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Friday, 1 May 2009

That EM lending retraction, graphic edition

Standard Chartered notes just how sharply banks pulled lending from emerging markets in Q4 2008:

DIFC posts loss as firms face downgrade

DIFC Investments, the investment arm of the Dubai International Financial Centre, reported a substantial loss last year as a leading ratings agency questioned the willingness of the emirate to fully underwrite the debts of its companies.

Growing uncertainty over whether Dubai will help companies meet their debt obligations led Standard and Poor’s (S&P) to put DIFC Investments, which reported a US$543 million (Dh1.99 billion) loss, and five other government-related companies on review for a possible ratings downgrade.

The announcement marked the latest in a series of similar notices from ratings agencies warning of a deteriorating credit environment for large corporations and banks in the UAE because of the global financial crisis.

Free trade deal could be signed within a month

Gulf oil producers could sign a long-sought free trade agreement with their main European economic partners within a month after almost two decades of tough negotiations, according to reports.

But Yousuf bin Alawi bin Abdullah, Oman's Minister for Foreign Affairs, acknowledged that two key issues remain unresolved, including demands by the European Union for Gulf Co-operation Council (GCC) countries to improve their human rights record and those related to high EU tariffs on Gulf exports of petrochemicals and aluminium.

After two days of talks between their foreign ministers in Muscat, Alawi bin Abdullah was quoted as saying the two sides had finalised negotiations on all topics needed to sign the landmark FTA.

Crisis costs Arab equity investors $325bn

Arab equity investors have suffered from a staggering loss of over $325 billion (Dh1,192bn) because of the global financial turbulence after netting a profit of more than $200 billion through 2007, official figures showed yesterday.

Share investors in the UAE and other Gulf oil producers have emerged as the main victims as they reeled under a loss of around $320 billion, accounting for more than 98 per cent of the total losses.

The figures by Abu Dhabi-based Arab Monetary Fund, which tracks the Arab world's 15 stock markets, showed the market capitalisation of the Arab exchanges dived to $794.26bn at the end of April from nearly $1,119.81bn on September 15, when news about the collapse of the US Lehman Brothers hit global markets.

MGM Mirage shares soar on CityCenter deal

Shares of MGM Mirage skyrocketed Thursday, gaining as much as 50% after the company cut a deal with a joint-venture partner -- and its lenders -- that will apparently ensure the completion of its massive CityCenter project.

After the close of trading Wednesday, MGM Mirage and Dubai World, co-owners of CityCenter, ended more than a month of turmoil and infighting with a pact under which they will fund their remaining contributions to CityCenter via letters of credit, while current lenders will fully fund a $1.8 billion senior secured credit facility.

Furthermore, Dubai World said it will dismiss a lawsuit it filed last month against MGM Mirage, which charged that the casino giant was mismanaging the project.

Oil price fall brings opportunity

The collapse in oil prices had opened a huge opportunity for foreign investment in Iraq, officials and private investors said on Thursday.

Until recently, with prices above $100 a barrel, the biggest hurdle to foreign investment had been resistance by Iraqi officials, who believed they could rely on their oil revenue to drive hard bargains. This, said investors was a far greater barrier than even security when it came to making decisions on putting money into the country.

But now with prices about $50 a barrel, Iraqi officials had become far more receptive to the efforts of the World Bank and national development agencies to drum up investment and diversify the country’s economy away from oil, one UK official said.

Saudi Arabia on track for railway boom

For two years engineers and construction workers from round the world have braved the north-eastern desert of Saudi Arabia, tackling mountains of sand and the whims of stubborn camels.

Their task is to lay more than 2,400km of track to connect remote mines with a new industrial city in the east, as well as passenger and freight links between Riyadh and the Jordanian border town of Haditha.

The SR20bn ($5.3bn, €4bn, £3.6bn) project – the north-south line – is one of three separate developments intended to create a railway network for Saudi Arabia estimated to be costing $25bn. Such plans have been doing the rounds for years but until now they had never made it off the drawing boards.

Middle East slump in investment banking

Investment banking revenue in the Middle East slumped 45 per cent to $103m in the first three months of the year, as the global financial crisis and a slowing trickle of petrodollars took its toll on Gulf states.

A year ago, international investment banks and asset managers flooded the region, hoping that the Gulf’s hydrocarbon-fuelled growth would offset the slowdown elsewhere. In the third quarter of 2008 revenue peaked at $296m (€224m, £200m), Dealogic, the data provider, said on Thursday.

But the deepening global crisis shattered hopes of a decoupling, with the region suffering its own credit crisis and significant slowdown in growth as oil prices collapsed.

S&P reviews ratings on Dubai companies

Standard & Poors on Thursday placed six government-related entities on review for a possible downgrade as it raised doubts about Dubai’s willingness to support all its companies as they deal with the emirate’s debt pile.

The ratings agency said it had started the review as Nakheel, an unrated government-owned offshore developer, is considering restructuring part of its $3.5bn Islamic bond that matures in December.

”The possibility of a restructuring is enough for us to review all government-related entities,” said Farouk Soussa, S&P credit analyst.