Google+ Followers

Monday, 2 February 2009

Amman Stock Exchange Annual Review

After the dust of 2008 cleared, the ASE emerged as the fifth best performing market in the MENA region, and proved both susceptible to global shocks and capable of strong domestically fueled runs. As we form our expectations for 2009, we consider both facts together. While the full extent of the global crisis is not clear yet, and effective remedies might have not been found or taken their effect yet, the ASE still has unique characteristics that could enable it to swim against the current.

Kuwait fund sees property, stocks chances abroad

KIA managing director said he sees many opportunities to invest following a move to reduce exposure to global equities last October.

KUWAIT, Feb 2 (Thomson IM) - Kuwait's sovereign wealth fund KIA sees opportunities in real estate and stock markets overseas despite having launched a multi-billion dollar fund to buy into the Kuwaiti bourse, its managing director was quoted as saying.

The Kuwait Investment Authority (KIA), which manages the Gulf Arab state's oil-generated assets, bought last year into U.S. banks such as Citigroup and Merrill Lynch before both shares fell and the latter was bought by Bank of America for a fraction of the price.

'Regarding our foreign investments there are many opportunities,' Bader al-Saad told Al Arabiya television when asked about its investment strategy in the light of a global crisis, according to a transcript of the interview.

'There are opportunities in real estate and there are opportunities in securities,' he said.

He gave no details on possible real estate and stock investments, saying only that KIA would focus on investments with good cash flows.

Last month, the government said in a report that KIA, which managed at least 72 billion dinars ($249 billion) in assets at the end of March, has reduced exposure to global stock markets since October, shifting assets instead into short-term cash funds to minimise risks.

In December, KIA launched on behalf of the government an investment fund worth 1.5 billion dinars to stop a slide on the local bourse, which fell 38 percent last year.

It also increased the ceiling of its investments in the local bourse through local funds to 75 percent from a previous 50 percent to boost liquidity.

Troubled local lender Gulf Bank said last week KIA would own 16 percent of it after an emergency rights issue.

Moody's may downgrade 6 Dubai-backed companies

DUBAI, United Arab Emirates: A leading credit agency says it may cut its ratings for some of Dubai's most prominent state-backed companies, putting pressure on the Middle East boomtown as it grapples with the financial slump.

Moody's Investors Service said in an e-mail Monday it is reviewing the ratings of six companies affiliated with the city-state and its ruler. The companies are Dubai Holding Commercial Operations Group, DP World, DIFC Investments, Dubai Electricity & Water Authority, Jebel Ali Free Zone and Emaar Properties.

The rating firm says the move is mostly motivated by a weakening economic outlook in Dubai.

It adds that the Persian Gulf city-state has been hit harder by the global meltdown than other economies in the region.

GCC equity fund assets down 46% - Markaz

Country specific and pan-GCC equity funds experienced a 46 percent plunge in assets under management from April to Dec 2008, as investor sentiment turned sour, Kuwait Financial Centre (Markaz) revealed on Monday.

Total equity fund assets under management plummeted from nearly $22 billion to less than $12 billion over the eight month period.

Equity fund gains made during the first half of 2008 were sharply reversed as oil prices tumbled from their July peak of $147 and the global financial crisis spread to the region, sapping investor confidence and sending stock markets into a tailspin, according to a report by Markaz.

Hunger growing for managed accounts

Providers of managed account platforms are reporting a “spike” in enquiries in the past month as hedge fund investors scramble for a safer way of investing in an asset class that suddenly looks more like a minefield. (PDF)

The sorry Bernard Madoff saga, and a number of smaller alleged frauds that have since emerged from the woodwork, have shone a light on the dangers of allowing lightly regulated managers to hold assets in a manner that cannot be verified by outside observers.

And even before Bernie’s face leapt from every newspaper front page, many hedge fund investors were growing increasingly concerned about the lock-ups, gates, redemption suspensions and side-pockets implemented by many funds to stem the tide of redemptions.

We plan to go public in 2011 and list on Nasdaq Dubai

The credit crisis and deepening economic downturn are creating a challenging backdrop for investment banking and private equity operations.

However, firms that push on and keep doing deals in this environment will emerge stronger than others that take a more cautious stance.

Regional investment bank and private equity company Millennium Finance Corporation (MFC) is continuing to do business in the region and other emerging markets. The company has advised on numerous initial public offerings (IPOs) and cross-border mergers and acquisition deals over the past few years.

US and UK oceans apart on regulation

Hedge fund managers based in London feel vastly superior to their US counterparts when it comes to the standards they are held to. For a start, they are regulated. The Financial Services Authority, the UK regulator, treats hedge fund managers the same way as other asset managers. There is no escaping its oversight.

The funds they run are mostly based offshore and so escape the UK regulatory net, but that is a minor issue, according to the managers called to account for their industry in front of the UK Parliament’s Treasury select committee last week.

