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Wednesday, 14 January 2009

Report sees Dubai population fall

Dubai’s recent surging population growth will reverse over the next two years as the troubled, but important, real estate and construction sectors cause the number of immigrants to slow and many expatriates to leave, a report said on Wednesday.

Over half of Dubai’s population is employed in the the real estate and construction industries, which are suffering from oversupply and a dearth of financing. Property prices fell 8 per cent in the fourth quarter, according to a report released on Tuesday.

Why we think HSBC needs $20-30bn of capital and to halve its dividend

That’s not the view of FT Alphaville but the banking team at Morgan Stanley who have published a detailed report on HSBC on Wednesday. And it really does not pull any punches.

Having lifted the lid on HSBC’s balance sheet, analysts Michael Helsby in London and Anil Agarwal in the far east, conclude that it is not as strong as the market thinks.

With $12bn of surplus capital carried at the group level has almost gone, HSBC’s Asian franchise is not as well capitalised as they previously assumed and $10bn of losses coming from HSBC’s US business and Available For Sale (AFS) portfolio, they reckon a cash call is inevitable.

Irish government warns it may need IMF help

The Irish government has told trade unions that it may have to seek help from the International Monetary Fund unless agreement is reached on public sector pay cuts.

Brian Cowen, prime minister, who is currently on a trade mission to Japan, confirmed government negotiators had warned about the consequences of a possible IMF bail-out in talks with union leaders last week.

Shuaa favours Saudi Arabia and Qatar

Dubai investment bank Shuaa Capital has announced that it will cut 9% of its workforce, or 21 jobs. "Our approach to managing our expenses is driven by the reality imposed on us from external market conditions and how we see our businesses performing next year," said Iyad Duwaji, chief executive. "We have a clear plan that reallocates resources to areas where we see demand in 2009, such as the Kingdom of Saudi Arabia and Qatar, and increasing our market share in brokerage and asset management," he said. Diminishing Gulf issuance has harmed Shuaa’s revenue.
Moody’s is reviewing the firm’s rating for downgrade.

Russian capital markets: Full of value or close to collapse?

NEVER LET IT be said that investors in Russia are short of a memorable turn of phrase when it comes to describing one of the most eventful markets. "The last few months have been like a Marxist’s wet dream – the rich have been absolutely decimated," says James Fenkner, managing director and founder of Red Star Asset Management. He adds: "The more money you had at the start of this crisis, the less you have now." Red Star is one of a legion of small hedge funds that have found the past months a traumatic experience as they’ve watched asset prices that have taken years to increase seemingly evaporate into the ether as investors have pushed the panic button and exited the Russian capital markets.

Magna Russia Fund December 2008 report

The Russian stockmarket remained depressed in December amidst continuing volatility and against a backdrop of currency devaluation. The Magna Russia Fund fell 13.5%, broadly in line with underlying markets.
The Russian authorities continue to manage the rouble down in a controlled fashion despite calls for a one-off devaluation. By skilfully widening the corridor within which the rouble can trade against its euro dollar basket at opportune moments, they have attempted to minimise their recourse to foreign exchange reserves and to maintain the population’s faith in the banking system. The rouble has now
fallen by more than 20% against the US dollar since the middle of last year, falling by around 8% in December alone. Although those Russian companies without US dollar or other foreign earnings have come under some downward pressure as a result of the weaker rouble, the market as a whole is beginning to benefit from the perception that order is being restored to financial markets that have been painfully disorderly for many months.
Charlemagne monthly report: Russia 12/2008

Europe baffled by broken gas promises

The bitter gas dispute between Russia and Ukraine descended into near-chaos on Tuesday, leaving European Union diplomats baffled as promises to restart supplies fully were broken and Moscow suggested that the US had meddled in the affair.

In a potentially alarming twist on Tuesday night, Gazprom, the Russian gas company, said it was unable to meet its legal commitments to supply European countries with gas because Ukraine was allegedly blocking the flow across its territory.

Russia and Ukraine both defied terms of a contract agreed last weekend with the EU to allow an EU-backed monitoring mission to observe gas transit, leaving people in 18 countries across the continent with supply disruptions.

Fund to repay investors in securities not cash

GoldenTree Asset Management, a credit hedge fund, is offering in­vestors who want to withdraw money securities instead of cash, triggering protests from those who in many cases lack means to dispose of such instruments, the FT reported. The fund, which specialises in investing in complex debt ins­truments, had about $10bn under management last year. But losses and redemptions could leave it with half as much if investors made good on withdrawal requests, a person with direct knowledge of the matter told the FT. GoldenTree was down more than 30 per cent in 2008 and is facing demands from investors for about 25 per cent to 30 per cent of their money, the person said.

ADX to List First ETF in March; Offer Derivatives by Year-end

ABU DHABI — Abu Dhabi Securities Exchange (ADX) will list its first Exchange Traded Funds (ETFs) in March, and will offer derivatives contracts by year-end, said its chief executiveTom Healy.

In an interview with Khaleej Times, Tom Healy said Abu Dhabi Securities Exchange would be the first bourse in the Middle East to offer an asset-backed product that would expand choices and opportunities to investors.

