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Tuesday, 31 March 2009

Whatever happened to frontier markets?

Merrill Lynch’s international investment strategist Michael Hartnett posed the question in a report released on Tuesday, in which he noted, inter alia:

For much of the decade Frontier markets were an uncorrelated, outperforming asset class.

- Between 2000 and 2008, the Frontier market index had a low 32% correlation with the S&P 500, compared with 78% for Emerging Markets
(EM) and 86% for Developed Markets.

- Between January 2000 and August 2008, annualized returns from Frontier Markets were 19% versus 8% from Emerging Markets.

- And the perceived risks from Frontier markets were falling thanks to policy improvements - external debt as a share of GDP fell in almost all regions , most dramatically in Africa from 70% to 14% in Africa

Abu Dhabi’s IPIC Pays $4.4 Billion for No. 2 Stake in Cepsa

International Petroleum Investment Co., the state-owned company in Abu Dhabi seeking to capitalize on falling asset prices, agreed to pay 3.3 billion euros ($4.4 billion) to raise its stake in Cia Espanola de Petroleos SA.

IPIC will own about 47 percent of Cepsa, Spain’s second- largest oil producer, up from 9.5 percent before, the Abu Dhabi- based company said today in a statement. Cepsa, which closed at the end of last year at 67.60 euros a share, rose as much as 2.1 percent in Madrid trading after Banco Santander SA and Union Fenosa SA agreed to sell their stakes for 33 euros a share.

“The price looks reasonable for both sides,” said Francisco Salvador, a director at broker Venture Finanzas.

Rasmala lists MENA fund on Irish bourse

Rasmala Investments has listed its MENA Equity Opportunity Fund on the Irish Stock Exchange.

The Dubai based investment bank said that the fund will be the first publicly listed fund to offer international investors access to the MENA region.

“Many investors can only invest in instruments that are listed on a recognised exchange such as the Irish Stock Exchange,” said Eric Swats, Rasmala’s head of asset management.

“We are confident that we will be able to leverage our experience and on the ground presence in the MENA region as well as our access to top fund managers across the Middle East to deliver significant investment opportunities and unlock value in these exciting, rapidly growing markets.”END

Dubai will emerge stronger once again

Germans use the term schadenfreude to describe the experience of taking delight in the misfortune of another. It's an experience that's visibly reflected in international media coverage of Dubai these days. Indeed, for over a decade, Dubai has been portrayed as a model case study of economic reform and diversification. Now, the media seems equally keen to dramatise the city's challenges.

The media's fascination with creating celebrities and then equally delighting in their fall is, of course, nothing unusual. Movie stars and musicians will vouch for that. Of late, Dubai – with its international resonance and symbolic value as a global Arab metropolis – seems to be the favourite theme.

Not too long ago, we had the rather wry credit crunch catchphrase, "Dubai, Mumbai, Shanghai or goodbye" reverberating across media. The narrative at the time was a city supposedly insulated from the financial implosion that was still unraveling in the West. Going by the torrent of media commentary about Dubai recently, that narrative has come full circle. One prominent international glossy recently ran a story that simply said, "Goodbye Dubai."

Tier 1 capital targets may pose challenges for some banks in UAE

Raising Tier 1 capital ratio to 11 per cent by June 30 this year and adding a percentage point by the same date next year could prove a challenge for some small- and medium-sized banks in the UAE, analysts said.

The UAE Ministry of Finance has said banks that receive federal deposits will have to achieve a Tier 1 capital ratio of 12 per cent by next year in two phases.

The ministry, as an initiative to inject liquidity into the banking system recently, has parked Dh50 billion with the national banks – proportional to each bank's asset book size.

Power plants face funds challenges

A lack of long-term project financing may force the Abu Dhabi Water and Electricity Authority (ADWEA) to issue a bond or seek help from government entities to finance a power plant, a senior official said today.

But ADWEA has no intention of delaying construction of the US$2.5 billion (Dh9.18bn) Shuweihat 2 complex, which will generate 1,500 megawatts of electricity and almost 454 million litres of fresh water a day when it goes onstream in 2011, said Abdulla al Nuaimi, ADWEA’s director of privatisation.

“The market is still too difficult to give long-term financing,” Mr al Nuaimi told a power conference in Abu Dhabi.

UAE utilities form cable joint venture

The Abu Dhabi Water and Electricity Authority (ADWEA) and Dubai Electricity and Water Authority (DEWA), yesterday launched a Dh500 million (US$136.1m) joint venture to make high-voltage cables for local use and export to GCC countries.

Abu Dhabi and Dubai are seeking to diversify their economies and develop industrial sectors. The venture is a rare example of industrial co-operation between the two and expands a 50-50 partnership in Ducab, the cable maker.

“The project is a reflection of the UAE’s vision to grow the industrial sector and national infrastructure,” said Saeed al Tayer, the chief executive of DEWA.
Half of the shareholding will be held by Ducab, with the two emirates equally controlling the rest.

Abu Dhabi's bond issue gains pace

Bankers on the Abu Dhabi bond roadshow arrived in London today, having spent the past few days talking to investors in the US.

Citigroup, Deutsche Bank and JPMorgan Chase are looking to raise between US$2 billion (Dh7.34bn) and $3bn for the Department of Finance.

The offer is part of the emirate’s plan to eventually borrow up to $10bn in the international capital markets, and will be a significant test of how the global financial crisis may affect economic development plans.

DIB fraud is big enough to 'influence' the economy

The $501 million reportedly defrauded in the Dubai Islamic Bank (DIB) case by seven suspects is enormous enough to influence the course of the economy, argued a prosecutor before a court on Monday.

"The reportedly defrauded amount, $501 million (Dh1.8 billion), is massive and influences the economy of Dubai and the UAE," said Tarek Yaqoub Al Khayyat, Deputy Head of Deira's First Public Prosecution, in his argument when he addressed Presiding Judge Hamad Abdul Latif Abdul Jawad.

"As if the global crisis was not enough and there came the suspects, who were avaricious and held a grudge against the city and the country that welcomed them and helped them earn them a living. They waited for an opportunity to betray and stab Dubai in the back. They proved to be ill-minded and ungrateful to this country. We ask the Dubai Court of First Instance to implement the harshest punishment possible against the defendants so that nobody would ever dare to do what they did," Al Khayyat said.

Dubai will always be hub of commerce

The various cultural and econ-omic events that took place in Dubai in February and March have proved beyond doubt that the emirate will always be an international centre for such activities. Dubai, just like any other open city, interacts with the rest of the world in all aspects. And those who think they are sheltered from the repercussions of global events are wrong.

All countries, without exception, have been hit by the global financial crisis. But the crisis has affected developed parts of the world more than the less developed, and those who were slow and did not move forward.

The UAE - and Dubai, the trading hub, in particular - is naturally facing more challenges than other countries in this region. Actually, it would be surprising if Dubai had not been affected, just like any other active and expanding city.

Bahrain seeks to exploit the downturn

After years spent in the shadow of its neighbours, Bahrain is hoping to claw back some of the business it has lost as a financial centre in the Arab world.

While rivals such as Dubai have been hit hard by falling property prices and scandals, Bahrain has only wobbled. Two regionally owned but locally based banks, Gulf International Bank and Arab Banking Corporation, have admitted heavy losses from investments in the sub-prime property market. But the island’s promoters say they are the exceptions that prove the rule.

“In tough times, people want to be in the most stable place,” says Kamal Ahmed, chief operating officer of Bahrain’s Economic Development Board. “Of course, nobody is immune to the crisis, but we have certainly shown we are less exposed.”

Deluge of Gulf bonds promises market boost

Underworked regional bond traders will soon be handed a much-needed fillip by a deluge of sovereign bond issuance by Gulf governments.

Kuwait, Qatar, and Abu Dhabi and Dubai in the United Arab Emirates are all planning to issue billions of dollars worth of bonds. These are primarily to secure financing for important development projects and government-owned subsidiaries, and in some cases to plug budget deficits.

Yet analysts say the most valuable contribution from fresh government bonds would be to provide a vital benchmark yield that Gulf companies can use to improve pricing and kick-start a badly needed regional corporate bond market.

Monday, 30 March 2009

Abu Dhabi well placed to recover before other emerging markets - Healy

"Diversification, strategic partnerships, increased institutional participation and increased co-operation between the Gulf capital markets will help the GCC stock markets recover from the impact of the recent economic downturn", said Tom Healy, CEO of Abu Dhabi Securities Exchange.

Speaking at the World Exchange Congress in Monaco today, Healy outlined the impact the global 'credit crunch' had on the GCC stock exchanges. He also gave a positive outlook for the region's markets and explained ADX's strategy for future growth.

"The fall in oil prices and the fact that foreign investors had to sell out of emerging markets to cover positions in their home markets had an impact on ADXADX, but these were not the main reasons stock market prices in Abu Dhabi fell in the second half of 2008", he said.

Sovereign wealth funds

Shovel money into hole, douse with petrol, set alight. Gulf investors got burned last year after they invested billions of dollars in struggling banks. The Abu Dhabi Investment Authority and its counterparts in Kuwait and Qatar no doubt thought they were getting a great deal when they agreed to inject capital into banks such as Citigroup and Barclays. Events proved otherwise.

Big sovereign wealth funds and smaller state-controlled investment vehicles have retrenched in recent months as falling oil prices added to the pain. Still, with all that oil wealth to put to work, no one expected them to sit still forever. And with last week’s €2bn investment in Daimler, the German carmaker, by Abu Dhabi’s Aabar Investments, the sovereigns are back.

Of the ten biggest direct investments by the world’s sovereign wealth funds since 2007 – transactions totaling more than $60bn, according to Dealogic – only one was for a non-financial firm. After this expensive and lopsided diversion, further diversification makes sense.

Rothschild Competing For Advisory On $20B Dubai Bond-Source

DUBAI (Zawya Dow Jones)--Rothschild is one of two banks shortlisted to advise Dubai on how to use $10 billion pledged by the Abu Dhabi-based federal government to help the emirate through the economic downturn, according to people familiar with the matter.

The fiercely contested advisory mandate comes as Dubai intensifies its efforts to fend off the global financial crisis and gears its finances to cope with the cost of servicing the near $80 billion of debt racked up by its government and corporate entities.

