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Wednesday, 6 May 2009

Rotana loses 25% profit, occupancy, rates in Dubai

Dubai’s Rotana hotels have lost 25 percent in profit, occupancy and rates in the last year, the vice executive chairman of the hotel group revealed on Tuesday to Arabian Business.

Imad Elias, admitted that hotel rates had risen too high in the emirate as result of “arrogance” among hoteliers, and it was now time for them to fall again to a more competitive level.

According to Hotel Price Index, Dubai hotels were the second most expensive in the world, after Moscow, in the fourth quarter of last year - the average price of a room was listed at AED953 ($260).

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Innovation: Downturn temporarily blunts inventiveness (Islamic Finance Special Report 4:4)

Modern Islamic banking may be less than four decades old, but scholars, bankers and lawyers have melded modern finance and centuries-old sharia law into a multitude of products, structures and services that replicate many conventional financial structures while adhering to ancient Muslim economic principles.

Now, global financial upheaval has blunted the innovation drive. Scholars are reviewing products developed in recent years, some of which, they feel, have been allowed to drift too far away from the guiding principles of Islam.

Meanwhile, bankers have more pressing concerns – such as the quality of their loan book and investments – than devising products.

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Islamic Banks: Real estate exposure may be largest threat (Islamic Finance Special Report 3:4)

Islamic banks have grown apace in recent years, fuelled by petrodollars gushing into the Middle East, but have remained minnows compared with western conventional financial institutions.

But the credit crunch has shaken things up. While few western financial institutions have been spared by the global economic storm and desiccated credit markets, Islamic banks have so far performed relatively well.

Measured by market capitalisation, Saudi Arabia’s Al Rajhi Bank – the world’s largest Islamic bank – has recently been larger than Citigroup, Barclays and Royal Bank of Scotland. Its value was only slightly lower than Morgan Stanley and Deutsche Bank.

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Regulation: Further development needs a common rule-book (FT Islamic Finance Special Report 2:4)

There may be calls for a tighter regulatory structure so as to rein back the potential for a repeat of the excesses that led to the global crisis, but experts in Islamic finance have been calling for a more joined-up approach to kick-start their industry.

It has been an age-old debate in Islamic finance: how to mesh and formalise the various regulations surrounding the industry to allow it to reach its full potential.

Experts say the various centres of Islamic finance, the east Asian version based in Malaysia, the emerging hubs of Bahrain and Dubai in the liquidity-rich Gulf and the practitioners promotingsharia-based finance in the established financial centre of London, need a more standardised suite of products to allow the industry to go truly global.

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Credit crunch may test industry beliefs (FT Islamic Finance Special Report 1:4)

While the conventional financial system is buckling under a mountain of debt and financial wizardry gone awry, Islamic finance has appeared relatively robust.

This young but swiftly growing sector is therefore attracting more and more supporters, some of them from unexpected quarters.

In an article published in its official newspaper L’Osservatore Romano in March, the Vatican argued that banks worldwide should look at adopting the principles of Islamic finance to restore confidence and ease the dangers of excessive credit generation.

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Non-entry, sort of (re-posted, click for access to blog site)

I was going to write an entry about the sale of pork being banned in the UAE because of swine flu, but no sooner did I sit down to write it, it turned out that it hadn't been banned at all. (I am probably the last Dubai blogger to comment on this, but there you go!)

I don't know if the story made it to the UK press, or Western press in general. If it did, I suspect most readers would have been surprised to know that pork was available here in the first place. The fact that it is, along with alcohol, is usually a surprise to most Westerners looking at coming here on holiday or to work. Johann Hari did enlighten Independent readers of booze fuelled expat behaviour, but neglected to mention that their mouths were also dripping with the greasy, greasy, fat of swine. To have done so, I expect, would have been a transgression too far.

Pork can be bought from 'non-Muslim only' signposted sections in most supermarkets. It's fairly pricey, but there is a wide choice. I have ventured into the pork section in the past to have a look- it feels kind of naughty, as you slip into a 'special' area. (Pork is not consumed in the Saul household). Most of the larger hotels also offer pork dishes.

