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Thursday, 11 June 2009

Ahmad Hamad Algosaibi & Brothers Company (AHAG) wishes to provide an update regarding its current financial strength and ongoing business activities.

As previously communicated by the group, the operations within AHAG's financial arm have been significantly scaled back pending a more in-depth review and assessment of each division by AHAG's management and external financial and legal advisers. While this review is in its early stages, the preliminary findings indicate strong evidence that there have been substantial financial irregularities within the financial services arm.

While AHAG cannot at this time provide further specific comment on this ongoing investigation, so as not to jeopardize it, the group continues to provide its full cooperation to the relevant government and regulatory authorities in this regard, and to act in the best interest of all group stakeholders, including creditors.

AHAG remains in dialogue with creditors to its financial divisions regarding current financial obligations, and intends to continue to facilitate this process. In that regard, AHAG is in the process of requesting its creditors, and the creditors of Algosaibi Trading Services Limited, to appoint respective formal steering committees, which the respective creditors consider as appropriate representation of the lender constituency in terms of both geographic spread and financial interest. Formal notices to lenders will be sent over the coming days. A steering group for The International Banking Corporation B.S.C. (c) was formed on 31 May 2009.

AHAG wishes to assure all its stakeholders that the group is committed to working in a collaborative manner to take swift and robust action to minimize potential losses. AHAG would also like to assure various stakeholders that the activities of AHAG's trading divisions remain unaffected by these potential financial irregularities.

- Ends -

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A third of Dubai's homes may be empty by end of next year

The vacancy rate in Dubai’s residential property market could double to about a third by the end of 2010 as the population declines and new buildings add to a glut of homes, UBS said.

The amount of empty houses and apartments may increase from as much as 15% at the moment, Saud Masud, a Dubai-based analyst at UBS, said in an interview today. About 30,000 homes will be competed by 2011, Masud estimates.

Dubai’s property market was hurt more than others by the global financial crisis and, according to a UBS report on 22 April, and home prices may slump as much as 70% from their peak last year. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate.

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Dubai-based Amara eyes China agriculture, utilities

Dubai-based Amara Holdings is eyeing investments in China each worth up to $200 million over the next 12 months, the latest Gulf Arab investor looking to tap opportunities in the world's most populous nation.

Amara, a sharia-compliant investment firm, said late on Wednesday it had teamed up with Ding Hai Investment Management Co, a subsidiary of New China Trust, to identify investments in China.

"The current market environment presents us with unprecedented opportunities to invest in China at very attractive valuations," Musab Jassim, executive chairman, Amara Holdings said in a statement.

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Bank Muscat's exposure to Saad tops $171 mln

Bank Muscat said on Thursday its exposure to troubled Saudi businesses Saad Group and Ahmad Hamad Al-Gosaibi Group and Brothers (AHAB) totals 66 million rials ($171.4 million).

"Bank Muscat has direct exposure to these groups amounting to approximately 49 million rials through our Riyadh Branch," it said in a statement on the Oman bourse website.

"One of our associates, BMI Bank, Bahrain, also has exposure to these groups, amounting to approximately 17 million rials."

The Omani lender said it was "too difficult at this stage to confirm any timelines, provisions if any we might have to take for a period of time".

Although "these groups are in default on some of their obligations, we take comfort in the fact that the groups' operating companies are profit-making and based on the last published financials, have strong balance sheets", it added.END

UAE Ppty Seen Falling Further 15-20% Until Yr End -DB

Property prices in the United Arab Emirates will bottom out at the end of the year after falling a further 15-20%, Deutsche Bank said in report released Thursday.

"While we noticed some signs of stabilization recently, we remain cautious given the limited number of transactions and the continuing declining trend in rents," the report said.

"We identify risks of further weakness driven by the exodus of expatriates and new supply flowing into the market," it added.

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Bahrain’s bond issuance (PDF)

•Bahrain issues a 5 year USD 750mn Islamic Bond with a 6.24% coupon

•The issuance comes amidst a flurry of other debt issuance in the Gulf

•This will help governments fund their ambitions while build a much needed yield curve

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Saad sees credit lines shut off

Saad Group company logoImage via Wikipedia

Western banks have begun to close down credit lines to Maan Abdul Sahed Al-Sanea – a major shareholder in HSBC - and his investment entity, Saad Group. Sanea’s investment business said that some of the several dozen international banks that had lending relationships with the Kuwaiti-born former fighter pilot had started liquidating shareholdings. This followed news of an edict from the UAE central bank, restricting lenders’ business with Saad or related companies.

