Reply #137: Gulf liquidity offers glimmer of hope [View All]

http://news.yahoo.com/s/ft/20071122/bs_ft/fto112220071213274823

Could Gulf investors be about to ride to the rescue of the US credit markets? Six months ago, that question might have seemed almost laughable. But as the oil price edges inexorably higher - and Western credit markets squirm in pain - the idea is now being quietly voiced behind the scenes at some Western financial groups.

After all, on one side of the world, an increasingly unpleasant liquidity crunch is taking hold. Just look at the stress emerging in the European covered bond sector and the American money markets - not to mention the continued freeze in the world of asset-backed structured credit.

But on the other side of the globe, liquidity is now so abundant that it seems to be growing on trees. Or, more precisely, gushing out of the ground in the form of $100-a-barrel oil, and abundant gas reserves.

So the question preoccupying some of the brightest minds in modern finance is whether there is any way to turn this contrast into a marriage of convenience? Could the $1,000bn-plus cash now swilling around Gulf Sovereign Wealth Funds, say, ever find its way into the subprime world?

Some Gulf financiers are certainly mulling the issue. Earlier this week, Omar bin Sulaiman, governor of the Dubai International Financial Centre, admitted to the FT - with unusual frankness - that teams in the region are "right now looking at opportunities" to grab distressed assets in Europe and the US.

Meanwhile, a flood of Western hedge funds and financial groups are furtively trekking out to the region, trying to raise funds. Some of these discussions have even produced tangible deals: a Dubai investment fund, for example, is now backing one bid for the troubled British lender, Northern Rock. But before such tentative financial flirtation can turn into any widespread matchmaking, at least three serious problems need to be overcome.

/continues...

Odd, how this writer doesn't mention 'Islamic Banking' and the Usury issue, huh?