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Wednesday, 11 March 2009

NBAD to convert $1.5 bln UAE govt cash into capital

National Bank of Abu Dhabi NBAD.AD said on Wednesday it planned to convert into Tier 2 capital 5.6 billion dirhams ($1.53 billion) of United Arab Emirates federal government deposits received last year.

Shareholders of the bank approved the move at a meeting on Wednesday, Chief Executive Michael Tomalin told reporters in the UAE capital, Abu Dhabi.

"It is attractive because it is Tier 2 capital, the coupon is 4.5 percent and the tenure is seven years," Tomalin said. "So it is all reasonably attractive."

Saudi Stock Market Weekly Report - 11-March-2009

Tadawul All Share Index

The Saudi stock market continued its deteriorating performance for the fourth consecutive week, amid pre-emptive selling of blue chip stocks before they announce their financial results for Q1 2009, which is led by investors' current fears surrounding the upcoming corporate results. However, the official monthly statistics of the Saudi Arabian Monetary Agency - SAMA showed that banks' accumulative profits witnessed an increase in Jan. 2009 compared to its results in Jan. and Dec. 2008. This enhancement might be due to the expanding spread between interest rates on the outstanding loans and those paid on deposits in the time being, furthermore, prices of petrochemicals have been performing positive YTD performance where many products rebounded amid varying rise; for example, the price of ethylene and urea recorded a YTD increase of 27% and 52% respectively. This increase can be seen as a positive indication for the coming profits of the petrochemical industry in Q1 2009.
On the other hand, small cap stocks continued its negative performance this week as a result of profit taking trades, especially in the insurance sector and number of stocks in the agriculture sector where the Tadawul insurance sector index decreased by 9% this week.
On the Oil front, prices were up this week due to investors' concern about a further production cut by OPEC members in their next meeting. The WTI closed on Tuesday March 10 at USD 45.7 up by USD 4.1 or 9.9% against last week. "TASI" registered 4130.15 points on Wednesday March 11 close, down by 5.0% from last week. As of today, "TASI" is 14.0% lower than year start and the trading value reached SAR 16.3 Billion, down against last week's SAR 17.1 Billion. "SABIC" dominated trading value at 15% followed by "Alinma" at 6% and "MA'ADEN" at 5%.

flydubai reveals Terminal 2 launch plan

Dubai's first low cost airline, flydubai on Wednesday announced it will operate from Terminal 2 at Dubai International Airport, when it begins its services later this year.

flydubai said it was on schedule to take off with the launch of its first routes mid-2009 without giving a specific date.

The carrier will operate a fleet of Boeing aircraft, each offering 189 economy class seats. Launch routes will be announced shortly and will include a range of destinations within four and a half hours flying time of Dubai.

Mumtalakat and Mubadala rated most transparent in SWF Institute index

Bahrain Mumtalakat Holding Company announced today that its transparency score has been upgraded following quarterly research undertaken by the independent Sovereign Wealth Fund Institute. The latest upgrade sees Mumtalakat retain its position as one of the leading investment companies in the GCC region for transparency.

Mumtalakat's transparency score has increased to 7 from 6 out of a possible 10 index score. Of the nine Gulf investment companies covered in the study, Bahrain has the joint highest transparency score on the SWF Institute's Linaburg-Maduell Transparency Index, alongside Mubadala of the UAE.

The Linaburg-Maduell Transparency Index, developed at the Sovereign Wealth Fund Institute, is based on ten essential principles that depict sovereign wealth fund transparency to investors. These include the provision of percentage ownership of company holdings, financial returns, and geographic locations of holdings as well as the provision of clear strategies and objectives for the future.

Iran says OPEC could accept Russia as member -report

TEHRAN, March 11 (Reuters) - Iran's oil minister suggested OPEC would accept Russia as a member if Moscow wanted to join the 12-member oil producers' group, the semi-official Fars News Agency reported.

