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Thursday, 19 February 2009

ICD provided two-thirds of Borse Dubai refi-sources (Update 6)

State-owned Investment Corporation of Dubai (ICD) has provided up to $2.3 billion of the $3.4 billion Borse Dubai needs to refinance an existing syndicated loan, banking sources close to the deal said on Thursday.

Borse Dubai closed a $2.5 billion loan on Wednesday, which together with a $1 billion equity injection from shareholders including ICD, allayed fears that Borse Dubai would default on its debt. [ID:nLI495825]

Only $1.2 billion of the $2.5 billion was raised from international banks, sources said, leaving about $1.3 billion, which was provided by state-owned Dubai banks after ICD deposited cash with them, the sources said.

ICD used the proceeds of its own $6 billion syndicated loan, agreed in November, to meet the $1.3 billion loan payment and the $1 billion equity injection, two of the sources said.

Borse Dubai is the first Dubai government entity to tap the loan market this year in order to refinance foreign debt.

Despite the successful outcome for the loan, syndication was hit by foreign banks retreating from Dubai to their domestic markets, the sources said, adding that the banks will not return anytime soon.

"This has postponed the problem and not solved it," a banker close to the deal said.

HSBC (HSBA.L), which coordinated the deal, provided $250 million to the loan, while Emirates Bank ENBD.DU and Dubai Islamic Bank committed $800 million each after receiving capital from ICD, and Bank of Tokyo Mitsubishi-UFJ (8306.T) contributed $100 million, the sources said.

The remaining $550 million was provided by seven banks -- Bank of Baroda (BOB.BO), ING (ING.AS), Industrial and Commercial Bank of China (601398.SS), Intesa Sanpaolo (ISP.MI), National Bank of Abu Dhabi NBAD.AD, SEB (SEBa.ST) and Union National Bank UNB.AD, the sources said.

Dubai's stock and credit markets reacted positively to the news that Borse Dubai had successfully refinanced its loan.

Shares on the Dubai bourse .DFMGI closed the day up 5.38 percent, and the cost of insuring Dubai's debt in the credit default swaps market was quoted in the morning as falling 50 basis points (bps) to 950 bps. [ID:nLJ382682]

Mohammed Al Shaibani, executive director and chief executive officer of ICD, Nicholas Hegarty, its chief financial officer, and Essa Kazim, Borse Dubai's chairman, were not immediately available for comment.

RLPC-ICD provided two-thirds of Borse Dubai refi -sources (Update 5)

LONDON, Feb 19 (Reuters) - State-owned Investment Corporation of Dubai (ICD) has provided up to $2.3 billion of the $3.4 billion needed by Borse Dubai to refinance an existing syndicated loan, banking sources close to the deal said.

Borse Dubai closed a $2.5 billion loan on Wednesday, which together with a $1 billion equity injection from shareholders including ICD allayed fears that Borse Dubai would default on its debt. [ID:nLI495825]

Only $1.2 billion of the $2.5 billion was raised from international banks, sources said, leaving around $1.3 billion which was provided by state-owned Dubai banks after ICD deposited cash with them, the sources added.

Morocco Economic and Strategic Outlook - February 2009

"In continuation of Global Investment House coverage of MENA economies, we have come out with Morocco Economic and Strategic Outlook.

Morocco's economy is based mainly on agriculture, industry, and services. Although, agriculture is an important sector, forming around 11% of GDP in 2007, the government has been successful in diversifying the economy in recent years, with agriculture and mining industries, mostly phosphates, becoming less important and manufacturing and services gaining more ground. However, a year of drought slowed down the growth in 2007 as agriculture production was hit by weather conditions. Despite the 15.3% y-o-y decline in agriculture, the primary sector, the secondary and tertiary sectors grew by 6%, and 11% respectively, which resulted in an overall growth of 6.6% in GDP in 2007. In the wake of the recent financial crisis, Morocco has revised its estimated growth rate for 2008 from 6.8% to 5.8%. Still the economy of Morocco will remain strong, and is estimated to grow 5.5% in 2009, though lower than the estimated growth in 2008.

The global financial crisis has shown a limited effect on Morocco’s economy so far, however, we expect the recession in Europe, Morocco’s major trade partner, to start impacting the economy in 2009 as it will hurt the trade balance of Morocco. Going forward, we do not expect major improvements in the current account surplus as the economic slowdown is likely to affect export growth on the back of lower demand from Europe. In addition, a global economic slowdown is likely to affect tourism receipts, and workers' remittances. However, on the upside, the drop in oil and commodity prices is likely to reduce import costs.

We believe that future challenges to Morocco's economic growth remain in lower export revenues, high public debt, and increasing unemployment rate. However, on the bright side, we expect that the economy will get through these challenges and sustain the growth achieved earlier given the government's commitment to the reform program, and the healthy investment environment which will induce the inflows from foreign direct investments.

