( CNN ) -- The Middle East may be awash with cash , but that did n't stop the region 's stock markets being swept up in the global gloom that engulfed investors around the world this week . Traders at the Kuwait Stock Exchange in happier times -- this week Kuwait 's main index fell four percent . The region 's share markets tumbled in a Mexican wave of selling that started in the U.S. and quickly spread to Asia and Europe . In the Middle East , the Saudi stock market suffered some of the biggest falls ; dropping ten percent in Tuesday 's trade , its largest one-day slump on record . `` It highlights the extent to which international investors have really come into the market during the course of 2007 , '' says Anais Faraj , Nomura 's Executive Director of Investment Banking for the Middle East . `` What you 're seeing now is that international investors who might have lost money in the sell-off in the U.S. and Europe cashing in where they 've made some profits to staunch their wounds . '' On Tuesday , the U.S. Federal Reserve shocked the market with its own measure to stem the sell-off . It cut interest rates by 75 percentage points to 3.5 percent , its biggest single cut in since October 1984 , and the first between scheduled meetings since the 9/11 attacks in 2001 . And it worked . Markets in the Middle East clawed back lost ground , but it also forced the hand of the region 's central bankers whose currencies are pegged to the dollar . Saudi Arabia , the UAE , Qatar , and Bahrain all cut key interest rates in tandem with the U.S. , and Oman was expected to follow . Despite having dropped its peg with the dollar last May , Kuwait also cut its benchmark interest rate for the first time in eighteen months . Kuwait Central Bank Governor Sheikh Salem Abdul-Aziz al-Sabah is quoted as saying : `` The measure aims at reducing any negative impact that could arise from unjustified high margins between the interest rate on the dinar and international currencies . '' While it may solve one problem , it only exacerbates another : Inflation . `` We are seeing a policy from the Fed , which is fully appropriate for the U.S. economy , being imported into the Gulf , '' says Marios Maratheftis , Regional Head of Research for Middle East for Standard Chartered . `` Unfortunately what is good for the U.S. is not good for the Gulf economy , '' he says . `` Inflation is already high and it 's already a concern , but something that concerns me the most is not so much the present inflation , it 's the inflation expectations we 're seeing . '' He says the Gulf governments need to act , and if they 're not prepared to drop their peg with the dollar , they must consider revaluing their currencies . `` The choice to proceed with a one-off valuation of the currencies would help to drain some of the liquidity out of the system . It would send a message to the economy participants in the region that there is a response to the inflationary pressures . '' While this week 's turmoil in the world financial markets may have been a curse for the Gulf economies , it could also be viewed as a potential blessing for the region 's sovereign wealth funds ( SWFs ) . As little as two weeks ago , they were in the market buying shares in leading U.S. banks Citigroup and Merrill Lynch . For them , the sell-off has created more buying opportunities . `` Where there is more risk and less certainty and less leverage available these guys are going to come in and support the stock market . From what we 've seen , they 're certainly ready to go out shopping , '' says Anais Faraj from Nomura . The chief of the Kuwait Investment Authority confirmed as much on the sidelines of the World Economic Forum in Davos , Switzerland . Bader Al Sa'ad is reported to have said he viewed the sell-off as a `` pure investment opportunity '' , citing the financial and real estate sectors as areas of interest . After much speculation , Saudi Arabia has confirmed it is considering launching its first sovereign wealth fund , a $ 6 billion investment pot accrued during the oil boom . However , the Vice Governor of the Kingdom 's Central Bank Mohammed Al-Jasser is reported to have said Saudi Arabia `` can live without one '' if there 's `` endless debate about abuses . '' Read more about calls for greater SWF transparency . Marios Maratheftis from Standard Chartered says the flow of funds from the Gulf to the West will help to correct the current imbalance in the global economy . `` There 's a shift of wealth . Asia and the Middle East are becoming richer and more important global powers . It 's a fact and it 's happening , '' he says . `` The surplus countries need to recycle their income into the deficit countries . These flows are being translated into the action of the sovereign wealth funds . In the current global environment it 's very natural for sovereign wealth funds from the East to be looking at investing in the West . '' E-mail to a friend .
Mideast indices go up in global stock sell - off as foreign investors bail out . US central bankers , lead from U.S. Federal Reserve , cut interest rates . Sell - off expected to increase buying opportunities for sovereign wealth funds . Maratheftis : Flow of funds will help correct current global imbalance .