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Saturday, 31 January 2009

Norway oil fund expels Textron, Barrick Gold

Norway has shut 27 companies out of the fund for ethical reasons, including nine producers of cluster munitions.

OSLO, Jan 30 (Thomson IM) - Norway's $300 billion plus sovereign wealth fund has excluded U.S. weapons producer Textron Inc and Canadian mining group Barrick Gold Corp for ethical reasons.

The finance ministry said on Friday Textron was ejected from the fund, one of the world's biggest investors, because it produced cluster munitions.

'We cannot participate in the funding of this type of production,' Finance Minister Kristin Halvorsen said in a statement.

She said Barrick Gold's exclusion was 'based on the assessment that investing in the company entails an unacceptable risk of the fund contributing to serious environmental damage.'

The Government Pension Fund -- Global, which held 1.25 billion Norwegian crowns ($184.7 million) worth of Barrick Gold stock at the end of July 2008 and 249 million crowns worth of Textron stock at the end of October, has divested its holdings in both companies, the ministry said.

The companies could not be reached for comment.

So far Norway has shut 27 companies out of the fund for ethical reasons, including nine producers of cluster munitions, but also landmine and nuclear arms manufacturers and groups that its ethics council has blamed for damaging the environment or abusing human rights or worker rights.

In December 2008, Norway hosted a conference that agreed a new international ban on cluster munitions, a type of weapon blamed for tens of thousands of civilian casualties around the world in conflicts from Vietnam to Afghanistan.

'The company (Textron) produces cluster weapons, which are banned pursuant to the Convention on Cluster Munitions,' Halvorsen said in the statement.

Barrick, the world's largest gold miner, joins South Africa's DRD Gold, India-focused Vedanta Resources and U.S. group Freeport McMorRan among miners removed from Norway's investment fund for environmental reasons.

The ethics council based its recommendation to exclude Barrick on an investigation of its activities at the Porgera mine in Papua New Guinea, the finance ministry said.

'In the opinion of the Council, the way this mine is run provides sufficient basis for recommending exclusion,' the ministry said.

(Reporting by John Acher and Wojciech Moskwa; Editing by David Cowell) ($1=6.768 Norwegian Crown) Keywords: NORWAY OILFUND/

12 cheque offers signal Dubai rental market shift

A new era has begun in the Dubai rental property market with a number of landlords offering monthly rent payments as bank lending tightens and the real estate market cools, Arabian Business can reveal.

From being a one-cheque culture just six months ago, the emirate's landlords are starting to offer 12 cheque payment schemes to tenants in a bid to fill accommodation.

With more properties coming onto the market as job losses mount and tenants downsize amid the global crisis, landlords are increasingly showing more flexibility, keen to secure rental income, it has emerged.

Laws not sufficient for foreign capital

Arab investment laws are still not attractive enough to foreign capital as they include many obstacles and do not provide enough protection to investors, according to the Arab League's main financial and investment institution.

Despite a sharp increase in foreign capital flow into some Arab nations over the past few years, regional countries still impose restrictions and some of their governments do not respect agreements signed with the investors, the Inter-Arab Investment Guarantee Corporation (IAIGC) said.

"There are too many obstacles for foreign investment and inter-Arab investment in the region. They include the absence of a unified law to regulate investment in member states and failure of some governments to comply with the agreements they sign with the investors," said Fahd bin Rashid Al Ibrahim, IAIGC Director.

Friday, 30 January 2009

Jupiter's Shaftan sees Russian tide turning

Government stimulus, a more stable rouble and an oil price which surely cannot fall much further are all factors which lead Jupiter's Elena Shaftan to believe Russia is once again becoming an attractive market.

Shaftan, who runs the Jupiter Emerging European Opportunities, New Europe and Emerging Euro Select funds, thinks the 'greater part' of the adjustments in the oil price and the rouble have now been played out and genuine value can be found in the Russian market.

'It was important and necessary for the rouble to devalue in order to relieve pressure on exporters and to ensure the economy remains competitive against other countries that have also devalued their currencies, such as Poland, Ukraine, Romania, and many of Russia's other trading partners including the UK,' Shaftan says. 'This is particularly important given the extent of the fall in the price of oil - Russia's main export commodity.'

Following a 21% decline in the rouble's value versus a basket of commodities, the Moscow government has said it is at the end of its devaluation process for now.

'A more stable rouble will remove the incentive for companies to hoard foreign currency in the expectation of profiting from the devaluation, which has been a contributing factor to the recent slowdown in economic activity. It will also enable the government’s proposed liquidity injection of over $200bn to flow into the Russian economy rather than be diverted into foreign currency speculation,' she says.

Considering the price of oil has plummeted in the last seven months from $147 a barrel to $47a barrel, Shaftan believes it can not decline much further in the medium term. However, Shaftan warns that Russia is braced for a raft of disappointing economic figures to be released shortly.

'Volatility may continue in the short term as macro data and corporate results for Q4 2008 and Q1 2009 are likely to be poor,' she says. 'Russian industrial production, for example, fell 10.3% year on year in December, and the global economic outlook for the next few quarters remains bleak.

'However, in the medium term, the beneficial effects of government stimulus and a more competitively priced currency will start to be felt. In the meantime, we believe much of the short term bad news is discounted through extremely low valuations, with the Russian market trading on just 3x 2009 price to earnings (p/e) even after significant earnings downgrades.'

One of her favourite countries in eastern Europe is currently Poland, which has proved to be resilient despite the eurozone's woes.

'Poland continues to grow despite a sharp slowdown in the eurozone, belying the argument that all the growth in region over the past decade has been linked purely to western European growth,' she says. 'We expect that domestic consumption, driven by wage growth and cuts in income taxes, will help Poland to maintain positive growth rates in 2009. Meanwhile, current account and fiscal deficits are manageable and public debt is relatively low.'

Despite the dramatic market falls seen in the past year in Eastern Europe, Shaftan's long term performance remains positive. In Citywire's pan-European fund manager rankings for the emerging Europe sector, she is ranked 8/29 over five years having returned 26.77%, compared to the average manager return of 13.66%.

Approach Russia with great caution

Vladimir Putin, the Russian prime minister, does not make it easy to grasp the barbed olive branch that he may be trying to offer.

Speaking at the Davos gathering of world leaders, he called for global co-operation in response to the global economic crisis. And he made the not unhelpful, though hardly original, suggestion that “excessive dependence” on the US dollar as the single reserve currency was “dangerous for the global economy”.

But the message came loaded with so much anti-US bile, with Mr Putin crowing over the US’s role in causing the crisis, that he did nothing to contribute to the trust on which the co-operation that he says he seeks must be built.

Where the Financial Gurus Are Putting Their Own Money

In times of market strife, financial gurus often tell investors to think long-term and stay the course. Some of them even put their own money where their mouth is.

A sampling of high-profile industry veterans, academics and brokerage-firm chiefs reveals that many are hanging on to holdings battered by last year's market slide and busily hunting down new opportunities, particularly among bonds and beaten-down value stocks. Some are snapping up municipal bonds, inflation-indexed securities and steady-Eddie dividend-paying stocks.

And they're generally upbeat about the prospects for long-term retirement savers.

"I think this is a marvelous time to be investing," says Rob Arnott, the 54-year-old chairman of Research Affiliates LLC, an investment-management firm in Newport Beach, Calif. "There are more interesting opportunities out there now than any of today's investors have ever seen."

NBK sets example on Madoff reimbursements

Banks and money managers across Europe and the US are coming under increasing pressure to compensate clients who lost money in the alleged fraud by Bernard Madoff, the US broker.

The National Bank of Kuwait has returned $50m to clients, while Spain’s Santander has offered to swap preference shares in the bank for the principal its private clients invested in funds that sent money to Mr Madoff. The 70-year-old allegedly confessed to running a $50bn Ponzi scheme and at least 20 lawsuits have been filed around the world in connection with the case.

Sources familiar with Union Bancaire Privée said the Swiss bank was analysing the legal and financial implications of offering compensation for the €700m ($907m) of client money it put into Madoff feeder funds, including one it ran itself. The investors include institutional and private clients.

Emirate on the ebb

At the height of Dubai’s recent boom, thousands of foreigners were arriving every day to seek their fortunes in this Gulf city of boundless ambition. Now, vehicles in the car park outside the airport gather dust as redundant expatriates abandon their wheels, fleeing home before they default on automotive loans and risk imprisonment.

Officials in the emirate were until the last few months unruffled by the credit crisis and a dramatic fall in oil prices, arguing that the services-led economy had not been affected. Indeed, they maintained, it would provide a safe haven for bankers and western companies suffering from the global downturn.

Dubai’s six-year boom, which rode the regional petrodollar wave, was fuelled by the city’s infrastructure and quality of life rather than by oil itself, of which the emirate has little. But the very openness of an economy built on finance and property investment now leaves it ill-placed to weather the storms raging elsewhere.

UAE regulator demands greater transparency

The market regulator of the United Arab Emirates called on Thursday for increased disclosure ahead of the companies reporting season, asking for extra information on companies’ real estate and financial positions.

The call for greater transparency comes as some regional companies have defaulted on debts and as ratings agencies downgrade some of the Gulf’s most respected companies on fears that the declining trading environment will hit profitability.

Markets across the Arab world crashed last year amid the global financial turmoil and have continued their downward spiral this year, with the MSCI Arabian market index declining a further 9.7 per cent in the year to date.

Etisalat profits rise 18%

Etisalat remained both profitable and growing in the last quarter of last year, largely weathering the global economic storm that reached the region in the same period.
But in a rare occurrence, the company yesterday reported full-year results that fell far below the expectations of analysts.

The national telecommunications company announced a full-year profit of Dh8.67 billion (US$2.36bn) yesterday, up 18 per cent on the previous year but well under the Dh9.46bn consensus estimate of telecoms analysts.

In 2007, Etisalat grew its yearly profit by 33 per cent. Analysts attributed the lower-than-expected yearly result to an unspecified downward adjustment made in the fourth quarter.

