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Friday, 3 April 2009

Positive flows into emerging markets trigger a “sell” at Merrill

Dedicated emerging market equity funds posted a fourth consecutive week of positive flows during the week ended April 1, according to data from fund-tracker EPFR.

Investors poured just over $1bn into these funds during the week, equivalent to almost 0.4 per cent of total assets. This is the first four-week run of positive flows since May 2008.

Mall rats of a different stripe

Commentary: Old ways of the souk bow to glitzy U.A.E. shopping centers

When I was between 13 and 15 years old in Massachusetts, my friends and I on a Friday or Saturday night could regularly be found haunting the Fairfield Mall. We would smoke marijuana and drink pony bottles of Miller High Life in the darkened woods in back of the mall near the Westover Air Force Base, climb the low branches of trees, sing at the top of our lungs -- I can remember particularly bad renditions of Barry Manilow's "Mandy" -- and play jokes on each other.

Then, if it was still early enough, we drifted over to the mall for slices of cheese pizza with red-pepper flakes and grated Parmesan, to the T-shirt kiosk for a new Queen, Eagles or Kansas silkscreen, the head shop to check out the lava lamps, and to the games arcade to tilt pinball machines and try our hand at (drinking and) driving on what would now be rather antiquated video games. Sometimes, we would bump into some of the girls from school. Maybe one or two of us would split off with them. But generally it was just teasing and giggling, and then off we all went on our merry ways.

This was in the mid- and late 1970s. We were the precursors, I guess, of the mall-rat culture of the 1980s, which was driven by consumerism rather than boredom, and the swarming gangs that invaded North American malls in the 1990s, which led to the decline in popularity of single-edifice malls and the resurgence of strip malls, with less chance of loitering and trouble.

Apple iTunes opens line to Skype

The Skype internet telephone service is the most popular free download on the UAE version of the Apple iTunes Application Store, despite a ban on the software.

The store, which distributes programs made for the Apple iPhone, was launched to coincide with Etisalat’s release of the device last month.

Skype for iPhone appeared at the top of the UAE Application Store’s list of most popular free downloads in the UAE today.

Sovereign wealth funds and financial stability (Registration required)

Publication date 30th March, 2009,
The present financial crisis has placed financial stability at the forefront of policy discussions. At the same time, sovereign wealth funds have become much more significant players over the past two years. This column summarises the results of some recent studies about sovereign wealth funds and their implications for financial stability. Overall, the existing research on SWFs suggests that they can be a stabilising force in global financial markets.

Sovereign wealth funds (SWFs) are defined as special-purpose investment funds or arrangements owned by the general government. They are often funded by balance of payments surpluses, official foreign currency operations, proceeds of privatisations, fiscal surpluses, or receipts resulting from commodity exports. Their total assets have been estimated at $2-3 trillion, but many of them have suffered unrealised losses stemming from the ongoing financial crisis.

There have been many arguments put forth regarding the potential positive and negative effects of sovereign wealth funds on global financial markets. Some argue that SWFs can play a stabilising role in global financial markets. First, as long-term investors with no imminent call on their assets and mainly unleveraged positions, SWFs are able to sit out longer during market downturns or even go against market trends. For example, the SWFs’ capital injections into systemically important financial institutions in late 2007 and 2008 augmented the recipients’ capital buffers and helped reduce risk premia for some banks, at least in the short term. This provides initial evidence that SWFs may reduce volatility in financial markets. In addition, SWFs in some countries, particularly in the Middle East, have recently supported domestic equity markets and financial institutions. Second, large SWFs may pursue portfolio reallocations gradually in order to limit adverse price effects of their transactions. Third, as long-term investors that add diversity to the global investor base, SWFs could contribute to greater market efficiency, lower volatility, and increased depth of markets.

TrimTabs Estimates All Equity Mutual Funds Redeemed $11.2 Billion in Week Ended Wednesday, April 1

TrimTabs Investment Research estimates that all equity mutual funds redeemed $11.2 billion in the week ended Wednesday, April 1, versus a revised inflow of $1.7 billion in the previous week.