Gholamhossein Nozari, speaking a few days before the cartel is due to meet in Vienna on March 15, also reiterated a call for more cooperation between OPEC and non-OPEC countries. Iran is the world's fourth-largest oil producer.

Oil prices have plunged about $100 a barrel since a peak of $147 in July as a global economic downturn hit fuel demand, despite a series of production cuts by the Organization of the Petroleum Exporting Countries in the last six months.

45 percent of world's wealth destroyed: Blackstone CEO

Private equity company Blackstone Group LP (BX.N) CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world's wealth has been destroyed by the global credit crisis.

"Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."

But the U.S. government is committed to the preservation of financial institutions, he said, and will do whatever it takes to restart the economy.

Private equity firms urged to be cautious

Private equity companies based in the region were on Tuesday warned against the pitfalls of relying on easy capital and excessive debt for transactions in light of the global financial turmoil, which has exposed the risks of doing business in that manner.

Dubai International Financial Centre (DIFC) Governor Omar Bin Sulaiman said the Middle East's private equity sector cannot ignore the lessons of the global financial crisis.

"The turmoil in Western countries has revealed the dangers of excessive debt levels and overly complex financial structures. It is very clear that private equity firms depending on easy capital alone will find it difficult to survive. Firms that over-leveraged for buyouts will struggle," he told a conference in Dubai on Tuesday.

Merger to create new mega-bank

The Industrial Bank is to be merged with the Real Estate bank, creating a new development bank with Dh10 billion in capital, a top official told the Federal National Council on Tuesday.

Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told the House the merger is expected to be finalised by summer, creating the Emirates Development Bank.

In effect, the government is merging the Industrial Bank with three other financial institutions to create a state-backed mega-bank aimed at reviving lending to property buyers and developers.

Dubai seeds Sharia-compliant hedge funds

The government-owned Dubai Sharia Asset Management (DSAM) on Tuesday launched five Sharia-compliant hedge funds with US$200 million (Dh734.6m) in government seed money.

DSAM also offers a platform for third parties seeking to launch their own Sharia-compliant hedge funds.

“No other Shariah-compliant platform has ever been endorsed by a government,” said Eric Meyer, the chief executive of Shariah Capital, a US investment company that owns 49 per cent of DSAM. The Dubai Multi Commodities Centre Authority (DMCCA), which provided the seed money, owns the remaining 51 per cent.

Qatar plans 150% gas production rise

Qatar, the world’s leading exporter of liquefied natural gas (LNG), is poised to increase its production capacity by more than 150 per cent, just as demand for the commodity is falling.

That would contribute to a global LNG supply glut likely to last through until 2013, delegates at a gas conference in Doha, the country’s capital, heard earlier today.

“We are certainly into an unexpected time for the LNG business,” said Andy Flower, an independent energy consultant and the former manager of BP’s interest in an LNG venture with state-owned QatarGas. “This year, 20 million to 25 million tonnes of extra supply will hit the market when demand will probably be 10 million tonnes less than last year.”

Learning lessons from the oil boom

Following the 1986 oil crash, a famous Texan bumper sticker read: “please Lord, send us another oil boom – we promise not to waste it this time.” Now that prices have fallen by US$100, and OPEC is making sharp cuts to production, and Gulf states are running budget deficits, it seems that the five-year oil boom is officially over. Now is a good time to ask: did oil exporters around the world waste the boom? And how should they adapt to the times ahead?

The phenomenon of the “oil curse” has been much discussed – though it is debatable whether it is inevitable, and whether it always strikes in the same way. A sudden rush of oil and gas wealth often leads to macroeconomic problems – inflation soars and the currency becomes overvalued – the so-called Dutch Disease – making other industries uncompetitive. Then, when the oil boom ends, as it always does, budgets have to be slashed and exporting countries face a long and painful adjustment.

The oil exporting countries are a diverse group, even if we consider only the Middle Eastern nations, and each has faced its own challenges, conditioned by factors including its political institutions, the size of its petroleum sector relative to population, or its state of economic development.