Abu Dhabi developers feel the heat

The two biggest property developers in Abu Dhabi, Sorouh Real Estate and Aldar Properties, have seen profits decline notably in the fourth quarter, underscoring that the effects of the global credit crisis have begun to impact on real estate in the emirate.
Since the end of summer, layoffs and delays have become the industry standard in the Dubai property sector, but Abu Dhabi was seen as largely protected from the turmoil. Now, with sales slowing to a near standstill and property prices declining, developers are taking a closer look at their plans and focusing on construction.

“Both developers now see that the important thing is to have the resources to execute in today’s environment,” said Sana Kapadia, an analyst at EFG-Hermes. “You probably won’t hear about them selling much in 2009, but they will continue to recognise revenue as they deliver units.”

Sorouh, the second-largest property developer in Abu Dhabi, yesterday said its quarterly profits fell 94 per cent to Dh46 million (US$12.5m) in the final three months of last year. The announcement came a day after Aldar, the largest developer in the emirate, said its fourth-quarter profits had dropped 89 per cent to Dh84m, after taking a strategic decision to move its focus away from selling.

DFM hits its lowest level since June 2004

Jittery retail investors are causing heightened volatility on Gulf exchanges, say analysts, as sentiments remain low and focused on short-term prospects. The Dubai Financial Market (DFM), the world’s third worst-performing market last year, fell 1.05 per cent to 1,520.24, its lowest close since June 2004. The Abu Dhabi Securities Exchange (ADX) declined 0.2 per cent to a value of 2,255.85.

“Volatility is in effect being created by the retail investors. Institutional participation has shrunk in the past six months, so the market is now mainly driven by [retail investors] who typically have short-term plans,” said Amro Diab, the head of GCC institutional sales at EFG Hermes. “They hold shares for short periods, an hour or a week, and when the stock rebounds they quickly offload.”

Property stocks led declines as analysts maintained forecasts that property prices in the UAE this year would continue to soften. A report by HSBC Holdings this week stated that Dubai property prices had dropped 23 per cent from a September peak.

Derivatives trading boost on NASDAQ Dubai

NASDAQ Dubai is moving to boost liquidity on its derivatives trading market in a follow-up to its introduction of the UAE’s first exchange-traded futures in November.

The exchange is looking to introduce its first options in the first quarter, on the FTSE NASDAQ Dubai UAE 20 Index, and on single stocks later on. In addition, it is putting in place a trading desk to assist members in making orders where they lack the resources, expertise or time to trade the derivatives themselves.

Besides increasing liquidity, the exchange, which has suffered from thin trading from even before the financial crisis battered markets, is eager to profit from the worldwide flight to safety. Investors and derivative houses are reducing over-the-counter (OTC) activities and leaving it to stock exchanges to trade such products.

Where have all the dollars gone?

Ten years ago, just before the birth of our first child, my wife decided to set up a school-fee fund for the little brute. Every month, £100 (Dh524) went out of our joint account. As we watched stock markets around the world soar and property prices double just about everywhere, we were reassured that even the most stupid financial adviser would have been able to do something impressive with our savings.

This week the policy matured. We threw aside the brochures from Marlborough and Roedean, and scanned the letter with some anticipation.

Even a personal finance editor could work out how much we had paid into the fund: 12 months x £100 equals £1,200. Multiply £1,200 x 10 and you get £12,000 (Dh62,290). That surely would be the minimum we could expect: we would have earned that by putting it under the mattress.

Fewer developers left standing

The number of property developers registered in Dubai has fallen by about 40 per cent in two months, according to the Real Estate Regulatory Agency (RERA).

Some firms were weeded out as part of a “clean-up” by the agency because they were unlikely to start their projects, while others fell victim to the economic crisis.

Marwan bin Ghalita, the chief executive of RERA, said there were now about 500 developers registered in Dubai, compared with more than 800 in November.

Tamweel restructuring

Dubai: Mortgage lender, Tamweel PJSC - a company which is currently under merger process with Amlak - is restructuring its business plans and organisational structure that involves a reduction of 57 staff members from its workforce, the company said in a statement.

The reason given was to enable the company to be in a stronger position to meet its objectives in the challenging environment that financial institutions are facing at present.

Wasim Saifi, group chief executive of Tamweel, said the job cuts were necessary in order for the company to function more efficiently.

Thursday, 29 January 2009

Gulf growth seen outpacing other emerging markets

(Please visit this link once finished reading below.)

The region is under-represented in global portfolios, mainly because just three MENA countries belong to the MSCI Emerging Markets benchmark index.

MANNHEIM, Germany, Jan 28 (Thomson IM) - Economic and corporate earnings growth in the Gulf region looks set to outpace other emerging markets, making Gulf stocks attractive, two equities fund managers said on Wednesday.

'The Gulf's macro (economic) outlook is positive, especially compared to other emerging markets,' said Birgit Ebner, manager of Frankfurt Trust Asset Management's 45 million euro ($59.5 million) Emerging Arabia fund.

'We are convinced about the GCC (Gulf Cooperation Council) region's growth prospects and corporate profit prospects,' Ebner told a mutual funds conference in Germany.

'Investing in equities only makes sense if you believe in growth,' said Joe Kawakabani, manager of Franklin Templeton's $40 million MENA fund, which invests in stocks of Middle East and North African (MENA) companies.

The market value of MENA equities at about $780 billion is on a par with India and higher than South Korea, he said, noting that the region is under-represented in global portfolios, mainly because just three MENA countries -- Morocco, Egypt and Jordan -- belong to the MSCI Emerging Markets benchmark index.

The Gulf Cooperation Council countries -- Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman -- would continue their extensive government-financed infrastructure projects, Kawakabani, who is based in Dubai, told the conference.

'Government spending is the main growth driver. That is good in the current environment,' he said.

Growth in the GCC area would slow as a result of the global recession but remain clearly positive. Contrary to many other nations, the GCC countries have no financing problems thanks to hydrocarbon revenue piled up over the past few years, he said.


Kawakabani said he favours a value-based investment strategy, which currently focuses on defensives such as infrastructure, fertilisers and selected home-market focused consumer goods companies.

Ebner, too, said infrastructure spending would underpin GCC growth, estimated by the International Monetary Fund at 3.5 percent this year. She forecast 15 percent earnings growth for GCC companies in 2009. In most countries elsewhere, analysts expect profits to shrink.

Both fund managers pointed to extremely low valuations -- around 7 times projected 2009 earnings -- for Gulf stocks after last year's rout, which saw the MSCI Arabia index fall just over 50 percent, underperforming world equities, which lost just over 40 percent.

Like most emerging market funds, both Franklin Templeton's MENA fund and Frankfurt Trust's Emerging Arabia fund suffered net outflows during the global financial markets turmoil sparked by the mid-September collapse of U.S. investment bank Lehman Brothers.

Franklin Templeton and its Gulf partner Algebra Capital saw net outflows of $200 million, bringing assets under management in the region down to 'around $300-400 million,' Kawakabani said.

The Emerging Arabia fund shrivelled to 45 million euros from 400 million euros amid the stampede, which saw investors withdraw an estimated total of $50 billion from emerging markets funds worldwide, Ebner said.

'We had to sell (stocks held by the fund) to meet redemptions,' she said. 'But it has stopped, we have no outflows now. And investors are still interested in emerging markets.'

Ebner said she expects Saudi Arabia to open up its stock market for foreign investors 'in the foreseeable future' and Kawakabani said there was talk of Kuwait, Qatar and United Arab Emirates being included in the MSCI Emerging Markets index.

Eastern Europe

It’s grim out east. Emerging Europe’s unravelling economic situation this week prompted the European Bank for Reconstruction and Development to downgrade its 2009 growth forecast for its 30 countries of operation from 2.5 per cent to 0.1 per cent. Five countries, it believes, will experience recessions; Ukraine and Latvia could contract by 5 per cent. Social unrest is surfacing in several capitals.

The risk is that better-off western Europeans abandon their eastern neighbours to their fate. Already Greece has cautioned its banks against transferring funds from a €28bn support package to Balkan subsidiaries because of fears of financial turmoil. Such disengagement would be a historic mistake. Certainly, many east European countries made errors, going on credit binges fuelled by foreign currency borrowing and running up yawning current account deficits. They are suffering now, however, in large part because of their integration with the international economy. Nowhere is integration greater than in financial services: large chunks of east Europe’s banks are owned by foreign groups.

Hedge funds offers to price in gold

A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money.

Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros.

The move follows a surge in investor demand for small gold bars and coins held by individuals and gold-backed exchange-traded funds that are holding a record amount of bullion.

Saudi Arabia to ease regulations

As Saudi Arabia competes for foreign direct investment during the global slowdown, the kingdom has committed itself to easing business regulation and facilitating investment in energy-intensive industries this year, a top official said.

Amr al-Dabbagh, governor of the Saudi Arabia General Investment Agency, told the Financial Times earlier this week that new regulatory and procedural reforms are intended to reduce the time and capital needed to start a business. The changes form part of a strategy to place Saudi Arabia among the world’s 10 easiest countries for doing business by next year.

The World Bank’s “Doing Business in the World” survey ranked Saudi Arabia the 16th easiest country for doing business last September, up from 23rd the year before, and up dramatically from 67th in 2004. However, the World Bank noted delays in enforcing contracts and commercial legal procedures as obstacles for Saudi Arabia.

Sovereign wealth funds lose their gloss

They have vast assets and highly secretive natures, and the Gulf’s sovereign wealth funds have been the source of much speculation over the past 18 months as bankers and officials have beaten a hasty path to their doors.

Their power and ambition initially drew a negative reaction from the west but suspicions have evaporated as the financial crisis has deepened. For desperate bankers it is as if the Gulf’s sovereign vehicles – with estimates of their overall assets ranging up to $1,500bn – are a last resort of funding.

But those clinging to that perception have been forced to rethink.

SWFs have taken a battering themselves as equity markets have collapsed. Analysts suggest that they may have incurred losses of 25 per cent to 30 per cent.

Dubai rental yields ease property woes

Gulf banks may have avoided most of the toxic assets polluting the global financial system but many are overexposed to a sector that rating agencies and analysts say may prove to be nearly as poisonous – property.

