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Wednesday, 10 June 2009

Saad on sale - again

This time the troubled Saudi investment group had sold 30m shares in 3i Infrastructure fund at 85p each.

Or has it?

Like Tuesday’s disposal of 16m shares in Berkeley Group, the sale has again been handled by Citigroup. The word in the market is that the Berkeley and 3i Infrastructure stakes had been pledged as collateral for loans, or held on margin, and the US bank is now liquidating these positions.

There’s still no clarity on whether Saad’s 2 per cent holding in HSBC has been pledged as collateral, or for that matter the status of the remaining holding of 17m shares in Berkeley shares.

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Citigroup downgrades three UAE banks

Citigroup downgraded three UAE banks, including First Gulf Bank FGB.AD, and said slower economic activity should lead to subdued balance sheet and profit growth among the banks.

Citigroup said it was concerned about asset quality deterioration for the UAE banks given their significant exposure to the construction and real estate sector.

"The sector is likely to see further stress, particularly the smaller/non-government backed developers and sub developers," Citigroup added.

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AngloGold, Thani Dubai form M.East mining JV

AngloGold Ashanti said on Wednesday it has formed a strategic alliance with Thani Dubai Mining Ltd to explore, develop and operate mines across the Middle East and parts of North Africa.

AngloGold, the world's No. 3 gold producer, said each company will have a 50 percent interest in the alliance, which would explore for gold, precious and base metals.

AngloGold added that project acquisitions and exploration programmes would be equally funded by both AngloGold Ashanti and Thani.

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Oman – Diversification drive (PDF)

An Oman Ministry of National Economy document outlined plans to reduce Oman’s reliance on the oil sector from 41.5% of GDP in 2007 to 9% of GDP by 2020. The plan identifies doubling income from industrial activities as one of the key drivers of the diversification plan.

The aim is to increase Oman’s industrial sector contribution from 14.3% of GDP in 2007 to 29% by 2020, while also raising the service sector contribution from 40.5% in 2007 to 46.9% by 2020. The target for the gas sector contribution is 10% by 2020 from 3.8% in 2007, while the share of agriculture and fishing is expected to increase to 5.1% from 1.3% over the same period. In 2008 Oman’s GDP reached USD 59.87bn with the non-oil sector contributing to 15.2% of total growth. The paper states that “The sources of national income will be diversified, with the non-oil sector assuming the primary role”. Oman’s diversification plans follow a pattern in other GCC countries, as oil exporters look for ways to create jobs for their young populations, and establish economies less reliant on the cyclicality of oil. We view diversification as a necessary step for hydrocarbon reliant economies like Oman to establish more sustainable economic growth, while the focus on the more “labor intensive” industrial sector will offer more job opportunities for Omani nationals, than those currently available from the existing capital intensive energy sectors.

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Dubai mall shops headed for closure

Dubai's mall shops are set for tougher times and even closure if landlords continue to stall on renegotiating high rents, the managing partner of Dubai-based Rivoli Group said on Tuesday.

Ramesh Prabhakar told at a summit in Dubai it would be clearer by the end of the year how retailers react after the traditionally quiet summer months and Islam's holy month of Ramadan, which ends around Sept. 20.

"If we do not talk and come to the table there will be collateral damage," Prabhakar said. "If it remains at this level of business for the rest of the year ... you will see some burnout."

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Blow for Berkeley as Saad reduces stake

Saad Group, the Saudi Arabian investment company, has sold half its stake in Berkeley, sending shares in the UK housebuilder plunging to their lowest level since last autumn.

Saad was seen as a long-term core investor and partner for Berkeley, and formerly held just under 38m shares, equivalent to 29 per cent of the total equity.

Shares in Berkeley closed at 782p, a drop of 43p, having fallen as low as 725p in early trading.

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Genting buys 3.2% stake in MGM Mirage

Genting, the Malaysian gaming group, has paid $100m for a 3.2 per cent stake in MGM Mirage, firming a relationship that could help pave the way for future deals in Macao and the US.

Genting matched the $100m that Kirk Kerkorian, MGM Mirage’s largest shareholder, invested in the US gambling group’s $1bn equity offering last month. Genting and Mr Kerkorian’s Tracinda Corp each bought 14.3m shares at $7.

In addition to the share purchase, which Genting was not required to disclose, the group bought $100m in MGM Mirage secured notes. Genting confirmed the bond purchase in stock exchange filings on May 21. Genting, founded by Lim Goh Tong, the late Malaysian Chinese tycoon, is particularly keen to explore opportunities in Macao, where MGM Mirage has a 50-50 joint venture with Pansy Ho, the daughter of Stanley Ho, the Hong Kong gaming magnate.

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'Airlines cannot sustain low prices forever'

Emirates was one of the few airlines that posted a profit last financial year. Speaking on the sidelines of the 65th International Air Transport Association (Iata) annual general meeting, Emirates' President Tim Clark told Emirates Business that the airline expects a moderate profit in the current financial year ending March 31, 2010, even the global airline industry makes a collective loss of $9 billion (Dh33bn) in 2009.

How is Emirates doing financially?

We made money last year. People in this room did not. Collectively, they are heading for a $9 billion loss, while Emirates is the only airline, or one of the only two or three airlines, that made money last year. We were down on the year before, but the fact that we made money was the exception.

Do you see airfares dropping further?

This is the best time for the travelling public. They have never had it so good with the fare levels. So if anyone wants to travel, they should do it quickly, because as soon as the going gets good all the fares will go up. They have to. This airline community here today cannot sustain these prices forever.

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Investcorp eyes regional luxury firms

Bahrain's Investcorp said yesterday it planned to buy stakes in homegrown Middle Eastern luxury goods companies as part of a wider plan to invest $650 million (Dh2.38 billion) in the region in the next two years.