They were keen to point out the differences between the US and UK approaches to regulation of hedge funds, particularly in the light of the Madoff affair. The UK regime had been much more successful in preventing fraud than other regimes, said Douglas Shaw, managing director at BlackRock, when asked if a fraud such as Bernard Madoff is alleged to have perpetrated could happen in the UK.

SWIP launches in Saudi

Scottish Widows Investment Partnership has set up an asset management business in Saudi Arabia, aiming to attract mainly domestic institutional investors who are looking for opportunities in the kingdom and abroad.

The Riyadh-based joint venture with local partner Manar Financial Investment Co comes after hopes for the region’s low correlation with the rest of the world’s markets vanished.

But Peter Dorward, chief executive of Swip Saudi Asset Management, sees opportunities in spite of a tougher environment. “Saudi is the biggest economy in the region and has shown the strongest growth in the past three to four years, with 70 per cent of its population under 30. That suggests there will be a growth in savings [in the future,” he said.

Institutions go for US ETFs

Exchange traded funds listed in the US are growing in popularity with institutional investors, most notably investment managers and hedge funds.

During the first nine months of last year, nearly 2,500 institutional investors worldwide used one or more ETFs listed in the US with the biggest increase coming from asset managers and hedge funds, according to research from Barclays Global Investors.

Asset managers accounted for more than 70 per cent of institutional users. Hedge funds, the second biggest category, represent 16 per cent of users. But hedge funds showed the biggest growth in use, with 48 more users at the end of September compared to a year earlier, representing a 14 per cent rise to 387. The number of asset managers using US ETFs also grew, but only by 2.5 per cent to 1,781.

Private equity assets melting away

Private equity houses are poised to announce huge writedowns on their holdings in the coming weeks, with some industry figures warning the downgrades will only be the start of a painful bloodletting. (PDF)

3i, Europe’s largest listed private equity group, said last week the value of its 50 largest investments fell 21 per cent in the fourth quarter of 2008, while EQT Partners, the Nordic buy-out group, wrote down its EQT Fund IV by 50 per cent.

The moves are likely to be the start of an avalanche of downgrades as the private equity industry, which made only tiny writedowns in the June and September quarters, catches up with reality in the public markets.

Barclays’ credit rating downgraded

Moody’s on Sunday night downgraded Barclays’ credit ratings, saying it expected the UK bank to record ”significant further losses” on credit-related writedowns.

The credit rating agency downgraded Barclays’ long-term debt from Aa1 to Aa3 after reviewing the bank’s prospects in the credit crisis.

“The downgrades reflect Moody’s expectation of potentially significant further losses at Barclays as a result of writedowns on credit market exposures as well as an increase in impairments in the UK,” Moody’s said.

Capital's strengths in focus at forum

Abu Dhabi: Abu Dhabi's economic strategy, the solid fundamentals of Abu Dhabi economy and its resilience will be the central themes of this year's Abu Dhabi Economic Forum (ADEF 2009).

The March 2-3 event will examine critical issues such as the new shape and determinants of the world financial system, the new global environment for investment, the future of oil, and the role of government in closing the financing gap resulting from the crisis.

Abu Dhabi's strategy of partnering with global companies in the energy, education, health, tourism and basic industries will also be gauged, along with technology transfer.

Amlak restructuring on case-by-case basis

Dubai: Mortgage provider Amlak is set to restructure its workforce as the financial situation continues to bite into the real estate sector.

In a statement to the Dubai stock exchange, Amlak said the restructuring was "in line with current market conditions and on a case-by-case scenario".

While the company did not say whether this restructuring would involve any job cuts, it seems possible as other companies in the real estate business have been forced to do so.

Gulf shares fall as oil prices ease, economies weaken

Dubai: Gulf shares fell as the International Monetary Fund cut its economic growth forecast for the United Arab Emirates after oil prices tumbled. Meanwhile, Kuwait's index gained on speculation details of a government bailout will be announced soon.

The IMF cut its economic growth forecast for the UAE by almost half after oil prices and the value of overseas investments plummeted, according to a draft report. Gross domestic product will expand by 3.3 per cent this year compared with a previous estimate of six per cent, in the fourth-biggest producer of the Organisation of Petroleum Exporting Countries.

Crude oil for March delivery settled at $41.68 (Dh153.12) a barrel on January 30 on the New York Mercantile Exchange. Crude lost more than $100 since it surged to a record $147.27 a barrel in July as the global economy slipped into recession.

Short-term instruments find favour

It is not surprising to see that money market and fixed income funds are enjoying a good run. With equity markets in a tailspin, short-term instruments, bonds and sukuk offer relatively safe harbours in a sea of troubled assets.

Not one to miss an opportunity, fund managers are quick to jump into the fray and are looking to launch new funds focused on short and long-term debt instruments.

Indeed, 17 per cent of the funds launched last year were focused either on sukuk (seven per cent), money markets (seven per cent) or fixed income (three per cent), and that trend will only continue as banks look to attract short-term deposits and government and public corporations look for more debt funding going forward.