After years of growth, Dubai’s real estate market is particularly exposed to the withdrawal of credit. Residential prices have dropped 23 per cent from their peak last September according to research by HSBC, the bank, and some experts are talking about a 50 per cent drop in property prices from top to bottom.

This has shocked speculators who have dominated the market in recent years, but may hearten longer-term property investors as already healthy rental yields may improve. Rental yields are a function of the income that can be earned from a property compared to the price paid. They are also an important indicator of how expensive property is and how sustainable underlying prices are.

Arcapita and Investcorp downgraded to junk

Standard & Poor’s on Wednesday downgraded two prominent Bahrain-based investment companies to junk status as signs mount the Gulf’s financial system is flagging.

Arcapita and Investcorp were both downgraded to BB+ from BBB and put on negative outlook for further downgrades by S&P, which cited the “difficult operating environment” for the two alternative investment companies.

Arcapita responded by saying that it was seeking to raise capital from regional sovereign wealth funds while Investcorp terminated its rating contract with the credit agency over what it called an “unjustified” downgrade.

Aldar profits up 77%

Aldar Properties, the largest developer in Abu Dhabi, saw annual profits increase by 77.5 per cent last year, despite sales in the fourth quarter grinding to a halt.
Shafqat Malik, the Aldar chief financial officer, said the company decided in September to “basically stop selling” for the last three months of the year because of a dramatic change in market conditions.

“We did it intentionally because of the market state,” he said. “The thing is that you need to be alert and cautious in your approach to make sure you adjust yourself to market conditions.” Annual profit jumped 77.5 per cent to Dh3.4 billion (US$926 million), while earnings in the last quarter fell by 89 per cent to Dh84m.

Ahmed Ali al Sayegh, the chairman of Aldar, said last year was successful for the company but warned that this year would see the impact of the global credit crisis and slowdown in the domestic property sector.

Sharia fund to exploit liquidity shortage

National Bonds Corporation, a Shariah-compliant savings scheme partially owned by the Government, plans to grab opportunities created by the global credit crisis and become a major regional private equity investor this year.

“During crises, people will save,” said Mohammed Qasim al Ali, the chief executive of National Bonds. “It is going to be a good year for private equity. A lot of businesses are going to be suffering from a shortage of liquidity.”

The company, which was founded in 2006, has Dh3 billion (US$817 million) worth of assets under management and about 500,000 bond holders. Investors received a 7.07 per cent return on their investments last year and the chance to win monthly prizes of up to Dh1m, the company said.

Tamweel removes detained board member

Saad Abdul Razak, who has been in detention since October, has been dismissed from Tamweel’s board of directors, the Islamic lender said yesterday.

Mr Abdul Razak, who is also a former chief executive of Dubai Islamic Bank and managing director of the Investment Corporation of Dubai, was arrested in connection with an inquiry into alleged corruption. He is still in police custody, although no charges have been brought against him.

The decision was taken at the company’s board meeting on Jan 6, and formally announced to the Dubai Financial Market in a statement yesterday.

Further market declines expected

Regional fund managers expect Middle Eastern markets will continue to decline over the next few months, but are optimistic they will rebound over the longer term, according to a survey taken of regional fund managers by Standard and Poor’s (S&P), the ratings agency.

During the past year, Middle Eastern stocks in nearly every sector declined, leaving funds heavily invested in the region with annual returns ranging from negative 20 per cent to negative 50 per cent, S&P said, although GCC funds fared slightly better than the rest.

“The region’s much vaunted low correlation with the rest of the world’s markets failed to materialise and all the major Middle Eastern markets fell significantly in recent months,” said S&P Fund Services lead analyst Roberto Demartini. The Dubai and Egyptian exchanges, which both fell by more than 50 per cent last year, were especially affected by global trends, he said.

Investors warned about risks in US

Riyadh: A top American business executive and economic expert cautioned Gulf and Arab investors against the risks of making investments in the United States at present in the wake of the global meltdown.

Addressing the Global Competitiveness Forum (GCF) in Riyadh, Peter Schiff, chief executive of Euro Pacific Capital, urged investors not to throw their wealth into the hands of Americans, who, in turn, will use them as borrowed money.

He said that it will take some five years for the world to get rid of the present financial crisis.

Wednesday, 28 January 2009

Kuwait minister dismisses reports of bailout plan

Kuwait’s finance minister denied newspaper reports on Tuesday that the government is considering setting up a multi-billion dinar bailout fund to help troubled firms in light of the global financial crisis.

Several newspapers said earlier the cabinet discussed on Monday a new package of measures to boost the economy and agreed to set up a 5-billion-dinar ($17.32 billion) fund to buy assets from firms.

"No, this is not correct," Finance Minister Mustapha al-Shamali told reporters when asked about the reports. Shamali added that the government was discussing a central bank-devised rescue plan, which is expected to be referred to parliament for approval.

Shanghai surprise

The ox is off to a flyer. While the world’s stock markets are down 9 per cent this year, China is up by about the same amount. The usual January uplift has eluded almost every major exchange. Only Sri Lanka, Norway and a few South Americans have gained more than 1 per cent in 2009.

Shanghai’s performance comes in spite of a range of discouraging global data in the run-up to the New Year festivities, and an emerging consensus that China will be lucky to achieve 5 per cent growth this year, never mind the magical 8 per cent. So what lies behind it? One theory is that China is relatively immune to renewed fears over the health of western banks – Citi is now worth less than one-ninth of ICBC – and deflationary busts in the eurozone. Investors can, therefore, start pricing in a rebound spurred by a big fiscal and monetary stimulus, negative real rates and the competitive renminbi.

Emerging markets: the way ahead

What are your views on the Middle East markets in an environment of $35-a-barrel oil?
Michael Chojnacki, London

JB: I do not think oil will stay at $35 for long. Our core assumption is for a price of $60 by year end. In any event there is a big difference between a weak price now, and a sustained weakness, particularly given large cushions of reserves in the region. We see particular value in a number of private equity deals in Saudi Arabia and are cautious where there is substantial leverage, most obviously in Dubai real estate – though there are prices at which even that has also been looking attractive selectively.

Slowdown takes toll on DP World

DP World, the Dubai-based container port operator, on Monday became the first major company in the sector to outline how the last few months' economic slowdown has hit trade through its ports.

The company, which is controlled by Dubai's royal family but listed on the Dubai International Financial Exchange, said that, excluding the effect of new terminals, growth at ports where it is the largest shareholder was just 6 per cent in 2008 compared with 2007.

Throughput at all ports where it had a shareholding was only 8 per cent over the previous year, down from 18 per cent in 2007 over 2006. Growth slowed particularly dramatically at the ports in Dubai - the heart of DP World's operation - which accounted for more than a quarter of 2008 throughput.

Growth slowed from 20 per cent in 2007 to 11 per cent in 2008. The company is expected to trim costs and re-examine its extensive port expansion programme.

Iran budget reflects falling oil revenue

Mahmoud Ahmadi-Nejad, Iran’s president, on Tuesday presented a shrinking budget bill to parliament, taking into account the dramatic decline in the country’s oil revenues.

The bill for next year’s budget, starting March 20, amounted to 2,827,000bn rials ($287bn, £203bn, €218bn). That was 2.5 per cent lower than the approved budget for the current year, a rare instance in Iran’s recent history of a budget decline.

“The budget shows discipline and takes into consideration the conditions in today’s world economy and drop in oil revenues,” said Mr Ahmadi-Nejad, who is expected to seek re-election in June’s presidential election.

Santander makes offer to Madoff victims

Santander, the Spanish bank whose clients lost €2.33bn in the alleged fraud by the US broker Bernard Madoff, on Tuesday night became the first institution to offer to repay the victims in an attempt to stave off lawsuits and preserve its reputation.

Santander said it would pay back 100 per cent of the investments made in the Optimal Strategic US Equity fund, which was wholly invested with Mr Madoff, to individual private banking clients but not to institutional investors. In exchange, clients would have to agree not to sue.

The repayment of the private bank client investments of €1.38bn would be in the form of Santander preference shares, paying an annual 2 per cent, which could be bought back by the bank after 10 years.

Ajman Bank starts with 'clean slate'

Starting a business in the current economic environment offers more opportunities than disadvantages, according to Ajman Bank, a new Islamic commercial bank that intends to become fully operational next week.

“We are not carrying any baggage. We are starting from a clean slate,” said Said Wafai, the head of the bank’s strategic corporate affairs.

The absence of past investing sins will better position the bank to succeed than many of its local peers, who are heavily exposed to a declining property market, Mr Wafai said. In addition, faltering local banks could offer good acquisition targets.

DIFC positions for captive insurance

Captive insurance will be a new focus for the Dubai International Financial Center (DIFC) as it seeks new ways of handling risk in the current economic climate.

“The DIFC has positioned itself as the principal domicile for the advice, consultation and implementation of insurance and captive solutions in the region,” said Abdulla al Awar, the managing director of the DIFC Authority at a conference in Dubai [CK].

“Given the current global economic conditions, an increasing number of organisations are investigating the adoption of innovative solutions to enhance their overall insurance programme and risk management framework.”

Captive insurance is a risk management technique where a business forms its own insurance company subsidiary to finance its retained losses in a formal structure. The company covers its parent group’s risks and sometimes the group’s customers. The term “captive” comes from the fact that the policyholder owns the insurance company. Among the advantages of captive insurance is that cash flow is protected as reserves for unpaid claims and unearned premiums can be held by a captive and invested.

Tuesday, 27 January 2009

National Bank of Kuwait profit drops 78%

National Bank of Kuwait has reported a 78% decline in fourth-quarter profit. Net income in the three months to December fell to 11.61 million dinars ($40.1m) from 53.1 million dinars a year earlier, according to calculations by Bloomberg. Full-year profit declined 6.7$ to 255.3 million dinars.

‘Unprecedented’ inflows into oil ETFs

Goldman Sachs’ energy analysts are the latest to warn of the unprecedented inflows into oil ETFs in their most recent research note. In fact they attribute the small spike in oil prices in the last few weeks largely to this, a US cold snap, storage demand for products, fuel switching and a spike in refining margins.

