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Tuesday, 24 March 2009

Roubini sees light at the end of the tunnel

Whoever dares to ask Dr. Doom- Nouriel Roubini - if the crisis has reached its bottom, if the worst is behind us, must also have the courage to hear his answer that can be summed up in two letters, an predictably “no”. According to the professor of economics at New York University, which now enjoys an undisputed reputation worldwide for having predicted well in advance and with an accurate analysis the crisis that has brought the world to its knees, the markets have yet to discount other bad news: he is of the view - in truth he is not the only - that the rise in stock markets in the last few days are a temporary “bear market rally” with more contraction ahead. However, in an intense presentation held yesterday in Milan at a meeting organized behind closed doors by Calyon Crédit Agricole, Dr. Doom gave a glimmer of hope: “there is possibly light at the end of the tunnel,” he said, although with close teeth. That bottoming out however requires a number of conditions: it requires governments and central banks of the countries most affected by the worst recession since the Great Depression of 1929 – the United States, European Union, China and Japan in the first place - “to adopt anti-crisis measures that very aggressive and front loaded”. What has been implemented so far, in terms of fiscal stimulus and monetary policies, including unconventional policies, is not enough. The severity of the crisis is such – “the world economy in danger of falling into the abyss of a near depression” to put it as Roubini says it - that resolving this crisis requires major policy efforts and timely and bold decisions by the governments.

UAE eyes up to 40 pct savings on refinery projects

Abu Dhabi's state-owned refining company Takreer is hoping falls in commodity and raw material prices will cut its cost base on new projects by up to 40 percent, a top official at the firm said on Tuesday.

But the company has no plans to cut either spending or projects due to the lower oil price or tight credit markets, Takreer General Manager Jasem al-Sayegh told an energy conference.

"We are proceeding with projects as planned and on schedule," Sayegh said. "All our projects are self-financed and fully secured... In fact, we see opportunities in the current environment to save 30-40 percent on proposed capital costs."

Kuwait investment firms lose US$32 billion in six months

Assets held by Kuwaiti investment companies slumped by US$ 32 billion in the six months to January as a result of the global economic meltdown, official media said on Tuesday.

The assets of 99 Kuwaiti investment firms slid 31% to US$72 billion from US$104 billion at the end of July, the KUNA news agency reported, citing official figures.

The drop reflected a 45% or US$26 billion decline in their holdings of companies listed on the Kuwait Stock Exchange, as well as falls in local mutual funds and investments abroad.

MGM Mirage responds to Dubai World suit

MGM Mirage said a lawsuit filed Sunday by its joint venture partner in the $9.1 billion CityCenter development is “completely without merit” and the casino operator plans to complete the Strip development.

Dubai World, the investment arm of the Persian Gulf state, sued MGM Mirage, saying the casino operator mismanaged the massive development, leading to cost overruns and calling into question the viability of the project.

MGM Mirage Senior Vice President of Public Affairs Alan Feldman e-mailed a statement from the company earlier this morning before trading opened on the New York Stock Exchange.

Monthly Oil Bulletin - March 19, 2009 (PDF report)

"Oil prices recovered as weaker dollar, curtailment of investment by oil companies and implementation of output cut by OPEC is raising some supply concerns despite weak oil demand. US crude oil price crossed the US$50 per barrel mark for the first time in four months. US crude increased by 37.6% during the review period (17 February 09-19 March 09) to settle at US$51.61 per barrel mark. US crude has lost 64.4% since it reached an all-time high of US$145.16 per barrel on 14 July, 2008. Simultaneous recession in the US, Euro-zone and Japan along with slowdown in growth in the emerging economies is pointing towards weaker demand for oil in 2009. However, efforts by major countries to stimulate their economies and efforts by OPEC to balance the supply-demand mismatch is providing support to oil prices. OPEC basket and Kuwait export crude price followed the same pattern increasing by 12.5% and 16.5% during the review period to settle at US$47.39 and US$47.95 per barrel respectively."

Gulf States to Extend Deadline for Common Currency, al-Kaud Says

Gulf Cooperation Council states will extend the deadline to introduce a common currency, Nasser al-Kaud, deputy assistant general for economic affairs at the Gulf Cooperation Council said in Manama today.

The GCC’s monetary council will start operating by the end of this year, al-Kaud said at the 9th GCC Banking Conference.

The GCC members are Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain. The currencies of all the members, except Kuwait, are pegged to the U.S. dollar.

INTERVIEW-Dubai finance chief pinpoints $10 bln aid funds

Funds from an emergency $10 billion rescue plan will target Dubai World, Dubai Holding and domestic firms in the emirate's sovereign wealth fund's portfolio, Dubai's finance department head said on Tuesday.

A five-man fiscal committee, headed by Emirates airline chairman and local power broker Sheikh Ahmed bin Saaed al-Maktoum, was re-established a month ago to assess the companies' requirements and decide how the funds would be used, Nasser al-Shaikh told Reuters in an interview on Tuesday.