The fact that the UAE allows pork into the country in the first place reflects the general tolerance there is for other people's way of life. There are churches here, non-muslims can drink alcohol and buy pork. Whilst those three things don't necessarily form the bedrock of every expat's way of life, I think it's pretty decent of the authorities that they are allowed.

When I first arrived here, I knew that alcohol was available, but I was surprised to see that pork was too. More importantly, I was also surprised to see that my local Dubai supermarket was fully stocked with exactly the same brands of razors, shaving cream and deodorant, at much cheaper prices (at least back then) than I was paying in London. I could have saved myself a good chunk of space in my luggage if I had known there was no need to ship over six bottles of Gillette shaving gel for sensitive skin...

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A thirst to reach the top in Iran

Fardin Alizad, owner of three food companies in Iran, is determinedly up­beat in spite of the challenges of running a business in the country. Like many other entrepreneurs the world over, he says opportunities can be forged from setbacks. In fact, that is the only way, he says, to respond to problems arising from the Iranian government’s economic and business policies as well as international sanctions over the country’s nuclear programme.

“Whenever restrictions tighten , it is a good opportunity to think of further improving the quality of products until things go back to normal, when you can expand bus­iness again,” says the 46-year-old Mr Alizad. Wearing a smart black jumper and a crisp, open-necked white shirt in the company’s modest but pleasant offices in central Tehran, he explains why he is optimistic while outlining the problems.

Last year, the combined turnover of his three companies – Alifard, Shiva and Sayeh and Saman – was about €190m ($254m), making the group one of the larger private enterprises in the country. His small business empire has grown substantially since 1991 when he returned to Iran from overseas and took over Alifard, the enterprise owned by his family, to produce fruit juice and concentrates under the SunIch brand.

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AIG reveals extra $454m in bonuses

Embattled US insurer AIG paid some $454m in previously undisclosed performance bonuses to employees for 2008, the company said in answers to questions from a US lawmaker that were released on Tuesday, reports Reuters.
The payments are in addition to a $120m corporate bonus pool for holding company staff and executives at subsidiary companies. AIG was criticised for paying some $165m in retention bonuses after gaining $180bn in US bailout aid.

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Fund chiefs charged with fraud

Executives of the $63bn US money market fund whose implosion last September helped deepen the global financial crisis were charged with fraud on Tuesday by the SEC. Bruce Bent Sr, who founded the Primary Reserve fund in 1970, and his son Bruce Bent II were accused by the SEC of hiding or failing to provide key facts to investors and trustees in the two days after Lehman Brothers sought bankruptcy protection on Sept 15. The fund owned $785m in Lehman debt that became worthless as a result of the bankruptcy.

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StanChart sees record Q1 profit

Standard Chartered said on Tuesday it was in “very good shape” as the emerging markets bank reported record levels of income and profit in the first quarter. In a trading update, the bank singled out a strong performance from its wholesale banking arm as the main reason for its buoyant start to 2009. The update, which exceeded some analysts’ expectations, mirrors recent and unexpectedly positive Q1 results from banks elsewhere.

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DIFC calls for uniform legal and financial frameworks in the region

The Dubai International Financial Centre (DIFC) and the Riyadh Chamber of Commerce and Industry (RCCI) yesterday jointly called for deeper integration among GCC states - and particularly between the UAE and Saudi Arabia.

A consolidated approach between the nations of the Gulf will allow them to maximise emerging opportunities around the world and in the region, said a top official of the DIFC.

Nasser Al Sha'ali, Chief Executive Officer of DIFC Authority, was speaking at a jointly-organised conference entitled 'Rising Giants: Opportunities in KSA' at the RCCI. The DIFC delegation was welcomed by Eng. Sa'ad Bin Ebrahim Bin Abdul Aziz Al Moajil, Vice-Chairman of the Board of the Riyadh Chamber of Commerce and Industry.

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Regional bourses 'to remain low but attractive'

Gulf stock markets are expected to remain low relative to regional economies in the near future but the decline in their valuations has made them more attractive for investors, a key Kuwait bank said yesterday.

After large gains during the first half of 2008, the bourses in the GCC dipped by at least $500 billion till the end of April, sharply reducing their ratio to the gross domestic product in member states, the National Bank of Kuwait said in an eight-page report on GCC markets.