If appointed, Rothschild will advise the Dubai Department of Finance on its $20 billion bond program launched last month, of which $10 billion was covered by the Central Bank of the United Arab Emirates, a person familiar with the deal told Zawya Dow Jones.

The person, who declined to be identified, said that Dubai's government will formally award the mandate this week to one of the two shortlisted banks. They didn't specify the identity of the other bank competing for the contract. Officials at Dubai government declined to comment.

A spokesperson for Rothschild in Dubai couldn't be reached.

The bank, headed by family patriarch Lord Rothschild, has gained a reputation as a financial fireman of late. It's advising Songbird Estates, the Morgan Stanley-backed group, that owns Canary Wharf in London on the refinance of more than $1.2 billion of debt and also helped the Dutch government with its $13.4 billion bailout of ING.

Dubai's $20 billion bond plan, and the subscription of the U.A.E. central bank to half the amount, followed months of concern that the emirate will struggle to repay its debt amid global financial turmoil.

The emirate's economy, 30% dependent on real estate, has been hit hard by a slowdown and concerns it may struggle to meet it's debt obligations.

-By Mirna Sleiman, Dow Jones Newswires, +9714-364-4966, END

Macquarie in a Brisconnections mess

Australian investment bank Macquarie - which prides itself on savvy investment strategies - looks to have landed itself in a right financial and legal mess in the form of toll road operator BrisConnections.

Macquarie on Monday took legal action in an effort to protect itself from having to cover millions of dollars worth of payments owed for shares in the A4.8bn ($3.27bn) toll road project. The Australian group became a key party in the venture along with Leighton Holdings, with a long-term agreement that they expected would bring hefty profits. But they are now looking at the possible collapse of the massive project.

Not only are banks which had committed to lend around A$3bn to BrisConnections looking distinctly reluctant now. But Macquarie - together with Deutsche Bank - had jointly underwritten a A$390m call due April 29 as an instalment on shares - a call that shareholders are now indicating they will almost certainly fight. What’s more, Macquarie has just piled more than A$320m into bridging loan finance for the troubled company - and another A$390m instalment is due early in 2010.

Global's Jordan Weekly Market Report - March 26, 2009 (PDF)


· ADX: Abu Dhabi Securities Exchange (ADX) announced today it will, for the first time, be hosting the Annual General Assembly for the South Asian Federation of Exchanges (SAFE), on 11 March 2009.
· ARMENIA: The Executive Board of the International Monetary Fund (IMF) today approved a 28-month SDR 368 million (about US$540 million) Stand-By Arrangement for Armenia
· BBVB: Baku Interbank Currency Exchange will from March 5 begin trading the EUR/AZN_SWAP
· BELARUS: On 13 March 2009, Belarusbank received the status of WSE IPO Parnter and was approved into the programme aimed to attract foreign companies to the Warsaw Stock Exchange.
· BOSNIA AND HERZIGOVINA: Bosnia’s 2 regions agreed to seek financial assistance from the IMF in covering budget shortfalls.
· EGX: the Egyptian Exchange (EGX) is launching a new price index
· IMF: Growth in the resource-rich Caucasus and Central Asia (CCA) is projected to slow to under 2 percent in 2009 from 6 percent in 2008
· MSM: The Areej Vegetable Oils and Deriv announced 33.3% bonus share.
· MONGOLIA: Mongolian Parliement accepted the USD 1.1 billion economical support package plan.
· NASDAQ OMX: Nasdaq Omx pushing ahead with plans for an exchange in St.Petersburg, Russia
· ROMANIA: An IMF mission, led by Mr. Jeffrey Franks, will visit Bucharest during March 11-25, following up on the ongoing economic dialogue with the Romanian authorities.
· TURKEY: American strategist George Friedman, stated that the only source that Turkey is lacking is the force management politics .
· UKRAINE: Ukraine’s Naftogaz paid its February bill for Russian gas

Qatar to steam ahead despite crisis as GCC states slow down

Qatar's economy will steam ahead in 2009 when performance in most other regional oil producers will tumble and the global financial crisis is pushing many other economies into a deep abyss.

The gross domestic product of the tiny Gulf Opec producer leapt by more than 19 per cent in real terms last year and independent estimates showed growth could still be as high as 10 per cent this year.

The reason for such a strong performance at a time when other economies are jolted by the global crisis is that Qatar is set to almost double its production of liquefied natural gas to more than 60 million tonnes in 2009 before output peaks at 77m tonnes by end-2011. "Qatar's economy is still very strong despite the global financial distress…it will remain strong as it is a real economy which enjoys many advantages and points of strength," said Abdullah bin Hamad Al Attiyya, Qatar's Deputy Premier and Minister of Energy and Industry.

HCC opens office in Dubai and aims to raise up to $150m

Toronto-based private equity firm Hilco Consumer Capital (HCC) yesterday said it has opened its international office in Dubai and wants to raise up to $150 million (Dh551m) for a fund that will invest in distressed brands globally.

The firm is talking about triple-digit returns in a possible time frame of six to 12 months. "Our investors are seeing very healthy multiples on their investment. We do not have specific time lines in our documents, so our investors are patient. That being said, we have in the past delivered very good returns over six to 12 months," HCC Global Managing Director Reyaz A Kassamali told Emirates Business.

"It's a contrarian move in this economic environment because it provides opportunities where others may not see them. The fund is open-ended; we allow new LPs [limited partners: a term that defines investors in a private equity fund] to participate as we go along."

FGB and Adib get Dh6.7bn finance for Tier 2 capital

Two Abu Dhabi-based banks have secured a total of Dh6.7 billion ($1.8 billion) in fresh capital from the emirate's government, the banks said yesterday, following similar moves by rivals as the downturn bites.

First Gulf Bank (FGB) received Dh4.5bn from the Abu Dhabi finance ministry and said it would convert it into Tier 2 capital, the second most reliable form of capital from a regulator's point of view.

Abu Dhabi Islamic Bank (Adib) got a Dh2.2bn injection in emergency government deposits and converted it into regulatory capital, following similar moves by rivals in the credit crisis.

Tamweel chief wants urgent property aid

The Government must urgently add liquidity to limit the drop in property prices and revive the economy, the chairman of Tamweel, the country’s second-argest home finance provider, said yesterday.

The fall in property prices is bringing “huge losses” to investors in the country, Sheikh Khaled bin Zayed said.

“Unless we bring in financing for the real estate sector, I do not think the economy can be revived,” Sheikh Khaled said on the sidelines of a Dubai Economic Council conference.

Sama fraud defendants just took normal commissions, trial told

Reselling property on behalf of a third party and earning commissions on that sale is normal and acceptable practice in Dubai’s real-estate market, witnesses in the Sama Dubai corruption trial told the Dubai Criminal Court of First Instance yesterday.

Lawyers acting for five defendants in the case, who include the former chief executive officer of The Lagoons project, said that the witnesses’ evidence showed that their clients’ actions were not illegal.

“All of the defendants worked as real-estate brokers before joining Sama Dubai, and all they did was outside their official duties; they brokered the sale of property, which many witnesses yesterday said was acceptable practice in the real-estate market,” said Hamdi al Shiwi on behalf of MA, 41, the Emirati former sales manager at Sama Dubai’s The Lagoons project.

Dubai outlines plan to escape doldrums

Dubai will this week outline borrowing terms to government-related companies in need of assistance as it seeks to inject much of its $10bn borrowing into the domestic economy to help lift the emirate from its economic malaise.

The government is about to appoint a financial adviser to hammer out loan terms for companies wanting credit lines from the $10bn loaned in February by the United Arab Emirates central bank to the city-state, which is suffering in the global crisis.

The first half of a $20bn government bond programme aims to help the emirate’s corporate giants pay off roughly $75bn (€56.4bn, £52.4bn) debt and meet commitments, especially in the troubled real estate sector, where some state developers have failed to pay large invoices for the past nine months.

UAE faces 2% deflation following sharp fall in rents

The UAE faces two percent deflation in 2009 driven by a 50 percent fall in Dubai rents, EFG-Hermes said in a report published on Mar. 26.

Egyptian investment bank EFG has also revised its GDP forecast to an overall contraction of the economy of 1.7 percent, meaning the country is likely to fall into recession this year.

Rents are a key driver of inflation, particularly in Dubai, and have been plunging in the last four months as the property downturn bites.

JCCI revokes weekend change

The board of directors of the Jeddah Chamber of Commerce and Industry has reversed a decision to change its weekend to Fridays and Saturdays.

The Jeddah Chamber of Commerce and Industry announced last week it was switching its weekend starting April 1 and that the Jeddah Chamber of Commerce and Industry board of directors had unanimously approved the move. However, a circular issued by the board of directors yesterday asked staff members to take note of new timings from April 1, which include the whole of Thursday and Friday off. Staff at the Jeddah Chamber of Commerce and Industry previously used to work half day on Thursdays.

Al-Sharif Awad Al-Hibaili, chairman of the JCCI Labor Committee, said a number of staff members had reservations about Saturday being a holiday and asked the board to reverse the decision to change the weekend. "The board of directors showed understanding toward the staff's request and revoked its earlier decision," he added.

Bahraini businessmen protest ex-pat tax

Hundreds of owners of small businesses in Bahrain demonstrated on Sunday in protest against a monthly tax they have to pay for each expatriate worker they hire.

The businessmen, many of them construction contractors, are unhappy with the ten dinars (26.5 dollars) per person monthly fee imposed on them by the Market Regulatory Authority, a government body, for their expatriate employees.

More than 1,000 business leaders took part in Sunday's protest, Ali Marhoun, head of the contractors' association, told AFP.

Sunday, 29 March 2009

Power 100 2009 The World's Most Influential Arabs (Results)

Global's Egypt Weekly Market Report - March 26, 2009 (PDF)

Currency futures gain allure amid volatile prices

Currency futures are showing signs of becoming the most attractive alternative asset class in the UAE so far in 2009, led by continued price volatility and a focus on currency risk hedging strategies, said Malcolm Wall Morris, chief executive officer of the Dubai Gold and Commodities Exchange (DGCX).

"The ongoing volatility in the currency markets will continue to encourage market participants to hedge their exposure to foreign currencies. From a long-term perspective, currency futures are especially beneficial to both individuals and commercial entities with investments abroad or those who are planning to invest abroad," he said.