"We will not wait to support the companies, there are urgent requirements that need to be dealt with quickly," he said. "There is no free lunch; we will be helping companies on commercial terms."

Dubai Islamic Bank says mulls $817 mln capital hike

Dubai Islamic Bank DISB.DU will consider raising 3 billion dirhams ($816.8 million) in capital over five years and converting government deposits made as an emergency support measure last year into regulatory capital.

The bank said on Tuesday in a statement on the bourse website that its board of directors would discuss the two measures the following day.

For the full statment, click on: www2.dfm.ae/documents/News%20Files/88660333-03fd-45e0-98 39-208369dd6e81.jpg

Goldman works on iShares bid

Goldman Sachs is working on a bid for iShares, the securities lending and exchange-traded funds business being auctioned by Barclays. Bids, due by Friday, could put a value ofup to $6.5bn on iShares. Goldman and at least three other parties have expressed interest in iShares including buy-out group Bain Capital and a consortium led by Hellman & Friedman. Fund manager Vanguard is also thought to be interested.

Hedge funds to see record withdrawals

Hedge fund investors believe the industry will see even bigger withdrawals this year than last, when record levels of cash left the sector. A survey of investors by Deutsche Bank found that a third expect withdrawals of more than $200bn, after a net $155bn was taken out last year, according to consultancy Hedge Fund Research. Only a quarter of investors expect net inflows into the industry, and 82% of the 1,000 respondents said redemptions were the biggest issue for hedge funds.

Emal still on target despite recession

Emirates Aluminium (Emal), a joint venture between Abu Dhabi's Mub-adala Development Company and Dubai Aluminium (Dubal), said it is on course to start production early next year despite the global economic recession driving down demand for the metal.

Emal aims to develop the world's largest aluminium production site in two phases, each with 700,000 tonnes of annual capacity, in Khalifa Port Industrial Zone in Taweelah, half way between Abu Dhabi and Dubai.

"Emal is on target to start production in April 2010 and all aspects of the project are proceeding as per the plan," chief executive officer Duncan Hedditch told Gulf News in response to an e-mail question.

More exchange-traded funds in precious metals

The Dubai Multi-Commodities Centre may start more exchange-traded funds linked to precious metals this year.

The DMCC and the London-based, producer-funded World Gold Council created a gold-backed ETF that began trading in the emirate this month.

"We'll be adding more ETFs this year," DMCC Chief Executive Officer David Rutledge said in a March 17 interview. He declined to give further details.

UAE warns against protectionist measures

The UAE believes countries engaged in international trade should not impose protectionist measures, a senior official at the Ministry of Foreign Trade said.

"The imposition of protectionist measures by states is harmful, especially to the service sector which sees the greatest level of international development and growth," said Abdullah Al Saleh, ministry's Director General.

"It is necessary today to remove any restrictions obstructing the influx of foreign investment and to safeguard such investments.

A dozen UAE family firms seek ratings


Several UAE-based corporate entities, especially family-owned groups, are seeking credit ratings from international agencies, industry sources said.

More than a dozen large business groups from across the GCC, most of them from the UAE, have signed up with investment bank Alpen Capital for rating advisory services, Rohit Walia, Executive Vice-Chairman and CEO of DIFC-based Alpen Capital, told Emirates Business.

Although the UAE has the most sophisticated business environment in the Gulf, it needs to catch up when it comes to "density of rated corporates".

RAK to build Indonesian rail line

Ras al Khaimah has been granted a licence to operate a special-purpose, 120km rail line in Indonesia, as part of its plans to source coal for a power plant it is building in the emirate.

The first phase of the 1,000 megawatt (Mw) coal-fired power plant is due to be built in the next two years and requires planners to secure a stable and consistent supply of coal to ensure the plant’s reliability.

In addition to buying coal mines in East Kutai, in Indonesia’s East Kalimantan province, RAK entities are also building the railway at a cost of up to US$600 million (Dh2.2bn) to transport coal from the mines down to a jetty for export. East Kutai awarded the licence to a subsidiary of RAK Minerals and Metals Investments (RMMI), a unit of the Ras al Khaimah Investment Authority (RAKIA).

IPIC assumes majority ownership of Aabar

The International Petroleum Investment Company (IPIC), a Government energy investment fund, has assumed majority ownership of Aabar investments a day after the firm bought a stake in one of the world’s largest carmakers.

IPIC converted the second tranche of a Dh6.6 billion (US$1.79) bond it bought from Aabar in September, increasing its ownership stake from 36 per cent to 71 per cent, Aabar said in a statement.

IPIC’s full conversion of the bond will boost Aabar’s capital pool hours after it agreed to spend Dh9.73 billion to buy a 9.1 per cent stake in Daimler, the maker of Mercedes Benz.

