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Sunday, 17 May 2009

Fund focus: Emerging markets of the future

Economic Map of the World: Emerging Markets an...Image via Wikipedia

New frontiers have historically always offered opportunities, whether for Christopher Columbus or Captain James T. Kirk. For Andrea Nannini, manager of the $70m (£46m, €51m) HSBC New Frontiers fund, they also provide a chance to make double-digit returns despite the current developed market woes.

“It’s a chance to position yourself in what will be the future emerging markets,” he says. “In five to 10 years’ time, the traditional emerging markets will be too developed and the focus will shift over to the next block of countries, such as Nigeria, United Arab Emirates and Vietnam.”

It is a compelling argument, backed up by the fact many fortunes have been made by early investors in the more traditional emerging markets. Yet with the chance to make great returns comes the possibility of heightened risk – a notion Mr Nannini is keen to dispel.

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Making money out of others’ troubles

When things get bad, someone somewhere sees an opportunity to make money. Prices of distressed assets look cheap. But that does not mean they cannot get even cheaper.

The sale of $750m (£493m, €551m) worth of 10-year notes for a unit of Harrah Entertainment, the largest US casino operator, was priced initially in 2006 at about $99. Then came the credit crisis. Problems in the economy took their toll on gambling revenues. Harrah’s, which in 2008 was bought by a private equity company, began to post losses. By early November 2008, the notes traded at $19. That probably seemed like a bargain to some investors. Or, it did until early March when the notes were quoted at a price of just over $4.

Certainly there is plentiful supply, as a growing number of prominent corporations struggle to survive. Examples of companies that have filed for bankruptcy in recent months are The Tribune Company, owner of newspapers including the Los Angeles Times and the Chicago Tribune, and Muzak Holdings, a company that has been providing “lift music” since the 1930s.

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UAE firms to pump gas from Kurdistan for EU pipeline

Map of Nabucco Gas PipelineImage via Wikipedia

Two UAE and two European companies said on Sunday they have formed a consortium to pump enough gas from Iraq's Kurdistan region to kick-start the Nabucco pipeline project to supply Europe.

The Western-backed Nabucco pipeline aims to lessen Europe's dependence on Russian gas, and is opposed by Moscow.

Until now, the $10bn pipeline project had plenty of willing buyers in Europe but little gas to sell.

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Asia fund flows begin to waver

Fund flows in Asia had appeared relatively immune to the global crisis, but are now beginning to falter.

First quarter flows were a modest $31bn (£20bn, €23bn), down from more than $51bn in the last three months of 2008, according to data from Lipper FMI. But it was China that changed the picture, with investors there pulling $33bn from funds across all asset classes, while the rest of Asia registered inflows of $62bn.

The outflows from funds in China were the first since 2006 and the steepest on record.

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Manager sees new bull market

Mary Chris Gay, co-manager of the Legg Mason Value fund, believes the recent rally in equity markets is the start of a new bull market.

Ms Gay, who runs the $7.6bn (£5bn, €5.6bn) fund with Bill Miller, said the market ebulliance it is not just a strong bear market rally

“We believe it’s the beginning of a new bull market,” she said.

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Schroders chief says rally not sign of recovery

The recent stock market run is a bear market rally, according to Alan Brown, group chief investment officer at Schroders.

“It is too early to declare victory and say we are necessarily in a bull market,” he said. “There are lots of promising signs and lots of reasons why the market should have rallied. I just think we need to be very cautious. We are going through a completely unprecedented period and the range of possible outcomes is still very wide.”
Video interview
He suggested it was more than coincidence that the market rally could be timed from when the Bank of England began its quantitative easing programme. “I’m concerned that the real power behind this rally is quantatitive easing, which isn’t going to go on forever.”

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Kuwait bourse halts trading in 26 firms (Re-post from

The Kuwait Stock Exchange (KSE) has halted trading in 26 companies for failing to publish their 2009 first quarter earnings on time. An announcement on the KSE website claims that the 26 firms include Investment Dar , Aayan Leasing & Investment Co , and Gulf Investment House. Trading usually resumes minutes after posting the financial results on the bourse website.