Since the start of 2009, 147,000 currency futures contracts have traded on DGCX, valued at $9.4 billion (Dh34.5 billion). This compares with 53,000 and $4.6 billion during the same period last year, representing a 104 per cent growth in the value of contracts traded for the currencies product range.

Saudi Arabia's bourse regulator probing 92 cases

Saudi Arabia's bourse regulator is probing 92 cases of suspected violations including price manipulation and improper disclosure, the regulator's chief said in remarks published on Saturday.

"There are 92 cases in the phase of subpoenaing and interrogation," Okaz newspaper quoted Abdul-Rahman Al Tuwaijri, chairman of the Capital Market Authority (CMA), as saying.

The cases are among 151 cases registered last year which involve suspected manipulation, misleading, and irregular disclosures and trading, he said.

Risk appetite extends to emerging market as equity funds spiral

The appetite for chasing higher risk and bigger returns increased last week as flows into emerging market equity funds hit a year-to-date high, a new research has revealed.

Emerging markets bond funds snapped a 10-week losing run and high-yield bond funds had their second best week of 2009 as investors regained more of their appetite for risk during the fourth week of March.

Money market funds, which are generally used by risk-averse investors, posted a third consecutive week of outflows and index funds geared to US equities surrendered $4.5 billion (Dh16.5bn) as more money found its way into actively managed equity and fixed-income funds, according to data released by EPFR Global.

Bahrain Mumtalakat delays plan to increase foreign investments

Bahrain's sovereign wealth fund has delayed by a year plans to increase foreign investments to almost half its total assets and would instead focus on assets at home, chief executive said.

Bahrain Mumtalakat Holding announced in April plans to diversify its portfolio by raising foreign investment to 50 per cent from more than two per cent.

"The implementation of that strategy has been slowed down," Talal Al Zain told Meed magazine.

Gulf sovereign wealth funds see further fall

The global financial distress has inflicted heavy losses on state funds from the Gulf oil heavyweights and their assets will likely erode further in 2009 because of low oil prices, according to a US study.

Even if oil prices averaged around $75 (Dh275.49) in the next few years, the asset portfolio of the sovereign wealth funds (SWFs) in the region could still suffer as high public spending means little surplus will be left for those funds, said the study by the New York-based Council on Foreign Relations (CFR).

In a working paper by two of its experts, CFR said the assets of those funds, especially the Abu Dhabi Investment Authority (Adia), had largely been overstated, estimating Adia's funds at below $300 billion.

Derivatives growth outpaces equities

While equity volumes on Nasdaq Dubai see-saw, derivatives trading has seen phenomenal growth this year.

This month till date, the number of derivative contracts rose to 4,536 over February's 386 contracts, which had grown 329 per cent over January.

Analysts attribute this to key factors such as larger institutional participation and the hedging mechanism inherent in derivative products.

Zain to delay London listing until next year

Zain, Kuwait's largest company by market capitalisation, will delay its listing plans until next year, Emirates Business has learned.

According to Dr Saad Hamad Al Barrak, Deputy Chairman and CEO of Zain Group, the telecommunications group is putting the listing plan on hold until a more favourable time.

"We were planning in 2009 but because of the international crisis we are putting this on hold," he said. "We are ready to be listed in London's (London Stock Exchange) GDR listing however we'll wait for a more favorable time. We hope it's within 2010, maximum."

Boeing keen on emirate’s plans

After seeing European firms strike deals with Abu Dhabi over aerospace manufacturing, Boeing, the largest US aerospace business, is “very interested” in finding ways to fit into the emirate’s development plans.

Boeing believes there are potential synergies in creating joint ventures with firms including Mubadala Development, an investment company owned by Abu Dhabi, for aviation education, training, manufacturing and technological development.

“They clearly want to move forward with economic diversification in aerospace,” said Paul Kinscherff, the newly installed president of Boeing Middle East in charge of promoting Boeing commercial and military aircraft in the region.

Saudi market catches up on good news

Saudi investors yesterday responded to last week’s rally in global markets by lifting the Tadawul 2 per cent from Wednesday’s close.

The Saudi market was closed during the rally on world exchanges on Thursday and Friday. Having watched from the sidelines as signs of vigour emerged in global equities and oil prices, buyers yesterday raised the Tadawul for the 11th straight session. The index is up almost 15 per cent since March 11.

“I believe Saudi investors are responding to some of the good news in the global markets and economy that we have heard since Wednesday evening, when the Saudi markets were closed,” said Udo Schaeberle, the director of private clients in the Gulf for the German wealth management company BHF Bank.

MGM’s $200m ‘sign of good faith’

Dubai World describes a last-minute US$200m (Dh734.6m) payment by MGM Mirage for the CityCenter project in Las Vegas a “sign of good faith”.

The payment temporarily ensured that construction would continue on the $8.8bn casino and property project, which has fallen victim to the global shortage of credit and a drop in gambling in the US.

CityCenter is a 31-hectare project that includes several casinos, hotels, a new retail complex and other office and residential buildings on the Las Vegas Strip. It has been reported to be the largest privately financed construction project in the US.

Investors take heart from Dubai court ruling

The Dubai Property Court is emerging as a champion of the small investor following its inaugural ruling last week, lawyers say.

On Monday, the Property Court ruled that Mizin, a development arm of the government-owned investment company Tatweer, had to pay back Dh7.4 million (US$2m) and 9 per cent interest to an investor because Mizin did not register the transaction with the Dubai Land Department within 60 days under a new law.

The ruling has triggered discussion among investors and lawyers who believe the court is planning to take a literal interpretation of laws relating to the property sector, which could mean many investors getting their money back.

Saturday, 28 March 2009

Boeing, Dubai Aerospace Enterprise Capital Deliver First Emirates SkyCargo 777 Freighter

Boeing, Dubai Aerospace Enterprise Capital Deliver First Emirates SkyCargo 777 Freighter

Boeing (NYSE: BA), DAE and Emirates SkyCargo today celebrated the first 777 Freighter delivery to the Dubai-based air freight carrier, and the first ever Boeing delivery to Dubai Aerospace Enterprise. Dubai Aerospace Enterprise Capital, the leasing arm of DAE, has a total of eight 777 Freighters on order.

"Today marks a milestone in our relationship with two key customers based in Dubai," said Marty Bentrott, vice president of Sales for the Middle East and Africa. "The unmatched efficiency and reliability of the 777 passenger models have made it the premier twin-aisle choice for our Middle East customers - so too, will the 777 Freighter enhance air freight delivery to and from the region at the best margins achievable."

Emirates' first 777 Freighter is shown here taking off from Paine Field in Everett during flight testing earlier this month.

Pearls of retail wisdom

For every tale of rags to riches in the Emirates, there are few millionaires today who can truly say they started at rock bottom. Yusuffali MA is one of them.

At the age of 15, in the early 1970s, he travelled from his south India home with only the money in his pocket and a single suitcase.

More than 30 years later, the managing director of Emke Group has built a retail empire through the LuLu brand, with a reported turnover of $2.2 billion (Dh8.07bn) last year. And he loves to tell his story.

For the banks, we are all potential delinquents now (Three items)

I always understood delinquents were nasty antisocial types who hung around city centres giving offence to the general public in every possible way.

Often preceded by the adjective “juvenile”, they were the subject of much attention by the caring professions and the law enforcers, but they usually grew out of their bad ways, and went on to become decent members of society.

Not so in the UAE, it seems. Here, potential delinquents are you and me – expatriate workers who have maybe lost their jobs, or fallen victim to the global credit crisis in some other way, and who are aiming to run back to their home country leaving a wad of unpaid debts in their wake in the Emirates.

Bermuda beckons for Dragon Oil

Dragon Oil, a Dubai-based energy group that pumps oil in Turkmenistan and is incorporated in Ireland, may move its legal headquarters to Bermuda by creating a holding company there.

The proposal by the directors will require regulatory, court and shareholder approval, and comes as Dragon seeks to expand its operations internationally, and could result in tax savings on acquisitions.

Dragon’s board said it would allow the group to structure proposed new business ventures in a “tax-efficient manner”, and that details of the ventures would be provided to shareholders soon.

MGM pays up for Las Vegas venture

MGM Mirage provided US$200 million (Dh734m) in financing to keep on track a huge Las Vegas leisure complex that it is building jointly with Dubai World yesterday, the company said, after days of uncertainty and legal disputes that brought the project near to bankruptcy.

Dubai World had declined to come up with the financing, arguing in a law suit against MGM Mirage that the American company had mismanaged the $8.8 billion project and was unable to foot its side of the bill.

The CityCenter project, which is the biggest privately financed construction in United States history, is meant to be a crowning achievement for MGM Mirage. It stands on a 67-acre site between the Bellagio and Monte Carlo resorts on the Las Vegas Strip with hotel-condominiums, a casino and a 500,000-sqft shopping centre.

Credit firms rate Abu Dhabi highly

ABU DHABI was yesterday rated a safe investment by three leading credit-rating agencies evaluating a plan by the Government to borrow US$10 billion (Dh36.7bn) on the international markets.

Abu Dhabi was rated highly, implying a low risk of default, on the strength of its oil revenues, massive savings and low debt levels.

“The ratings on the Emirate of Abu Dhabi are supported by the Government’s very strong asset position, which provides significant financial flexibility, the country’s high level of political stability and wealth, underpinned by its rich resource endowment, and by policies that reinforce Abu Dhabi’s integration with the global economy,” said Farouk Soussa, a credit analyst at Standard & Poor’s.

MGM Mirage wins CityCenter respite

MGM Mirage has won a waiver from its lenders allowing it to provide $200m in funding for its estimated $8.7bn CityCenter mega resort, enabling development to continue and averting potential bankruptcy of the project.

The payment covers $100m that was to have been paid by MGM's partner in the project, Dubai World, the sovereign wealth fund-backed investor. Dubai World sued t he casino operator controlled by billionaire Kirk Kerkorian this week for breach of contract after MGM warned it was at risk of defaulting on its loans.

MGM said it and Dubai World would have to pay another $800m in combined equity contributions before they could tap a $1.8bn credit facility to complete the building of the massive luxury resort, shopping mall and residential complex located between the Bellagio and Monte Carlo resorts on the glittering Las Vegas Strip.