Abu Dhabi’s goals

News that an Abu Dhabi-based investment fund is to take a strategic stake in Daimler will excite envy among other carmakers scrabbling for capital, along with the familiar sneers about Arab investors with more money than sense.

But we should look closer at what the oil-rich city-state is buying. Sitting on 8 per cent of the world’s crude reserves and the senior partner in the United Arab Emirates, Abu Dhabi is clear if not always transparent about its ambitions.

This is more than a portfolio investment. It is more than a strategic bet on the long-term success of one of the world’s top carmakers. And it is more even than a policy of mere diversification into activities other than oil. A lot more.

Kuwait highlights need for more democracy

Talking politics with Kuwaitis is always interesting. Invariably they have much to say and do not hold back in expressing their views.

The past week has been no exception as the government once again resigned and parliament was dissolved for the second time in a year. There were grumbles about parliamentarians; gripes about a lack of leadership and the weakness of the government; and speculation about rifts within the ruling family.

The analysis is often punctuated with sighs of frustration and chuckles – bitter-sweet laughs which reveal a dose of gallows humour. The cabinet has resigned five times in the last three years and Kuwaitis will vote in their second election in a year within the next two months.

Agility refuses to rest on Iraq success

The US invasion and occupation of Iraq may not have been popular in the Arab world, but it was the making of Agility, previously a small logistics company based in Kuwait.

The year before the 2003 invasion, Agility had revenues of $79m. By 2006, after winning lucrative contracts to supply the US Army with food and logistics services, sales jumped to $3.4bn.

“Their business before Iraq was mostly some warehousing and logistics, but then they got some major contracts from the US Army, which transformed the company,” says Kareem Murad, an analyst at Shuaa Capital.

UAE may rue its exodus of expatriates

In the United Arab Emirates, a deluge of foreign professionals has underpinned rapid economic growth. But as job cuts mount, analysts warn that the federation’s open and flexible labour market could backfire.

A swathe of job losses in real estate, financial services and tourism is leading to an exodus. The UAE’s labour and immigration laws allow for easy corporate cuts, but force expatriates who lose their jobs to find new employment within a month – or leave.

This has turned unemployment into emigration, and economists say the population of the UAE – one of the most lopsided and expatriate-driven economies in the world – could decline over the next two years.

Arab states bail out Gulf International Bank

Bahrain-based Gulf International Bank, one of the worst-hit financial institutions in the oil-rich Middle East, has sold $4.8bn of toxic assets to its shareholders, six Arab Gulf governments.

GIB, an investment bank owned jointly by the six hydrocarbon-rich members of the Gulf Co-operation Council, invested heavily in complicated debt-based toxic assets. Due to swingeing impairments and exposure to US banks such as Lehman Brothers, GIB has reported two years of losses totalling $1.1bn.

The bank’s shareholders – led by Saudi Arabia – injected an additional $1bn of capital in February 2008 to prevent the bank from going under and speculation of a Saudi-led takeover has been around since.

Daimler’s move possible ‘blueprint’ for carmakers

Investors and the German government hailed Daimler’s move to lure Abu Dhabi-based Aabar Investments as an anchor investor, in a deal that could act as a blueprint for other carmakers.

Daimler’s share price jumped by up to 7 per cent, after it emerged on Sunday that Aabar had invested €1.95bn ($2.65bn) for a 9.1 per cent stake in the German premium carmaker.

Investors cheered, even as Daimler’s 10 per cent capital increase diluted existing shareholdings.

Riyadh starts fund to oversee investment


Saudi Arabia is establishing a new company to oversee the investment of the assets of the oil-rich kingdom’s largest state-run pension fund, in a significant break from tradition.

The kingdom, which is ruled by King Abdullah and boasts the Arab world’s largest economy, has traditionally given the responsibility for managing its investments to the Saudi Arabian Monetary Agency (Sama), the de-facto central bank.

But under a move announced by the Saudi cabinet on Monday, the General Organisation for Social Insurance (Gosi) will establish a new fund to invest in local, regional and international stock markets. The fund, named the Hassana Investment Company, will also lead the development of real estate, commercial and services projects and be able to sell those projects, the statement said.

Dubai World sues MGM Mirage for breach (Update 1)

Dubai World, the sovereign wealth-backed investor and joint venture partner in MGM Mirage’s CityCenter development project, has sued the casino operator for breach of contract following the debt-strapped company’s disclosure earlier that it was at risk of defaulting on its loans.

The disclosure by the US company controlled by Kirk Kerkorian in early March, which also included a warning of a “substantial doubt about [MGM Mirage’s] ability to continue as a going concern” puts the $8.8bn luxury resort project in jeopardy, Dubai World said.

“The current path of the project is simply unsustainable given our partner’s financial troubles,” Dubai World said in a statement announcing the suit.