Equity funds that invest primarily in U.S. stocks posted an outflow of $8.5 billion, versus a revised inflow of $2.3 billion in the previous week. Equity funds that invest primarily in non-U.S. stocks had an outflow of $2.8 billion, versus a revised outflow of $557 million in the previous week. In addition, bond funds had an inflow of $2.9 billion, versus a revised inflow of $7.1 billion in the previous week, and hybrid funds had an inflow of $810 million, versus a revised inflow of $451 million in the previous week.

Separately, TrimTabs reports that exchange-traded funds (ETFs) that invest in U.S. stocks posted an outflow of $1.4 billion, versus an outflow of $5.0 billion in the previous week. ETFs that invest in non-U.S. stocks had an inflow of $502 million, versus an inflow of $1.6 billion in the previous week.

MGM Mirage Up On Possible Capital Infusion; Rivals Also Up

Shares of MGM Mirage (MGM) rose sharply Thursday, a day after reports that the company may receive a capital infusion to keep its massive City Center project in Las Vegas afloat, helping send the overall casino and hotel sector higher.

Jefferies & Co. analyst Lawrence A. Klatzkin said Colony Capital LLC's potential investment in a casino project could help boost sentiment across the casino, travel and leisure sectors, which have suffered with the broad economic decline.

"Investors are looking for any good news these days," said Klatzkin, adding that he believes City Center is not going to experience another default.

Dubai Appoints Rothschild as Adviser

The Dubai Department of Finance has appointed London’s investment bank, Rothschild, to advise on the establishment of a fund to disburse $10 billion it recently raised from bonds.

The fund will be fully owned by the Department of Finance and controlled by the Supreme Fiscal Committee of Dubai. It will provide targeted financial support and liquidity to certain state-affiliated entities, while facilitating the reforms to protect the long-term viability of these entities.

In February, the Government of Dubai had launched a $20 billion long-term bond programme to fund its various spending and financing requirements. The first tranche of the $10 billion was fully subscribed by the Central Bank of the UAE. The second tranche is yet to be issued.

DIFC Week postponed until 2010

This year’s DIFC Week has been postponed until the first quarter of 2010 to avoid conflict with other major international events taking place in Dubai, according to organisers of the annual event designed to bring regional and global financiers together.

The programme of conferences, which was organised for November 22-24, features economic leaders from the regional and global financial worlds.

Event organisers said they had decided to postpone this year's event until the first quarter of 2010.

Strong fundamentals key to Abu Dhabi bond demand

Abu Dhabi says the strong investor demand for its US$3 billion (Dh11bn) bond issue is testimony to its solid economic fundamentals and will help the emirate diversify its funding needs in the future.

“We have seen significant demand for the issue with a total order book of US$11.8bn ... a testament of international and regional investors recognition of Abu Dhabi’s strong economic fundamentals,” said Hamad al Suwaidi, undersecretary at the Department of Finance in Abu Dhabi. He added that despite the change in market conditions, the Emirate had been able to secure the same conditions as for its $1bn (Dh3.68bn) bond issued in July 2007.

The bond, which is part of a $10bn programme, was priced last night after being marketed to US and European investors.

Jailed former minister denies deception and fraud

A former UAE minister of state, already jailed for unlawfully taking control of a company belonging to his late Lebanese business partner, pleaded not guilty in an appeal court yesterday to deception and fraud.

The minister, KF, was sentenced in February by the Dubai Misdemeanours Court to two years in prison after he was found guilty of unlawfully taking possession of the IT company belonging to his former business partner, HJ. KF’s defence lawyers told the Dubai Misdemeanours Appeal Court yesterday that he does, in fact own a 51 percent stake in the company, that he was more than simply a sponsor for the trade licence and that he did not cheat his business partner’s family, as prosecutors have claimed.

The defence also raised doubts about a 1996 document, signed by the former minister and his business partner, which was presented to the court by HJ’s sister, MJ, the civil claimant in the case. MJ claims the document shows that KF was her brother’s local sponsor and had no stake in the company.