Instead of using the traditional price to earnings, price to book and other known ratios to assess share valuations in the GCC stock exchanges, NBK opted for market capitalisation to GDP (Mcap/GDP) ratio, which it said reflected the real market performance in the GCC over the past few years.

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Capital base of insurance firms under stress

The capital bases of a number of regional insurance companies are under pressure due to the steep decline in the value of their investment portfolios, says credit rating agency Standard and Poor's (S&P).

The decline has been caused in particular by the fall in the value of local stocks and real estate, Kevin Willis, Director of Financial Institutions Rating Services, told Emirates Business.

"Six regional insurance companies have been put on the negative outlook list due to the strong pressure on their capital base caused by their high exposure to the local stock and property markets," he said.

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Tamweel, Amlak to get support

Islamic home finance firms Amlak and Tamweel are to receive major government support, Tamweel Chairman Sheikh Khalid bin Zayed bin Saqr Al Nahyan has revealed.

He said the eagerly awaited announcement about the future of the firms would be issued by the highest authorities in the UAE.

"I cannot disclose the nature of the decisions but most certainly they will take into account the interests of the two companies and their shareholders," he told financial website

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Capital insulated from oil price

Abu Dhabi is well insulated from swings in the price of oil despite its heavy reliance on the commodity, according to new rankings from Standard & Poor’s, the ratings firm.

The rankings, published for the first time yesterday and covering 19 oil-producing countries, singled out Bahrain, Saudi Arabia and Azerbaijan as the most economically vulnerable to fluctuations in the price of oil. Mexico, Cameroon and Norway were ranked the least vulnerable.

Abu Dhabi ranked 13th on S&P’s “Oil Price Vulnerability Index”, making it the least susceptible in the Gulf to falling oil prices, despite the big slice of government revenues and GDP that have historically come from petroleum. After Bahrain and Saudi Arabia, Oman ranked fifth, followed by Kuwait in sixth spot and Qatar eighth.

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Boeing spreads its wings again

Last March, Boeing’s top Middle East salesmen knew they were facing a golden opportunity.

The Dubai Government had just announced it would launch a second airline to join its profitable long-haul carrier, Emirates. But flydubai, as the start-up was later named, would be a budget carrier, meaning its fleet would probably consist of either the Airbus A320 or the Boeing 737.

Boeing, which has lagged Airbus in Middle East sales, had a chance to win a major contract with a new operator that, if it won the crucial first order, promised additional deals as the airline expanded its network.

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Abu Dhabi stocks most undervalued

Abu Dhabi stocks are the most undervalued among Gulf markets, according to a new survey from Shuaa Capital, the UAE’s largest investment bank. The GCC Investors Sentiment Report, which surveyed 100 institutional investors, also said markets in Saudi Arabia, Qatar and Abu Dhabi were likely to outperform other Gulf indexes in the next six months.

“Overall, investors reported finding the GCC markets more attractive than those of the BRIC – Brazil, Russia, India and China – countries and even the global emerging markets universe,” it said.

It follows a Morgan Stanley report that said Arab stock markets, especially Saudi Arabia, Qatar and Egypt, had “appealing” valuations and were “economically resilient” to the global financial crisis. Morgan Stanley said its preferred stocks in the region were Qatar Electric and Water, Qatar Telecom and Telecom Egypt and it recommended investors increase exposure to the “MSCI” Arabian markets again.

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Demand for Gulf bonds to grow

Gulf corporate bonds sales will see growing investor demand this year because recent sovereign debt issuances have established a local “pricing curve” that has been missing since the onset of the financial crisis, bank executives say.

The success of sovereign debt sales and improved conditions have whet investors’ appetites for diversifying into other corporate debt instruments.

“Over the past couple of months as sovereigns started issuing paper, including Abu Dhabi, Bahrain and Qatar, a debt curve was created that generated liquidity and has allowed corporate [debt instruments] to be correctly priced,” said Nish Popat, the head of the fixed income division at ING Investment Management.

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UAE lenders expect to see rising mortgage defaults

Mortgage defaults are expected to rise in Dubai this year due to the global downturn, Amlak Finance, an Islamic lender being rescued by the government, said on Tuesday.

