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Monday, 4 May 2009

Chrysler first, next GM?


“The Lehman Brothers bankruptcy is fading into history”

Bloomberg appears to be a paid-up member of the green shoots brigade, if recent stories are any indication. On Monday, the newswire ran a piece trumpeting bond traders’ belief that the memory of Lehman’s collapse was no longer cause for angst:
From Frankfurt to London to New York to Tokyo, bond traders say the Lehman
Brothers Holdings Inc. bankruptcy is fading into history as the cost of credit
retreats throughout the Group of Seven industrialized nations.
The shock to
financial markets from Lehman’s collapse in September sent the Standard &
Poor’s 500 Index to its biggest annual decline since 1938, froze credit markets,
drove Goldman Sachs Group Inc. to seek $5 billion from Warren Buffett and
sparked a run on Treasuries that caused bill rates to fall below zero for the
first time.

Two years ago disaster was on the horizon, now to move forward.



Joined twitter this past week, with my one man jury, still very undecided as to it's worth. Do any readers, if there are any, of this blog find twitter useful?


I am becoming increasingly confused as to whether any green shoots are appearing, globally. I recall on 1st April completing my posts and feeling very optimistic as most clippings were greenish of hue, with even the sceptic Peter Hellyer writing up, as opposed to talking up, Dubai .

Now such optimism has faded, as yet more poor economic news is released:

  • Chrysler to Chapter 11;
  • Swine Flu, is it over-hyped or, as one cynic suggested, the opportunity to boost the pharmaceutical sector;
  • And ridiculous probability games are played by research organisations, when they suggested there was a 1:10 chance of The United Arab Emirates reverting to pre-Union state.

My answer is that yes the future does look better, but has to be put in context, or as Lucy Kellaway writes the "denial, rage, acceptance and a burst of cheer" has to occur first.

Here in UAE I sense we are at the acceptance stage, with Dr Omar Bin Sulaiman, DIFC and UAE Central Bank, leading the way:

I give a lot of credit to the Central Bank of the UAE. I'm one of the people who opposed the governor of the Central Bank [Sultan bin Nasser Al Suwaidi]. Because all of us have been running very fast for a long time. And he's been walking. But during the crisis when a lot of us stopped, he continued walking. And that is a very credible thing to do and shows wisdom. The fact that the Central Bank was conservative – something we kept complaining about – actually saved a lot of the banking and financial systems in the UAE. Whether we like it or not, that's the truth today. We're fortunate that they've been conservative because it saved a lot of us.

as written in Business24/7 this past Saturday, with no repetition anywhere, I have checked.

Instead I believe journalists have latched on to these few lines, from the same article:

What was the biggest impact of the recent $10 billion bond issue?

Confidence. The bond issuance even though it is a liquidity solution that
will go into the economy, brought back confidence.

I'll share a personal example: We were constantly meeting with global bankers
and financial institutions for a few months to discuss each other's plans and
possibilities for growth. Global banks said they didn't know whether they'd
exist. But when the bond was announced, the first call I got was 20 minutes
after the news broke. It was from the chairman of one of the global banks that I
was with just a few days before. He called me and asked, 'How can we
participate in the second tranche?'
. Now he is someone I know very
well. So I said, 'You were with me two days ago and you said you didn't have
money and were worried about your existence.' And he said, 'No, we can manage.'

It is nearly two years since Fannie Mae, Freddie Mac and Northern Rock hit the rocks, so with our acceptance of the true situation, our psychological green shoots of anticipation should lead to this becoming reality, throughout the economy, over the next few quarters.

Please do feel free to let me know your thoughts on the outlook, from your perspective.





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Q209 Dubai & Abu Dhabi Real Estate Report (PDF)


Today, Landmark Advisory released its free Q209 Dubai & Abu Dhabi Residential Real Estate Report. The independent report analyzes multi-source transaction data and other statistical trends, with a focus on master developers.

“Public research helps the market by allowing all stakeholders to compare free information,” said Jesse Downs, Director of Research & Advisory Services at Landmark Advisory. She added that “access to multiple sources improves objectivity.” For example, Ms. Downs explained that “since mortgage activity is low, cash buys constitute a significant portion of transactions. Therefore, to accurately assess price trends, it’s critical to have access to datasets containing both transaction types.”

In both emirates, buyers and renters are showing renewed willingness to pay for better units and better locations. “Even if decline patterns differ between Dubai and Abu Dhabi, falling prices create excellent opportunities that boost demand in both markets. In April, we observed strong leasing and higher sales volumes,” said Ms. Downs.