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

MSCI Barra Announcement on the Status of the MSCI Argentina and Pakistan Indices

New York – February 18, 2009 - MSCI Barra (NYSE:MXB), a leading provider of investment decision support tools worldwide, including indices and portfolio risk and performance analytics, announced today the conclusions from its recent consultation with the investment community on the market classification of Argentina. MSCI Barra also announced today that it will begin consultations with the investment community on a proposal to include the MSCI Pakistan Index in the MSCI Frontier Markets Index.

As a result of the continued restrictions to in- and outflows of capital in the Argentinean equity market, MSCI Barra will reclassify the MSCI Argentina Index from the MSCI Emerging Markets Index to the MSCI Frontier Markets Index at the end of May 2009 to coincide with the May 2009 Semi-Annual Index Review. In addition, MSCI Barra
will consider only American Depositary Receipts (ADRs) of Argentinean companies as eligible securities for inclusion in the MSCI Argentina Index.

MSCI Barra now opens a consultation with the investment community on a proposal to include the MSCI Pakistan Index in the MSCI Frontier Markets Index at the end of May 2009 to coincide with the May 2009 Semi-Annual Index Review. As a reminder, the MSCI Pakistan Index was removed from the MSCI Emerging Markets Index at the end of December 2008 following the deteriorated investability conditions prevailing in the Pakistani equity market. The MSCI Pakistan Index is currently a stand-alone index. Following the removal of the “floor rule” by the Karachi Stock Exchange trading activities have progressively recovered. The proposal for the MSCI Pakistan Index to join the MSCI Frontier Markets Index is based on the recent record of limited accessibility of the market as well as the fact that the MSCI Pakistan Index no longer meets the size requirements set for Emerging Markets.

The Eurekahedge Report February, 2009 (Registration required)

"Welcome to the latest Eurekahedge monthly newsletter, which includes proprietary research on hedge fund trends, asset flows and performance. We now compile all in-house research into the new The Eurekahedge Report. Highlights from this month’s report:

Hedge funds started the year on a positive note; up 0.2% in January
Hedge fund assets fell US$69 billion in January 2009, to US$1.4 trillion
Eurekahedge is pleased to announce a new area of enhancement to our product offerings. Database subscribers can now access 57 new data points including more key personnel, investments in private placement, managed accounts offered, secondary investment and geographic mandates, instruments traded, unique identifiers and much more."

Dubai: boom to bust? (Blog)

"You don't have to be Einstein to work out that things are slowing down."

Not the words of an Embittered Expat™ retrenched from his tax-free job in one of Dubai's endless "Cities", nor a disgruntled journalist having a whinge over an overpriced pint of frothy haram-juice in the Radisson's Media Bar, but a quote from the CEO of one of the world's biggest construction companies operating in Dubai:

"There are undoubtedly issues in Dubai."

New boutique to launch Africa and Middle East funds (Registration required)

Silk Invest, a new London-based boutique founded by some experienced fund industry figures, is launching two funds - one focused on Africa and one on the Middle East.

Among those who have set up Silk Invest is the former head of Commerzbank's asset management arm, Heinz Hockmann, who is chairman of the new firm. Chandima Mendis, a successful emerging bond manager who left AXA last year, is also involved in the enterprise as a member of the supervisory board and director of strategy. Meanwhile the CIO of the company is Daniel Broby, formerly global head of asset management at Renaissance Investment Management.

CEO of the new boutique is Zin Bekkali, whose Dutch Moroccan roots are representative of the diverse origins of a Silk Invest team which includes fund managers from South Africa, Egypt, Nigeria, Cameroon and Morocco. 'We attracted some senior people and then surrounded ourselves by people with local expertise,' Bekkali says.

SocGen takes a Russian hit

Société Générale, France’s second-biggest bank, on Wednesday put its Russian expansion plans on hold and wrote down some Russian assets but insisted it remained confident about the outlook for eastern Europe.

Growing concern about the health of economies in eastern Europe have hammered shares in SocGen, which has more exposure to the region than other French banks. It has a majority stake in Rosbank, the Russian bank, and owns the Czech Republic’s third-largest consumer banking network as well as Romania’s second-biggest bank.

Shares in SocGen have fallen 35 per cent since January, underperforming the FTSE Eurofirst Banks index by 14 per cent. The other French banks have all outperformed the index. It clawed back some of the losses on Wednesday, closing 2.7 per cent higher.

Two Wermuth Europe board members to quit

Lord Skidelsky, the historian and biographer of John Maynard Keynes, is planning to quit the board of a hedge fund that lost most of its value after investing in Russian assets, including the Moscow-based Wild Orchid lingerie chain.

Another eminent figure planning to leave the board of Frankfurt-based Wermuth Asset Management’s Greater Europe fund is Garret FitzGerald, the 83-year-old former Irish Taoiseach, who has health problems.

The two Russophiles are part of a five-man board at Wermuth’s Greater Europe fund, which is set to be replaced this year, as the hedge fund adapts to its vastly shrunken value and sharply lower annual fee income.

Scare warns of potential quake ahead

The shock that has passed through central and east European markets in the past two days adds to the pressure on governments, banks and international institutions to rescue the region’s economies.

“I hate to say it,” says Erik Berglof, chief economist at the European Bank for Reconstruction and Development (EBRD), “but it is, of course, what we have been expecting. What is necessary now is to put in place what needs to be done.”

