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Wednesday, 15 April 2009

Vodafone Qatar begins big IPO test

The last Qatari initial public offering to come close to the size of Vodafone Qatar’s $952m share sale was Masraf Al Rayan’s IPO in early 2006. The issue was sold seven times over and subscriptions had to be held at a football stadium.

But Vodafone Qatar’s share sale, which opened for subscription this week, is being offered in a drastically different market.

The financial crisis has mauled the Doha stock market despite the country’s sterling economic fundamentals. Investor sentiment has recovered somewhat in recent weeks but the IPO will still be “a big test”, says Ahmed Al-Hammadi, head of EFG-Hermes’ asset management arm in Qatar.

Kuwait stymied by political infighting

As Kuwait has drawn up plans to transform its economy it has sought out the services of some big guns – from the World Bank to McKinsey, the international consultants, to Tony Blair, the former British prime minister, who has been hired as a government adviser.

Like other oil-rich Gulf states, Kuwait harbours big dreams as it looks to spend tens of billions of petrodollars transforming itself into a regional trade and finance centre. For more than a year, a government body has been working on a lofty 25-year plan involving more than 1,000 projects designed to build a diversified economy capable of sustaining itself when the oil runs dry.

Yet, while its neighbours have moved ahead with a swathe of grandiose schemes, talk of “strategic visions” and megaprojects in Kuwait is met with furrowed brows and shrugs of shoulders. The reactions illustrate a despairing belief among Kuwaitis that such plans will ever materialise.

Gulf companies learn price of globalisation

The private sectors of the six oil-exporting countries of the Gulf Co-operation Council are, by varying degrees, experiencing their worst crisis since the oil price crash of 1998-99. However, this downturn is different to previous globally induced oil shocks.

Historically, corporate profitability was hit by cuts in public expenditure as Gulf governments recoiled from plummeting oil revenues. This time, the accumulation of sovereign wealth funds is enabling governments to raise expenditure despite falling oil receipts. But as the GCC has opened to the outside world over the past decade, the private sector’s exposure to economic contagion has grown.

In the old days, fluctuations in oil prices were the main driver of corporate profits in the GCC for two main reasons. First, government expenditure, which is the primary economic stimulant in Gulf countries given their expansive public sectors, tended to track changes in oil receipts. Second, Gulf economies were largely insulated from global capital flows given their then limited opportunities for foreign investment and the lower reliance of companies and banks on external debt financing.

Brazil's mining giant sells 19% shares to Dubai aluminium firm

RIO DE JANEIRO, April 14 (Xinhua) -- Brazil's mining giant Companhia Vale do Rio Doce (Vale) announced Tuesday that it had sold a 19-percent stake in its subsidiary Companhia de Alumina do Para (CAP) to Dubai Aluminium Company Limited (DUBAL).

If the deal, still pending for "certain conditions," is stricken, DUBAL, one of the largest single site aluminum smelters in the world and the industrial flagship of Dubai, will have a 19 percent stake in the CAP, while Vale still holds 61 percent shares.

Norway's Hydro Aluminium, Vale's another partner in CAP, has other 20 percent stake.

Abu Dhabi to be the strongest performing MENA real estate market over the next two years

Abu Dhabi will be the stand out market for real estate investors, according to findings from the second annual Investor Sentiment Survey, an in depth study of real estate professionals market views conducted by Jones Lang LaSalle in association with Cityscape.

The report also reveals that, increasingly, investors are returning to invest in fundamentals with more weight being attached to regulatory issues and market risks than six months ago. Further, according to investors surveyed, markets will begin to recover in 12-18 months a view consistent with Jones Lang LaSalle’s MENA House View that 2010, will be the ‘vintage’ or optimal year to have invested in.

Jones Lang LaSalle’s Investor Sentiment Survey, incorporates the views of over 200 developers, sovereign wealth funds and high net worth investors, and provides an ideal benchmark for the state of regional real estate markets.

Whither the bankruptcy laws in the UAE? (Blog)

Interesting article to revisit from late last year that has nothing to do with the UAE but makes one contemplate the mess created by the financial crisis here.

Dizard offers clues on what more to expect in 2009.