OPEC ready to enforce quotas

OPEC needs total compliance to existing supply curbs before talking about a further reduction, Qatar’s oil minister said.

Ministers are due to hold a policy meeting on Sunday and some members have already called for deeper reductions to revive prices.

“We cannot discuss another cut until we see the compliance at 100 per cent,” said Abdullah al Attiyah, the Qatari oil minister, at an industry conference in Doha. “The first step is to make sure we see full compliance.”

New date for first of corruption cases

A new date has been set for the first court case linked to an ongoing investigation into corruption in Dubai.

A case of bribery and revealing company secrets brought against four former employees of the real estate developer, Sama Dubai, will now be heard on March 15, after the previous court date of March 8 coincided with a public holiday to mark the Prophet’s birthday.

The most senior former businessman to be referred for trial in the case is AM, 42, the Emirati former chief executive of Sama Dubai’s The Lagoons project. He is charged with asking for bribes in the form of properties and cash from Sama Dubai clients that led to the company incurring a loss of Dh137 million (US$37m), prosecution sources confirmed.

Passenger shortfall may keep metro stations shut

Some stations on Dubai Metro’s Red Line may not be open when trains start running in September because of a shortage of passengers.

Mattar al Tayer, the executive director of the Roads and Transport Authority (RTA), said yesterday that some stations might remain closed because delays in nearby residential developments meant there would not be enough passengers. “Maybe some of the stations may not open because of the ridership,” he said, adding that all 29 stations on the Red Line would be structurally ready on time. He would not say which stations could remain closed.

The 52km Red Line, which stretches the length of Sheikh Zayed Road between Al Rashidiya and Jebel Ali, is on schedule and due to take its first passengers on Sept 9. Until yesterday, the RTA had maintained that all the stations would open.

Funds of hedge funds shrink by 30% in year

The funds of hedge funds industry shrank by almost 30 per cent last year, with most of the losses coming in the latter part of the year as volatile markets, poor returns and the impact of the Bernie Madoff scandal took their toll.

More than $1,000bn in assets was held in funds of hedge funds in June last year but, by the end of the year, about $300bn had flowed out of the industry.

More than 27 fund of funds groups that ran more than $1bn either closed or had their assets fall below the $1bn level last year, according to the latest survey by InvestHedge, the industry publication.

Carlyle raises $500m for MidEast fund

The Carlyle Group on Monday became the first global private equity group to raise a fund specifically for the Middle East and North Africa, after it collected $500m for energy, infrastructure and financial services investments in the region.

Two years after Carlyle launched its Middle East and North Africa team, with 12 people operating from offices in Cairo, Dubai and Istanbul, it has raised only half the $1bn it initially targeted for its debut fund in the region.

But Walid Musallam, hired by Carlyle from the Abu Dhabi Investment Company to run its new team, said conditions were improving for private equity investments in the Middle East and North Africa.

Saudi moves to limit off-plan property

As part of a drive to curb real estate speculation, Saudi Arabia has banned the marketing and presale of building projects which are still in the planning stage except with the approval of a newly-formed government committee.

Although Saudi Arabia is the largest real estate market in the Middle East, bankers and real estate brokers report significant property shortages. They attribute this to rampant speculation linked to sales of plots of land and units during the pre-construction phase as well as growing demand from a young population.

Such speculation has fuelled rising rents and property values, some of which exploded by up to 30 per cent in 2008.

Thaw spurs prospect of arms sales to Libya

Newly rehabilitated from its pariah status, Libya is establishing military ties with the US that could lead to the sale of lethal weapons to the north African country.

In a remarkable sign of the degree of rapprochement after four decades of open hostility during which the US carried out military strikes against the regime of Muammer Gaddafi, Gene Cretz, the US ambassador to Tripoli, told the Financial Times that the new military relationship would begin with training programmes, followed by the sale of non-lethal weaponry.

Then “at some point, if both sides want it . . . we would hope that [the sale of lethal weapons] would be a culmination of our military relationship”, he said.