Most interestingly, however, the Goldman oil bulls believe the spike is only transient as most of these factors are likely to reverse in the near term, hence they do not believe it represents the impending end to the current bear market (which they are still expecting before the end of the year).

The above certainly fits their view that the new bullish cycle will only reappear when the contango flattens out, in itself only likely to happen when most spare production (most likely from non-Opec producers) is brought offline.

Obama vows to listen to Muslims

Barack Obama on Monday night granted an Arabic-language television channel his first formal interview as president – an unprecedented gesture that appeared aimed at offering the Muslim world a sharp contrast with his predecessor, George W. Bush.

Mr Obama, who in his inaugural address last week promised the Muslim world a “new way forward based on mutual respect and mutual interest”, told the Al Arabiya television channel that his administration wanted listen to the Muslim world and re-examine America’s “preconceptions” towards the region.

Mr Obama also went further than he had at any point during the general election in speaking openly about his own personal ties to the Muslim world.

Fuld ‘sold’ mansion to wife for $100

The controversial former chief executive of Lehman Brothers transferred ownership of a $14m Florida mansion to his wife for $100 in a possible attempt to move assets beyond the reach of infuriated investors of the collapsed bank, reports The Times. Dick Fuld, who led the 158-year-old investment bank to its demise last September, sold the beach-front house to his wife, Kathleen, for $100 on Nov 10, according to Marin County real estate records. The couple had previously jointly owned the Jupiter Island property, which was valued at $13.75m when they bought it in March 2004.

Investors to cut stakes in China banks

Sales of Chinese bank shares by overseas investors are expected to accelerate this year as western financial institutions divest stakes to help bolster balance sheets. Over the past few weeks, UBS and RBS have sold their holdings in Bank of China, raising a combined $3.2bn, while Bank of America raised $2.8bn by selling a chunk of its stake in China Construction Bank. Sale of the stakes, acquired in 2005 and 2006, come as Bejing tries to support domestic banks amid the economic slowdown. The next wave could come late April when lock-ins expire on stakes in Industrial & Commercial Bank of China. Goldman Sachs’s 5% ICBC stake could fetch more than $7bn. Temasek, Allianz and HSBC also own lucrative stakes in Chinese banks.

To save the banks we must stand up to the bankers

If you hid the name of the country and just showed them the numbers, there is no doubt what old International Monetary Fund hands would say when confronted by the current situation of the US: nationalise the banking system. The government has already essentially guaranteed the system’s liabilities , bank assets at market value must be massively lower than liabilities and a severe global recession may yet turn into the Greatest Depression.

Nationalisation would simplify the job of cleaning up bank balance sheets, without which no amount of recapitalisation can make sense. An asset management company would be constructed for each nationalised bank, and loans and securities could be clearly divided into “definitely good” and “everything else”.

Good loans would go into a recapitalised bank, where the taxpayer would not only hold all the risk (as now) but also get all the upside. Careful disposal of bad assets would yield lower losses than feared, although the final net addition to government debt would no doubt be in the standard range for banking fiascos: between 10 and 20 per cent of gross domestic product.

Norway dips into oil fund for NKr20bn stimulus

Norway on Monday unveiled a NKr20bn ($3bn, €2.25bn) fiscal stimulus package as it starts to use its massive oil wealth to boost growth and employment in its struggling economy.

The Nordic country of just 4.7m people has amassed $370bn in oil revenues – the world’s second largest sovereign wealth fund, after Abu Dhabi’s – and is now starting to use it to soften the effects of an expected recession.

The new spending package comes on top of a previously announced expansionary budget that was equivalent to 0.7 per cent of gross domestic product and takes total government spending on the crisis to 2.3 per cent of GDP – one of the most aggressive spending plans in Europe.

Counterproductive currency quarrel

President Barack Obama’s choice for Treasury secretary, Tim Geithner, was playing with fire last week when he told US senators that China was “manipulating” its currency. To manage the economic imbalances at the heart of today’s crisis, the US must bring China on board. Rattling sabres will only complicate that task.

Since China abandoned its dollar peg in 2005, the renminbi has in fact gained more than 20 per cent against the greenback. No wonder the Chinese feel slighted by Mr Geithner’s rebuke. Pandering to anti-China sentiment in the US Congress may have helped to smooth the confirmation process for the new secretary, under pressure for underpaying his taxes. But given the virulence of some US politicians on the US-China trade relationship, it may even have been a way to forestall more radical congressional demands in the future.

The episode highlights how managing Congress risks getting in the way of a responsible international economic policy. Mr Obama must start to see the crisis as a global economic problem, not something the US can solve by itself.

Buy-out groups chase elusive targets

The Middle East has been fertile ground for fundraising by big international private equity firms but it has proven less so for acquisitions.

Several large partnerships have set up in the Middle East recently – most notably Kohlberg Kravis Roberts , the Carlyle Group and Colony Capital – but deals have been few and far between.

In 2007, KKR bought UN Ro-Ro, a Turkish shipping company, for €910m ($1.15bn), while the property oriented Colony Capital bought control of Tamoil, a Libyan refiner, for €4bn and is developing a $2bn resort in Morocco. Yet not one deal has been closed in the Gulf even after years of oil-soaked growth.

Worries weigh on Saudi banks

Fourth quarter profits of $380m might be something to be celebrated – particularly given the state of the global economy. But Al-Rajhi Bank, the Gulf’s biggest bank, said last week that its profits of SR1.4bn had been depressed by higher provisions and were almost 10 per cent lower than a year earlier.

At the same time, Samba Financial Group, another prominent Saudi bank, reported a 13.5 per cent decrease in fourth quarter earnings.

In October, as global recession loomed and credit from international banks dried up, the Saudi government injected $3bn into banks to finance private sector projects and help the lenders cope with a tightening local currency money market. It has also twice dropped reserve requirements on demand deposits to 7 per cent.

Karachi index falls for ninth day

Karachi: Pakistan stocks fell for a ninth day, as selling by foreign investors outweighed purchases by a market stabilisation fund. Pakistan Petroleum Ltd, the biggest gas producer led declines.

The Karachi 100 Index lost 114.2, or 2.32 per cent, to 4,815.34 at the 3.30 pm. local-time close. This is the lowest since February 25, 2004, when the index closed at 4,809.52.

"The buying by the fund isn't enough to compensate for the selling pressure," said Atif Malik, JS Global Capital's director of international equity sales.

Bank Sarasin aiming to raise $100m

Dubai: Bank Sarasin's Dubai-based asset management firm on Monday launched an equity fund worth $100 million (Dh367 million) to target Gulf Arab bourses which it believes are undervalued.

Sarasin-Alpen & Partners said it aimed to raise an initial $100 million in the first quarter of 2009 from both international and regional investors, which it would invest in the markets of the six-member Gulf Cooperation Council (GCC).

"The economic outlook, government finance and regional stability in the GCC are much better than in the developed world and than in some of the other emerging markets," said Paul Cooper, senior executive officer at Sarasin-Alpen & Partners.

Kuwait to own 16% of Gulf Bank

Kuwait City: The Kuwait Investment Authority, the country's sovereign wealth fund, will own 16 per cent of Gulf Bank KSC after the commercial bank's capital increase.

Gulf Bank shareholders subscribed to 68 per cent of the capital increase, which ended late on Sunday, Fawzy Al Thunayan, general manager for board affairs at the bank, said in a phone interview yesterday from Kuwait.

Gulf Bank, which last November announced 375 million dinars (Dh4.77 billion) of losses from derivatives trading, doubled the bank's capital by issuing 1.25 billion shares to existing investors at a nominal value of 100 fils and a premium of 200 fils, to raise an amount equal to the losses.

Mixed reaction to Central Bank initiative

The Central Bank’s request that banks delay their quarterly reports until they have fully reviewed their loan and investment books is prompting analysts to question the financial sector’s transparency. For others, however, it is further proof that the authorities want to ensure reporting is up to international standards.

“There are 50-odd banks here in the UAE and the likelihood of inconsistencies remains high. With this step the Central Bank wants to assure a certain level of consistency of how the [accounting] rules are applied,” said Sanjay Uppal, the chief financial officer at Emirates NBD, the country’s largest bank by assets.

Other bankers echoed his sentiments, adding that the financial body was merely trying to ensure that banks did not use accounting loopholes or off-balance-sheet vehicles to hide losses.

Growth stalls at DP World

The financial crisis forced global trade to slow sharply in the fourth quarter, creating one of the toughest operating environments ever in the shipping and terminals business, DP World said today.

“We ended (the year) with some of the worst market conditions the container terminals industry has ever seen. There has been a sharp downturn in global conditions,” said Yuvraj Narayan, the senior vice president of corporate strategy at DP World, the world’s fourth largest ports operator, in a conference call today.

Despite a poor fourth quarter DP World said its annual container handling traffic at its 26 consolidated terminals — or terminals in which it has a controlling stake in — still grew 15 per cent last year, to 27.7 million containers. However, it said excluding the contribution from new terminals which joined the portfolio during 2008, DP World’s volume growth was six per cent.

Dubai Economic Department prepares proposal to secure jobs in major sectors

The 2008 GDP breakdown is:

- Wholesale and retail: 37 per cent

- Real estate and business services: 15 per cent

- Manufacturing: 15 per cent

- Construction, transport and financial services: Around 10 per cent each

Monday, 26 January 2009

Gold breaks $900 barrier

Gold rose above $900 a troy ounce on Monday, hitting a three and a half month high and posting record highs in euro and sterling as investors sought safe haven from troubled equities markets and expensive government bonds.

Precious metals traders said that investors, particularly in Europe, were pouring money into gold exchange traded funds – a popular way to gain access to the metal – and also buying physical gold, from coins to large bars.

“Effectively what we are seeing is safe haven buying,” said one London-based trader.

The total amount of gold held by the world’s gold ETFs last week rose above 40m ounces for the first time, consolidating the investment vehicles as the largest holders of physical gold after the official reserves of the US, Germany, the International Monetary Fund, France and Italy.

