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Wednesday, 4 February 2009

Kazakhstan devalues currency

Kazakhstan allowed its national currency, the tenge, to drop by almost one-fifth on Wednesday in a devaluation that it blamed on falling world oil prices and the sharp depreciation of the Russian rouble.

The Kazakh central bank set a new corridor for the tenge: it said the currency would be allowed to fluctuate by about 3 per cent around a new level of 150 against the US dollar.

Kazakhstan devalues currency

Kazakhstan allowed its national currency, the tenge, to drop by almost one-fifth on Wednesday in a devaluation that it blamed on falling world oil prices and the sharp depreciation of the Russian rouble.

The Kazakh central bank set a new corridor for the tenge: it said the currency would be allowed to fluctuate by about 3 per cent around a new level of 150 against the US dollar.

Russia: From rags to riches to rags

Fitch has finally buckled and downgraded Russia’s sovereign rating to ‘BBB’ from “BBB+” — the first such move by the agency since 1998. What is more, the agency says further cuts are still possible. Not that FT Alphaville is surprised - note this post from last December.

To blame: falling commodity prices, the dislocation of global capital markets, and difficulties with managing necessary macroeconomic policy adjustments.

While buy-out groups struggle, SWFs retreat

Much has been written and spoken lately about the travails of the private equity industry - not least by the buy-out kingpins themselves, led by KKR co-founder Henry Kravis who, as the FT notes Wednesday, gave an “adapt or die” warning to the “inaptly named Super Return private equity conference in Berlin”. (As Lex wryly noted, calling a conference ” SuperReturn ” was, even in the good times, asking for trouble).

KKR, like other big buy-out groups, will be forced to do smaller deals, use less debt, and to diversify into other areas, such as infrastructure and corporate lending, he warned, highlighting how the biggest buy-out houses are being forced to fundamentally rethink their business models after years of relying on cheap debt to fund big acquisitions.

Ironically, Kravis’s remarks came around the same time rival firm TPG was finally giving up on long-running talks to sell a stake in itself to investors led by the Kuwait Investment Authority - up to recently one of the world’s most active sovereign wealth funds - and two Californian pension funds.

UAE Cabinet appoints Steering Committee to Review, Develop Strategies for Amlak, Tamweel

Move reflects the Federal Government's support to the economy and strengthening of financial institutions

High level Committee to evaluate Amlak's and Tamweel's performances in the changed economic environment; recommend plan for the development of a strong long-term business model

Dubai, February 4, 2009: In a step that will lend strong impetus to UAE's mortgage market and its sustainability, the UAE Cabinet announced the formation of a Steering Committee to review and recommend strategies for the country's leading mortgage lenders - Amlak and Tamweel.

The high-level Committee, headed by H.E. Sultan bin Saeed Al Mansouri, UAE Minister of Economy, brings together experts from across ministries and regulatory bodies. The move highlights the federal government's support to the UAE economy and strengthening of its financial institutions.

Dubai's Istithmar slows investment as result of credit crisis

UAE. Istithmar World, a Dubai government-owned investment company with about US$10 billion in assets, has slowed investment because of the global credit crisis.

Chief Investment Officer Felix Herlihy said that even though Istithmar was “inundated” with calls for investment, the company didn’t plan to rush into something because it looked cheap. “We want to stick to what we know enough about,” Herlihy said at a conference in Dubai.

Istithmar owns Barneys New York, a majority of Gulf Stream Asset Management, and 20% of Canadian circus troupe Cirque du Soleil. The company last month said it cut staff by 10%, or 13 employees, to reduce costs.

Istithmar will continue to look for opportunities in building products, transport, logistics, insurance, emerging market banks, healthcare and education, Herlihy said.

Abu Dhabi Islamic Bank to issue Tier 1 capital Sukuk to Government of Abu Dhabi

WAM Abu Dhabi, 4th February 2009 (WAM) -- In response to the Government of Abu Dhabi's initiative to inject additional capital into certain Abu Dhabi financial institutions, Abu Dhabi Islamic Bank PJSC (ADIB) announced today that it will issue Tier 1 capital sukuk to the Government of Abu Dhabi, with a principal amount of AED 2.0 billion (the "Sukuk").

The issuance of the Sukuk has been approved by ADIB's board of directors on Tuesday 03 February, and will be subject to obtaining shareholder approval.

The Sukuk will pay an expected return at a rate of 6% per annum, payable semi-annually in arrear from (and including) the issue date for a period of five years, and thereafter at a rate, reset and payable semi-annually in arrear, reflecting the initial margin above the then prevailing six month Emirates Interbank Offered Rate.

Government of Abu Dhabi announces plans to inject Tier I capital into Abu Dhabi Financial Institutions

WAM Abu Dhabi, 4th Feb. 2009 (WAM) -- Following a comprehensive review of the growth strategy of the Abu Dhabi banking sector, and in view of the economic ambitions of the Emirate of Abu Dhabi, the Government of Abu Dhabi, at its initiative, has decided to implement an action plan under which it will inject additional capital into the following Abu Dhabi financial institutions: Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Gulf Bank, National Bank of Abu Dhabi and Union National Bank.

Given current global economic conditions, the Government believes that this strategic initiative is an appropriate and proactive response to ensure that the strong confidence in Abu Dhabi's financial institutions is further enhanced.

His Excellency Hamad Al Hurr Al Suwaidi, Member of Executive Council and Undersecretary of the Abu Dhabi Department of Finance, added: "The Government views this capital injection into the banking system as an important step to allow Abu Dhabi financial institutions to remain strong and well-capitalised compared to international peers, and fulfil their role in achieving the Government's vision for the Abu Dhabi economy.

GCC Real Estate Sector - Changing Times!