A major problem Kuwait is facing is transparency in regulations. Analysts have long demanded better regulation and clarity on stock market rules. The implications of halting trading has been beneficial to companies that wish to avoid further decline in their stocks. Without an imposed penalty, company’s will hold on to their results and delay announcing results, further skewing comparisons between companies in the local exchange. Investors have been fairly passive in their investments while there is no mention of when the company’s will announce earnings.

The Investment Dar (alDar) had been halted from trading since April 1 following an order to halt company’s which had not announced 2008 annual earnings results. Last week, alDar defaulted on a $100 million Islamic debt issue, the first such default for a major, public, Islamic instrument in the region. The actions of alDar have caused many foriegn investors to avoid investments in Kuwait due to its disregard to investors, and lack of enforcement by authorities.
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Four women clinch historic victory in Kuwait parliamentary elections

KUWAIT, May 17 (KUNA) -- Four women won parliamentary elections for the first time in Kuwait history on Sunday.

Maasouma Al-Mubarak, a former minister, came first in the first constituency with 14,274 votes, while Salwa Al-Jassar won a seat to represent the second constituency with 4,776 votes.
In the third constituency, Dr. Aseel Al-Awadhi came second with 11,860 votes then Dr. Rola Dashti came sixth with 7,666 votes.
Al-Awadhi almost won the 2008 elections but came 11th with 5,173, only 885 votes away from the 10th position. (end) KUNA 170655 May 09NNNN
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Emirates denies EU charge it misleads on prices

Dubai's Emirates airline on Friday denied a European Commission charge that it misleads customers over website ticket prices.

"We are surprised at the revelations of the EU report on airline websites. Our commercial operations are guided by fair business practices and transparency for our customers," Richard Vaughan, Emirates' divisional senior vice president, commercial operations worldwide, said in a statement.

"There has been no communication from the EU investigators warning us of any compliance issues. If such issues exist, we would be very keen to engage in dialogue to understand these issues," he said.

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UAE may cut energy investments by $8bn in 5 years

The UAE is expected to slash investment in its hydrocarbon and other energy projects by nearly $8 billion (Dh29bn) in the next five years because of lower costs and the global financial turmoil, an official report said yesterday.

Other oil producers in the Middle East and North Africa (Mena) region are also expected to trim capital requirements in the energy sector during 2010-14 but the UAE will be the least affected, showed the report by the Dammam-based Arab Petroleum Investment Corporation (Apicorp).

The report, sent to Emirates Business, showed the total Mena energy investments during that period would plunge by around 30 per cent, or nearly $271bn, from $550bn to $385bn.

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Qatar's lack of interest may hinder gas cartel

Qatar, the largest exporter of LNG in the world, may no more be interested in establishing a gas cartel market sources said. The development could lead to a complete ruling out of the possibility of a cartel, analysts point out.

Qatar with the world's largest non-associated gas reserves under its belly (it stands third in the list of total gas reserves) and often termed the 'Saudi Arabia of gas', is considered to have the strongest say in decisions of the Gas Exporting Countries Forum (GECF). Doha, the Qatari capital, is the head office of the GECF.

"The new development has come in the wake of two of the largest gas producers Qatar and Russia competing for the Western markets. Russia has for long supplied gas to Europe through pipelines. Qatar has now begun shipping LNG to these markets brining in competition," said Robin Mills, a Dubai based oil economist.

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Dana Gas loses Dh32m

Dana Gas lost Dh32 million (US$8.7m) in the first quarter of this year, compared with a Dh25m net profit in the same period last year.

The company, based in Sharjah, attributed the difference mainly to a one-time financial gain last year from the sale of some of its Egyptian oil and gas assets, its biggest source of revenue and earnings.

Dana agreed to sell its 30 per cent interest in Egypt’s West Gharib concession in Feb 2008. The transaction boosted the company’s bottom line for the first three months of last year by Dh45m, an amount appearing on its income statement for the period as “other income”.

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Aggressive strategy with strong balance sheet is way forward

Conflicting views are emerging about whether the global financial downturn is deepening or easing, but Eric Meyer, CEO of Shariah Capital, says the crisis – even at its worst – will help him attract talent.

The US-based company has formed a joint venture with the Dubai Multi Commodities Centre Authority (DMCC) and launched four hedge funds that comply with Shariah principles early this year.

The DMCC, a Dubai Government agency, seeded $50 million (Dh184m) into each of the four funds, making the launch worth a total of $200 million.

