Kuwait has asked its investment arm to set up a fund to invest in the bourse to shore up confidence, after investors managed to briefly halt trading following weeks of decline.

"The cabinet decided to assign the Kuwait Investment Authority to set up a long-term investment portfolio, in cooperation with other government institutions, to invest in the Kuwait Stock Exchange," the cabinet said in a statement on Tuesday.

The move aims to support the economy and contain the impact of the global financial crisis and to boost confidence in the local market, the second largest Arab bourse, the cabinet added.

It did not say the size of the fund, but some local newspapers said on Tuesday, in unsourced reports, it would be in billions of dinars.

A central bank-led task team was assigned "to put in place the technical regulations" for the fund, the cabinet said.

On Monday, central bank governor Sheikh Salem Abdul-Aziz Al-Sabah called on the government to ask KIA to swiftly set up the fund to shore up the bourse, which has fallen more than 30 percent this year.

Last month, the sovereign wealth fund KIA, which manages Kuwait's oil-generated assets of at least 72 billion dinars ($265 billion), increased its investments in eight stock funds on the local bourse to support the market.

KIA is a major shareholder in many Kuwaiti companies including heavyweight Mobile Telecommunications Co (Zain).

The bourse halted trading on Thursday due to a court order won by investors seeking emergency measures by the government to protect their holdings and prevent further declines on the sagging bourse.

Trading resumed on Monday after the government won an appeal against the court ruling. - Reuters