"In continuation of Global Investment House coverage of the sectors in the GCC region, we have come out with a detailed report on GCC Real Estate Sector.

Strong crude prices over the last five years have played a significant role in boosting the economic growth of GCC region. However, the focus of regional economies to diversify from reliance on hydrocarbon sector, provided a direct impetus for the growth of real estate sector. In tandem with the increasing contribution of real estate activity to the GDP, the credit distribution to this sector increased astronomically due to close linkage with increasing construction activity. The recent global credit meltdown and cautiously optimistic market sentiments towards property investments in the regional real estate market is reflected through the signs of price correction in the sector. Although the declining oil prices coupled with global financial crisis is expected to slowdown economic growth and capital investments which will directly affect the real estate sector growth, certain regional economies, still offer attractive opportunities based on enduring demand fundamentals.

In order to view the full report, kindly click on the link below: Real Estate Sector022009.pdf

To view more reports on the Kuwaiti and other markets, please visit our website:"

GCC Labour Market Could Shrink by 30 pc, says Expert

The aftershocks of the global financial meltdown could shrink the GCC labour market by up to 30 per cent, according to an expert.

Dr Baqer Al Najjar, Professor of Sociology at the University of Bahrain, who was attending the 14th annual three-day conference on "Human Resources and Development in the Arabian Gulf", told Khaleej Times on the sidelines of the conference that the labour market in the GCC as a whole could see up to 30 per cent of its workers laid off, with the construction sector hardest hit.

"The job market in the Gulf countries is badly affected in real estate, construction, service, retail and wholesale sectors. The construction sector could reduce workers by up to 40 per cent due to the downturn," Al Najjar said.

Housing and utilities use up 40% of income

The average household spends nearly 40 per cent of its income on housing and utilities and 14 per cent on food and drink, a new Ministry of Economy survey has revealed.

The results of the first nationwide expenditure and income survey were released yesterday, compiling data from 15,000 families from the second quarter of 2007 to the end of the first quarter of 2008.

Sultan bin Saeed al Mansouri, the Minister of Economy, said in a statement that the figures would help the UAE meet statistical requirements of international organisations such as the World Bank.

Fund to buy up sukuk

Emirates NBD yesterday launched a closed-ended fund to buy sukuk of government or semi-government-owned companies in the Middle East.

The bank said it was taking advantage of the low prices for sukuk, or Islamic bonds, which have suffered from a general flight out of emerging markets, drying up liquidity as investors retreat.

“We are taking advantage of the market scenario. The markets are totally distressed and there are even panic sales. Now is a great opportunity to buy sukuk at great prices,“ said Jamal bin Ghalaita, the general manager of consumer banking and wealth management at Emirates NBD.

Abu Dhabi SWF should back Dubai - Merrill Lynch

Abu Dhabi should deploy its wealth fund to support the Dubai economy, says the Merrill Lynch chief investment officer of its global private client group in Europe, Middle East and Africa.

“Abu Dhabi still has one of biggest sovereign wealth funds in the world and can support any domestic troubles,” said Gary Dugan, speaking at the launch of the bank’s research document,‘Outlook 2009: Turbo-gloom and anno horribilis’, in Dubai.

He said the falling oil price, which he believed could go as low as $30 a barrel, would put local economies under severe pressure and little relief could be expected from international markets, on which the region was heavily dependent.

A Russia united by anti-westernism

In its recent disputes with Georgia and Ukraine, Russia has been crashing around like a bear in a china shop. As a result, the west has been hyperventilating about the dangers of Russia’s resurgence and a new cold war. But as the global financial crisis and collapsing commodity prices shake Russia’s economy and strain its political system, the west may soon be worrying again about the country’s weaknesses rather than its strengths.

Just as economic booms amplify a country’s assets, so busts magnify their frailties. This crisis is rapidly exposing the design flaws in Vladimir Putin’s project: the failure to create impartial state institutions; the elimination of constitutional checks and balances; and a potentially brittle social compact dependent on the Kremlin delivering the economic goods. In such dangerous times it is all the more urgent for the west and Russia to devise new rules of engagement.

First, though, the west must acknowledge it has “lost” Russia and try to understand why. The hopes of the early 1990s that Russia would evolve into an instinctively pro-western partner have evaporated. Opinion polls show anti-western feelings are now deeply rooted in Russian society, irrespective of age, geography or income. Like much of the Muslim world, Russia feels humiliated by the west. It is determined to pursue a separate destiny.

Asia to the rescue

One version of how to save the world economy goes something like this. Banks are stabilised. Contracting private demand is met by lower interest rates and higher public spending. Then Asian consumers replace western shoppers, acting as bridges to a new prosperity.

Asia is a land of saving gluts: the flipside to US and European deficits. China’s current account surplus this year is forecast to reach almost 10 per cent of gross domestic product. The “manipulated” renminbi is one cause of this huge surplus. Asia’s less open capital accounts, younger populations and rudimentary social safety nets also help drive savings higher. Furthermore, the experience of the Asian financial crisis of 1997-8, when the region ran current account deficits with modest foreign reserves, spooked governments. Hence today’s near $4,000bn of reserves held by countries in the region, excluding Japan, Australia and New Zealand.

UAE sets loan growth cap

The United Arab Emirates central bank plans to cap loan growth at local banks at 10 per cent this year to prevent additional government-supplied liquidity from spurring last year’s rampant credit growth.

“The 10 per cent growth cap will be enforced until further notice,” Sultan bin Nasser Al Suwaidi, the central bank governor, told a local newspaper on Tuesday. “This is part of our measures to handle the impact of the financial crisis.”

The central bank last year put in place a Dh50bn credit facility for banks operating in the UAE, while the finance ministry said it would deposit as much as Dh70bn in banks to help ease financing strains.