Shuaa Capital will perform badly this year if share prices continue to fall, a senior official has admitted.
"I think our financial situation is solid and we have good liquidity estimated at $100 million," CEO Iyad Duwaji said during an interview with Al Arabiya TV channel. "This liquidity is sufficient to face our commitments," he said.
But he added: "Our results during the year will be good if we have a return of eight per cent on investments, while if the current situation continues and investments continue to fall our position will be bad."
Duwaji said the revenues generated from services, fees and commissions remained good.
When asked about the measures Shuaa has taken in response to the large losses it suffered as a result of the falling value of its investment portfolio, he replied: "We concentrate now more on budget management than profit and loss management. We started in September the revision of spending to rationalise it. We merged some units to reduce expenditure, as spending management will be a major issue in the next phase.
"The biggest fall in the markets happened in October and November 2008. The fall was quick to the extent that taking a decision to sell the shares or retain them became very difficult, especially as the shares' market prices are much less than their real and book values.
"Most listed companies in GCC states registered good profits in 2008. But the market value of their shares is much less than their nominal and book value. The fall in prices is attributed mainly to the shortage of liquidity. As long as the market continues to suffer from the shortage of liquidity, the prices of shares will continue to be passively affected."
Duwaji urged the region's governments to intervene quickly and in a major way to tackle the impact of the global financial crisis.
"World governments do daily movements to help banking and financial sectors affected by the crisis. However, we notice the intervention in the Gulf is slow. Speed represents a vital factor in that regard."
He said the slowing of the flow of credit from international banks had affected the region's banks which, in turn, restricted credit not only through the stoppage of loans but also through the cancellation of facilities that were provided previously.
That affected different economic sectors, especially real estate and stocks.
More equity needed to be injected into the banks to tackle the effects of the financial crisis.
Shuaa, which posted net loss of Dh948.5 million ($258.2m) for the 2008 financial year due to write-downs on investments, has been severely impacted by a sharp fall in asset prices.
"The rules of the game have changed," said Duwaji. "It is not a matter of net profit but managing liquidity," he added.