RPT-WRAPUP1-Qatar buys banks in morale booster, Gulf shares leap

(Wraps Gulf stories)

By Thomas Atkins

DUBAI, Oct 13 (Reuters) - Qatar launched a $5.3 billion plan to purchase shares of its listed banks on Monday in the most dramatic move to date by Gulf Arab states to shore up confidence in their banks, sending stocks across the region soaring.

The plan comes as the Middle East combats the financial crisis that spread from the West, battering bank stocks and threatening a 5-year economic boom, and is likely to herald more moves by the cash-rich states to fortify their capital defenses.

It also marks an acceleration of moves by sovereign wealth funds -- the state run investment agencies that control trillions of dollars -- to invest at home instead of abroad in the wake of the financial crisis.

In the plan, the Qatar Investment Authority, the Gulf Arab state's sovereign wealth fund, will buy 10-20 percent of banks' listed capital on the Doha bourse based on Sunday's closing share prices, the state news agency said on Monday.

The announcement sent shares soaring in the country's top banks. Financial shares rocketed higher elsewhere in the Gulf, lifting sentiment and broader indices as well, with Qatar's .QSI and Dubai's .DFMGI leading indexes up almost 8 percent.

"People are starting to have confidence in the market," said Adel Nasr, a local brokerage manager at United Securities, in Muscat.

In another sign of relief, the UAE 3-month interbank rate <AEIBOR=> fell to 4.70938 percent from 4.73750 percent a day earlier, perhaps the clearest sign of easing tensions since interbank rates began climbing marching higher in June.