Friday, 27 March 2009

Investcorp Bids Credit Hedge Fund Adieu

It looks like the 16-month marriage between hedge fund seeder Investcorp and Washington Corner Capital Management, a distressed and credit-focused hedge fund, is over.

Spokesmen for Investcorp confirmed that the $4 billion seeding firm is unwinding its $50 million investment in the emerging hedge fund, which it seeded in November 2007. The firm was unavailable for further comments.

“We’re not under pressure to sign up funds, but, for example, we got Washington Corner and Stoneworks Asset Management at about the same time because we thought both of them were interesting,” Deepak Gurnani, co-head of Investcorp’s hedge fund, told FINalternatives at the time.

Investors put billions into emerging market equity funds

Funds dedicated to emerging market equities reported their largest weekly inflows since May 2008 during the week ended March 25th, Merrill Lynch said in a report on Friday.

These funds attracted $2.3bn in a third consecutive week of inflows, including $1.6bn through ETFs.

The top talking points, according to Merrill’s Josh Hartnett international investment strategist:

The money is 1) going in via diversified “global EM” category, 2) going in via ETFs which indicates retail & hedge fund activity and 3) going to EM rather than developed market funds.

Retail interest in EM picking-up a bit; inflows should make LO investors less fearful of redemptions/encourage lower cash levels. But no doubt flow numbers show that HF’s are using EM ETFs as a way to quickly raise risk levels; note EEM up a staggering 24.3% in March (that’s 1784% annualized).

Country focus: Indian tiger wounded but still in the hunt (Registration required)

In the first of a series of country-specific reports, Patrick Sherwen examines the complex and dynamic political and financial situation in India.

No so long ago, India – and its BRIC brothers Brazil, Russia and China – was considered not only a great investment opportunity, but one of the new drivers of global economic growth. Today, through the lens of global financial crisis, the perception is very different.

The Indian government has cut its growth estimate to 7.1%, from 9.6% in 2007 to 2008, which is optimistic compared with the 5.5% estimate offered by Citigroup. This is considerably better than the pre-liberalisation rate of about 3.5%, but still disappointing, and has dashed hopes that India would be more or less immune to the current troubles.

With an election only months away, what can investors expect to happen next? Will India return to its tiger-ish performance or will its previous growth be exposed as nothing more than an Indian rope trick?

Las Vegas Development Might File for Bankruptcy (Update 2)

CityCenter, the troubled residential and casino development in Las Vegas, has hired a law firm, Dewey & LeBoeuf, to prepare for a potential bankruptcy filing, people briefed on the matter said on Thursday.

Its developers, MGM Mirage and Dubai World, will likely fail to make a $220 million debt payment due Friday, these people said. The sprawling and unfinished $8.6 billion project may file for bankruptcy within days, though an agreement could be reached before then.

Talks among the developers, MGM Mirage and Dubai World, and their lenders are already under way.

Global's Kuwait Weekly Report - March 26, 2009 (PDF)

Al Boom loses Dh1.1 billion compensation claim

A court on Thursay dismissed a Dh1.1 billion civil compensation claim which Emirati businessman Abed Al Boom earlier lodged against the Dubai Public Prosecution.

Advocate Salim Al Sha'ali, who represents Al Boom, told Gulf News that he will appeal the Dubai Civil Court's primary judgment which was handed yesterday.

Al Sha'ali earlier lodged the civil lawsuit against the Public Prosecution which represents three government bodies, Dubai Police and Departments of Economic Development and Financial Control.

Global crisis shatters the decoupling myth

The economic fundamentals of the region are generally better than those of the rest of the world. The GCC countries have a combined population of 35 million and are cushioned by US$1.2 trillion (Dh4.4tn) of foreign assets, making it possible for their governments to implement expansionary fiscal policies. However, those GCC countries which are more integrated into the global economy, and whose financial systems have high loan-to-deposit ratios, are affected more than others (UAE and Kuwait more than Saudi Arabia). The myth that the region is decoupled from the rest of the world has been shattered. Not only is it not decoupled, but the region is very much influenced by what happens elsewhere.

Prices of the region’s main exports, such as oil, petrochemicals and minerals, are determined by world markets. The fact that the Gulf currencies have been pegged to the US dollar since the mid-1980s means that the exchange rate and domestic interest rates are also determined mainly by factors beyond our control. But above all, the region is an active participant in world financial markets. It is estimated that the private sectors of the region own US$1.8tn worth of foreign assets. The fear and panic that has hit the world has affected us. If our portfolio abroad suffers we tend to reduce our exposure to our regional stock markets.

We are forecasting an average oil price of US$40 a barrel this year. This is also believed to be the price per barrel assumed in the Saudi budget for the year. Oil prices may well drop below $30 if the US dollar strengthens against the euro, say to its purchasing power parity of $1.18, and there is a greater than expected slowdown in emerging countries, especially China which will grow at 3 per cent instead of the assumed 8 per cent.

Government moves to issue benchmark bond

The Abu Dhabi Government is moving to develop a more mature debt market by issuing a “benchmark” bond, bank sources say.

The news follows calls from officials and analysts for Gulf governments to issue the bonds, which are necessary for developing debt markets. A bond market attracting a larger number of buyers and sellers could eventually provide companies with an alternative way of raising funds, which have grown scarce since the financial crisis forced banks to cut lending.

The government bond is likely to raise at least US$500 million (Dh1.83bn) and be designed to set a pricing standard against which corporate bonds could then be priced. On Tuesday, the Bahrain government announced plans to issue a similar $500m sukuk. Qatar is also reported to be planning to issue its own benchmark bond.

Lufthansa sees UAE ‘imbalance’

Announcing a big increase in its services to the UAE, Germany’s flagship airline, Lufthansa, complained of an “imbalance” in competition with Emirates for air travel between the two countries.

The two carriers have a long-standing rivalry stemming from the threat Emirates poses to Lufthansa’s market share on long-haul routes between India and North America, and between Europe and East Asia.

Lufthansa complained about the difference in handling fees in Dubai and unequal opportunities in the two markets, prompting a swift response from Emirates.

Investors to control Iraq oil contracts

After months of criss-crossing Europe talking to investors, Iraq’s oil minister has decided to allow foreign companies to take a controlling interest in projects to boost oil production, reversing an earlier rule limiting them to minority status.

The move had been sought by international oil companies seeking a role in developing Iraq’s vast resources, after they had expressed concerns about the severity of the terms on offer. It follows a pivotal meeting last month in Istanbul and at this month’s OPEC conference in Vienna, where Iraqi officials met the heads of several companies.

“In Istanbul there were many questions and changes suggested to the model contract. We have found most of the suggestions and changes reasonable,” Hussein al Shahristani, the Iraqi oil minister, said after the OPEC conference in Vienna. “We fully understand that the companies do not feel comfortable with making such large investments if they don’t have control over the operating group to make sure they produce according to the time schedule.”

Decision imminent on Shahin prosecution

A decision will be reached within 10 days on whether to refer to court the case of Zack Shahin, the former CEO of the property company Deyaar and the first executive arrested as part of Dubai’s year-long corruption investigation, the Attorney General said yesterday.

“The investigation is 90 per cent complete,” Issam Humaidan told reporters at Dubai’s third annual Judicial Forum. “The file is with me and I will be reviewing it over the next few days, a decision will be made with regards to this case within the next 10 days.”

This month marks the first anniversary of Mr Shahin’s detention on allegations of betrayal of trust. Last month Mr Humaidan said investigations were nearing a conclusion and that charges of money-laundering were also being considered.

The Geithner plan explained (Click for video)

The plan announced this week by the US Treasury secretary Tim Geithner is designed to clear away a large load of so-called “toxic assets” clogging up America’s financial system. But what are these assets? And how will the plan work?

Normal loans go bad every time the economy enters a recession, as companies’ profits fall and mortgage-holders lose their jobs. But on top of that familiar problem, banks and other financial institutions have created complex financial securities, called derivatives, so blindingly complicated that even the people creating them didn’t really understand them.

With the financial markets in a state of high anxiety and uncertainty, no-one can be sure what these assets are really worth. They haven’t just gone sour. They have become toxic.

The banks and financial institutions that own these assets are caught in a bind. No-one wants to buy the assets from them at anything but extremely low prices. Selling them at those knock-down values could mean realizing huge losses and admitting they are insolvent – meaning they cannot meet their own liabilities. But until they can clear them off their books, the banks don’t want to take any more risks by lending out more money. Play the explainer below to see Mr Geithner’s strategy for unblocking the financial system.

State aid urged for Russian banks

Hundreds of Russian banks are likely to go under by the end of the year as the amount of bad loans surges, potentially hitting as much as 20 per cent of credit portfolios, a senior Russian banker has warned.

Pyotr Aven, president of Alfa Bank, one of Russia’s largest private banks, called on the government to move swiftly to recapitalise the top 30 banks and name the institutions that will receive assistance to help kick-start the flow of credit, which has almost dried up amid growing fears over bad loans.

“We can expect that the level of overdue loans for the whole system might reach 15-20 per cent” by the end of the year, Mr Aven told the Financial Times. “Maybe the 20-30 biggest banks, including Alfa, will receive state support – we’re sure."

Kuwait finally approves $5.2bn stimulus

Kuwait’s cabinet finally passed a $5.2bn economic stimulus package on Thursday after a dissolution of its fractious parliament allowed the government to implement the bill unopposed.

The package had previously stalled due to bickering between the cabinet, most of whose members come from the ruling al-Sabah family, and the combative Islamist-dominated parliament, which wanted to question Sheikh Nasser al-Mohammed al-Sabah, the prime minister, over allegedly misappropriating public funds.

Despite its vast oil reserves and $200bn sovereign wealth fund, Kuwait has been one of the Gulf countries most severely affected by the financial crisis. The parliament had delayed several economic laws and rescue bills, finally spurring the emir to dissolve the elected body last week.

Las Vegas Project Weighs Bankruptcy

MGM Mirage has hired counsel for a possible bankruptcy filing by an $8.6 billion resort and casino development in the heart of the Las Vegas strip.

MGM Mirage and investment partner Dubai World appear unlikely to make a $220 million payment due Friday on City Center -- a massive project under construction on 67 acres. MGM Mirage hired law firm Weil, Gotshal & Manges LLP to help prepare a possible Chapter 11 court filing for City Center, as well as to explore other options, according to people familiar with the matter.