In Dubai, Emaar is faring best in terms of demand and pricing. According to Ms. Downs, “with a flight to quality clearly underway, end-user preferences are differentiating prices in favor of quality developers like Emaar and preferred locations like Dubai Marina.”

In Q109, Emaar master developments accounted for approximately two-thirds of sales and 57% of new leases. More specifically, units developed directly by Emaar represented over half of sales and 39% of new rentals. “Residents in Dubai see Emaar as a source of quality, not only for master-planned communities, but also for individual buildings,” said Ms. Downs.

Dubai Marina was the most popular area among renters, capturing 30% of all new annual leasing contracts. Emirates Living came in second, at 16%. Isolating apartments, Dubai Marina scored 30% of all new apartment contracts. For villas, Emirates Living dominated, with 40% of new villa rentals, followed by Mirdiff and Jumeirah/Umm Sequim.

Turning to Abu Dhabi, Ms. Downs explained that “the issue of first-phase master development integration will leave certain Abu Dhabi developers more vulnerable in the short- to medium-term.” Landmark Advisory’s analysis shows a positive correlation between price performance and proximity to central Abu Dhabi.

“Aldar’s entire freehold/leasehold portfolio is in off-island developments on the city outskirts. In contrast, Sorouh will be less affected, as most of its freehold/leasehold properties are centered on Al Reem Island, which is close to central Abu Dhabi,” said Ms. Downs. Sorouh’s secondary market prices have retained 20%-25% average premiums over their primary prices, while Aldar’s units averaged close to primary prices, and in some cases fell 10% below.

Ms. Downs added that “prospective end-users in Abu Dhabi will increasingly differentiate first-phases based on ease of access to alternative/nearby amenities, like those found on-island in Abu Dhabi. These differentiators are already reflected in prices.” Overall, this trend is likely to continue for the next 2-3 years, until master developers integrate community-sustaining elements among project phases.



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Global's Jordan Weekly Market Report - April 30, 2009 (PDF)

Fake Plastic Souks: Recession? What recession?

I found this fascinating quote today:



Gulf News is weighing in at something like (don't forget I'm using a Dhs19 scales from Lal's, so I can't really do the old atomic level measurements here) 540g these days, down from 1.3 Kg in November 2008 - and also down from the 640g-odd that it had sort of settled down to in February.Fake Plastic Souks: Recession? What recession?, May 2009



You should read the whole article.

Tadawul Monthly Investment Report - May 2009

Dragon Oil plans to increase output and eyes acquisitions

Dubai-headquartered Dragon Oil plans to increase output at a time when others are slashing theirs. The company, which is majority owned by Enoc, has quite a number of targets including restructuring and venturing into acquisitions, again at a time when most upstream players are quietly watching the market.

In an interview with Emirates Business, Dr Abdul Jaleel Khalifa, CEO and Executive Director of Dragon Oil, said: "I believe the current economic environment is right for investing in infrastructure considering the fact that there are surplus capacities available in the backdrop of lower commodity prices."

Khalifa – who was the first president of the International Society of Petroleum Engineers to be appointed from the Asia/Africa region – has talked about a variety of pressing issues, including Dragon Oil's ongoing probe on contracts irregularities, hedging policy, production and acquisition plans and its adoption of a Bermuda incorporation.

Private bankers remain optimistic about region

Despite the drop in wealth seen in the region, private bankers are optimistic about the GCC.

According to Douglas K Schaenen, Vice-President, BNY Mellon International Wealth Management, the bank has seen more enquiries regarding their wealth management services than ever before.

The increase in the number of private banks in the region is also offering a wider choice to the wealthy individuals. Hussain Al Qemzi, Group CEO, Noor Islamic Bank sees the fallout as a great opportunity for Islamic banks.

Court defers fraud trial verdict

Fujairah Criminal Court has deferred to May 17 the verdict in a fraud case involving former Fujairah Municipality Director, heads of Planning and Land Departments and others who are charged with forging official documents and accepting bribes.

Fujairah Public Persecution had referred eight defendants to the Criminal Court for forging the documents related to renting of shops and plans of commercial and industrial land. The shops and land were allocated to false names and then sold. The defendants were also charged with taking bribes in exchange for the forgery.

The eight suspects include the former municipality director, heads of the municipality planning and land departments, an employee of the National Bank of Fujairah, a contracting company owner, an expatriate and two women. The Public Prosecution referral decision mentioned that former municipality director (RH) and ex-planning department head (TR) forged official documents. The first defendant, former municipality director, signed blank forms of requests to rent shops as well as plans of commercial and industrial land.