PwC staff detained in Satyam probe

Indian police have detained two PwC auditors in their first move against the professional services firm over the scandal afflicting Satyam Computer Services. Police said the pair were detained for interrogation over the scandal, in which B. Ramalinga Raju, former chairman of Satyam, confessed to fixing the accounts for several years. Price Waterhouse was the auditor of India’s fourth largest outsourcing firm by revenue. The arrests mark a widening of the fraud probe beyond the immediate family and former executives of Satyam. Investigators said the two auditors would be held in judicial custody until Feb 6.

Fledgling markets in shock after the battering of 2008

If the central and eastern European markets had their day in the sun in 2007, when local stock markets were booming and inflows to funds were strong, 2008 was more like a total solar eclipse.

With stock markets in freefall and local currencies taking a pasting, money was cascading out of investment funds across the region.

“The markets saw outflows in all categories and the collapse of a number of bubbles, such as small cap and Russia,” says Nicolas Faller, head of distribution partners at Fortis Investments. “Even bond funds suffered due to higher rates on bank deposits and rising interest rates at the beginning of 2008.”

Institutions stick with hedge funds in 2008

Institutional investors’ appetite for hedge funds remained intact as 2008 drew to a close, although pension funds and their ilk are becoming more concerned about the industry’s dire performance.

Some 85 per cent of institutions surveyed by SEI and Greenwich Associates in November said they planned to maintain or increase their allocations to hedge funds, with only a quarter saying they had liquidated some investments or planned to do so.

Appetite for oil ETCs on the increase

Appetite for oil-based exchange traded commodities is rising as investors anticipate a rebound in global oil prices.

The market value of outstanding long oil ETCs, listed securities backed by a commodity, issued by ETF Securities surged to a record $670m (£490m, €522m) in the week ending January 16, a jump of $147m in just one week and the fastest rise since inception in 2005.

Saudi warning

Anyone with a stake in the stability of the wider Middle East should take very seriously the warning set forth in the Financial Times last Friday by Prince Turki al-Faisal.

Prince Turki, a man who expresses himself with care and moderation, was recently the Saudi ambassador to the UK and the US and, before that, the long-serving chief of Saudi intelligence. He and his brother, foreign minister Prince Saud al-Faisal, have represented the pro-US kingdom to the world for well over three decades. They are also part of the reforming wing of Saudi Arabia’s absolute monarchy and allies of King Abdullah.

Prince Turki, citing equally forthright remarks by King Abdullah and Prince Saud, is now telling the new administration of Barack Obama it can either change course radically on the Israeli-Palestinian conflict or forfeit the US “special relationship” with Saudi Arabia. The US, he warns, risks losing its leadership role in the Middle East.

Joint initiatives can rescue eastern Europe

The financial crisis of 2008 has turned into the economic crisis of 2009 and the first signs of social unrest are emerging just as the full effects of the downswing are starting to be felt in eastern Europe.

The region’s problems are deeply interwoven with those of the rest of Europe and the solution lies in a co-ordinated response on the part of both public authorities and international financial institutions. Narrow domestic approaches in individual countries would worsen the situation for all.

Most eastern European countries have seen a rapid deterioration of their real economies since last September, when credit flows dried up and their main western trading partners entered into recession. This has had a severe impact on eastern European countries’ all-important exports.

KIA cuts global stocks exposure

A government report has confirmed that the Kuwait Investment Authority (KIA), the nation's sovereign wealth fund, has reduced its exposure to global stock markets since October, shifting assets instead into short-term cash funds.

In a briefing to parliament, the government said KIA had cut the ratio of international share investments in a key fund in a bid to minimise the effect of the global financial crisis on Kuwait, the world's seventh-largest oil exporter.

The news comes after KIA, which manages Kuwait's substantial oil-generated assets, last year burned its fingers by buying into U.S. banks such as Citigroup and Merrill Lynch before both stocks nosedived and the latter filed for bankruptcy protection.

Global's Jordan Weekly Market Report - January 22 , 2009

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Sunday, 25 January 2009

Etisalat to invest up to $5bn in Iran

RIYADH, Jan 25 – Emirates Telecommunications Corp (Etisalat) expects to invest up to $5 billion over five years in its Iran operations after winning the country's third mobile phone licence, its chairman said on Sunday.

"We will invest $4bn to $5bn in the Iranian operation in five years," Mohammed Hassan Omran said at an economic conference in Saudi Arabia.

He said Etisalat, the second-largest Arab telecommunications company by market value, would spend $1bn in the first year on its network in Iran.

Global's GCC Islamic Index –Weekly Brief dated January 22, 2009

"Following the successful launch of Global GCC Islamic Index; and in line with the growing interest in Islamic finance, Global Investment House is proud to present a “GCC Islamic Index –Weekly Brief”.

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Dar appoints Credit Suisse as adviser

Kuwaiti Islamic firm Investment Dar, which owns half of British luxury carmaker Aston Martin, said on Sunday it has appointed Credit Suisse as its financial adviser.

Dar said in December it was seeking to borrow up to $1 billion to refinance debt and was considering offers to sell up to 20 percent of Aston Martin.

Investment Dar will work with Credit Suisse "to consider the options available to us in this market", chairman Adnan Al-Musallam said in a statement.

Kuwaiti Noor Invest. Co. sets up joint company with Russian Gazprom

KWUAIT, Jan 24 (KUNA) -- Kuwaiti Noor Financial Investment CompanyNoor Financial Investment Company said on Saturday that it has completed procedures for the establishment of a joint venture with Russia "Gazprom Giovezeka" of the Russian gas company Gazprom.

The establishment of the new company comes as part of implementing an earlier agreement between the two sides which would set up two companies one in Russia and one in Kuwait under one joint company, Noor InvestNoor Invest Vice President and Member of Board of Directors Nasser Al-Murri told KUNA.

Al-Murri said the joint venture in Russia will work under Gazprom company, one of the most specialized companies in oil and gas in the world and will control a share of 51 percent of its shares, while NoorNoor will control 49 percent of the shares.

Kingdom Holding issues earnings upgrade

Kingdom Holding Co, the media to banking conglomerate owned by Saudi billionaire Prince Alwaleed bin Talal, said on Saturday that it had revised its fourth-quarter earnings to show an overall profit of 276 million riyals compared to 76 million riyals earlier.

The company's fourth-quarter net loss of around $8.3 billion was not affected by the revisions.

Overall profit refers to net sales minus the cost of sales, according to Saudi reporting rules posted on the stock exchange's website.

Fitch forecasts tough year for Gulf banks

Dubai: Fitch Ratings said yesterday that the difficult global economic environment has begun to have a negative impact on banks in the Gulf and made the outlook in 2009 for all banks more challenging.

The preliminary 2008 results released by the ten main commercial banks in Saudi Arabia confirmed that the fourth quarter was the worst quarter of the year for all the banks.

Nevertheless, the ten main commercial banks in Saudi Arabia remain among the highest rated by Fitch across the Gulf and generally have sound domestic franchises.

National Bonds announces the highest annual profit rate

Dubai: National Bonds Corporation PJSC, the Sharia-compliant national savings scheme, has announced the highest annual profit rate of 7.07 per cent in the UAE on saving schemes for its bond holders for a second consecutive year in 2008.

In spite of a gloomy global economic outlook, National Bonds has succeeded in achieving the highest returns for 2008 compared to the annual profit rate of 6.03 per cent achieved at the end of its first financial year in 2007.

Bondholders enjoyed the highest growth of 17.25 per cent in their profit rate in 2008 as compared to the previous year, along with the opportunity to win worth Dh 5 million in 26,318 prizes every month.

Saudi banks show fatigue

Saudi Arabia’s 10 biggest commercial banks are reporting weaker earnings for the final quarter of 2008, revealing that they have not been spared the cocktail of weaker economic growth, tighter funding and falling asset prices that have battered counterparts across the region.

Saudi Arabia’s largest bank, National Commercial Bank (NCB), yesterday issued the latest in a series of weak results, announcing a net loss for the fourth quarter of 2.55 billion riyals (Dh2.49bn). Full-year profits, it said, fell 66 per cent compared with 2007 to 2.03bn riyals.

The poor results from Saudi Arabia’s financial sector, until now considered relatively sheltered, illustrate what analysts say is a deteriorating operating environment for banks and companies this year. What began as a financial crisis in the West that sparked a global recession is now coming full circle, with low growth and weak corporate profits sapping loan demand and pushing more borrowers into default.

Snow, natural, not man made, in United Arab Emirates!

Saturday, 24 January 2009

Interest in emerging market funds wanes

FT Alphaville » Blog Archive » Interest in emerging market funds wanes

Rogue traders who went off the rails

In retrospect, it did seem odd that Jérôme Kerviel hadn’t taken any holiday for a couple of years. But so what? The young trader was an affable colleague, diligent to the point of staying late and always courteous to the back-office staff. Being away from work forced him to confront the death of his father, he said. That’s why he came in at weekends, too. He had few friends. He wanted to do well. And so it was that a 31-year-old with a penchant for computing was given the time and freedom to gamble up to €50bn on the stock market. A few more weeks and Société Générale, his employer, might have gone bust.

The risk of an employee going rogue has existed ever since the owners of capital entrusted others with their money, either to safeguard or invest it. The most likely rogue, inevitably, is the one who absconds with funds before the investor realises there is no South Sea plantation, no patented miracle cure. But even more complicated swindles are nothing new.

John Kenneth Galbraith, whose treatise The Great Crash, 1929 is enjoying a depression-era revival, mused that embezzlement in banks and businesses was far more common than suspected. “At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s businesses and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars,” he wrote. In good times, Galbraith said, when people are more relaxed and money is plentiful, the bezzle grows. In a depression, it shrinks. As a financial system disintegrates, the capital cushions that mask the bezzle vanish. Or, in the words of Warren Buffett: “It’s only when the tide goes out, you find out who’s swimming naked.”

Premier League bans Emirates NBD fund

The English Premier League has told all 20 clubs they risk breaking rules if they sign players connected to an investment fund launched by Dubai-based bank Emirates NBD.