"We are experiencing more delinquencies in terms of mortgages in 2009 and it will be very challenging to manage going forward," Max Hamidi, chief financial officer at the Islamic mortgage firm, said at a conference.

"The default on mortgages is growing and it will probably grow further," he said.

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No formal talks between Deyaar, UP on merger

There is no official discussion on a merger between Deyaar and Union Properties but it could be a possibility, a top official from Deyaar said.

"It [merger talks] is just a rumour. So far there are no official talks between the two companies so far. But it is a possibility if it makes sense for the shareholders of both companies," Nasser Al Shaikh, Chairman of Deyaar told Emirates Business.

Earlier, Markus Giebel, CEO of Dubai developer Deyaar also said the company would consider merging with another company, noting that a merger is good in bad times as it stabilises the economy.

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Building bridges to Abu Dhabi and Dubai

America’s relations with the Islamic world, and the Arabian area specifically, are one of the most important in our nation’s future. While foreign policy is the responsibility of national governments, relationship building actually falls to people and urban regions who find themselves at the forefront of building these relations. The Greater Seattle region has begun building a friendship bridge to the Middle East.

The Trade Development Alliance of Greater Seattle and the Greater Seattle Chamber of Commerce have been mounting yearly International Study Missions of civic and business leaders of our citistate for many years. Recently we organized an annual International Study Mission program to Abu Dhabi and Dubai in the United Arab Emirates (UAE). Our goal: to study an urban region overseas to learn about how it competes in a global economy. The trips are a “traveling university,” with the student body encompassing the civic leadership of the Greater Seattle region.

The visit to the UAE was suggested by Boeing, with a goal of enhancing our leaders’ understanding of that part of the world and strengthening relations with it. We wanted to study the UAE’s successes and challenges, as well as to learn more about each other. Our delegation found the people of these two emirates to be warm and friendly and as interested in us as we were in them.

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UAE oil pipeline to avoid Hormuz delayed to 2011

The United Arab Emirates will complete a pipeline for oil exports to bypass the Strait of Hormuz around two years later than initially scheduled, the project's director said on Tuesday. But the managing director of Abu Dhabi government-owned International Petroleum Investment Company (IPIC), which is carrying out the project, later said it would be ready in 2010.

The pipeline would allow the world's third-largest oil exporter to pump around 60 percent of its crude exports to a port on the Gulf of Oman, avoiding the strategic shipping chokepoint at the Strait of Hormuz.

Iran has threatened to block the route, through which about 40 percent of the world's traded oil is shipped, if it were attacked over its nuclear programme.
"There have been some delays due to market conditions," said Dieter Blauberg, the head of the IPIC pipeline project. "The market was congested and getting materials was difficult."

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Riyadh set as Gulf region’s central bank base

Leaders of the oil-rich Gulf Cooperation Council on Tuesday agreed to base any future regional central bank in the Saudi capital of Riyadh, pushing forward efforts to establish a regional monetary union.

However, while an agreement on where the central bank will be located – which had been a point of contention – will be seen as some progress, the GCC states are still far from forming a single currency. Oman has said it is not ready to join a monetary union, Kuwait unilaterally delinked its peg to the US dollar in 2007 and it is widely accepted that the Gulf states will not meet a 2010 deadline for the proposed single currency.

“This will definitely be a catalyst for making progress toward the GCC union,” said John Sfakianakis, chief economist at the SABB Bank. “Riyadh is not a regional financial centre, but it has the highest concentration of capital in the broader region.’’

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Abu Dhabi multiplies investment arms

On the surface, a luxury German carmaker, an English football team, a New York landmark and a troubled British bank may seem to have little in common. But in the Gulf, each one has come to represent the increasing ambitions of Abu Dhabi.

Daimler, Manchester City, the Chrysler Building, and Barclays are among a growing list of global assets that have been the target of a multibillion shopping spree by various state entities acting on behalf of the oil-rich emirate. Some $15bn has been invested overseas by the emirate’s funds in the past six months.

As Abu Dhabi entities are more aggressively courted by international companies desperate for capital during the economic crisis questions have been raised about the extent of co-ordination between the various funds and also whether the diversity heightens the risk of Abu Dhabi overplaying its hand.

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