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Wednesday, 11 February 2009

Obama’s rescue plan explained

The US Treasury has unveiled a revamp of its financial rescue plan, pledging to clean up to $1,000bn dollars of distressed assets from banks’ balance sheets and inject fresh capital into troubled institutions.

In our graphic, Financial Times reporters explain each part of the rescue plan – click on the button under each column to hear their analysis.

Temasek portfolio falls 31%

Temasek Holdings, the Singapore state investment company, suffered a 31% fall in the value of its portfolio from S$185bn ($123bn) to S$127bn in the eight months to the end of November, the government said Tuesday. The disclosure in parliament about Temasek’s performance provided a rare early look at the group’s performance amid recent financial turmoil. Temasek normally waits until five or six months after the close of the fiscal year to reveal its results. In the past 18 months, Temasek made big investments in several financial groups, including Merrill Lynch and Barclays, whose share prices have since plunged. The disclosures came after news last week that Ho Ching, the group’s chief executive, will step down after seven years in the post and be replaced by Chip Goodyear, former CEO of BHP Billiton.

Russia’s debt

Russia has stamped on reports that it was seeking to restructure up to $400bn of corporate debt – though not before they sent ripples through international equity and foreign exchange markets. Jitters are understandable. Russia does have foreign corporate debt issues, if not of the magnitude the reports implied. With the banking system still gummed up and commodity prices languishing, corporate defaults are set to multiply.

Quantifying the problem, however, is tricky. While Russia in recent years paid off much sovereign debt, its companies went on a foreign borrowing spree. The central bank’s most recent figures show total foreign currency debt on October 1 2008 was $541bn – a third of gross domestic product – including $43bn of sovereign debt. Some $198bn was bank debt, and $300bn non-bank debt.

GCC Market Review – February 2009

"In continuation of Global Investment House coverage on the GCC markets, we have come out with GCC Market Review – February 2009.

With no encouraging news on the economic front and further deepening of global financial crisis, GCC market continued their downward journey in the first month of 2009. The only market which managed to end the month in green was Saudi Arabia with a marginal M-o-M gain of 0.1%. Qatar market declined the most in January-2009 with Global DSM Index ending the month at 396.02 points i.e. an M-o-M decline of 23.2%. Among other markets, Kuwait market was down 12.8% for the month. In fact the decline in Kuwait market was much steeper during the month; however the market recovered to some extent during the last week of the month on the news about bailout package proposed by Kuwait government. The performance of the markets during the first month of 2009 was no different than what we have already seen in during the last quarter of 2008. The markets continue to be weighed down by adverse economic developments. Though governments in the region have been taking steps in the right direction to support the economy and market; these have proved to be insufficient to improve the market sentiments. For the period 4Q-2008, the profitability of the companies has declined; however the decline has been less than what was expected by the market. However it is very early to draw any conclusion as most of the companies are yet to declare their results.

In order to view the full report, kindly click on the link above."

Novaar opens investment office in DIFC

Novaar Limited, a Gulf-based family office platform, has opened a proprietary investment office in the Dubai International Financial Centre (DIFC).

Novaar will serve as a turnkey investment management and advisory platform for Prince Saud bin Mansour bin Faisal bin Saud bin Abdul Aziz Al Saud and participating members of his family. Novati Group International and Harald Quandt Holding advised the formation of Novaar.

"Those committed to the continued growth of the Gulf are well served by a strong point of connectivity with Dubai. DIFC continues to woo world-class legal, financial and management professionals, which serve to advance the opportunities available to those who affiliate their interests with this global centre."

Ipic may buy 20% stake in Schaeffler

Abu Dhabi-based sovereign wealth fund Ipic is mulling an investment in the troubled German auto parts maker Schaeffler.

The state-owned fund might seek to acquire at least 20 per cent of the capital in either Continental, a parts group owned by Schaeffler, or the parent company itself, and might be interested in a stake of more than 25 per cent, the Financial Times Deutschland reported.

Financial details were not revealed however.

Schaeffler is struggling to wrap up its purchase of Continental because the financial crisis has prompted banks to tighten credit.

Saudi government urged to buy bonds from banks

Saudi Arabia should follow the example of the UAE and encourage its banks to issue bonds for the government to ensure enough liquidity to finance mega projects worth $400 billion (Dh1.46 trillion) in four years, according to a key Saudi bank.

The government should also fund projects directly to offset a sharp decline in foreign financing because of the global credit crisis, the Saudi British Bank (Saab) said in its monthly economic bulletin.

According to the bulletin, Saudi Arabia's 12 banks are not suffering from liquidity shortages but that official curbs on lending and their resources do not match the massive projects to be carried out in the Kingdom.

Western institutional funds unlikely to return to GCC in 2009: EFG-Hermes

Western institutions are unlikely to return to GCC markets for most of 2009, says EFG-Hermes in its latest GCC Strategy Note sent to Emirates Business.

However, the research agency does not rule out temporary and intermittent flows "given ongoing volatility, both in the Middle East and in global stock markets".

According to the report, data on the flow of funds indicates the Middle East markets in general continue to see outflows of foreign capital, while global emerging market (Gem) funds are witnessing a gradually improving trend. This, says EFG-Hermes, is as expected.

Three held in Dubai corruption probe

The authorities have detained senior managers at Dubai Waterfront, one of the emirate’s most ambitious property developments, as part of an investigation into bribery allegations.

The detentions come amid a series of emirate-wide probes into alleged fraudulent activity at state-backed property developers and banks which has rocked Dubai in the past 12 months.

One of those detained, Matt Joyce, was managing director of the vast Waterfront project until he was made redundant last month.