The Hero Global Football Fund, which has been backed by Alan Hansen and former Football Association executive director David Davies, has been banned by league chiefs.

The fund, which is planning to raise $100 million, was set up by Emirates Investment Services Ltd, a subsidiary company of Emirates NBD, and plans to have a life of five years.

Thain behaviour

What is it that bankers don’t get? Unable to own up to a collective failure, some still display a sense of entitlement that bears no relation to their current status as wards of the state supported by the taxpayer. Step forward John Thain.

Formerly of Goldman Sachs, he was feted just months ago for securing the sale of Merrill Lynch to Bank of America, just as Lehman Brothers crumbled into dust. BofA even paid a 70 per cent premium. Some deal. Some salvation.

It now emerges that Mr Thain brought forward about $4bn in discretionary bonuses, paying them out in the narrow window after the sale of Merrill was agreed but days before the deal was actually closed.

China hits back over renminbi comments

The US and China have embarked on a public row over foreign exchange policy only three days after Barack Obama’s inauguration, with China denying on Friday night it was “manipulating” its currency and saying the allegation would only fan protectionist sentiment in the US.

The Chinese government was responding to claims by Tim Geithner, President Obama’s choice for Treasury secretary, who told a Senate nomination hearing on Thursday that China was “manipulating” the renmnbi.

Rumours Istithmar may sell Barneys

Dubai: Barneys New York's owner, Dubai's Istithmar World PJSC, may sell the retailer less than two years after buying it as the fund struggles with losses and the luxury market slows, two people familiar with the situation said.

Istithmar doesn't want to sell the business for less than the $942.3 million (Dh3.46 billion) it paid in 2007, said one of the people, who declined to be identified because the talks were private. The state-owned fund has had calls from potential buyers and would sell its entire stake, one of the people said. Istithmar Chief Executive Officer David Jackson declined to comment.

The Dubai investment fund has struggled to expand Barneys outside the US after Howard Socol resigned as chief executive in May and the luxury market withered.

Friday, 23 January 2009

Albert Edwards LOL China

As the debate over how bad things in China are rages on, growing Sino-sceptic Albert Edwards offers his two pennies on the country’s latest statistics.

Well, to be accurate, he laughs out loud at them:

That this outturn was bang in line with the median estimate of economists surveyed by Bloomberg makes it all the more unbelievable in my mind. All other economic data worldwide have been surprising massively on the downside and China should be no exception. A few hours earlier, for example, South Korea reported Q4 GDP had declined a hefty 5.6% QoQ, massively worse than a Reuter’s consensus which looked for a contraction of 2.7%! I naively thought that this QoQ decline was already annualized, but it was not. On a US style of reporting, the South Korean economy contracted at a 20% annualised rate in Q4. Asia is in depression. Whatever the heavily manipulated Chinese GDP is telling us, that economy must now be contracting. The Yuan needs to be devalued.

Global's UAE Weekly Report - January 22, 2009

"In our effort to provide the investment community, economists and researchers with an array of market reviews, we at Global Investment House are proud to present “The Weekly report on UAE Stock Markets”. The report views the latest developments in Abu Dhabi Stock Market (ADSM) & Dubai Financial Stock Market (DFM), trading activities, indices performance and corporate news. We hope you find this publication useful.

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Warning: rating agencies can do you harm

Standard & Poor’s has downgraded Greece, Spain and Portugal and has warned Ireland that it might suffer a similar fate. Do I hear this right?

Is S&P still in the business of producing risk analyses? Should the rating agencies not have gone out of business after they told us for years that the risk associated with the ballooning debt of banks and large companies was nothing to worry about? How can these agencies, which were systematically wrong in the past, have any credibility in whatever risk analysis they make?

Yet, remarkably, they are alive and well, and their credibility seems to have been restored. The rating agencies are now believed by the market when they warn us of risks associated with a number of eurozone governments’ debt. As a result, the interest rate these governments have to pay on their borrowings increases.

Gapper blog: Fiddling while Merrill burned

Reputations get shredded fast in a financial crisis, but the speed of John Thain’s descent from hero to zero is extraordinarily rapid, says the FT’s John Gapper. In mid-October, he seemed the smartest guy in the pack, delivering Merrill Lynch to Bank of America for $50bn. Since then, it has been all downhill. Symbolism matters, and Thain’s initial attempt to gain a $10m bonus for 2008, as well as details of his $1.22m office redecoration, have turned him into a symbol of Wall Street excess. But most shocking is the FT report that Thain accelerated payments of Merrill bonuses. That act has a ring of fiddling while Rome burned, particularly in view of the Roman theme of his office decorations.

Saudi patience is running out

In my decades as a public servant, I have strongly promoted the Arab-Israeli peace process. During recent months, I argued that the peace plan proposed by Saudi Arabia could be implemented under an Obama administration if the Israelis and Palestinians both accepted difficult compromises. I told my audiences this was worth the energies of the incoming administration for, as the late Indian diplomat Vijaya Lakshmi Nehru Pandit said: “The more we sweat in peace, the less we bleed in war.”

But after Israel launched its bloody attack on Gaza, these pleas for optimism and co-operation now seem a distant memory. In the past weeks, not only have the Israeli Defence Forces murdered more than 1,000 Palestinians, but they have come close to killing the prospect of peace itself. Unless the new US administration takes forceful steps to prevent any further suffering and slaughter of Palestinians, the peace process, the US-Saudi relationship and the stability of the region are at risk.

Prince Saud Al-Faisal, the Saudi foreign minister, told the UN Security Council that if there was no just settlement, “we will turn our backs on you”. King Abdullah spoke for the entire Arab and Muslim world when he said at the Arab summit in Kuwait that although the Arab peace initiative was on the table, it would not remain there for long. Much of the world shares these sentiments and any Arab government that negotiated with the Israelis today would be rightly condemned by its citizens. Two of the four Arab countries that have formal ties to Israel – Qatar and Mauritania – have suspended all relations and Jordan has recalled its ambassador.

Middle East private equity sees lower returns

Previously bullish Middle East buy-out kings and financiers have lowered their expectations for the next year, predicting that delayed exits and tough economic conditions will lower returns, according to a new report.

More than 80 per cent of senior private equity executives in the Middle East and North Africa surveyed by Deloitte, the consultants, said they expected returns to decrease, compared to 11 per cent when surveyed in the first half of 2008. Nearly three quarters said exit activity would decrease, compared to just 6 per cent when polled in the first half of last year. Deloitte surveyed 30 private equtiy companies from around the world last month.

Years of oil-backed growth and willing investors have swelled the regional private equity industry. There are now nearly 100 funds focused on the region which have raised US$19.5bn in capital, according to Preqin, a private equity data provider.

etisalat expands global footprint

Dubai: Emirates Telecommunication Corporation (etisalat), one of the region's largest telecom companies, has spread its reach to 18 countries in the past 32 years.

The large leap is evidence of its aims to be one of the top 10 operators worldwide by 2010. The expeditious acquisition plan, which began with Tanzania's fourth mobile licence provider, Zanzibar Telecom (Zantel) in 1999, is well under way with less than a year left. Early last year, the operator was ranked among the 20 largest operators in the world.

"etisalat is in its strongest position ever and is on course to achieving its goal of being one of the top 10 operators in the world by 2010," said Mohammad Hassan Omran, chairman of etisalat.

Qatar snaps up Dubai workers

While construction firms in Dubai are shedding jobs, their counterparts in Qatar see the downturn as an opportunity to source staff for their projects.

Building, consultancy and engineering firms in the country have long struggled to attract key skills because of competition from Dubai, but they hope to take advantage of the redundancies that are sweeping across the emirate.

Developers, contractors and other property-related companies in Dubai have cut thousands of jobs in recent months as the financial slowdown has gripped the sector, grinding many projects to a halt.

UAE leads world in Rolls-Royce sales

DUBAI // Abu Dhabi has become the world’s biggest market for Rolls-Royce cars, edging out Dubai and Beijing in sales last year.

Rolls-Royce’s Abu Dhabi and Dubai dealerships achieved the highest sales and second-highest sales respectively, said Frank Tiemann, Rolls-Royce’s communications manager for Europe and the Middle East.

This was ahead of Beijing and London, which tied for third place, and Beverly Hills in the US in fifth place.

Kuwait’s culture of risk suffers a shock

KUWAIT CITY // Only one traded stock in Kuwait is more valuable than one Kuwaiti dinar (Dh12.5) after the regular market fell for the sixth consecutive day yesterday, bringing the exchange’s index to its lowest value in almost four years.

The drop is a serious concern in a country where most citizens invest in the market.

In the past year, 36 companies’ stocks were valued at more than one dinar, but the effects of the global credit crunch ravaged the market. The Middle East’s second largest exchange nosedived more than 50 per cent in the past year.

Thursday, 22 January 2009

China's economic growth eases sharply

HONG KONG (MarketWatch) -- China's economy grew at its slowest pace in seven years in the fourth quarter, as slumping exports put the brakes on the world's fastest-growing major economy.
Gross domestic product expanded 6.8% in the October-to-December period, compared to a year ago, easing from a 9% expansion in the preceding three-month period, according to data released by the National Bureau of Statistics Thursday. The result was in line with a median estimate for a 6.9% expansion of 13 economists polled by Dow Jones Newswires.
For the full calendar year GDP expanded 9%, cooling from a 13% expansion in 2007.

The Eurekahedge Monthly

Welcome to the latest Eurekahedge monthly newsletter, which includes proprietary research on hedge fund trends, asset flows and performance. We now compile all in-house research into the new The Eurekahedge Report. Highlights from this month’s report:

Hedge fund assets fell US$380 billion or 20% in 2008, from just under US$1.9 trillion to just over US$1.5 trillion
September/October/November – the worst 3-month period – accounted for 85% of the fall at US$320 billion
Hedge funds returned 1% on average in December, wrapping up a tumultuous year at -12.3%

Banks lobby for eastern Europe funds

Leading international banks operating in central and eastern Europe have clubbed together to lobby the EU and the ECB to extend their anti-crisis policies to ease the credit crunch in the region. The group of nine, which wants action to ease liquidity shortages and revive lending, is urging Brussels and the ECB to extend support beyond the EU’s new member states, such as Poland, to prospective members, such as Serbia, and to Ukraine, which has few prospects of joining the bloc soon. Herbert Stepic, chief executive of Raiffeisen International, the Austrian bank, who brought the group together, said any action to support banks should not be limited to western Europe.

