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Sunday, 24 May 2009

Arab stocks ready to outperform as oil advances

Abu Dhabi by SPOT SatelliteImage via Wikipedia

Stocks in the oil-rich Middle East may gain more than global equities, after the MSCI Arabian Markets Index entered a 12-month “outperformance phase,” fueled by higher crude oil prices, according to Abu Dhabi Investment Co (ADIC).

“People who want to play the oil story should definitely focus on the Arabian markets,” said Aksel Kibar, a portfolio manager at Abu Dhabi Investment. “Relative performance charts indicate that this outperformance may last for another 12 months.”

The MSCI Arabian Markets’ relative performance oscillator, which tracks the performance of the gauge relative to world equity markets, shows that the region’s 11 biggest markets will outperform as oil may surge as much as 30% in the second-half of this year, Kibar said.

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Dubai's GCC exports down in first quarter

For the first three months of 2009, total exports of Dubai Chamber members reached AED 14.5 billion in January, AED 14.2 billion in February and AED 15.4 bilion in March; for a total of AED 44.1 billion.

In the first quarter of 2009, Dubai Chamber members’ exports to 25 destinations exceeded AED 100 million each. During the period, the largest market remained to be the GCC, where exports grew from AED 17 billion in the first quarter of 2007, to AED 22 billion in first quarter 2008, but declining to AED 19 billion in 2009.

Exports to Qatar dipped by 36%; exports to Oman and Bahrain dipped by 29% and 10% respectively.

The total GCC exports declined despite the 1.3% and 12.0% increases in exports to Saudi Arabia and Kuwait, respectively.

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UAE advertising agencies owed $150 mln

Advertising and media agencies operating in the UAE are owed about $150 million from the public and private sectors, as clients struggle to pay their bills, a leading industry executive said.

“We are aware of a number of International Advertising Association (IAA) members who have been affected,” Ghassan Harfouche, IAA treasurer in the UAE, told Mediaweek Middle East in an article published on Sunday.

“Those with a higher percentage of real estate clients have unfortunately taken the largest hit.”

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India-focused funds have a great week after elections

Emerging market equity funds soaked up another $2.46 billion (Dh9bn) during the third week of May as India's lengthy election produced the result investors were hoping for, Chinese officials reiterated their determination to lift GDP growth to at least eight per cent and commodity prices rallied, according to data released by EPFR Global.

EM and high-yield bond funds also extended their recent winning runs. "Investors worldwide are clearly anxious to put their money back to work," said EPFR Managing Director Brad Durham. "They took another $21bn pulled out of the money market funds we track during the past week, which provide a degree of safety but minimal returns, and brings the year to date total outflows to $78.2bn."

The $26.3bn that investors pulled from money market funds on May 15 was the third largest daily outflow total this year from these funds, and the third largest since at least the beginning of 2008.

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GCC fiscal surplus tops $564bn in four years

A surge in crude prices has allied with high output to allow Gulf oil producers to accumulate a staggering fiscal surplus of more than $564 billion (Dh2 trillion) over the past four years despite record spending, figures showed yesterday.

Nearly half the surplus in the combined budgets of the GCC was achieved in 2008, when the member countries netted its highest ever income after oil prices soared to historically record levels, showed the figures by the Abu Dhabi-based Arab Monetary Fund (AMF).

The cumulative surplus of $564.8bn during 2005-2008 was more than 14 times the $40bn surplus recorded in the previous four years and in sharp contrast with the deficit registered by some members during those years.

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Qatar may form energy SWF

The overseas arm of state-run Qatar Petroleum is considering setting up a consortium with sovereign fund Qatar Investment Authority (QIA) to invest in energy projects, the London-based Meed reported.

"There will be official co-ordination looking at how much each one should spend. This could include forming a consortium together," said Ibrahim Ibrahim, a board member at Qatar Petroleum International (QPI), quoted by Meed's latest issue.

