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Tuesday, 20 January 2009

Roubini: Not even halfway there

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

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

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

GLG hires Pendragon founders

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

Abu Dhabi SWF exits Gatwick race

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

Rouble devaluation

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

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

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

Qatar orders new property merger

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

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

Telecoms spree set to dial down

Even after years of petrodollar-fuelled growth, few Gulf companies have made an impact on the international business scene. The region’s telecommunications companies are a notable exception.

Spurred by small, increasingly saturated but lucrative and partially protected home markets – and helped by government owners – Gulf telecoms companies have embarked upon an aggressive investment and acquisition spree in recent years.

According to Dealogic, acquisitions and licence purchases by Middle East operators jumped from $6.3bn in 2006 to $27.4bn in 2007. Even though the exertions of 2007 and the deepening of the credit crunch meant expansion activity slowed last year, Middle East operators still spent a further $9.6bn on licences and acquisitions.
Gulf telecoms markets are close to saturation

Oman’s economy on verge of slowing

As the global economy grapples with its worst financial disaster in decades, countries across the world are hoping that countercyclical spending will prevent or damp economic slowdowns or recessions.

The sultanate of Oman is the most recent addition to the swelling ranks of Keynesians. This month, the government pledged to increase spending by 11 per cent to OR6.4bn ($16.7bn).

While this will give Oman a budget deficit of about OR810m, or about 5 per cent of gross domestic product, policymakers are wary of the effect the credit crunch has had on oil prices and the country’s economy.

Norilsk eyes metal mega-merger

An ambitious plan to create one of the world’s biggest mining groups through the merger of up to five Russian companies has been proposed by two billionaire tycoons.

Oleg Deripaska and Vladimir Potanin, the two biggest shareholders in Norilsk Nickel, have proposed the merger as the groups seek to restructure tens of billions of dollars in debts.

The other companies include Metalloinvest, the iron ore and steel group owned by Arsenal Football Club shareholder Alisher Usmanov; Evraz Group, the steel group part owned by Chelsea Football Club owner Roman Abramovich; Mechel, another steel group; and Uralkali, the potash producer.

Shuaa sees buyout opportunities

Dubai: Shuaa Capital PSC sees "good opportunities" for acquisitions this year as small to medium-size brokerage firms struggle amid the global credit crisis.

"As I see good assets come up at the right price, I think we are in a good position to take advantage of that," Michael Burgess, chief financial officer of the UAE's largest investment bank, said.

The Gulf is bracing for a slowdown in the property market as economic growth slumps and oil prices fall. Saudi Arabia and the UAE cut their benchmark interest rates yesterday.

Wealth funds should fuel Gulf

Kuwait City: Gulf states should use their sovereign wealth funds to help steer their economies through the global financial crisis, an Arab League official said.

"Saudi Arabia and Gulf countries should invest in their economies," Mohammad Bin Ebrahim Al Twaijri, assistant secretary general for economic affairs in the 22-nation Arab League, said in Kuwait City.

The Arab League will propose to the Arab Economic Summit, being held in Kuwait January 19 and 20, ways of dealing with the fallout from the global economic crisis, Al Twaijri said.