A filing could come this weekend, depending on talks among MGM, its lenders and Dubai World, these people said. Of course, there always a possibility that any filing for court-protection could be averted if the talks lead to an agreement.

TrimTabs Estimates All Equity Mutual Funds Post Outflow of $10.7 Billion in Week Ended Wednesday, March 25

TrimTabs Investment Research estimates that all equity mutual funds posted an outflow of $10.7 billion in the week ended Wednesday, March 25, versus a revised outflow of $233 million in the previous week.

Equity funds that invest primarily in US stocks posted an outflow of $9.8 billion, versus a revised inflow of $131 million in the previous week. Equity funds that invest primarily in non-U.S. stocks had an outflow of $921 million, versus a revised outflow of $364 million in the previous week. In addition, bond funds had an inflow of $3.5 billion, versus a revised inflow of $5.6 billion in the previous week, and hybrid funds had an outflow of $323 million, versus a revised outflow of $201 million in the previous week.

Separately, TrimTabs reports that exchange-traded funds (ETFs) that invest in US stocks posted an outflow of $5.0 billion, versus an inflow of $891 million in the previous week. ETFs that invest in non-U.S. stocks had an inflow of $1.6 billion, versus an inflow of $126 million in the previous week.

Thursday, 26 March 2009

MGM Mirage plans to finish CityCenter

Las Vegas Gaming Wire

LAS VEGAS, Nevada -- A day after being accused by its joint venture partner of mismanaging the $9.1 billion CityCenter development, MGM Mirage said a lawsuit filed by Dubai World was "completely without merit" and the casino operator plans to complete the Strip development.

MGM Mirage attempted to quell nervous shareholders' fears after Dubai World, the investment arm of the Persian Gulf state, filed suit Sunday in Delaware Chancery Court asking for unspecified damages and seeking to be relieved of its obligations under the companies' August 2007 joint venture agreement.

MGM Mirage Senior Vice President of Public Affairs Alan Feldman Tuesday e-mailed a statement from the company before trading opened on the New York Stock Exchange and tried to deflect Dubai World's claims that question the viability of CityCenter.

"Dubai World is well aware of our written commitment to meet our funding obligations and that MGM Mirage has available cash to satisfy those obligations," Feldman said in the statement. "MGM Mirage is ready, willing and able to fund its share of the costs to complete CityCenter, including a required payment this week."

During MGM Mirage's fourth-quarter earnings conference call March 17, the company said it had $600 million in cash on hand. Three days later, the company collected another $600 million as the initial payment on the $775 million sale of Treasure Island to Phil Ruffin.

Geithner’s game plan (Click to access full text)

Sovereign wealth funds prefer equities (Complete article)

Sovereign wealth funds are overwhelmingly exposed to equities and fixed income, according to the latest data from Preqin, a research firm which focuses on alternative asset classes.

SWFs’ appetite for Western assets - notably financial institutions, is on the wane, with many funds turning to domestic and regional investments. (FT Alphaville can’t help but wonder how Prince Al-Waleed bin Talal feels about that Citigroup investment these days…)
But despite recent losses, the aggregate total assets of these funds have continued to increase, the London-based Prequin said. Assets under management currently stand at $3,220bn, a six per cent increase from the same period a year ago and a 59 per cent rise compared with 2007. Of course, there’s a hedge:

This growth is primarily due to the reclassification of China’s $312bn SAFE Investment Company as a SWF following its purchase of a number of public and private equity interests in 2008. Khazakstan has also incepted a new fund - the $29bn Samruk Kazyna National Welfare Fund over the course of 2008, while Korea is one of the existing funds that has boosted the assets of its SWF over the past year. These funds have counteracted the effects of declining total assets of some SWFs that have suffered as a result of poor investment returns in the wake of the global economic downturn.

Compliance, Moody’s style

The complicity of the rating agencies in the current financial mess is well documented. One of the major protestations from the agencies in response to various accusations, however, has been their robust internal checks and balances, which, clients and regulators are assured, make sure everything is done by the book.
Today though, another nail in the coffin of that particular trope. From the WSJ:

A former Moody’s Investors Service credit analyst has sued the company, alleging he was fired after his call on a bond rating was trumped by a manager’s concern about how much the bond issuer was paying Moody’s.

Onto specifics:

In his complaint, Mr. Bienstock says that on Dec. 4, 2007, he presented Express Scripts debt to a Moody’s committee for an upgrade from a speculative Ba1 to an investment-grade rating of Baa3, based on improved company performance. Mr. Bienstock alleges that the committee voted 5-2 for the upgrade, but his supervisor, Patrick Finnegan, the ratings committee chairman and then director of Moody’s corporate-finance group, called for a revote saying “Express Scripts doesn’t pay us,” and “they don’t visit us and they don’t deserve our upgrade.”

Mr. Bienstock said he protested, but the committee voted again, this time 6-1 against the upgrade.

Middle Eastern Wealth Funds Seek Mining Investments (Update1)

Sovereign wealth funds from the Middle East, and Japanese and Korean companies are seeking mining acquisitions and investments after asset values dropped, competing with Chinese companies, UBS AG said.

“This is the time to do that because asset values are low,” Paul Knight, managing director and joint global head of metals and mining with UBS, said today. “The Koreans are looking at acquisitions, and the Japanese to some extent.”

China last month agreed to invest $22 billion in commodity producers including Rio Tinto Group as indebted companies seek funds after the global recession and credit crunch spurred a collapse in metal prices and lending. Sovereign wealth funds may be diversifying after losing more than $60 billion since the onset of the credit crisis after investing in financial stocks.

NBK, Kuwait Finance, Commercial Bank Rated New ‘Sell’ at UBS

National Bank of Kuwait, the emirate’s biggest lender, Kuwait Finance House, and Commercial Bank of Kuwait were rated “sell” in new coverage at UBS AG.

“Falling asset prices spread like a sickness throughout an economy, damaging the banking system,” Dubai-based analyst Stephen Andrews wrote in a note to clients today. “The Kuwaiti banks face significant headwinds over the next 12 to 18 months.”

The analyst set a share-price estimate for NBK and Kuwait Finance House of 900 fils and for Commercial Bank of 650 fils.END

Cabinet approves draft bill on boosting Kuwait''s financial stability (End)

Iran-Armenia oil pipeline construction work begins

Armenian Minister of Energy and Natural Resources Armen Movsisyan said Iran-Armenia oil pipeline construction work has begun According to the report of Armenian news agency "Arminfo", Movsisyan in a press conference in Yerevan, capital of Armenia, on Tuesday declared beginning of construction work of the pipeline and said the pipeline will transfer oil products such as gasoline and gas from Tabriz refinery to Armenia.

Iran and Armenia reached a primary agreement on construction of a 300-kilometer pipeline from Iranian northwestern city of Tabriz to the border city of Mughri, in Armenia in 2007.

Movsisyan estimated the construction expenditure about 240 million dollars which will be paid by Iran in the form of a loan.

Property Prices' Biggest Declines in Hong Kong, London and Dubai

The Citi Private Bank report commissioned from Knight Frank provides a fascinating snap-shot of global property markets, and relative performance in the fourth quarter of 2008.

The biggest falls in residential property prices were in Hong Kong (-26.8%), Home Counties (-19.4%, the region surrounding London), London (-16.9%) and Dubai (-19.1%).

Annual gains
But the fall in the fourth quarter was insufficient to totally wipe out annual property price gains in three cities: Moscow (+13.1%), Shanghai (+5.2%) and also Dubai (+10.8%). Aside from Dubai the other property markets that slumped in the fourth quarter were all down for the year: Hong Kong (-24.5%), Home Counties (-10.2%) and London (-9.4%).

Dubai, Rome, Charlotte and San Francisco airports grew the fastest in 2008

Dubai and Rome have the world's two fastest growing airports, while Charlotte, N.C., and San Francisco lead the U.S. airports.

How do we know this? Because Airports Council International has released its preliminary passenger traffic numbers for the 30 largest airports worldwide, and that's what the numbers show.

On the other end of the scale, Chicago O'Hare saw its numbers drop the most, followed in order by Bangkok, Thailand, Las Vegas, Phoenix and Dallas/Ft Worth.

We're talking about percentages in those numbers.

If you take the actual numbers, the fastest growers in order are Dubai, Rome, Beijing, Denver and Charlotte, N.C. The ones that saw their passenger numbers decline the most were, in order, Chicago O'Hare, Las Vegas, Dallas/Fort Worth, Bangkok and Los Angeles.

Time is right for regulator

There probably has never been a better time to be a regulator. While some have been accused of sleeping on the job, others are making the most of the new appetite for greater regulation.

Paul Koster is the new chief executive of the Dubai Financial Services Authority (DFSA) in his office at the Dubai International Finance Centre (DIFC). He is a Dutchman with a wealth of experience, ranging from his time as the commissioner of the Autoriteit Financiële Markten (Netherlands Authority for the Financial Markets), executive vice president of Royal Philips Electronics and chief compliance officer at the Amsterdam Stock Exchange.

He has carried out a number of senior finance functions in his earlier career, having trained as an accountant with Arthur Andersen.

Government considers US stimulus model

The Government is considering new options to help aid the nation’s financial sector, according to the UAE governor of the Central Bank, Sultan bin Nasswer al Suwaidi.

He said the Central Bank is working with the Ministry of Finance to formulate new policies, similar to those that have been enacted in the United States and the United Kingdom.

“There will be some arrangements to help the banks [decrease their loan to deposit ratios], but there a lot of issues. There is not only one solution for the whole thing. It is not only a cash injection that you need to do. You need to do multiple things, like they did in the US or the UK,” Mr Suwaidi said.

Dubai’s flying buttresses

It is hard to believe that an airport that averaged 712 flights a day last year could have come from such humble beginnings half a century ago.

But in 1959, Sheikh Rashid bin Saeed Al Maktoum, the then Ruler of Dubai, ordered a strip of compacted sand be established along Dubai Creek to serve aeroplanes in need of refuelling during the “Horseshoe line”. The route was operated by British Overseas Air Co (BOAC), a precursor to British Airways, on the route from southern Africa via the Gulf to Sydney.

The airport was opened a year later and in 1968, the customs department hired Sultan al Joker who has been there for the past 41 years and is its longest-serving official. Mr al Joker was 18 years old and newly married when he became an inspector.