"Making this sort of move is not for lack of money on either side, but for finding the right investment and using our joint experience to find the right deal together," Ibrahim said. The QPI has undertaken to invest in energy projects overseas.

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Foreign funds back on DFM

Foreign investors are returning to the Dubai Financial Market (DFM) and their net investments in market heavyweights are gradually moving northwards, according to available figures.

With a rebound in some global markets, the recent increase in oil prices and other key positive factors such as the Dubai government's proactive measures to catalyse economic growth, the DFM General Index is now attracting foreign investors. During the week ending May 21, the DFMGI gained 1.92 per cent with foreign investors buying a net Dh89.20 million.

Interestingly, though trading volume was much higher during the previous week the index gained less than one per cent (0.49 per cent), following the bleak net buying by foreign investors at Dh3m only. It was only when they turned into heavy aggregate buyers that the index registered greater gains. Therefore, regardless of volume, it is net buying by foreign investors that seems to be driving the index.

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UAE should be more than just a port of call

Menudo is a Puerto Rican band that was founded in the late 1970s. The band came about after a producer enjoyed success with the management of a Spanish teen group called La Pandilla from 1973-1976. He returned to Puerto Rico with the intention of forming a new boy band in which the members would be replaced as they grew older. He resolved that the group's members would have to make way when they reached the age of 16, their voices changed, they grew facial hair, or grew too tall. In a sense, this is a brand rather than a band. Its product is flexible but its message remains the same; this is a marketer's dream.

So why am I talking about Menudo? Well, because the UAE's business model is very similar to that of the band. The UAE basically tells you that you are welcome to come here and give it your best shot, build yourself a life, get a good job, start a business, make Dh10 million, find a partner, buy a house and have children - but leave at 60.

This rule was drafted a long time ago. The times have changed and the UAE no longer aims to make money by simply re-exporting goods. We are now a self-proclaimed centre for a region that stretches to Central Asia and West Africa. We are undergoing a testing transformation from commercial centre to civil society and, most importantly, we aim to become a home as opposed to a transient state. We have great expectations indeed. But however great they may be, we must not shy away from them. We must not be hindered by archaic rules and regulations that were drafted for different times, different demographics and certainly different ambitions.

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Dana Gas announces new discovery in Egypt

Dana Gas, the Middle East's largest regional private sector natural gas company, has announced another gas discovery in one of the company's concessions in the Egyptian Nile Delta. The Tulip-1 well is set to add up to 30 billion cubic feet (bcf) of gas to the company's reserves in Egypt.

This comes soon after the announcement of three previous gas discoveries in the Nile Delta area: two dry gas discoveries at the firm's Sondos-1 and 2 wells, and one gas/condensate discovery at the Azhar-1 well. This is the result of Dana Gas' aggressive drilling campaign in Egypt, which began in 2008 and continues to add new gas reserves in 2009.

The Tulip-1 well is located in the West Al Qantara Concession, approximately 15 kilometres from the Company's South Al Manzala gas processing facilities and seven kilometres from the recent discovery Salma Delta-1. The well was spudded on 25 April 2009 and reached a total depth of approximately 2200 metres within the Messinian Abu Madi formation.

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Mubadala denies reports about investments in Malaysia

Mubadala Development Co, the investment arm of the Abu Dhabi government denied media reports about its plan to invest $1.8 billion (Dh6.6 billion) in property projects in Malaysia.

"Beyond the Medini Project in the Iskandar Development Region, we currently have no other real estate projects in Malaysia," the company said in a statement to Gulf News.

Mubadala however, clarified that they are not closing their doors to "partnerships and real estate opportunities globally that generate sustainable returns which may include future projects in Malaysia".

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Now is no time to debate the dollar peg

The announcement by the UAE that it was pulling out of the GCC monetary union has led to renewed questions about a 30-year monetary relationship: might the Emirates eventually reconsider the dirham’s peg to the US dollar?

“I wonder if the UAE is not interested in getting away from the dollar peg,” says Jean-Michel Six, the managing director and chief European economist at Standard & Poor’s, the ratings agency. “At some point it might be a smart move to have a currency that is strong in its own right.”