He said the ADX has received a tremendous response to its ambitious ETFs programme. Strong interest has been expressed by counterparts in Tokyo, Taiwan and in Pakistan who are eager to launch their ETFs on ADX in order to expand their investor base.

China trade

Detroit automakers, German industrialists, Japanese electronics makers – in fact, almost any manufacturer you care to mention – would delight at such a modest fall in their order book. China, the world’s favourite factory floor, reported a mere 2.8 per cent year-on-year drop in exports in December.

This undoubtedly understates, or rather lags, the damage. The biggest hint comes from neighbouring countries. Exports from South Korea and Taiwan, the third and fourth biggest exporters to China last year, in December plunged by 17 per cent and 42 per cent respectively. Many of these shipments contain parts which China processes or assembles and then ships on to the rest of the world. If Chinese imports of such components are down by about a third, you can bet a more serious export slump will follow soon. Prices are also falling. Chinese shipment prices to the US fell by 0.6 per cent month-on-month in November, according to US data. Morgan Stanley calculates the Chinese export contraction, measured in local currency, is about 10 per cent.

Citigroup moves towards break-up

Citigroup is to break itself up by separating higher risk US consumer finance and securities businesses from its global commercial banking operations in an attempt to ensure its survival.

People close to the situation said Citi would place unwanted assets and businesses worth more than $600bn – a third of its balance sheet – into a “non-core” unit to isolate them from healthier parts of the company.

Bankers said the new unit would remain on the company’s books but its results would be reported separately from the rest of the business in an effort to convince investors of the company’s viability. The non-core unit could be eventually sold in parts or as a whole or spun off once market conditions improved, they added.

Gulf indices likely to be excluded from EM benchmark

MSCI Barra, the global market index provider, indicated on Tuesday that it would not include three large Gulf stock markets in its main emerging markets index, mainly due to “stringent” foreign ownership restrictions.

The result of MSCI Barra’s preliminary assessment of the equity markets of the United Arab Emirates, Qatar and Kuwait doused hopes that an inclusion in the important emerging markets index would bring a flood of passive, index-tracking capital into the region.

The UAE’s two main stock markets in Dubai and Abu Dhabi were the premier contenders to join the MSCI Emerging Markets Index.

Saudis cut oil output beyond Opec limit

Saudi Arabia has unilaterally slashed its oil production by more than its agreed Opec limit, the kingdom said on Tuesday.

The rare and politically difficult move highlighted the huge losses the Saudis and other oil-producing nations face following the collapse in crude prices as the result of the global economic crisis.

Riyadh’s decision to step outside the group underlines how severely Opec, the oil cartel that supplies about 40 per cent of the world’s oil, is struggling to reverse the slide in oil prices, in spite of the record 2.2m barrel a day cut it announced last month. Oil prices traded on Tuesday at about $39 a barrel, boosted by Saudi Arabia’s decision, but remain well below the kingdom’s $75 target.

Etisalat wins Iran mobile licence

A consortium led by the United Arab Emirates’ state-controlled telecommunications company said it had won a bid for Iran’s third mobile licence on Tuesday, making inroads into a potentially lucrative market.

Etisalat, which is more than 60 per cent owned by the UAE’s federal government, said its consortium beat operators including Zain, Omantel, Telekom Malaysia and Bharti Airtel with a €300m ($396m) bid for the Iranian licence.

Middle East telecoms companies – primarily in the Gulf – have expanded rapidly in recent years, making more than $43bn of licence purchases and acquisitions since 2006, according to figures by Dealogic, a data provider.

DFSA Stops Issuing Licence Notices

DUBAI — The Dubai Financial Services Authority (DFSA) said it will stop issuing notices of the approval and cancellation of licences of companies operating in the Dubai International Financial Centre (DIFC).

“The DFSA has amended this policy so as to bring the DFSA more closely in line with the usual means employed by international regulators to provide that sort of information,” DFSA chief executive Paul Koster said in a statement.

The DFSA also said its public register can be accessed through its website www.dfsa.ae.

Brokers quit UAE market

Local brokerage companies are shedding jobs and cancelling their trading licences as they fall victim to an investor crisis of confidence brought on by falling stock prices in the region.

The Dubai Financial Market (DFM) was the world’s third-worst performing stock market last year as investors fled the property-heavy bourse. The DFM licensed five brokerage houses in the early part of last year, but applications dried up after July as the financial crisis unfolded and trading volumes declined.

Etisalat to offer 3G services in Iran

Etisalat will use a two-year period of exclusivity in offering advanced 3G mobile services to capture new, high-spending customers in Iran, where it has won the licence to become the country’s third mobile operator.

As in Egypt, where it launched in mid-2007 as the country’s first 3G operator, Etisalat will enter Iran offering a new generation of high-speed mobile services. But while its Egyptian competitors launched their own 3G services within months, Etisalat’s US$400 million (Dh1.46 billion) licence guarantees two years of exclusive service.
“Iran will be a unique launch for us. We are the third entrant, but at the same time we will be in many ways the first,” said Jamal Jarwan, the chief executive of Etisalat’s international unit.