Crisis will not end in 2010: AMF

The international financial crisis will not end this year or in 2010 – and no one can predict when it will, said the Arab Monetary Fund (AMF).

"Nobody in the world can predict when the crisis will end and how far its repercussions will reach," said Dr Hazem Elbeblawi, an advisor to the fund.

Asked by Emirates Business about the extent of the losses suffered by the region as a result of the meltdown – said by some commentators to have reached $1.5 trillion (Dh5.5trn) – he replied: "There is no accurate figure and no Arab research institution has confirmed a figure.

Gulf SWFs to keep a low profile after slowdown

Heavy losses caused by the collapse of global markets will ally with the crash in crude prices to force Gulf state funds to slow down their investment push into the West and other countries, a key Saudi investment fund has said.

NCB Capital, an offshoot of the Saudi National Commercial Bank, said the sovereign wealth funds (SWFs) in the six-nation Gulf Co-operation Council (GCC) have received a severe blow from the global economic crisis as the bulk of their assets are based abroad.

It said the Abu Dhabi Investment Authority (Adia), ranked as the world's largest SWF, and other government funds in the region, could have suffered as much as 30 per cent loss.

Adih eyes US, Europe distressed assets

Abu Dhabi Investment House (Adih) aims to capitalise on opportunities in distressed assets in the US and European countries, said its Deputy Chief Executive Officer Fawaz Al Jowder.

In an interview with CNBC Arabiya, he said the company has extended its operations to North Africa including Morocco and Tunisia, and Southeast Asia.

Al Jowder added that the company has also made significant investments in funds such as the India Entertainment City, part of the Qatar Entertainment City.

Ipic completes acquisition of 70% of MAN Ferrostaal

The International Petroleum Investment Company (Ipic), owned by the Government of Abu Dhabi, has completed the acquisition of 70 per cent stake in Germany's auto maker MAN Ferrostaal.

Ipic has thus become the new majority owner of MAN Ferrostaal.

Ipic has acquired 70 per cent of the shares with 30 per cent retained by MAN shareholders. The price for 100 per cent of the shares will amount to about 700 million euros (Dh3.4 billion), depending on the outcome of a mutual option that MAN and Ipic have agreed on for the sale and purchase of the remaining shares. The transaction includes all business activities and subsidiaries.

MAN said in a statement that it had closed the sale of a majority stake in its Ferrostaal services unit to Ipic for €490m.

DP World profit up 48%, revenue rises to $3.3bn

DP World, the global terminal operating arm of Dubai World, has started 2009 with a decline in consolidated throughput across its network, with an average slowdown of eight per cent registered in the first two months of the year.

Despite announcing strong results for 2008, company officials said the volume deceleration witnessed in the last quarter of 2008 had continued into early 2009 with no signs of easing in the foreseeable future. The company considers its current market valuation disappointing and will call a board meeting in the coming months to evaluate available options to address the situation.

The company results announced yesterday showed profit after tax for continuing operations rising by 48 per cent to $621 million (Dh2.28 billion), while revenue growth increased 20 per cent to $3.3bn.

No delay in GCC monetary union: Attiyah

Gulf oil producers yesterday denied reports that they have shelved plans to launch a monetary union by 2010 and said the issue would be discussed by their heads of state at a meeting in May.

Quoting officials from the Gulf Co-operation Council (GCC) yesterday, Reuters and other news reports said member countries have decided to extend the 2010 deadline for the world's second currency union.

Reacting to such reports, GCC Secretary-General Abdul Rahman Al Attiyah said the 2010deadline remains in force, according to the Saudi Arabic language daily Al Jazeera.

Lehman investors seek Central Bank help

UAE-based investors who have purchased investments linked to failed US investment bank Lehman Brothers from the National Bank of Fujairah (NBF), have asked the UAE Central Bank to urgently resolve the complaint they have filed against NBF.

Investors are seeking the Central Bank's help in a complete waiver of repayment of leverage (loans) offered by NBF and the money they have invested in Capital Protected Notes sold by NBF.

Investors cite that similar complaints lodged by investors against banks in Singapore, Hong Kong and Europe have already been settled with waiver on the repayment of the leverage while in some cases banks have agreed to repay investors' money.

Emirates NBD open to government help

Chairman of Emirates NBD Ahmad Humaid Al Tayer on Wednesday admitted that accessing funding from the Dubai government or the federal government was an option to raise its capital base.

"All these banks worldwide are getting support from their governments. so if we get support from our government then that is normal," Al Tayer said. He said that any conditions for support had not yet been discussed.

The UAE Central Bank requires all banks to have a minimum capital adequacy ratio of 11 per cent by June 30, 2009, and of 12 per cent by June 30, 2010.

Egypt equities rally sparks wary optimism

The Egyptian bourse has been one of the hardest hit in the region by the global financial crisis, but in recent weeks the prices of bellwether shares have started to pick up. This has prompted cautious hopes that the market may have bottomed out.

Analysts report increased buying by foreign institutions interested in blue chips, including Orascom Telecom, Orascom Construction Industries and Ezz Steel Rebars.

“These have been the first solid moves up that we’ve seen across the board and that suggests we’ve turned a corner,” says Angus Blair, head of research at Beltone Financial, a regional investment bank. “It is unlikely that we will test the lows we have seen earlier.”

Loan worries weigh on UAE banks

If confirmation were needed of woes in the United Arab Emirates banking industry, Moody’s this month said it was considering downgrading the rating of HSBC Middle East, mainly due to the prospect of rising loan delinquencies in the UAE, its largest market.

HSBC Middle East said its charges for bad loans rose by five times to $280m last year because of a “significant” increase in consumer loan defaults, equivalent to about 1 per cent of the bank’s regional loan book.

The travails of UAE banks first emerged last year, when an exodus of international capital left an estimated $55bn hole in funding at local institutions, but the federal authorities acted swiftly to buttress the banking system. The central bank opened a Dh50bn ($13.6bn) credit facility, while the finance ministry said it would guarantee all deposits and interbank lending, and deposit up to Dh70bn with the banks.

Ras al-Khaimah mines a variety of seams

Ras al-Khaimah, the mountainous northern outpost of the United Arab Emirates, never had much oil, rather like Dubai, its more famous neighbour. But rather than basing its economy on trade, it chose to look underground for mineral wealth and to adopt an industrial strategy.

That has led to a large ceramics factory – RAK Ceramics – cement factories and quarrying in the Hajar mountains becoming the chosen vehicles for developing the emirate.

RAK Minerals & Mines Investments, a joint venture between RAK Ceramics and Trimex, an Indian minerals group, has taken that strategy international. The partners are investing in and developing raw materials for the industries that underpin the emirate’s fortunes.

Wednesday, 25 March 2009

Emirates NBD to Convert $3.43 Billion Deposits to Tier 2 Capital

Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, plans to convert 12.6 billion dirhams ($3.43 billion) of federal government deposits into Tier 2 capital, Chief Executive Officer Rick Pudner said.

The state-controlled bank’s capital adequacy ratio will rise to 15.6 percent, from 11.4 percent at the end of last year, after the deposits are converted into capital, Pudner told a conference today.

The lender needs to add 3.5 billion dirhams to its Tier 1 capital by the end of June, Chief Financial Officer Sanjay Uppal said earlier. The bank doesn’t plan to offer shares to raise the Tier 1 capital and it is likely to be in the form of a “perpetual debt instrument,” he said.

Saudi Stock Market Weekly Report Week Ending Wednesday, 25 March 2009

Dear AIG…

The NY Times on Wednesday featured a strongly-worded and impassioned letter sent by Jake DeSantis, an executive vice president at AIG’s financial products unit to chief executive Edward Liddy.

Here’s the 1,500 word dispatch in full:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

Kuwaiti Central Bank Advices Companies to Issue Bonds, Not Loans

Kuwait’s central bank urged private companies to use bonds instead of loans for financing, the bank’s governor said.

“We advised the private sector not to rely almost completely on loans instead of issuing bonds,” Sheikh Salem AbdulAziz al-Sabah said at a conference in Bahrain today. “This is an opportunity for the private sector to finance through bonds which can make the financial sector much deeper.”

GCC Shouldn’t Rush to Monetary Union, Al-Jasser Says (Update1)

The Gulf Cooperation Council shouldn’t rush into forming a single currency as member states need to work out the framework for a regional central bank.

“It took the European Union 45 years” to put together a single currency, Saudi Arabia’s central bank Governor Mohammad al-Jasser said in Manama, Bahrain, today. “We should not rush.”

Gulf Arab leaders approved an agreement in December to create a central bank and a regional single currency to help boost trade among the members. The heads-of-state agreement still needs to be endorsed by the national governments of the five member states, Saudi Arabia, Kuwait, Bahrain, Qatar, and the United Arab Emirates. Within the six-nation GCC, Oman has pulled out of the process.

Saudi credit growth still healthy -cbank gov

Saudi Arabia's central bank governor said on Wednesday that credit growth in the oil-exporting kingdom remained healthy.

'There is still very healthy growth in credit,' Muhammed al-Jasser told reporters on the sidelines of a banking conference in Bahrain's capital Manama.

When asked if the kingdom planned to issue government bonds, Jasser said: 'We don't need a government bond issue.'

UAE will not cut interest rates now -cbank

All Gulf Arab economies face a possible economic contraction this year but the United Arab Emirates will definitely not cut interest rates immediately, the UAE central bank governor said on Wednesday.

Sultan Nasser al-Suweidi told reporters that the UAE was looking at how to bridge loan-to-deposit ratios. He said that banks' capital adequacy ratios would be raised to 11 percent by June 30.

'A contraction is a possibility in all GCC countries,' he said. 'It is still on the drawing board with the UAE finance ministry to help bridge a gap between loans and deposit ratios.

Questions Still Surround Dubai World Lawsuit

The economy has taken a big toll on Las Vegas, with plummeting home sales and values, a decline in visitors, and layoffs and project delays. Now a lawsuit's been filed over the massive CityCenter project that is supposed to help the city rebound from the recession.

MGM Mirage says the lawsuit filed Monday by a subsidiary of Dubai World is "completely without merit."

The company released a statement Tuesday morning that says, "Dubai World is well aware of our written commitment to meet our funding obligations and that MGM Mirage has available cash to satisfy those obligations.