Investcorp, previously an investor in high-end brands Gucci and Tiffany, is in talks with families and businesses in the Gulf, North Africa and Turkey, said Azmat Taufique, Co-head of the bank's Gulf Growth Capital business.

New investments under its $1bn Gulf Opportunity Fund would strive to mirror a 70 per cent acquisition last year of the Middle East's largest gold and jewellery maker, L'Azurde, which Investcorp made along with partners, Taufique said. "We are looking at other businesses in the region with similar dynamics, not necessarily jewellery but broadly in mass luxury," Taufique said, adding he estimated the mass luxury market would grow about 10 per cent a year in the region.

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Banks unfreeze mortgages as sentiment improves

Almost three quarters of a year after real estate prices started their southbound journey banks are restarting mortgage lending.

HSBC is bullish on the sector's prospects, and has hiked its loan-to value (LTV) ratios to 75 per cent on its flexi-loan and Eibor-based mortgage products, as well as on its Amanah Home Finance.

"HSBC is primarily targeting end-users who have recently faced acute difficulties getting affordable mortgage finance," said Abdulfattah Sharaf, CEO of Personal Financial Services, HSBC Middle East and North Africa. "The relaxed LTVs will provide flexibility and choice to customers looking to own a home," he said.

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Dubai court agrees to rehear statements

In a surprise move, two prosecution witnesses asked a court on Tuesday to rehear their statements, saying they had forgotten to mention important details when they earlier testified in the Mizin corruption case.

The Dubai Court of First Instance yesterday agreed to rehear the statements of an Emirati police officer and his compatriot female manager in a case of alleged financial fraud amounting to nearly Dh49 million when it reconvenes on June 21.

Mizin's former executive manager, 50-year-old Emirati S.A., and a 53-year-old Lebanese engineer, J.H., have pleaded innocent and refuted charges of bribery and financial irregularities. Both defendants are out on bail.

During Tuesday's hearing, the court heard testimony from a Lebanese sales executive and an Egyptian accounts manager.END

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Saudi Arabia set to launch new bond market

Saudi Arabia is poised to launch a Sukuk and bond market this week, a step analysts said reflected the OPEC kingpin’s push to further develop its debt market at a time when the global meltdown is drying up credit and restricting liquidity.

The new market’s launch on June 13 comes as Saudi Arabia, home to the world’s largest proven reserves of crude oil and the Arab world’s largest economy, forges ahead with a slew of infrastructure projects that officials say will cost about US$400 billion (Dh1.47 trillion) over the next five years.

It also marks a broader push within the Gulf Arab region to try to encourage a shift away from bank lending and the development of a new debt market. “If there is anything that they’re realising, it’s that the size of the projects are burdening the banks and one cannot expect, going forward, that the banks will be able to shoulder the burden,” said John Sfakianakis, chief economist with SABB, the HSBC affiliate formerly known as Saudi British Bank.

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Retailers seek new lease of life

When Georges Farha signed up with Emaar Malls to open a soup and sandwich restaurant in Dubai Mall, he was counting on about 100,000 people passing his shop each day.

But after the global economic downturn hit, Mr Farha, one of the investors in the Dubai-based Intercat Hospitality, says there is only between 40,000 and 50,000 potential customers each day passing the Toast outlet, which for now is not generating enough sales to stay open.

“I’m losing my shirt,” Mr Farha says. “And all the other people who signed up, they’re not doing much better.” The first few months of this year has been tough for retailers in the UAE with fewer tourists, and shoppers going for cheaper items or curbing their spending until easier times.

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Kuwait’s rating under threat

The government of Kuwait could face a credit rating downgrade as a result of continuing political turmoil, a major agency said Tuesday.

In the past few months, conflicts between Kuwait’s ruling family and its parliament have hindered the government’s ability to address the local effects of the financial crisis and threatened its stability, analysts have said.

In March, Moody’s placed the government’s credit rating on review for a possible downgrade as a result of the strife. Since then, it has decided not to lower Kuwait’s ratings, although it noted that a downgrade was still possible if political conditions worsened.

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Heritage and Enerji in US$5.5bn deal

Genel Enerji, a Turkish firm exporting crude from Iraqi Kurdistan, has agreed to merge with Canada’s Heritage Oil in a strategic deal aimed at accelerating the development of billions of barrels of oil from discoveries in northern Iraq and Uganda.

If approved by a majority of Heritage’s shareholders, the stock transaction would create a combined company, HeritaGE, worth about US$5.5billion, with substantial cash flow from which to fund development, according to Paul Atherton, the chief financial officer of Heritage.

“We see this as an opportunity whereby we can build a new regional giant,” he said.

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Funds fuel property recovery

Investment funds focusing on distressed property are forming in the UAE, helping to solve some of the problems caused by disputes between developers and investors that have hit tower builders’ cash flows.

Their emergence has coincided with a recovery in prices in some parts of Dubai and Abu Dhabi, raising hopes that the property market may have turned the corner after a sharp downturn.

“The arrival of these funds marks the beginning of the upturn in the market,” said Hamish Walton, a partner in the financial services practice at the law firm Clyde & Co in Dubai. “I think the market in many ways has already hit the bottom. These transactions will be the first signs of recovery.”

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Banks resort to niceness over debt

Major international banks are taking a softer approach to customers with outstanding debts, in an effort to stem a sharp rise in unpaid credit card bills and loans.

While they have reassigned scores of employees to debt collecting, they have also introduced some unusually conciliatory measures to aid the heavily indebted.

These include readily reducing interest rates, extended grace periods on loan payments, and telephone help lines offering financial counselling.

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