India’s Larsen frontrunner for Satyam

Indian engineering and construction firm Larsen & Toubro is likely to present a revival plan to the board of fraud-hit Satyam Computer Services, reports Reuters citing local media reports. Larsen was a front-runner for acquiring Satyam, and institutional investors in Satyam such as Life Insurance Corporation and ICICI Prudential Life Insurance were supporting its bid. Larsen, which holds about 4% in Satyam, did not rule out the possibility of an alliance with Satyam once the investigations into the company’s accounts had been done

Deyaar halts unsold projects

DUBAI // Dubai developer Deyaar has put all its unsold projects on hold due to the global financial turmoil but still expects to post record profits for the fourth quarter, its chief executive said today.

Markus Giebel told reporters the company had put “many projects” on hold adding “it’s wrong to deliver units which have not been promised to the customer”.

Mr Giebel did not give figures when asked about his profit forecast for 2008 and the fourth quarter, but said: “The increases are substantial ... [We have a] record breaking quarter and year.”

Finance sector moves to stop brain drain

DUBAI // Financial sector employees who lose their jobs in the credit crunch should be given help to find another post or a place on a retraining programme to help the UAE avoid a brain drain, business leaders said yesterday.

The Dubai International Financial Centre (DIFC), the financial free zone in Dubai, said it would work with those who lost their jobs to secure a new role with another financial company, or place them in educational institutions on new resident visas until they can find a new full-time job.

“If you see what happened with the Lehman Brothers – by placing employees in other companies and supporting them you will see that talent and skill are an important factor in turning the situation around,” said Nasser al Saidi, the centre’s chief economist, on the sidelines of The World in 2009 executive forum in Dubai yesterday.

Job losses threaten economy

Unemployment is one of the major threats to the economy, as layoffs spread from property and financial services to other sectors, analysts say.

As the majority of the labour force is made up of foreign nationals, they fear rising job losses could lead to a population outflow as expatriates made redundant are required to leave the country.

However, Sultan Nasser al Suwaidi, the Central Bank Governor, said the UAE was not headed for a recession, but instead looking at posting “low single-digit growth in 2009”. He said the Central Bank might ask local lenders to set aside funds for potential write-downs, according to Reuters.

Markets at four-year low

Stock markets in Abu Dhabi and Dubai slumped to their lowest levels in more than four years yesterday after oil dipped below US$33 and poor fourth-quarter results confirmed the global financial crisis is hurting the region.

The sell-off was triggered by Saudi Basic Industries Corporation (SABIC), one of the world’s largest petrochemical firms, which reported a 95 per cent drop in fourth-quarter profit. SABIC shares tumbled 9.8 per cent, leading declines on all seven bourses in the Gulf.

“SABIC is a bellwether stock, not only in Saudi Arabia but for the entire Gulf, and markets will take a cue from it,” said Shakeel Sarwar, the head of asset management at SICO investment bank, based in Bahrain.

Indian regulators shake up share rules in wake of Satyam scandal

Controlling shareholders in Indian companies will be forced to reveal borrowings made against their own shares under reforms launched by regulators that could provide more transparency about how India's most powerful business families control their empires.

The move by the Securities and Exchange Board of India to make it mandatory for the controlling shareholders of companies to disclose when they pledge shares as collateral to lenders is the biggest capital reform since the Satyam scandal erupted this month.

"Such disclosures shall be made as and when the shares are pledged as well as by way of periodic disclosures," Sebi said.

The spy who came over the fold

After the tragic events of the week, Aleksander Lebedev was not inclined yesterday to reflect on his purchase of 75 per cent of the UK's Evening Standard newspaper. "My thoughts are elsewhere right now," he said when reached by phone.

On Monday, a lawyer for Moscow's Novaya Gazeta - owned by Mr Lebedev - was shot dead in broad daylight in Russia's capital. A trainee journalist was also killed.

Mr Lebedev said he would have a different set of challenges with the loss-making London based paper: "My commitment is that for quite some period of time I will make sure that the losses are not hurting the newspaper."

Rusal considers seeking 'standstill' debt deal

Oleg Deripaska's UC Rusal is considering seeking an agreement from its more than 70 foreign banks to give it time to restructure nearly $17bn in debts, people familiar with the situation said yesterday.

Rusal is weighing up seeking a "standstill" agreement as Mr Deripaska's aluminium group grapples with billions of dollars in debt and plummeting revenues due to falling aluminium prices.

A standstill is an agreement by lenders not to take any unilateral action to enforce any of their debt claims against the company.

Sovereignty is crucial to single currency plans

When I first began analysing Gulf banks more than 20 years ago, I wrote on a piece of paper the exchange rates of the six Gulf currencies against the dollar and stuck it in front of my desk. With the exception of the Kuwaiti dinar, I could use those same rates to convert the currencies today.

Even the Kuwaiti dinar, which for most of the last 20 years has been managed against a basket of currencies, has remained within about 8 per cent of an average rate since the mid-1980s. (The dinar was pegged to the dollar for three and a half years from 2003 to 2007.)

So I am always rather bemused when the Gulf states speak of their plans for a single currency. Five out of six of them already have a single currency – it is called the dollar.

State interventions fail to pay off

When Kuwait’s government – under pressure from irate, day-trading citizens – announced late last year that it would support domestic equity prices, a Kuwaiti banker observed ruefully: “Moral hazard doesn’t exist in the Gulf.”

Oman would seem to agree. Last week the government announced it would proceed with an OR150m ($389m) stock market stabilisation fund to offer succour to the Muscat Stock Exchange, which lost 41 per cent last year.

Qatar also decided to intervene last year – albeit in a roundabout way. The Qatar Investment Authority, the country’s sovereign wealth fund, said it would buy stakes of up to 20 per cent in all the country’s banks through fresh share sales, thereby injecting extra capital for lending and extending its gold-plated sovereign guarantee across the sector.

Gulf renewables race hots up

It may have been overshadowed by events in Gaza and by the US presidential accession ceremony in Washington, but there was no disputing the seriousness of purpose at Abu Dhabi’s second world energy summit (pictured above) this week.

Abu Dhabi announced the recipient of a $1.5m prize for sustainability, which went to a subsidiary of a Bangladeshi micro-finance house. The city also committed itself to having 7 per cent of its energy coming from renewable sources by 2020. And a subsidiary of Mubadala, the owner of Abu Dhabi’s Masdar development, announced an environmental research and development tie-up with General Electric of the US

The centrepiece of the country’s claims to leadership in sustainability, though, centre on the Masdar initiative.

Gulf handicap

After a period of oil-soaked growth, Gulf economies increasingly resemble a Silk Road dromedary: ugly, stubborn and slow.

It’s not just falling oil prices that are responsible. Take the United Arab Emirates. Its $270bn economy is also heavily reliant on construction and real estate, two of the industries worst hit by the credit crunch. In Dubai, developers last week called a 12-month halt to initial work on the Nakheel Tower, a planned kilometre-high skyscraper, citing “current market trends”. House prices in the emirate fell 8 per cent in the fourth quarter, according to Colliers International, a real estate consultancy. Abu Dhabi, Dubai’s bigger, wealthier neighbour, has also seen job cuts, not just in construction and property but in financial services too. Mounting gloom recently led Standard Chartered, the UK bank, to cut its full-year UAE growth forecast to just 0.5 per cent from an earlier 2.7 per cent estimate – well below the 7 per cent rate of recent years.

Wednesday, 21 January 2009

New Star's A-rated Thakrar exits (registration required to access)

New Star's A-rated Hitesh Thakrar (pictured) has left the group and is understood to be joining a Abu Dhabi sovereign wealth fund.

His departure sees the management of the New Star Global Equity fund passed to Nick Sheridan, who also manages the New Star European Value Fund.

Thakrar had built a good reputation at New Star and held a Citywire A rating. He is understood to be joining an Abu Dhabi sovereign wealth fund based in London. According to Lipper, he performed in line with his peers over one year to the end of December returning -26.06% on the New Star Global Equity fund, versus a peer group average loss of 26.03%.

Saudi Stock Market Weekly Report 21-01-2009

Monthly Oil Bulletin for the period (17 Dec 08-16 Jan 09)

Global Investment House, Kuwait monthly Oil Bulletin.

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Dubai looking to life after the bubble

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Article published 5th January, 2009, today's date 21st January, 2009.

We have to bring the banking sector back to life

There was a time when US banks were like the high-priced properties on a Monopoly board: expensive to buy yet very profitable, especially once you added houses and hotels. This is no longer the case. Banks increasingly resemble the utilities on the board: cheap to buy, with low revenue potential and limited ability to leverage.

The transformation of the banking system into a utility model has become inevitable in light of the risks that banks’ damaged balance sheets pose for the broader economy. The process is being driven by both market- and government-related factors and the implications are huge. In the weeks ahead, look for bold government initiatives, even greater fiscal spending and a further subordination of equity holders. The longer-term impact is even more consequential and threatens to erode the dynamism and growth potential of the US economy.

Banks play an important role in any economy – so much so that, by efficiently channelling funds to productive uses, they can meaningfully improve prospects for employment and wealth creation. Yet, if they run into difficulties, they become sources of turmoil and painful contraction in economic activity.

Saudi Arabia and the need for $75 oil

Not long ago, when oil prices were at historically high levels, there were calls from within the Organisation of the Petroleum Exporting Countries for production cuts to keep them there. These efforts failed, and Saudi Arabia was responsible for unilaterally increasing supplies to try to calm the market. In fact, the Kingdom saw that while extremely high oil prices may be good for the short-term budgetary needs of oil producing states, they are not good for the global economy. Oil prices have fallen dramatically and oil consumer nations should recognise Saudi Arabia’s long-standing defence of “fair” oil prices and stable production, and realise that just as unrealistically high oil prices are unadvisable, so too are unrealistically low prices. The Kingdom has called for a “fair” price of $75 and, considering the global economic climate, that is an appropriate number.

