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Friday, 8 May 2009

YOU CAN’T HANDLE THE TRUTH (Re-posted from original site)

Apparently, Americans like being lied to. For two years we have been told by bank CEO’s that they “don’t need capital”. For two years our government has told us that recovery was around the corner. For two years our money has been funneled into the banks’ bondholder’s pockets. It continues to this day. But a funny thing is happening in Europe where the banks aren’t mired in AIG money laundering scams or odd accounting shenanigans: they’re telling the truth. In a statement very similar to Lloyds yesterday, RBS had this to say today:

“We expect credit conditions to continue to deteriorate over the next few quarters consistent with these trends, and that there will be a slow-down in financial market activity compared with the very buoyant conditions seen in Q1. Some commentators are beginning to talk about economic recovery; we remain cautious and continue to plan and manage our businesses in the full expectation that both 2009 and 2010 will be very tough years for RBS.“

You can’t handle the truth. Unless you’re European, that is….

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Insight: A harmful hedge-fund fixation

Almost exactly two years ago, at the craziest peak of the credit bubble, Western leaders gathered in a conference room at the World Bank in Washington to discuss what they should do about the financial world.

These days it is clear what those grandees ought to have discussed – notably the wild excesses afoot in subprime lending, structured credit, monoline insurance, credit ratings and bank leverage.

In practice, though, those issues were barely discussed. Instead, the hot topic for debate in that April 2007 meeting (as I describe in a book published this month) was how to clamp down on hedge funds – a topic dear to German leaders, who were chairing the G7 at that point.

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GCC states set to cancel sponsorship system

The Gulf Co-operation Council states are set to cancel the sponsorship system under which expatriate manpower is hired in the region, according to media reports.

In a report in Alaswaq.net, sources connected with the GCC labour market said after Bahrain's announcement on Monday of a new labour law from August 1 this year, which does away with the sponsorship system, other GCC countries are expected to follow in the island nation's footsteps.

The Bahraini Labour Minister, Dr Majid Al Alawi, said on Monday that all GCC states were kept informed about Bahrain's decision to cancel the sponsorship system and the decision was not taken in isolation.

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Foreigners in Dubai hit by downturn

Denay and Jesse Vargas met as teenagers, working as lifeguards at the Fiesta Texas water park in their hometown of San Antonio. They fell in love, married at 20 and moved six times while Jesse worked as a manager at amusement parks around the U.S.

Last year, Jesse accepted a job with what promised to be one of biggest amusement parks in the world. He would make almost triple his $80,000 after-tax salary and wouldn't have to pay any income tax. That would help with the couple's medical bills from Denay's unsuccessful attempts to get pregnant.

The catch: It was in Dubai.

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Hedge funds have their best month in years

Hedge funds posted their best monthly returns in nine years in April as they took advantage of rallying stock markets and opportunities in the energy and fixed income markets.

On average, hedge funds gained 3.8 per cent over the course of the month, taking their year-to-date gains to 4.2 per cent, according to Hedge Fund Research, the data provider.

This marks the strongest monthly gain since February 2000.

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Nasdaq profits plunge 22%

Nasdaq OMX Group on Thursday reported a 22% decline in Q1 profit as rivals continued to cut into its market share in US equity trading. The exchange group reported Q1 earnings of $94m, down from $121m in the same quarter last year. Its shares were down 7.5% at midday in New York.

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Dubai rents to fall as expats leave

Rents and occupancy rates in Dubai will fall in 2009 as expatriates leave the Gulf Arab region's business hub as a result of the global economic downturn, CB Richard Ellis said on Thursday.

Dubai's once-booming property sector is suffering a sharp slowdown, with property prices tumbling 41 per cent in the first three months of 2009, according to property consultants Colliers. The slowdown has led to project cancellations worth billions of dollars and jobs being slashed.

"The drop in demand for commercial and rental space, following the decline in an expatriate workforce, will have a significant impact on the lease and occupancy rates in all areas of Dubai throughout 2009," the real estate services firm said in a report.