“I suspect the next tsunami will come in the second quarter of next year (2009), which is when the private equity financed companies will feel the worst effects. Many of those companies bought insurance [against economic stress] with cov-lite loans [which do not impose strict financial ratio controls]. Even so, those loans had relatively short maturities, and nobody can refinance on those terms.”

Al-Jihani gets 20 years for SAWA swindle

The trial of Abdul Aziz Al-Jihani, the 42-year-old mastermind of what is known in the Kingdom as the SR1.2 billion SAWA card scam, has finally come to an end with the Jeddah Summary Court sentencing him yesterday to 20 years in jail and 1,000 lashes.

Al-Jihani's lawyer, Hisham Hanbouli, described his client's sentence as "very harsh" and said he would appeal the verdict at the Court of Cassation. "The verdict is more severe than in other such cases where defendants received prison terms ranging from 10 to 15 years, which were later reduced," Hanbouli said.

Al-Jihani, a former STC security guard, has been found guilty of defrauding thousands of investors by claiming to have access to SAWA calling cards at about 80 percent of their face value. The man was accused and found guilty of creating an investment scam where he sold shares in his venture to sell these cards in the market at face value with promises to distribute the profits among the investors.

Fund gloom returns to Europe

The fragile recovery in fund flows across Europe reversed sharply in February and March, according to data providers Lipper FMI. The downturn followed three months of inflows, as fund managers were hit by stock market falls and rising redemptions. The data show that in February, private investors withdrew a net €9.1bn in Europe with most markets suffering net outflows. The exception was the UK, Europe’s biggest mutual fund market, where net sales touched €1.1bn.

Russia eyes overseas funds

Russia is considering borrowing funds on international markets for the first time in a decade, amid a deepening economic recession. The move, revealed on Tuesday by Alexei Kudrin, finance minister, comes as Moscow seeks to plug looming budget deficits and help heavily indebted companies raise funds. Kudrin predicted a budget cut of Rbs1,300bn (€29.3bn) to Rbs9,000bn next year amid an expected 30% drop in revenue due to low oil prices.

GCC IPO market shows crisis stress in Q1

In line with global IPO trends, the GCC has witnessed a dismal start to the year but has still managed to outperform the US and Europe, new data shows.

In the first quarter of 2009, the GCC has seen only one fund-raising IPO, that of Etihad Atheeb Telecommunication Company which raised $80 million (Dh293m) on Tadawul in Saudi Arabia.

This compares to nine IPOs in the GCC in the first quarter of 2008 which raised $3,976m representing a 98 per cent drop in terms of value and 89 per cent in volume. Drake and Scull listed on the DFM in the quarter but didn't raise any money – having raised its IPO proceeds last July.

DGS records 7,744 contracts since Nasdaq Dubai listing

Dubai Gold Securities (DGS) saw a total of 7,744 contracts in the first one and a half months since its listing on Nasdaq Dubai by the Middle East's first exchange traded Shariah-compliant fund.

The total value of contracts traded so far stands at $712,018, (Dh2.6 million), according to Nasdaq Dubai.

"We are satisfied with the response we have had so far. I believe that exchange traded funds (ETFs) are still a new instrument to Dubai and to the region.

Lag in sukuk issuance weighs on takaful

The market for Islamic insurance, or takaful, could reach US$11 billion (Dh40.4bn) if Sharia-compliant investment opportunities such as sukuk are increased, according to industry sources.

“The challenge is the long-term asset base and investment market,” said Abdulrahman Tolefat, the chief executive of Allianz Takaful. It was difficult to find long-term sukuk to match the duration of retirement schemes and offer annuities, he said.

Islamic insurance has grown at a rate of about 25 per cent in recent years, but faces fierce competition from conventional insurers who are also setting up takaful products. Contributions to Sharia-compliant insurance totalled about $7bn in 2007.

Firm plans four iron plants

A Bahrain-based firm plans to build four iron plants across the region in an attempt to become the main supplier of raw materials to the growing steel industry.

Foulath’s proposed plants in Egypt, Bahrain and Oman would source iron ore from mines in Brazil and refine it into more than 30 million tonnes of iron pellets suitable for direct reduction, said Anurag Bisaria, the director of the company’s metal manufacturing projects.

The investments would position Foulath as a dominant player in the global iron pellet trade, Mr Bisaria told a steel conference in Abu Dhabi. “We are to become a leading source of direct reduction melt pellets in the world,” he said.