Realty, construction sectors' contribution to GDP may fall

Dubai's real estate and construction sectors contribution to the UAE's GDP this year is likely to fall to single digit, down from 20 per cent in 2008, a senior government official said.

"These sectors used to have double-digit contribution. I don't think they will drastically fall down. I think there will be few percentage here and there but within a single digit," Hamad Buamim, Director-General of Dubai Chamber of Commerce and Industry (DCCI) told Emirates Business.

"The Dubai Municipality has recently said there were 8,000 projects on going in Dubai so the contribution of these projects to GDP will happen this year," he added.

World’s tallest tower put on hold

Dubai World said on Sunday it would complete all projects currently under construction but would delay any new developments, including a plan to build the world’s tallest tower, until market conditions improve.

Dubai World unit Nakheel, developer of Dubai’s palm-tree shaped islands, said in January it would halt work on a one kilometre tall tower for a year as the former boomtown suffers from a downturn in its property market.

“The tower will be delayed until the market changes. You can’t build something like that in this kind of market,” Dubai World Chairman Sultan Ahmed bin Sulayem said at a tourism conference.

Emirates delays 777 deliveries

Emirates Airline will delay the delivery of several new Boeing 777 aircraft next year by several months to protect its cash reserves during the downturn, say officials.

It is the latest interim measure for the Dubai airline to navigate through the global recession, following efforts to give staff leave of absence and reposition aircraft to more promising routes as demand has waned in some markets. Emirates is expected to announce a small profit in the coming weeks amid one of the worst revenue environments for airlines in decades.

Maurice Flanagan, the executive vice chairman of Emirates Airline and Group, said there had been a “slight rearrangement” of deliveries next year, without disclosing further details. However, in a media report yesterday, Abdullah al Shams, a fleet manager at Emirates based at the Boeing factory in Washington, said the delays involved the long-range 777.

Dismissals keep lawyers busy

The ranks of the legal profession have been thinned out by the global financial crisis, but for one group of lawyers in the Gulf, that crisis is providing a lucrative line of new work.

Employment lawyers of international law firms say they have never been busier, cleaning up the mess left by corporate restructuring, company closures and redundancy programmes.

Unfair dismissal cases and severance disputes have them working overtime while their company’s corporate practices await better times.
“We have at least one new employment case every day because banks are retrenching without giving reasons,” says Kavitha S Panicker, the chairman of the global law firm ACE Consulta Juris’s UAE operations. “Six months ago we had about one case a week related to employment.”

Think positive: economic revival will begin in the Gulf

A distinguished American think tank suggested last week that the UAE and other countries around the globe face growing political uncertainty resulting from the global financial crisis. To apply this theory to the GCC, and the UAE specifically, borders on the absurd; they are far from sunk. http://docs.eurasiagroup.net/fattails2009.pdf
The truth is that UAE and the rest of the GCC countries will be among the first economies to rebound from the financial meltdown on the back of a steady recovery in oil demand and global trade flows. Moreover, the economic outlook for the GCC is positive, as the region continues to amass huge foreign exchange reserves driven by the unprecedented rally in oil prices until July 2008, combined with the fact that the GCC states together jointly control 45 per cent of world oil reserves and 18 per cent of world natural gas reserves.

The proactive measures taken by various GCC governments to manage the situation seem to be working. The GCC states have generated considerable fiscal surplus, substantially improving their balance of payments position and enabling them to invest wisely in a variety of industrial and infrastructure projects. The GCC has in the process emerged as a role model for economic and social transformation, which will help to prolong the region’s gains.

DIFC urges further shift in intra-Mideast trade

Intra-regional trade in the Middle East has grown 28 percent between 2000 and 2007 and now represents 19.3 percent of all trade in the region, according to an economic note released by Dubai International Financial Centre (DIFC).

The report, published on Sunday by the DIFC economics unit which analyses World Trade Organisation data covering the years through to 2007, also revealed that Middle East trade was increasingly shifting toward Asia and away from the United States.

The DIFC note also showed an increased diversification toward non-oil products such as chemicals, travel and tourism.

Analysts raise doubts on impact of UAE visa plan

Analysts said on Sunday that the UAE's plan to grant expat homeowners multiple-entry visit visas enabling them to stay six months at a time if they own properties worth at least 1 million dirhams ($272,300) was unlikely to stimulate the market to any degree.

Property buyers had been waiting for legislation for years to clarify their residency rights in the second-largest Arab economy after many of the country's seven emirates allowed foreign investment in property in recent years.

But analysts said the government decree, issued on Saturday, needed more details on which properties would be eligible amid a real estate downturn that dragged Dubai property prices down 41 percent in the first quarter.