A report on Tuesday from Moody’s, the ratings agency, warning of deteriorating conditions in eastern Europe triggered turmoil in the region’s markets, which spread to western Europe and even spooked New York.

New labour policy for Emiratis

Private-sector employers may not lay off Emirati workers for anything other than exceptional misconduct, the Ministry of Labour announced yesterday.

The new policy is a response to concerns that private-sector companies could lay off staff because of the global economic downturn.

Under the policy, companies may sack Emiratis only for serious misconduct defined in labour law, such as arriving to work under the influence of alcohol, stealing from the company or forging identity documents.

A ground-breaking move for Arabian Gulf region

In a ground-breaking move, Abu Dhabi and Fujairah announced their intent to set up a harbour that allows exporting 70 per cent of Abu Dhabi's oil exports through Fujairah, without passing through the Strait of Hormuz.

The move sounds extremely important due to its strategic, economic and environmental dimensions - not only for the UAE but also for the entire Arabian Gulf region.

Over the past three decades, Gulf navigation faced turbulent conditions and threats, which reached its peak in the mid-1980s when oil carriers were attacked during the so-called "war" on oil tankers.

Assets cushion Oman

Moody's Investors Service yesterday said it has maintained A2 investment-grade sovereign ratings of Oman due to extensive offshore assets that will enable the country to fund projected deficits without resorting to debt accumulation.

It also gave stable outlook to the country.

"The government's extensive offshore financial assets will enable it to provide fiscal stimulus and fund projected deficits without resorting to debt accumulation, at least over the short- to medium-term," said Tristan Cooper, Moody's Vice-President/Senior Analyst.

S&P affirms RAK rating

Standard & Poor's Ratings Services yesterday affirmed its "A" long-term and "A-1" short-term sovereign credit rating of Ras Al Khaimah (RAK) as the emirate enjoys modest liabilities.

It gave a stable outlook to the emirate with the Transfer and Convertibility assessment remains "AA+".

"The ratings on RAK, the northernmost of the seven emirates that comprise the United Arab Emirates, rest primarily on ongoing support from the federal government of the UAE and the likelihood of extraordinary support in the event of financial stress," said Standard and Poor's credit analyst Farouk Soussa.

Borse Dubai closes $2.5bn syndication (Update 4)

In a massive vote of confidence in Dubai's economy, Borse Dubai attracted "some fresh money" in closing a fully subscribed $2.5 billion (Dh9.1bn) syndication, a senior executive close to the transaction said yesterday.

"It was mainly the foreign banks who rolled over what they were holding. Local banks – based in Dubai as well as Abu Dhabi – also rolled over their facilities. And some fresh money came in," the executive said on condition of anonymity.

The original financing, which was split between a $2.226bn and a £796 million (Dh4.1bn) facility, paid a margin of 70 to 130 basis points (bps) over the London Interbank Offered Rate, or Libor.

State largesse can ward off worst of recession

By all accounts, 2009 is shaping up to be an annus horribilis for the global economy. For the first time in decades, the world is in a synchronised recession of unknown severity.

What about the Middle East and North Africa (MENA) region? Is it being swept away with the ebbing tide of global activity, as one observes in the property, tourism and trade sectors in the more exposed parts of the region? Or will it be spared the downturn’s traumas?

To assess the impact of the turmoil, one needs to be reminded of some of the more salient characteristics of the regional economies. First, abstracting from the special case of the energy sector, countries in the region are less fully integrated into the global production and trade cycles or the dynamics of financial markets. Dubai, a city state of fewer than 2m people, is not typical of the 300m-strong region. Contagion, therefore, is less of a risk than in other emerging markets.

Money market funds prove safer

In times of severe financial upheaval, investors have often kept their money in cash. Some may prefer the proverbial mattress but money markets have traditionally been a low-yielding yet stolidly safe investment.

The haven reputation took a pummelling when a US fund “broke the buck” last year, as the fall of Lehman Brothers, an investment bank, dislocated credit markets and reduced the value of the fund’s assets to below the level investors paid in.

Nonetheless, with equity markets in turmoil, money market funds offer an attractive level of safety for risk-averse retail investors. US money market mutual funds posted net inflows of $64bn in January, bringing the industry’s assets to a record of almost $4,000bn, according to Strategic Insight, a fund intelligence provider.

UAE to safeguard jobs of nationals

The United Arab Emirates labour ministry on Wednesday said it would regulate the dismissal of nationals working in the private sector, raising another level of protection around the local workforce as the ravages of the financial crisis cut deep into the Gulf state.

Issued by Saqr Gobash, labour minister, the order threatens to raise concerns among investors in the Arab world’s second-largest economy as the financial crisis forces companies to trim staff levels that ballooned during the six-year petrodollar boom.

Property and financial companies, especially in Dubai, have been shedding staff since the credit crunch triggered a real estate crash in the emirates. The gloom has spread to other previously vibrant sectors, such as tourism, with the recently opened Atlantis hotel cutting staff and Dubai hospitality giant Jumeirah planning redundancies.