Certainly, many say it is now only a matter of time before debate over the peg resurfaces. The dirham has tracked the dollar since 1978 and was officially pegged to the US currency in 1997, before GCC countries had begun preparing for a common currency. Since then, only Kuwait among GCC states has abandoned its peg to the dollar in favour of a currency basket.

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Iraq parliament holds key to gas pipeline

By all accounts, Sharjah’s Crescent Petroleum and Dana Gas have pulled off a coup by persuading a pair of European oil companies to shell out roughly US$700 million (Dh2.57 billion) in cash and shares for 20 per cent of a politically risky, and so far unprofitable, gas project in Iraqi Kurdistan.

The “farm out” to Austria’s OMV and Hungary’s MOL more than covers the UAE partnership’s $605m of investment in the project to date, and establishes an asset value of $1.4bn to each of the Sharjah companies for their remaining 40 per cent stakes in Kurdistan’s Khor Mor and Chemchemal gasfields. It also furnishes a financial upside to the development by holding out the tantalising prospect of gas exports to Europe.

But Dr Hussein al Shahristani, the Iraqi oil minister, has effectively vetoed the plan.

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Monetary union does not have to be all about the money

The GCC monetary union is dead. And long live monetary union. In a perverse manner, both statements are technically correct. The decision to locate the GCC’s future central bank in Riyadh was a milestone on the road to full monetary union, and a signal to sceptics that the 10-year project was at last coming to fruition. But alas, the dream may have crashed to the ground after the UAE formally announced it was withdrawing, and wished the remaining members “all the very best”.

The shock has been doubly compounded as it came only a few days after the UAE had expressed its unspecified “reservations” following Riyadh’s selection. And as Sultan al Mansouri, the Minister of Economy, pointed out on Thursday, the reason for the UAE withdrawal was precisely that it did not manage to secure the future headquarters. But since the UAE apparently has not ruled out rejoining the project at a later date, experts believe a compromise could emerge. One possibility, for example, might be for the first GCC central bank governor to be chosen from the UAE.

Nevertheless, the UAE’s decision caught everyone by surprise and is causing the remaining members of the project – Saudi Arabia, Bahrain, Qatar and Kuwait – to go back to the drawing board and ask what sort of unified GCC central bank will now emerge. For this, the UAE should be thanked.

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Silver lining to Dubai’s worker cloud

City-state may have lost its reputation as a job magnet, but there are other options to consider

The economic meltdown may have put a dampener on job opportunities in Dubai, but there are opportunities available in other parts of the Middle East.

Thousands of South Africans have flocked to Dubai in the past 10 years to take advantage of what the city has had to offer, but in the past few months retrenchments have resulted in many expats returning home and others not even getting to the city after their contracts were cancelled.

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Arab stocks post weekly gains on rising oil prices

Arab stock markets kept their upward thrust this week, buoyed by rising oil prices and the flow of fresh liquidity to regional markets as investors appeared upbeat over indicators that the world recession could be bottoming out, financial analysts said Friday.

"I believe rising oil prices represent a positive indicator that sends a message to markets that the situation of the world economy could be improving," Wajdi Makhamreh, Chief Operating Officer at the Amman-based Sanabel International Holding, told the German Press Agency dpa.

"Higher oil prices mean more liquidity coming to the regional bourses particularly in the Gulf region, but it is insufficient so far to produce the required momentum," he said.

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Saudi Shares rebound from early losses to close 0.8% higher

The Saudi markets rebounded on Saturday as Saudi Basic Industries (Sabic), the world’s biggest chemical maker by market value, climbed to the highest close in six months.

Sabic gained 3.4%. National Industrialization Co., which holds interests in industrial and manufacturing firms in the kingdom, gained the most in two weeks.

Sabic climbed to SAR69.25, the highest close since 5 November. National Industrialization advanced 6.1% to SAR20.85.

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