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Saturday, 9 May 2009

Saudi Arabia gold project on track, says Citadel

Citadel Resource shareholders have overwhelmingly approved, at an extraordinary general meeting in Melbourne, the recently announced A$22 million capital raising undertaken by the Company.

Citadel is a minerals exploration and development company, focused on gold and base metals in the Arabian Shield.

The EGM of shareholders was held primarily to approve approximately 25% of the share placement, which is in excess of the 15% limit.

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How panic gripped the world’s biggest banks

Part one here.

When a young team at investment bank JP Morgan pioneered credit derivatives in the 1990s, it classified some of them as “super-senior”, safer even than a triple-A rating. But 10 years later, as the US housing crash gained momentum, the world’s biggest banks were awash with mortgage-backed securities that were proving to be super-toxic. In the second extract from her book, Fool’s Gold, the FT’s Gillian Tett reveals how subprime spoiled the banking binge.

On October 11 2007, Moody’s cut its credit ratings on some $32bn of mortgage-backed bonds. Those had largely been issued in 2006 with medium-risk ratings of A or double-B. The ratings agency also warned that it might downgrade more than $20bn of mortgage-backed bonds that carried the triple-A stamp, and also downgrade collateralised debt obligations (CDOs) – credit derivatives made up of those bonds. All told, the cuts affected $50bn of securities.

The statement caused alarm among investors. Worse still, Moody’s seemed unsure how much further the downgrades might go. “The performance, particularly in the US housing [and] mortgage sector, [has been] deteriorating more quickly and more deeply than the ratings agencies or most other participants in the market anticipated,” Raymond McDaniel, chief executive of Moody’s, told the Financial Times on October 12. The subprime mortgage market was not behaving as the models had predicted. The “class of 2005 and 2006” borrowers were defaulting much faster than households which had taken out mortgages before those dates.

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From worst to first

Global markets have staged a dramatic recovery in recent weeks, easing the sense of desperation that had engulfed them, if not quite replacing it with something altogether cheerful. The prevailing mood is one of caution and uncertainty, but investors may be content with that, considering that not long ago they were certain that conditions were as grim as they could possibly be.

Another significant change is that the UAE market has been one of the strongest in the Middle East after trailing the region – and nearly every bourse in the world – last year. An MSCI Barra index of UAE stocks is up 32 per cent so far in 2009.

Performances for MSCI country indexes elsewhere in the Middle East vary widely, from a roughly 10 per cent gain for Saudi Arabia to a loss exceeding 20 per cent for Qatar. The UAE has also handily surpassed the returns of key mature markets around the world. The United States and Britain were recently down about 5 per cent so far this year, while Japan and markets across Continental Europe showed losses of about 10 per cent.

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Forget where it is; who will run the Gulf Central Bank?

In the end, it was a bit of an anti-climax – Riyadh will be the home of the Gulf Central Bank which will begin the process of steering the region towards a common currency, though on a still uncertain timetable.

The decision that came out of a meeting of GCC heads of state in the Saudi financial capital last week lacked the razzamatazz of, say, the naming of a venue for the Olympic Games, but these are bankers, after all, and this was Saudi Arabia. Perhaps we can discern some of the style of the new bank from its origins. It will be low-key, dry as dust and very Saudi.

The UAE expressed its “reservations” about the decision, no doubt reflecting its disappointment that Abu Dhabi – which thought it had a good chance of playing host – did not get the nod. But in reality it was always going to be Saudi Arabia. The Kingdom is by far the biggest economic and financial player in the region; its near-$600 billion of GDP is more than all the other states combined, and its population of close to 30 million similarly dwarfs its neighbours by a factor of two to one. No contest, really.

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Shoppers are paying a premium

Prices in the UAE of consumer goods, from cosmetics to electronics, are among the highest in the world, an investigation by The National has found.

A survey of major cities reveals that shoppers in this country frequently pay significantly more than their counterparts in London, New York, Paris and Hong Kong.

The higher prices are even more striking because shopping in Abu Dhabi and Dubai is tax free – unlike in Europe, which imposes value added tax of between 15 and 25 per cent, and New York, with a sales tax of 8.5 per cent.

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Dubai companies may sell bonds to raise cash in next few years

Dubai companies may sell bonds to raise cash during the next few years because investor demand for new share offerings will remain depressed, the emirate's chief financial regulator said.

"In the next two to three years bonds will play a far more critical role in the financing of companies rather than equity," Paul Koster, chief executive of the Dubai Financial Services Authority, said in an interview in Singapore on the sidelines of the Islamic Financial Services Board summit. "In terms of IPOs for equities there will be very little."

Companies in the United Arab Emirates sold Dh1.89 billion of equity in three initial public offerings during the past year as benchmark stock indexes for Dubai and Abu Dhabi, the biggest of seven states that make up the UAE, tumbled more than 47 per cent, according to data compiled by Bloomberg.

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Dubai helps halt $28b money laundering operation

A massive money laundering operation worth $28 billion (Dh102.8 billion) was halted with the help of Dubai Police recently.

The operation, involving money derived from drug trafficking, was spread around at least 13 countries and a number of the gang members have been arrested, said Younus Yousuf Al Mua'alem, Financial and Banking Fraud Expert and Head of Combating Money Laundering and Financial Crimes Department of Dubai Police.

The UAE is not part of the organised crimes but is among the countries where money is laundered. Corporate corruption plays a part in the money laundering process which has some marks in the UAE, he said.

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