EIB loans and facilities up by 7.6% in 2008 to Dh448m

The Emirates Industrial Bank (EIB) offered loans and financial facilities worth Dh448m in 2008, according to the bank's annual report.

In 2007, the report said, the bank funded 49 projects worth Dh540m.

"Loans and other facilities grew by 7.6 per cent in 2008 to Dh448m from Dh416m in 2007," revealed the report which was discussed at the ordinary general assembly of the bank today. Figures showed that the bank has financed 613 out of 837 projects in the tune of Dh4.6 billion since its inception up to the end of 2008.

Nakheel delays $3bn mall work

Nakheel said its retail unit had delayed by 12 months its $3 billion (Dh11bn) mall expansion plans.

"Design work and site preparation for Nakheel Retails expansion plans has been delayed for 12 months," it said yesterday.

"We have the responsibility to adjust our short-term business plans to accommodate the current global environment; our short-term business model is aligned to meet market demand," it said.

Region’s airlines face $900m loss

A mix of falling revenues, high fuel-hedging positions and overcapacity will see Middle East airlines lose US$900 million (Dh3.3 billion) this year, according to a revised forecast by the International Air Transport Association (IATA).

Travel agents in the UAE, meanwhile, are expressing cautious optimism that travellers are slowly returning.

The speed and ferocity of the economic downturn in the final months of last year persuaded IATA to dramatically revise its forecasting yesterday. This year’s $900m loss is more than four times IATA’s prediction three months ago when it said its Middle East members would lose $200m.

Media circus distracts us from the main event

Along with the demise of investment banks, bundled securities, greed, and suburban living, let’s hope the global recession also does away with the 24-hour news cycle, that endless onslaught that is distracting us from the big picture.

The news last week that senior executives at American International Group, the ailing insurance giant and federalised money-pit, awarded themselves at least US$165 million (Dh606m) in bonuses triggered the inevitable Pavlovian response in the media.

Like iron shavings to a magnet, legislators raced for the TV cameras to exploit the popular ire.

Gulf states to issue bonds to cover debt

The central bank of Bahrain will issue bonds this year, one of a series of issuances planned by Gulf countries to finance potential budget deficits and bolster debt markets.

For 2009, Bahrain is budgeting for total expenditure of US$5.5 billion (Dh20.2bn) against income of $3.7bn, leaving a record projected deficit of $1.7bn. The bond issuance will help plug this gap.

“We are working on two issues, one in local currency and one in dollars,” the Bahrain central bank governor, Rasheed al Maraj, said at the GCC Banking Conference in Bahrain. “This will hopefully come soon. We are finalising the programme with the ministry of finance.”

VAT is not on the table

The UAE Government is not discussing value added tax (VAT) at the moment and would not be doing so in the near future, Emirates Business has learned.

According to Mohammed Ahmad bin Abdul Aziz, Director-General of the UAE Ministry of Economy, VAT is "not on the table". "It's not up for discussion… it's not on the table at the moment and we don't foresee that happening in the near future," he said on the sidelines of the Arab Investment Forum yesterday.

Hisham Abdullah Al Shirawi, Second Vice-Chairman of Dubai Chamber of Commerce and Industry, said he is not sure whether VAT will be implemented, adding that in times like these, the government is rather expected to lower its service fees.

Deadline for Gulf currency union extended

Gulf countries are extending a deadline to introduce a single currency for the oil-rich region owing to difficulties in thrashing out a common regulatory and monetary framework, a senior official admitted on Tuesday.

The six members of the Gulf Co-operation Council, a loose free trade area of Arab states, have long planned to introduce monetary union in 2010, but bankers have often questioned the feasibility of the deadline.

The countries, collectively known as the GCC, include some of the richest countries in the world, such as Saudi Arabia and the United Arab Emirates, and share a common language and culture.

Gulf emirates test appetite for bonds

Qatar and Abu Dhabi are testing the waters for benchmark bond programmes aiming to open capital markets and secure financing for ambitious development programmes, bankers say.

These oil-rich emirates want to tap investor interest in their diversifying economies as they seek to ease funding costs by helping foster domestic bond markets.

Abu Dhabi, the capital of the United Arab Emirates, is already testing the market for a deal that bankers estimate could raise about $2bn-$3bn, but may be part of a larger medium-term programme.

UAE, Kuwait most affected by global slump within region -- Deutsche Bank

Countries with economies that are more integrated into the global economic network are to be more seriously affected by the global slump, and this means the United Arab Emirates and Kuwait in the Gulf region.

However, Deutsche Bank CEO for the MENA region Henry Azzam told attendees at a seminar here Monday night that the fundamentals in the region are better than those elsewhere. He said the governments in the region have great room to maneuver investment and development in view of a population of 35 million supported by foreign assets at some USD 1.2 trillion.

The seminar addressed causes behind the current economic downturn and certain aspects of it which affect the region the most, and the expert said average growth rate forecast for this year was 1.5 percent for Saudi, 1.8 for Kuwait, 0.5 percent in the UAE, 1.2 in Oman, 1.5 in Bahrain, and 10 percent in Qatar.

Tuesday, 24 March 2009

Roubini sees light at the end of the tunnel

Whoever dares to ask Dr. Doom- Nouriel Roubini - if the crisis has reached its bottom, if the worst is behind us, must also have the courage to hear his answer that can be summed up in two letters, an predictably “no”. According to the professor of economics at New York University, which now enjoys an undisputed reputation worldwide for having predicted well in advance and with an accurate analysis the crisis that has brought the world to its knees, the markets have yet to discount other bad news: he is of the view - in truth he is not the only - that the rise in stock markets in the last few days are a temporary “bear market rally” with more contraction ahead. However, in an intense presentation held yesterday in Milan at a meeting organized behind closed doors by Calyon Crédit Agricole, Dr. Doom gave a glimmer of hope: “there is possibly light at the end of the tunnel,” he said, although with close teeth. That bottoming out however requires a number of conditions: it requires governments and central banks of the countries most affected by the worst recession since the Great Depression of 1929 – the United States, European Union, China and Japan in the first place - “to adopt anti-crisis measures that very aggressive and front loaded”. What has been implemented so far, in terms of fiscal stimulus and monetary policies, including unconventional policies, is not enough. The severity of the crisis is such – “the world economy in danger of falling into the abyss of a near depression” to put it as Roubini says it - that resolving this crisis requires major policy efforts and timely and bold decisions by the governments.

UAE eyes up to 40 pct savings on refinery projects

Abu Dhabi's state-owned refining company Takreer is hoping falls in commodity and raw material prices will cut its cost base on new projects by up to 40 percent, a top official at the firm said on Tuesday.

But the company has no plans to cut either spending or projects due to the lower oil price or tight credit markets, Takreer General Manager Jasem al-Sayegh told an energy conference.

"We are proceeding with projects as planned and on schedule," Sayegh said. "All our projects are self-financed and fully secured... In fact, we see opportunities in the current environment to save 30-40 percent on proposed capital costs."

Kuwait investment firms lose US$32 billion in six months

Assets held by Kuwaiti investment companies slumped by US$ 32 billion in the six months to January as a result of the global economic meltdown, official media said on Tuesday.

The assets of 99 Kuwaiti investment firms slid 31% to US$72 billion from US$104 billion at the end of July, the KUNA news agency reported, citing official figures.

The drop reflected a 45% or US$26 billion decline in their holdings of companies listed on the Kuwait Stock Exchange, as well as falls in local mutual funds and investments abroad.

MGM Mirage responds to Dubai World suit

MGM Mirage said a lawsuit filed Sunday by its joint venture partner in the $9.1 billion CityCenter development is “completely without merit” and the casino operator plans to complete the Strip development.

Dubai World, the investment arm of the Persian Gulf state, sued MGM Mirage, saying the casino operator mismanaged the massive development, leading to cost overruns and calling into question the viability of the project.

MGM Mirage Senior Vice President of Public Affairs Alan Feldman e-mailed a statement from the company earlier this morning before trading opened on the New York Stock Exchange.

Monthly Oil Bulletin - March 19, 2009 (PDF report)

"Oil prices recovered as weaker dollar, curtailment of investment by oil companies and implementation of output cut by OPEC is raising some supply concerns despite weak oil demand. US crude oil price crossed the US$50 per barrel mark for the first time in four months. US crude increased by 37.6% during the review period (17 February 09-19 March 09) to settle at US$51.61 per barrel mark. US crude has lost 64.4% since it reached an all-time high of US$145.16 per barrel on 14 July, 2008. Simultaneous recession in the US, Euro-zone and Japan along with slowdown in growth in the emerging economies is pointing towards weaker demand for oil in 2009. However, efforts by major countries to stimulate their economies and efforts by OPEC to balance the supply-demand mismatch is providing support to oil prices. OPEC basket and Kuwait export crude price followed the same pattern increasing by 12.5% and 16.5% during the review period to settle at US$47.39 and US$47.95 per barrel respectively."

Gulf States to Extend Deadline for Common Currency, al-Kaud Says

Gulf Cooperation Council states will extend the deadline to introduce a common currency, Nasser al-Kaud, deputy assistant general for economic affairs at the Gulf Cooperation Council said in Manama today.

The GCC’s monetary council will start operating by the end of this year, al-Kaud said at the 9th GCC Banking Conference.

The GCC members are Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain. The currencies of all the members, except Kuwait, are pegged to the U.S. dollar.

INTERVIEW-Dubai finance chief pinpoints $10 bln aid funds

Funds from an emergency $10 billion rescue plan will target Dubai World, Dubai Holding and domestic firms in the emirate's sovereign wealth fund's portfolio, Dubai's finance department head said on Tuesday.

A five-man fiscal committee, headed by Emirates airline chairman and local power broker Sheikh Ahmed bin Saaed al-Maktoum, was re-established a month ago to assess the companies' requirements and decide how the funds would be used, Nasser al-Shaikh told Reuters in an interview on Tuesday.

"We will not wait to support the companies, there are urgent requirements that need to be dealt with quickly," he said. "There is no free lunch; we will be helping companies on commercial terms."

Dubai Islamic Bank says mulls $817 mln capital hike

Dubai Islamic Bank DISB.DU will consider raising 3 billion dirhams ($816.8 million) in capital over five years and converting government deposits made as an emergency support measure last year into regulatory capital.

