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Tuesday, 14 April 2009

IMF sees UAE growth slowing

Economic growth in the United Arab Emirates will more than halve this year, as declining oil revenues and a weakening real estate sector sap the strength of the previously ebullient economy, according to the International Monetary Fund.

The UAE’s real economic growth will slow to a five-year low of 3.3 per cent in 2009, from an estimated 7.4 per cent last year, the Fund forecast in a report on the second-largest Gulf economy released on Monday.

The IMF growth projections are at variance with most private sector analysts. National Bank of Abu Dhabi is forecasting flat real growth in 2009 and a contraction in nominal terms. Bank of America-Merrill Lynch analysts predict the UAE economy will shrink 0.6 per cent in real terms.

Shrinking Singapore

Singapore, one of the world’s most open economies, fittingly expects to be one of its fastest sinking. After a ghastly first quarter the government now forecasts full-year shrinkage of between 6 and 9 per cent.

What to do? By “re-centring” the policy band that pegs the Singapore dollar to an (undivulged) basket of currencies, the Monetary Authority of Singapore gains a pitifully modest devaluation – estimated by analysts at about 1-2.5 per cent. MAS was careful to attach some suitably tough language, in effect putting currency traders on notice that more aggressive action will not follow.

Stresstify (Registration required post Link)

Roubini posits that the stress test scenarios are already more optimistic than reality.

Dubai World to withhold CityCenter payments-source

Dubai World, joint venture partner with MGM Mirage (MGM.N) in the $9 billion Las Vegas CityCenter, will withhold payments toward the project until a comprehensive finance package is obtained, a source with knowledge of the matter told Reuters on Monday.

But the partners are now in negotiations to try to secure a longer-term financing solution for the project, said the source, who was not authorized to speak publicly about negotiations.

MGM said on Monday that it had secured a waiver from lenders so that it can pay about $70 million due to CityCenter contractors by Friday. [ID:nN13393798]

ICBC takes top slot for deposits

Industrial and Commercial Bank of China, the world’s largest lender by market cap, has now also become the biggest by deposits. The latest symbolic milestone underlines how Chinese banks have weathered the global crisis to become the world’s largest lenders. ICBC’s customer deposits reached Rmb8,900bn ($1,300bn) by end-March after increasing by Rmb950bn from Jan 1, the bank said Monday. ICBC, which is 4.9% owned by Goldman Sachs and 75% owned by Beijing, increased net profits last year by 36% to Rmb111bn, making it the world’s most profitable bank.

Property developer's victims surface in Cairo

The Damac Properties, a Dubai-based developer that has not been doing well in the face of the current global financial crisis, is caught in a new row involving its staggering real estate projects in Egypt after allegedly victimizing a number of investors in the Kingdom, Al-Madinah newspaper reported yesterday.

According to the daily, more than 170 Saudis and expatriates were recently discovered to have bought housing units in the company's defaulting Hydepark project in the Egyptian capital Cairo.

The newspaper said the victims of the Cairo project were in addition to those who invested money in the company's Al-Jawhara Tower project on the Jeddah Corniche.

PE firms have enough funds to put to work despite crisis

Fundraising and secondary advisers to the private equity community have benefited from the financial crisis. This is because the complexity of financial matters these days has led more and more clients to seek advice, says Antoine Dréan, Founder, Chairman and CEO of Triago, Europe's first independent private equity placement agent.

Dréan said the Middle East remained "rich" and a source of enormous liquidity. "There is money coming out of the ground every day," he told Emirates Business.

"There was over-leveraging in some countries and companies. This needs to be treated and that is what happening now. It doesn't mean that people are completely broke, it means there is a mess that needs to be taken care of before they invest again."

Mena markets outperform global indices

Equity markets in the region have outperformed both developed and developing countries and, with a low correlation with main asset classes, are poised to emerge even stronger in the next one to two years, a senior executive of an asset management company has said.

Middle East and Africa being the "only regions" in the world with reserves higher than debt, (debt is eight per cent while reserves are 22 per cent of the GDP in Middle East against the world average of 146 per cent for debt and 12 per cent for GDP) have greater flexibility to deal with the current challenges. "Until the middle of 2008, these markets quite significantly outperformed global markets and in the coming one-two years would show much higher growth," Zin Bekkali, Chief Executive Officer of Silk Invest, told Emirates Business.

The economic crisis marks the ushering in of a new phase where economies of Asia, Africa and the Middle East would emerge new growth champions, said Bekkali.

Shuaa fate in balance

Shuaa Capital's shareholders will decide tomorrow at an extraordinary general meeting (EGM) whether the firm continues to function or is dissolved.

The Dubai Financial Market-listed firm is seeking the decision in accordance with Article 285 of the UAE Commercial Companies Law, a regulatory filing to the DFM reveals.

Shuaa reported a Dh948.496 million loss for 2008. Article 285 provides that if the losses amount to half of its capital, the directors shall call an EGM to consider the matter of continuation or dissolution of the firm.

Non-Sharia compliance costs sukuk industry billions

Up to US$15 billion (Dh55.09bn) of sukuk, or Islamic bonds, have been shelved since the onset of the financial crisis because the specialised debt instruments became indistinguishable from conventional bonds, an Islamic banking expert says.

New issuance of sukuk had completely dried up because Islamic banks were structuring them incorrectly from the start, said Sohail Zubairi, the chief executive of the Dubai Islamic Bank unit Dar al-Sharia, which advises on how to structure Islamic financial products.

“We lost at least $10bn to $15bn since the onset of the crisis – I’m talking about the second half of 2008,” Mr Zubairi told Reuters.