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Kuwait to raise stake in Industrial and Commercial Bank of China

A Shanghai branch of Industrial and Commercial...Image via Wikipedia

Kuwait is looking to raise its stake in the Industrial and Commercial Bank of China (ICBC) and invest in Chinese energy and industrial sectors, its finance minister said.

Mustapha Al Shamali also said the world's fourth-largest oil exporter would not reduce its dollar-denominated assets. "We have an investment in ICBC. We have a portion of it and we are going to enlarge it," he said in an interview, without disclosing the size of the stake.

"We could get our share from the market," he said.

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Nasdaq Dubai cuts capital requirements

Nasdaq Dubai has substantially reduced this month the minimum capital requirement for three categories of membership introduced by the exchange in October 2008.

In a notice, Nasdaq Dubai said the minimum capital requirement for a General Clearing Member (GCM) of Nasdaq Dubai Securities Market will be $8m (Dh29.4m) compared to the $20m minimum capital stipulated in October 2008. The minimum capital required for GCM before October 2008 was $5m.

"In order to be admitted as, and remain, member of Nasdaq Dubai, the applicant must satisfy Nasdaq Dubai that it has, and continues to have sufficient capital for its intended business at the bourse that complies with the revised minimum capital requirement," the notice said.

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Too many things happened too fast, Al Ghurair says

"The speed of growth in Dubai was a problem. Too many things were happening too fast, and the 15 per cent growth was seen as good. But in the future we should look for more sustainable growth," said Abdul Aziz Al Ghurair, Speaker of the Federal National Council.

"When things speed up again, we should slow them down so that we are able to digest them better," he said, while taking part in a CNBC debate on the state of capitalism in the Middle East, held at the World Economic Forum at the Dead Sea.

Al Ghurair saw no need to rush the single Gulf currency into existence. "We should take our time to get to the Gulf currency. Even if it takes five to 10 years, that will still be alright. It is important that the politics, the economy and the people are all ready for the change."

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Dubai will probably help Nakheel with $3.52b bond repayment

This is a photo showing the Burj Dubai and how...Image via Wikipedia

Dubai's government will probably help property developer Nakheel PJSC repay a $3.52 billion (Dh12.9 billion) Islamic bond due this year as it qualifies for assistance under a $10 billion support programme.

"There is a criterion that has to be met, and if that happens we will support any government-related entity," Nasser Bin Hassan Al Shaikh, director general of Dubai's Department of Finance, said in an interview at the World Economic Forum at the Dead Sea, Jordan, late on Saturday. Nakheel meets the criterion, he said.

Dubai sold $10 billion of five-year bonds in February to the United Arab Emirates central bank, part of a $20 billion medium-term note programme, to assist state-owned companies struggling to raise cash during the credit crunch. That money will be used to meet payment shortfalls or repay loans, the government said.

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Dubai bank CEO says market ripe for buyouts

The United Arab Emirates may have passed through the worst of the global financial crisis and now is a good time to make acquisitions, the head of Mashreq bank said on Saturday.

"I feel we have reached the bottom and the worst is behind us," Mashreq Chief Executive Abdul Aziz Al-Ghurair told reporters on the sidelines of the World Economic Forum in Jordan. "How long this will last we still don't know, but at least we have stabilized."

Mashreq is based in Dubai, where real estate prices have crashed since hitting peaks late last year following a multi-year building boom.

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Tamweel says fate of merger awaits state plan

A decision on whether to merge troubled UAE mortgage lenders Tamweel and Amlak will happen only after the government unveils a plan to restructure the firms, Tamweel's chairman said on Saturday.

Speaking to reporters on the sidelines of the World Economic Forum in Jordan, Sheikh Khaled Bin Zayed al-Nahyan reiterated the government would announce the restructuring plans in a "few weeks", but declined to be more specific when asked.

"Once that's done there is going to be a decision about a merger or not," Sheikh Khaled said.

Saudi stocks fall 2.9% on profit taking

Third Saudi State (present day) (Saudi Arabia)Image via Wikipedia

The Saudi markets fell on Saturday dragged lower by Saudi Basic Industries (SABIC) as investors took profits after a two-week rally.

SABIC closed 7.75% down at SAR62.60 after rising some 28% in the past two weeks.

The Tadawul All Share Index sunk 2.87% to close at 5,871.57 points.

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