The bank said on Tuesday in a statement on the bourse website that its board of directors would discuss the two measures the following day.

For the full statment, click on: 39-208369dd6e81.jpg

Goldman works on iShares bid

Goldman Sachs is working on a bid for iShares, the securities lending and exchange-traded funds business being auctioned by Barclays. Bids, due by Friday, could put a value ofup to $6.5bn on iShares. Goldman and at least three other parties have expressed interest in iShares including buy-out group Bain Capital and a consortium led by Hellman & Friedman. Fund manager Vanguard is also thought to be interested.

Hedge funds to see record withdrawals

Hedge fund investors believe the industry will see even bigger withdrawals this year than last, when record levels of cash left the sector. A survey of investors by Deutsche Bank found that a third expect withdrawals of more than $200bn, after a net $155bn was taken out last year, according to consultancy Hedge Fund Research. Only a quarter of investors expect net inflows into the industry, and 82% of the 1,000 respondents said redemptions were the biggest issue for hedge funds.

Emal still on target despite recession

Emirates Aluminium (Emal), a joint venture between Abu Dhabi's Mub-adala Development Company and Dubai Aluminium (Dubal), said it is on course to start production early next year despite the global economic recession driving down demand for the metal.

Emal aims to develop the world's largest aluminium production site in two phases, each with 700,000 tonnes of annual capacity, in Khalifa Port Industrial Zone in Taweelah, half way between Abu Dhabi and Dubai.

"Emal is on target to start production in April 2010 and all aspects of the project are proceeding as per the plan," chief executive officer Duncan Hedditch told Gulf News in response to an e-mail question.

More exchange-traded funds in precious metals

The Dubai Multi-Commodities Centre may start more exchange-traded funds linked to precious metals this year.

The DMCC and the London-based, producer-funded World Gold Council created a gold-backed ETF that began trading in the emirate this month.

"We'll be adding more ETFs this year," DMCC Chief Executive Officer David Rutledge said in a March 17 interview. He declined to give further details.

UAE warns against protectionist measures

The UAE believes countries engaged in international trade should not impose protectionist measures, a senior official at the Ministry of Foreign Trade said.

"The imposition of protectionist measures by states is harmful, especially to the service sector which sees the greatest level of international development and growth," said Abdullah Al Saleh, ministry's Director General.

"It is necessary today to remove any restrictions obstructing the influx of foreign investment and to safeguard such investments.

A dozen UAE family firms seek ratings

Several UAE-based corporate entities, especially family-owned groups, are seeking credit ratings from international agencies, industry sources said.

More than a dozen large business groups from across the GCC, most of them from the UAE, have signed up with investment bank Alpen Capital for rating advisory services, Rohit Walia, Executive Vice-Chairman and CEO of DIFC-based Alpen Capital, told Emirates Business.

Although the UAE has the most sophisticated business environment in the Gulf, it needs to catch up when it comes to "density of rated corporates".

RAK to build Indonesian rail line

Ras al Khaimah has been granted a licence to operate a special-purpose, 120km rail line in Indonesia, as part of its plans to source coal for a power plant it is building in the emirate.

The first phase of the 1,000 megawatt (Mw) coal-fired power plant is due to be built in the next two years and requires planners to secure a stable and consistent supply of coal to ensure the plant’s reliability.

In addition to buying coal mines in East Kutai, in Indonesia’s East Kalimantan province, RAK entities are also building the railway at a cost of up to US$600 million (Dh2.2bn) to transport coal from the mines down to a jetty for export. East Kutai awarded the licence to a subsidiary of RAK Minerals and Metals Investments (RMMI), a unit of the Ras al Khaimah Investment Authority (RAKIA).

IPIC assumes majority ownership of Aabar

The International Petroleum Investment Company (IPIC), a Government energy investment fund, has assumed majority ownership of Aabar investments a day after the firm bought a stake in one of the world’s largest carmakers.

IPIC converted the second tranche of a Dh6.6 billion (US$1.79) bond it bought from Aabar in September, increasing its ownership stake from 36 per cent to 71 per cent, Aabar said in a statement.

IPIC’s full conversion of the bond will boost Aabar’s capital pool hours after it agreed to spend Dh9.73 billion to buy a 9.1 per cent stake in Daimler, the maker of Mercedes Benz.

Abu Dhabi’s goals

News that an Abu Dhabi-based investment fund is to take a strategic stake in Daimler will excite envy among other carmakers scrabbling for capital, along with the familiar sneers about Arab investors with more money than sense.

But we should look closer at what the oil-rich city-state is buying. Sitting on 8 per cent of the world’s crude reserves and the senior partner in the United Arab Emirates, Abu Dhabi is clear if not always transparent about its ambitions.

This is more than a portfolio investment. It is more than a strategic bet on the long-term success of one of the world’s top carmakers. And it is more even than a policy of mere diversification into activities other than oil. A lot more.

Kuwait highlights need for more democracy

Talking politics with Kuwaitis is always interesting. Invariably they have much to say and do not hold back in expressing their views.

The past week has been no exception as the government once again resigned and parliament was dissolved for the second time in a year. There were grumbles about parliamentarians; gripes about a lack of leadership and the weakness of the government; and speculation about rifts within the ruling family.

The analysis is often punctuated with sighs of frustration and chuckles – bitter-sweet laughs which reveal a dose of gallows humour. The cabinet has resigned five times in the last three years and Kuwaitis will vote in their second election in a year within the next two months.

Agility refuses to rest on Iraq success

The US invasion and occupation of Iraq may not have been popular in the Arab world, but it was the making of Agility, previously a small logistics company based in Kuwait.

The year before the 2003 invasion, Agility had revenues of $79m. By 2006, after winning lucrative contracts to supply the US Army with food and logistics services, sales jumped to $3.4bn.

“Their business before Iraq was mostly some warehousing and logistics, but then they got some major contracts from the US Army, which transformed the company,” says Kareem Murad, an analyst at Shuaa Capital.

UAE may rue its exodus of expatriates

In the United Arab Emirates, a deluge of foreign professionals has underpinned rapid economic growth. But as job cuts mount, analysts warn that the federation’s open and flexible labour market could backfire.

A swathe of job losses in real estate, financial services and tourism is leading to an exodus. The UAE’s labour and immigration laws allow for easy corporate cuts, but force expatriates who lose their jobs to find new employment within a month – or leave.

This has turned unemployment into emigration, and economists say the population of the UAE – one of the most lopsided and expatriate-driven economies in the world – could decline over the next two years.

Arab states bail out Gulf International Bank

Bahrain-based Gulf International Bank, one of the worst-hit financial institutions in the oil-rich Middle East, has sold $4.8bn of toxic assets to its shareholders, six Arab Gulf governments.

GIB, an investment bank owned jointly by the six hydrocarbon-rich members of the Gulf Co-operation Council, invested heavily in complicated debt-based toxic assets. Due to swingeing impairments and exposure to US banks such as Lehman Brothers, GIB has reported two years of losses totalling $1.1bn.

The bank’s shareholders – led by Saudi Arabia – injected an additional $1bn of capital in February 2008 to prevent the bank from going under and speculation of a Saudi-led takeover has been around since.

Daimler’s move possible ‘blueprint’ for carmakers

Investors and the German government hailed Daimler’s move to lure Abu Dhabi-based Aabar Investments as an anchor investor, in a deal that could act as a blueprint for other carmakers.

Daimler’s share price jumped by up to 7 per cent, after it emerged on Sunday that Aabar had invested €1.95bn ($2.65bn) for a 9.1 per cent stake in the German premium carmaker.

Investors cheered, even as Daimler’s 10 per cent capital increase diluted existing shareholdings.

Riyadh starts fund to oversee investment

Saudi Arabia is establishing a new company to oversee the investment of the assets of the oil-rich kingdom’s largest state-run pension fund, in a significant break from tradition.

The kingdom, which is ruled by King Abdullah and boasts the Arab world’s largest economy, has traditionally given the responsibility for managing its investments to the Saudi Arabian Monetary Agency (Sama), the de-facto central bank.

But under a move announced by the Saudi cabinet on Monday, the General Organisation for Social Insurance (Gosi) will establish a new fund to invest in local, regional and international stock markets. The fund, named the Hassana Investment Company, will also lead the development of real estate, commercial and services projects and be able to sell those projects, the statement said.

Dubai World sues MGM Mirage for breach (Update 1)

Dubai World, the sovereign wealth-backed investor and joint venture partner in MGM Mirage’s CityCenter development project, has sued the casino operator for breach of contract following the debt-strapped company’s disclosure earlier that it was at risk of defaulting on its loans.

The disclosure by the US company controlled by Kirk Kerkorian in early March, which also included a warning of a “substantial doubt about [MGM Mirage’s] ability to continue as a going concern” puts the $8.8bn luxury resort project in jeopardy, Dubai World said.

“The current path of the project is simply unsustainable given our partner’s financial troubles,” Dubai World said in a statement announcing the suit.

Monday, 23 March 2009

Dubai Bond Risk Falls to Lowest in 2009 on Loan Deals (Update1)

Dubai bond risk declined to the lowest this year on improving prospects that state-owned companies will get loans to refinance debt.

The cost of protecting against a default by the Dubai government fell to 650 basis points today from 669 on March 20, CMA Datavision prices show. The cost had surged to 1,000 basis points last month on concern Dubai will struggle to refinance its debt.

“Spreads on Dubai debt will come down further,” said Mohieddine Kronfol, managing director at Dubai-based Algebra Capital Ltd. “People are getting more comfortable with Dubai’s fundamentals. Also, some of the steps which the government has taken to ease the economic crisis have begun to work.”

MGM Mirage Faces Suit Over Dubai World Vegas Project (Update2)

MGM Mirage, the casino operator controlled by billionaire Kirk Kekorian, was sued by a unit of Dubai World, the state-owned investment group, claiming it defaulted on a Las Vegas joint venture.

Dubai’s Infinity World unit accused MGM of breaching its obligations under an agreement to jointly design, construct and operate a development on the Las Vegas strip called CityCenter. The lawsuit was filed yesterday in Delaware Chancery Court.

MGM’s admissions in its filing with the Securities and Exchange Commission on March 17 “constitute a breach of the CityCenter joint-venture agreement and puts the CityCenter development project at risk,” Dubai World said in an e-mailed statement today.