Crucially, the next few months will be among the first in Saudi Arabia’s history where more than 35 per cent of its oil production capacity is likely to remain idle – far above the historical norm of 15-20 per cent. That comes at an enormous cost, estimated to be more than $15m per day. No other country has the discipline to maintain that much idle capacity. By the end of next year, Saudi Arabia’s oil capacity will reach 12m barrels per day, the result of an estimated $60bn in expansion investments. While this spare capacity will be painful for the Saudi government to carry, it highlights the ever-growing power that the Kingdom maintains over energy security and global prices. With millions of barrels in spare capacity, Saudi Arabia will continue its traditional role of stabilising prices and it will continue to be an essential buffer against any unforeseen supply disruptions.

Singapore in a sling

In good times, governments have the luxury of fretting about an ageing population. In bad times, they start to worry about a vanishing one. Singapore, the beneficiary of a population that grew by almost a fifth during the economy’s recent fairytale years of high growth and low inflation, is undergoing a sharp reversal. Almost two-thirds of 796,000 new positions since 2003 were filled by foreigners, mostly in construction and financial services. Of them, 200,000 will leave by 2010, reckons Credit Suisse, causing the population to fall 3.3 per cent to 4.68m.

As harsh as that looks, the prediction implies that the economy merely gives up the jobs it created in 2008 and a portion of the new jobs in 2007. The reality could be far worse. Many expatriates took their leave during a shallow Sars-related recession in 2003, causing population growth briefly to dip below zero. This time, companies will cut deeper. Fourth-quarter gross domestic product contracted 12.5 per cent – the worst on record. The electronics assembly sector, accounting for two-fifths of non-oil exports, has been hard hit.

State Street

The stock market has not yet lost its capacity to be shocked. State Street – among the largest providers of stodgy but dependable custody services, and one of the “too big to fail” banks that first received federal bail-out money – was supposed to be safe. On Tuesday morning, however, its shares halved.

The rout followed fourth-quarter results that lowered this year’s earnings expectations. Investors also had the long weekend to digest a filing with the Securities and Exchange Commission. The 31-page form presented a list of risks that investors should consider, in effect bringing to their attention a variety of novel ways in which the company could lose money. State Street may be forced to bail out more money market funds that have “broken the buck” – that is when the net asset value of a cash vehicle falls below par. There is also a danger that mark-to-market losses on asset-backed securities may have to be recognised if impairments prove to be more than temporary. Unrecognised losses on instruments that State Street intends to hold to maturity now stand at $5.9bn.

European EMs suffer most

It has been a bad start to the year for the markets of eastern and central Europe.

After a dire 2008, the new year has brought little relief for these emerging economies as their equity and currency markets have been the laggards, underperforming developing markets in other parts of the world.

With every kind of economic data deteriorating across the globe in what has been described as the most synchronised recession since the 1930s, no market is safe from the general malaise.

Abu Dhabi awards green prize

Abu Dhabi on Tuesday awarded the boss of the renewable energy subsidiary of a Nobel prize-winning microfinance bank a $1.5m prize for bringing energy to millions of poor people.

The Zayed Future Energy Prize was awarded to Dipal Chandra Barua, the head of Grameen Shakti, for the Bangladeshi company’s work in installing more than 200,000 solar panels to provide renewable power to 2m mainly rural people.

Abu Dhabi, the wealthy capital of the United Arab Emirates, is spending billions on renewable technology development through its Masdar initiative as part of an economic diversification drive.

Arab states to form $2bn business fund

Arab states agreed to form a $2bn fund to help small businesses through the credit crunch, one of the few concrete initiatives to emerge from an economic summit in Kuwait on Tuesday.

Mohammed Al Sabah, Kuwait’s foreign minister, told reporters at a press conference that the fund, to be managed by the Arab Development Fund, would include a microfinance programme to extend credit to cottage industries and help reduce unemployment in the Arab world.

“It’s already been proved that economic activity is the best way to control poverty,” he said at the end of the two-day Arab Economic, Social and Development Summit in Kuwait.

Sabic profits sharply lower

Saudi Basic Industries , the biggest listed company in the Middle East, said on Tuesday, that its fourth-quarter net profit fell 95 per cent, sharply below analysts’ expectations.

Net profit fell to SR311m ($83m), from SR6.87bn a year earlier, the company said. It attributed the sharp drop to a decline in demand for petrochemical products – particularly speciality plastics – in the global automotive industry and building sectors.

The company said affiliates outside Saudi Arabia had been particularly adversely affected, but the scale of the underperformance caught analysts by surprise.

Shuaa bond dispute vote postponed

A shareholder meeting to try end the dispute over a convertible bond between Shuaa Capital and Dubai Banking Group on Tuesday was postponed after too few voting members turned up.

The extraordinary meeting was to vote on a compromise that would allow DBG to delay the conversion of a convertible bond originally due last October. But with less than 50 per cent of shareholders or proxy votes present, the meeting must be re-convened within 30 days.

Analysts are worried about Shuaa’s financial risk profile if the bond does not get converted, which would make it appear as debt on the bank´s books rather than equity.

Sharp fall in business confidence

Business confidence in the Gulf fell sharply in the last quarter amid sector-wide layoffs, earnings report fears and unstable market conditions, according to a business survey released Tuesday.

While sentiment in Qatar and Saudi Arabia showed a more gradual decline, the UAE business outlook showed the steepest dip, falling to a rating of 62.2 out of 100 in the quarterly HSBC Gulf Business Confidence Survey. The survey tracked business sentiment across all six Gulf nations through a series of questionnaires in the first week of this month.

Even within the UAE, the survey revealed distinctions in business confidence. In Abu Dhabi, 43 per cent of businesses were optimistic about revenue growth, compared with just 26 per cent in Dubai, while negative sentiment about meeting annual budgets was twice as high in Dubai, at 35 per cent, as in Abu Dhabi, at 17 per cent.

Markets at four year low

Stock markets in Abu Dhabi and Dubai slumped to their lowest levels in more than four years yesterday after oil dipped below US$33 and poor fourth-quarter results confirmed the global financial crisis is hurting the region.

The sell-off was triggered by Saudi Basic Industries Corporation (SABIC), one of the world’s largest petrochemical firms, which reported a 95 per cent drop in fourth-quarter profit. SABIC shares tumbled 9.8 per cent, leading declines on all seven bourses in the Gulf.

“SABIC is a bellwether stock, not only in Saudi Arabia but for the entire Gulf, and markets will take a cue from it,” said Shakeel Sarwar, the head of asset management at SICO investment bank, based in Bahrain.

Tuesday, 20 January 2009

Roubini: Not even halfway there

Nouriel Roubini is just a day late to make the most depressing day of the year just that little bit more painful, but his latest missive is sure to continue the pain into Tuesday.

By his calculations we are not even halfway through the fallout from the financial crisis. In fact, we seem at least a couple of trillion away from it:

Jan. 20 (Bloomberg) — U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

GLG hires Pendragon founders

UK hedge fund GLG Partners is hiring the founders of smaller firm Pendragon Capital in a move that signals how the tricky markets are making it increasingly tough for small managers to go it alone, reports the WSJ. Emmanuel Roman, GLG’s co-chief executive, said the firm will hire Pendragon founders Kaveh Sheibani and Julian Harvey Wood, who specialise in making bets on merger deals and other corporate events. Much of the few hundred million dollars in assets Pendragon manages is likely to follow Sheibani and Harvey Wood to GLG, pending the approval of Pendragon investors. The move marks a reversal for the Pendragon founders, who held discussions with GLG about a year and a half ago but were not interested in joining a larger firm.

Abu Dhabi SWF exits Gatwick race

Six consortiums have submitted bids of up to £2bn for Gatwick Airport, but the Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, is understood to have dropped out, reports The Times. ADIA, which has assets of about $700bn, formally registered its interest in Gatwick last year, but did not submit an initial bid by Monday’s deadline of 3pm. The fund has spoken to other interested parties and is thought to be considering joining one of the consortiums in the coming months. Half a dozen consortiums submitted initial bids to RBS and HSBC, which are arranging the sale for BAA, the airports operator. However, the FT adds, bids are expected to be depressed both by the problems of finding sufficient debt finance - and the cost and terms of the debt - as well as by falling passenger traffic.

Rouble devaluation

It has been an expensive white-knuckle ride. But Russia’s step-by-step rouble “depreciation” since November appears to be in sight of the finish gate. Russia has upped the pace since the new year with six mini-devaluations, widening the rouble’s trading corridor against a dollar/euro basket.

It has now fallen 8 per cent against the basket this year, and 29 per cent since last August. Some believed pressure on the rouble was increasing and Russia might be forced into the sizeable one-off devaluation it has sought to avoid. But Arkady Dvorkovich, the Kremlin’s economic adviser, on Monday ruled that out, suggesting the currency was approaching the level where the current account balances.

Separately, Russia’s government published new budgetary assumptions based on Urals crude averaging $41 a barrel in 2009 – $3 below current levels – and an average exchange rate of Rbs35.10 to the dollar. That represents a further 10 per cent devaluation, less than is priced in by the forward market. The rouble would again look overvalued if oil prices dropped further. But if Russia can stabilise the rouble at that level for a while, Goldman Sachs notes, its total devaluation will be similar to other commodity-reliant markets such as Brazil, Chile and South Africa. The sense among foreign investors of an economy gradually unravelling may ease.

Qatar orders new property merger

Reuters - Pressure on Qatari companies to merge to withstand the global financial crisis increased after the government ordered a merger between Barwa Real Estate and Qatar Real Estate Investment Co.

The merger – the fourth in the Gulf Arab gas exporter in three months – comes as Gulf real estate markets suffer under the financial crisis and falling oil prices. The two companies have a combined market capitalisation of $2.5bn.