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Thursday, 26 February 2009

Eastern European Tinderbox: How Explosive Could It Get? (Registration required)

The Central and Eastern Europe (CEE) region is the sick man of emerging markets. While the global crisis means few, if any, bright spots worldwide, the situation in the CEE area is particularly bleak. After almost a decade of outpacing worldwide growth, the region looks set to contract in 2009, with almost every country either in or on the verge of recession. The once high-flying Baltics (Estonia, Latvia, Lithuania) look headed for double-digit contractions, while countries relatively less affected by the crisis (i.e. Czech Republic, Slovakia and Slovenia) will have a hard time posting even positive growth. Meanwhile, Hungary and Latvia’s economies already deteriorated to the point where IMF help was needed late last year.

The CEE’s ill health is primarily driven by two factors – collapsing exports and the drying-up of capital inflows. Exports were key to the region's economic success, accounting for a significant 80-90% of GDP in the Czech Republic, Hungary and Slovakia. By far the biggest market for CEE goods is the Eurozone, which is now in recession. Meanwhile, the global credit crunch has dried up capital inflows to the region. An easy flow of credit fueled Eastern Europe’s boom in recent years, but the good times are gone. According to the Institute of International Finance, net private capital flows to Emerging Europe are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009. Whether or not this is formally considered a ‘sudden stop’ of capital, it will necessitate a very painful adjustment process.

Classic Emerging Markets Crisis In The Works?

Santander revives Cepsa stake sale talks

Santander has rekindled talks on selling its 32 per cent stake in oil group Cepsa in what could lead to the divestment of the Spanish bank’s last remaining equity holding of importance.

The bank, the eurozone’s biggest by market capitalisation, told the Spanish stock market regulator on Wednesday that it was “in negotiations” over its holding in Cepsa, in which Total, the French oil major, controls nearly 49 per cent. However, it said no agreement had been reached.

It is understood that the International Petroleum Investment Company (IPIC), of Abu Dhabi, which already holds 9.5 per cent of Cepsa, heads the list of potential buyers.

DWTC: Building a dream

When the Dubai government decided to build an exhibition facility and a tower in the 1970s, no one knew how the sector would shape up to contribute to the future economy of this one-time fishing settlement.

They did not know where to develop the facility in the first place and where to start.

So, when the late Shaikh Rashid Bin Saeed Al Maktoum, then Vice-President and Prime Minister of the UAE and Ruler of Dubai, announced his intention to build what would then be the tallest building in the Middle East, the reaction was one of pure incredulity.

Sharif ban sends index tumbling

Islamabad: Pakistan's key stock index, the biggest decliner in Asia on Wednesday, fell the most in 32 months, after a court barred former premier Nawaz Sharif from running in elections.

The benchmark Karachi Stock Exchange 100 index, fell 294.05 or 5.01 per cent to 5,580.78 at time-close yesterday, its biggest decline since June 14, 2006. Oil & Gas, the biggest fuel explorer, fell 5.3 per cent to 54.24.

Pakistan's Supreme Court ruling may heighten tension between the biggest opposition party run by Sharif, and President Asif Ali Zardari's ruling coalition. Sharif said two days ago Zardari was seeking to have him banned.

HDB to purchase 60% of Damac Properties' projects at Hyde Park

Damac Properties yesterday signed a partnership with the Housing and Development Bank (HDB) of Egypt (Taameer Wel-Iskar) for 60 per cent of the developer's projects in New Cairo to be transferred to the bank.

Under the new partnership, HDB will purchase 60 per cent of Damac Properties' development at Hyde Park. This share will then be transferred to the management of the newly formed Hyde Park Property Development Company.

A board will be formed comprising seven directors – four from HDB and three from Damac Properties who will manage the company. Damac Properties will retain the remaining 40 per cent of the development. The company did not disclose the value of the deal.

Rasmala gets funds approval

Rasmala Investments Saudi announced yesterday that it has received the approval from the Capital Market Authority to launch two Saudi equity funds. One of the funds 'Rasmala Saudi Equity Fund' will be managed according to the Shariah guidelines approved by the fund's Shariah Committee and the other will be a conventional fund.

Hamad Al Huthaili, Managing Director of Rasmala Investments Saudi said: "Both funds will be suitable for investors who seek capital appreciation over the medium to long-term and will focus on adding value through a robust stock selection process relying primarily on the fundamental analysis skills of Rasmala's asset management team. Rasmala pioneered the fund-of-funds model in the Mena markets and the company strives to provide high quality investment products to major segments of Saudi investors".

Muhammad Shabbir, Head of Asset Management and CIO, said: "The funds will invest in companies poised to benefit from opportunities in Saudi."

2009 could be challenging for Kuwaiti banks

Slower deposit mobilisation, a reluctance to lend and concerns over loans quality are expected to make 2009 a "challenging" year for the Kuwait banking system, research released this week has indicated.

Loan quality has deteriorated in 2008 and further erosion is expected, Kuwait-based Global Investment House said.

"The second largest bank by asset size, Kuwait Finance House, exhibited a manifold increase in its non-performing loans while the largest bank by the same criterion, National Bank of Kuwait, has taken very high general provisions, presumably bracing itself for worse to come," the report said.

