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Wednesday, 28 January 2009

Kuwait minister dismisses reports of bailout plan

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

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

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

Shanghai surprise

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

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

Emerging markets: the way ahead

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

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

Slowdown takes toll on DP World

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

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

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

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

Iran budget reflects falling oil revenue

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

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

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

Santander makes offer to Madoff victims

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

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

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

Ajman Bank starts with 'clean slate'

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

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

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

DIFC positions for captive insurance

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

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

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

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