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Car inventories pile up

A fall in new car shipments into Abu Dhabi, and reports of car inventories piling up elsewhere in the UAE, could be a sign of the global downturn hitting the economy.
Analysts say car rental agencies are feeling the bite from the slowdown in tourist arrivals, while the Government, normally a large purchaser of vehicles, has similarly cut back spending. A potential population decline in Dubai and continuing tight credit markets for car loans are also considered factors.

Car imports at Abu Dhabi’s main port, Mina Zayed, fell 12 per cent in the first quarter, from 18,046 to 15,866 vehicles over the same period a year ago, according to its operator, Abu Dhabi Terminals. The drop is a sharp reversal from last year, when brimming optimism about the Gulf region and the high price of oil led dealerships to bring in 92,944 vehicles, a 27 per cent rise from 2007. Car imports “are being hit hard because of the financial situation”, said Mohammed al Mannaei, the chief executive of Abu Dhabi Terminals.

Ramzi Razian, a car industry consultant based in Dubai, said dealers were probably reluctant to order more cars after seeing sales weaken in the past six months. Inventories had accumulated from previous shipments to such an extent that there were thousands of vehicles at Jebel Ali port, he said. Officials from DP World, which manages Abu Dhabi Terminals, declined to comment.

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Construction firms owed billions

Construction firms in Dubai say they are having to either accept reduced payments, or risk not getting paid at all.

Riad Kamal, the chief executive of Arabtec Holding, the UAE’s largest construction company, told Reuters yesterday the company had outstanding invoices of about Dh3 billion (US$817 million), of which nearly 80 per cent was due from the Dubai Government or related entities. Arabtec is hoping to meet government officials next week to discuss the payments.

“We feel quite secure the money is going to come eventually. It’s a question of if it’s going to come in good time to be able to sustain the outlook and commitments that we have with our suppliers and sub-contractors,” Mr Kamal said.

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‘Egypt’s Madoff’ faces trial in UAE

Nabil al Boushi, an Egyptian businessman sentenced in absentia to 15 years in jail in his home country after he was convicted of fraud, will have to stand trial in Dubai before any thought can be given to his extradition, the Ministry of Justice said yesterday.

Al Boushi was sentenced on Wednesday by Cairo’s economic court for promising fake returns to investors that totalled US$62 million (Dh227.7 million) through his Optima Security Brokerage firm.

Dr Ali al Hossani, the acting undersecretary at the Ministry of Justice, said that while there was an extradition agreement between the UAE and Egypt, pending charges against al Boushi meant he would have to be tried here first.

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Four charged with fraud in UAE-Europe VAT case

Four men have been charged with involvement in a major fraud case that bears similarity to the complex carousel fraud that has plagued the UK tax system.

The Dubai Attorney General, Issam al Humaidan, yesterday referred two Europeans and two Asians to the Dubai Misdemeanours Court on charges of money laundering and forgery involving the illegal transfer of £150 million (Dh830m) between the UAE, the UK and the Netherlands.

Mr al Humaidan said in a statement that information received by the Anti-Organised Crime Department uncovered “suspicious transfers” of large sums of money between the accused and accounts in the UK and the Netherlands.

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UAE's central bank ready to ease policy

The UAE central bank is prepared to ease monetary policy further to support an economy that is reeling from falling oil prices and weak global demand, its governor said yesterday.

"There is no pressure on inflation so it makes sense to keep expansionary monetary policy," Sultan Nasser Al Suweidi said on the sidelines of an Islamic finance conference.

In January, the central bank lowered its key interest rate by 50 basis points to one per cent, following similar moves by other central banks around the world as they attempted to limit the damage from the global financial crisis.

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Dubai's Shuaa Capital posts $54 mln Q1 net loss

Dubai-based investment bank Shuaa Capital SHUA.DU posted a net loss of 197.9 million dirhams ($53.88 million) in the first quarter as it booked losses on investments, it said in a statement on Thursday.

"Despite significant efforts to enhance profitability through cost-cutting measures, and focus on growing our fee businesses, book losses from investments still overshadowed the overall results," the statement said.

Shuaa Capital's private equity, asset management and finance businesses were all profitable in the quarter, the statement said, but its investment banking unit, brokerage and corporate segment, which controls all cash related to the group, posted losses in the period.

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