EmiratesNBD to rectify lending-deposit ratio

EmiratesNBD, the largest bank in the UAE in terms of assets as well as profit, has set a target time of three to six months to fix the daunting issue of high lending-deposit ratio, according to the bank's chief executive officer.

The ratio which was more than 125 per cent as of December end, 2008, is likely to rise as there is substantial amount of medium-term notes (MTNs) maturing during this year. Out of the total Dh30.1 billion worth of notes, Dh1.836bn has been settled during January and another Dh5.837bn needs to be settled during this year itself.

Talking to Emirates Business, Rick Pudner, CEO of the bank, said the bank has been looking at various strategies to fix this issue. "Not only our bank, all banks must be working on this and I am sure within the course of the next few months, we will be able to bring down this to close to 100 per cent which is the prescribed level by the Central Bank of UAE," he said.

Qatar’s high and low roads to freedom of the press

The Qatar campus of Northwestern University’s Medill School of Journalism rises formidably out of the desert like a temple to something grand, mysterious and exotic. And in a way, that is what it is.

Despite the reputation for outspoken journalism that Qatar has built up over the years by hosting the feisty Al Jazeera network, the local press is still a long way – legally and culturally – from being able to practise the kind of sceptical, American-style journalism that Medill is now teaching. The country is still operating under a 1979 media law that allows journalists to be jailed, helping to create a situation that the Doha Centre for Media Freedom recently said “encourages self-censorship and makes it difficult to criticise the government”.

But the opening of the journalism school last year and the media advocacy centre in 2007 – both with government backing – indicates that there is political will at the highest levels for things to change for Doha’s local press.

RAK government may seize DH2bn development

The Ras al Khaimah Investment Authority (RAKIA) may seize control of a Dh2 billion (US$545 million) property development on the emirate’s flagship Al Marjan Island project after Khoie Properties, a Dubai-based developer, failed to honour its obligations for the cost of the land.

La Hoya Bay is one of the main mixed-use projects on the man-made island, a 270-hectare area of reclaimed land 20km west of the city of Ras al Khaimah designed to look like a coral atoll.

“RAKIA is acquiring the project in its entirety from Khoie Properties, but the deal has not been finalised and the Government needs to look at all the liabilities,” Ahmad al Jazayeri, the chief financial officer of Khoie Properties, said today.

Corruption cases set for court

The first court case connected to the ongoing investigation into alleged corruption in Dubai is due to start early next month.

Four former employees of the property developer Sama Dubai are to appear in the Dubai Criminal Court of First Instance with a fifth defendant from another company.

Among the defendants is AM, 42, the former chief executive of Sama Dubai’s project The Lagoons.

He is charged with asking for bribes in the form of properties and cash from Sama Dubai clients, which led the company to incur a loss of Dh137 million (US$37.3m), prosecution officials said.

Amman reshapes itself for business

At present it is a construction site and, as the locale of a notorious former secret police headquarters, for many Jordanians it has sinister undertones. But Amman’s Abdali district is where a highly touted new central business area is due to open next year.

The scheme, the city’s mayor says, will enable Amman to “compete with the other capitals of the Middle East”.

Abdali is one of several big projects designed to reshape Amman, a city of 2.5m which was a village of only 5,000 inhabitants when Jordan was founded as an independent kingdom in the 1920s. These projects include urban regeneration schemes and developments such as Jordan Gate (pictured above), set to be “the tallest residential towers in the Middle East”, according to Omar Maani, the mayor.

Dubai takes another dive into pearls

One of the toughest moments in Dubai’s history came when Japanese scientists discovered how to culture pearls. The process devastated the economies of the Gulf region in the 1930s as the primary industry, diving for natural pearls, collapsed and depression in the US punctured demand.

So the symmetry of Dubai seeking once again to become a pearl trading hub is apt just as the global credit crunch curbs the city-state’s financial and real estate sectors.

“Maybe there is some sentimentality here, but we do believe Dubai can once again become a pearl trading centre, even if it does not turn into a multibillion-dollar industry here,” says Ahmed Sulayem, chairman of the Dubai Metals and Commodities Centre (DMCC).

Gulf companies pay for lack of transparency

Stock market downturns invariably reveal mistakes and failures previously concealed when markets were buoyant, often leading analysts and officials to call for increased transparency and improved regulation.

Reporting and governance are areas where analysts and asset managers say most Gulf companies have much room for improvement.

Quarterly results are frequently late, they say, and often only in Arabic; companies rarely have an investor relations team; access to executives is often negligible; and bankers are increasingly questioning the true worth of reported balance sheets.

Dubai says loan sufficient for next year

Dubai’s $10bn bail-out loan from the central bank of the United Arab Emirates is sufficient to refinance debt and meet operational costs at government-related companies for the next year, an official said on Wednesday.

Nasser al-Shaikh, director-general of the department of finance, said Dubai would reveal details of the next $10bn tranche of its medium-term bond programme if it were launched at a later date, but he said the full $20bn would cover ”the worst case scenario” of Dubai’s ongoing requirements.

The federal cash, lent to Dubai on Sunday, will be used to retire debt and fund operational costs, primarily in the hard-hit real estate sector. Under an as-yet-to-be-defined mechanism, government-owned or related companies will borrow money priced more dearly than the 4 per cent at which the bonds were issued.