Central Bank assets fall 32%

The Central Bank said its assets declined by 32 per cent last year to Dh193.7 billion (US$52.7bn), down from Dh285.9 billion the year before.

Although the Bank did not provide a breakdown of its assets, analysts said the drop was largely the result of selling foreign assets to repay speculators who had bet on the revaluation of the dirham. When it became clear that the dirham would remain pegged to the dollar, speculators demanded the return of their foreign currency from the domestic banking system, which forced the Central Bank to liquidate its foreign currency holdings.

The Central Bank’s foreign assets declined from Dh286bn at the end of 2007, to Dh163bn in August of last year, according to the International Monetary Fund.
The Bank’s net profit rose by 1.4 per cent to Dh3.83bn last year, compared to Dh3.77bn the year before. The Central Bank has several mechanisms for making a profit, including returns on its domestic and foreign investments. The bank also profits from printing money, since the face value of the banknotes and coins is considerably greater than the cost of producing them.

Khalifa hails Mohammed’s ‘vision’

Sheikh Khalifa, President of the UAE and Ruler of Abu Dhabi, yesterday visited Dubai where he toured a number of major landmarks and development projects, the state news agency, WAM, reported.

The President was met on arrival in the Jebel Ali area by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. He then went to Dubai Marina and Jumeirah Beach Residence, where he toured residential and recreational facilities including towers, offices, shopping centres, marinas, and world-class hotels and resorts, and later to the Palm Jumeirah. From there the presidential motorcade proceeded to Union House, scene of the historic signing of the UAE confederation.

“Sheikh Mohammed’s vision is part and parcel of the Government comprehensive strategy which as a leadership is striving to maximise its elements to improve living conditions of the citizen, education standards and provide all factors of stability and strength to our citizens,” the President said.

S&P cuts Barneys credit rating, warns on liquidity

Standard & Poor's on Monday cut its ratings on Barneys New York Inc to a deeply distressed level and warned that vendors may tighten terms or limit shipments to the luxury retailer as its liquidity declines.

S&P cut Barney's credit ratings two notches to CCC, eight steps below investment grade, from B-minus. The outlook is negative, indicating an additional downgrade is more likely in the next two years.

"The downgrade reflects the deteriorating liquidity position of the company as demonstrated by the need for a cash infusion by Istithmar World," S&P said in a statement.

Bahrain to launch $1bn debt sale

Bahrain will add to efforts by the Arab Gulf states to create an active bond market in the region by raising more than $1bn in a debt sale in local currency and US dollars, the central bank revealed on Tuesday.

Abu Dhabi, part of the United Arab Emirates, and Qatar have already sold $6bn worth of bonds between them in the past month but are expected to issue more and at longer maturities, as are Kuwait and the UAE’s Dubai.

The bonds are primarily to secure financing for important development projects and government-owned subsidiaries and, in some cases to plug budget deficits. But it is also hoped that sovereign bonds from the states can create benchmarks against which corporate issuers in the region will be able to price their own debt.

Tangier hopes rest on customs ‘freezone’

It is a long way in every sense from the green hillside location of Tangier’s container terminals to the patch of desert that has become Dubai’s huge Jebel Ali port. But the developers of the Tangier-Med port complex have taken much of their inspiration from the Gulf facility.

Their hopes of emulating the success of Jebel Ali, which last year was the world’s sixth-busiest container port, rest on an area behind the terminals set aside for manufacturing and distribution developments.

It is intended to function like the huge “freezone” that has grown around the Jebel Ali port – an area that is outside the United Arab Emirates for customs purposes. Products are assembled and stored there for distribution throughout the Gulf region. They can be moved freely into and out of the port without having to clear customs and can be quickly sent almost anywhere in the world: as a major trans-shipment port, Jebel Ali boasts frequent, regular connections to other ports around the Arabian Gulf and to major destinations all round the world.

Saudis set aside $800m for foreign food

Saudi Arabia is putting $800m into a new public company that will invest in overseas agricultural projects.

The move signals a large step-up in Riyadh’s efforts to outsource supply for the kingdom’s food needs.

The provision of public money, on top of private-sector efforts to secure supplies, follows last year’s food crisis and Riyadh’s decision to phase out production of domestic wheat to conserve water resources.