Gulf's four-year oil boom brings $300bn wall of cash to markets

Petrodollars could buy developing world's debt
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The Independent Online

Analysis by HSBC, which has substantial banking interests in the Middle East, indicates that this "Gulf liquidity" is behind booms on the Egyptian and Turkish stock markets, as well as in Lebanese property, and is supporting Western equity markets and US national debt.

According to David Lubin, an economist at HSBC, the wall of cash is being created by high oil prices but the petrodollars are not being recycled the way they were in the 1970s, when Middle Eastern money was largely deposited in Western banks, which lent the money on.

This time, the money is being invested directly. Mr Lubin points out that $300bn would buy the entire outstanding debt of developing countries, or 7 per cent of US Treasury bonds held by the public.

Where the money is going is hard to tell, as few countries collect data in enough detail or with enough accuracy. For example, if a Gulf investor buys US shares through a London investment bank, it is recorded as a UK purchase by the US authorities.

The opposition to the purchase of P&O by Dubai's DP World, thanks to P&O's ownership of five US container ports, is expected to have a big effect on where the money is invested.