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Wednesday, 21 January 2009

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

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

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

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

Saudi Stock Market Weekly Report 21-01-2009

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

Global Investment House, Kuwait monthly Oil Bulletin.

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Dubai looking to life after the bubble

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

We have to bring the banking sector back to life

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

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

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

Saudi Arabia and the need for $75 oil

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

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

Singapore in a sling

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

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

State Street

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

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

European EMs suffer most

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

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

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

Abu Dhabi awards green prize

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

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

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

Arab states to form $2bn business fund

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

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

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

Sabic profits sharply lower

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

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

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

Shuaa bond dispute vote postponed

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

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

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

Sharp fall in business confidence

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

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

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

Markets at four year low

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

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

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