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Saturday, 11 April 2009

Food for thought in Last Supper quiz

This year as last, the world has entered what many of its population regard as a holy period, at a time when the markets are rallying after a period of great fear. So, once more, it is a good juncture for reflection.

The original Last Supper was a Seder meal, in which Jews commemorate the flight from Egypt, with a dinner in which almost every action is symbolic. One of the most important acts is the asking of the Four Questions, where the diners must ask themselves what they are doing and what the ceremony means.

This is a good discipline. So, for a second year, here are the Long View’s Four Questions for the markets.

Difficult couple of years ahead for Dubai

Dubai Government officials have tried to sound upbeat in recent days, saying that the ‘bad times’ are now in the past, and that might be technically correct - with property and equity prices now so low that the additional possible downside is limited. Yet there are few in local business who do not see a hard road ahead.

Dubai Land Department figures showed some buyers getting extraordinary bargains last week with a total of 12 villas changing hands for an average of $286,000 each, and 535 apartments sold for an average price of $193,000. Agents talk of ‘distress selling’ and indeed at these price levels the downside is relatively low for buyers.

Rules of the game have utterly changed

Well, it was certainly bad while it lasted. Like those mystical 'green shoots', a growing consensus seems to have sprouted in the financial markets that the worst has passed.

Equities have rallied by about 20 per cent from their recent lows. Having spiked sharply higher after the Lehman Brothers collapse, both the Vix index of expected equity market volatility and corporate bond yields appear to be stabilising at somewhat lower levels. Is it finally all over?

Perhaps. As ever in investment markets, clarity is in short supply. What makes me sceptical about the duration and further strength of the equity rally is the degree of hope that accompanies it. Hopefulness may be a good characteristic in presidential nominees, but it makes a lousy bedfellow for investors. Market watchers were admittedly impressed by the G20 in London. And having been previously unable to spot a minefield without gallumphing through it, US Treasury Secretary Tim Geithner has finally found some traction with the euphemistically titled 'Legacy Assets' programme.

What about Islamic investment choices?

Investors across the globe have suffered over the last 12 to 18 months. Risk aversion has got hold of the investor and there has been a move away from equities and alternatives to cash and bonds.

But Islamic investors may have mixed feelings looking at their portfolios.

The equity side of asset allocation has been hurt across sectors and geography, but Muslim investors may take heart from the fact that Sharia stocks or Sharia-screened stocks have performed relatively better than their conventional counterparts. Commodities and currencies, which are Sharia compliant, have been extremely volatile and gains and losses have fluctuated accordingly. However, bank deposits may have provided some respite.

Aabar will not buy more Daimler, Opel shares

Abu Dhabi's government-linked investment fund Aabar does not plan to buy either further shares in Daimler or a stake in Opel, a spokesman for Aabar said.

Asked by Reuters about a report yesterday that Aabar was raising its stake in Daimler, the spokesman said: "We are not."

Germany's Focus magazine said Abu Dhabi was in talks to raise its Daimler stake from 9.1 per cent now to more than 20 per cent. It also said Aabar had no plans to invest in Opel, brushing off speculation the fund could make a white-knight appearance.

Dubai World sets new plan to save Las Vegas CityCenter--WSJ (With comments)

Dubai World, MGM Mirage's partner in the $8.6 billion Las Vegas CityCenter development, has proposed the troubled project's investors agree to fund it through completion, the Wall Street Journal reported Friday. Details of the plan were not immediately available, but according to people familiar with it, it calls for Dubai World, MGM Mirage and bank lenders to commit to providing the estimated $3 billion needed to finish the project. Such a move could result in banks dropping an earlier agreement to back a $1.8 billion emergency loan only if MGM Mirage and Dubai World increased their own cash contributions to the massive 67-acre hotel, condominium, shopping mall and casino project.

Dubai developer abandons bid for Sydney project

Mega Dubai developer Nakheel has has withdrawn from a consortium bidding to build a major waterfront development in Sydney.

The multi-billion dollar project is being mooted as one of Australia's biggest commercial property developments.

Nakheel's withdrawal comes on the eve of closing time for bids, and leaves its partners Australian property giants Leightons and Mirvac stranded.

Nakheel has abandoned a number of projects in its home country of the UAE, where it leads the way with mega palm projects in Dubai, while trimming its international interests.

Investor Floats Plan to Complete Las Vegas Project

MGM Mirage, Dubai World, Banks Would Commit to Chip in Billions to Ensure Massive Casino and Resort Is Finished

Dubai World, in an effort to save the troubled City Center development in Las Vegas and its relationship with co-investor MGM Mirage, is proposing the two and their lenders pledge billions still needed to complete the project, according to people familiar with the matter.

Work at the $8.6 billion resort and casino development is in danger of halting due to financing woes and a dispute between the joint owners. The proposal calls for Dubai World, MGM Mirage and lenders to commit a combined $3 billion.

City Center's fate has been in doubt in part because MGM Mirage's financial situation has worsened. Dubai World, a conglomerate led by Chairman Sultan Bin Sulayem and owned by the government of Dubai, is suing MGM Mirage for alleged mismanagement and cost overruns at the project. Last month, it skipped its half of a $200 million construction payment.