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GCC bourse regulators urged to curb speculations

Gulf bourse regulators should take measures to put an end to speculative trading which has hampered sustained market improvement and inflicted heavy losses on millions of regional investors, according to a semi-official study.

The problem is complicated by lack of transparency market makers, and the random entry of foreign investors who had helped stoke speculation in the stock exchanges of the six-nation Gulf Co-operation Council (GCC), the government-controlled Emirates Industrial Bank said in its monthly bulletin.

"Changing these trends in GCC markets and converting them from speculation halls into development centres is possible through the development of new legislation that will curb speculation, spread investment education and strengthen transparency and disclosures. Another crucial element is the establishment of market-makers, which can play a key role in stabilising these bourses."

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Bank interest rates still double of Eibor

Some banks in the UAE are still offering rates more than double the Emirates Inter-bank Offered Rate (Eibor) for deposits. While Commercial Bank International (CBI) offers rates of seven per cent, the Abu Dhabi-based ADCB is inviting one-year deposit at rates of up to six per cent and Emirates NBD of up to five per cent.

Interbank rates, which normally stay higher than any deposit rates in any markets, are much lower than the rates offered by certain UAE banks on deposits.

Against the high deposits rates, the one-year Eibor is three per cent whereas the corresponding Libor is 1.6 per cent. The three-month and six-month Eibor are 2.46 per cent and 2.8 per cent, respectively. In a matter of about five months, Eibor has fallen by approximately 50 per cent from a high of five per cent.

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Saudi funds, IFC to help lift mortgage lending

The International Finance Corp (IFC) and three Saudi Arabian government funds will provide $400 million (Dh1.4 billion) in Islamic financing to help Saudi banks boost mortgage lending.

"Home financing in Saudi Arabia is a priority for the IFC," Walid Al Murshed, Saudi country manager for the IFC, said in an interview yesterday. "Less than 10 per cent of total consumer financing goes to mortgages."

Saudi Arabia may approve the country's first mortgage law by the end of the year. The law may spur a rise of as much as 50 per cent in demand for housing, Kuwait Financial Centre said in a report earlier this month.

Court to sentence man in absentia for duping Dubai World of Dh14m

A Frenchman has been charged with abusing his duty as a former executive of Dubai World (DW) and misappropriating Dh14 million worth of purchase orders, including two submarines.

Records quoted an American DW financial manager alleging that the 55-year-old Frenchman, who managed a DW entity, confessed in writing that he allegedly misappropriated Dh14 million and promised to settle and pay Dh3 million before he fled the country.

The Public Prosecution has referred the suspect, H.J., who records say is at large, to the Dubai Court of First Instance where he will be prosecuted for charges of abusing his public duties and unlawfully pocketing Dh14.122 million from one of DW's entities which he managed.

RAK to keep exploring despite Oman gas setback

RAK Petroleum will push ahead with plans to explore for natural gas in Oman despite losing its partner firm earlier this year and encountering significant technical challenges last year, a senior executive said yesterday.

The company is planning to drill two exploration wells this year and increase existing production at two fields offshore from the Musandam Peninsula, said Alain Duport, the general manager of RAK Petroleum.

The company’s priority this year, he said, was Block 47, a large tract less than 100km from the Abu Dhabi border that has several prospects, including a gasfield in which the company was drilling a well at a cost of US$15 million (Dh55m).

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Green shoots? Dig deeper into the yield curve

Whew! Anyone who has read this column in recent weeks will recall the scepticism, yea, the alarm and scorn, in which it holds talk of so-called “green shoots” of recovery.

It’s not that this column is a paean to the global recession, nor that it is written by some misanthrope who delights in misfortune, some miserable curmudgeon who kicks small animals and abhors human happiness.

On the contrary, my idea of acting out is to yield to pedestrians and drive the speed limit in my rented SUV. Courtesy is contagious, I am confident, even if resistance remains high.

UAE is key force in stopping money laundering, British security chief says

The UAE has a crucial role to play in blocking the flow of funding to terrorist groups, Britain’s security minister said on a visit to the UAE.

Admiral Lord West said that as a financial centre, the country was in a unique position to help “exorcise the cancer of violent extremist terrorism” by preventing money laundering.

He also underscored the strong bond between Britain and the UAE, noting the UK had no greater friend in the Gulf region.

Lord West spoke on Sunday at the start of a two-day visit to the Emirates, during which he met Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. The minister later visited the headquarters of Dubai Customs, where he discussed ways of improving the exchange of intelligence between British and Emirati law enforcement agencies.

“It is in the interests of all countries in the world to exorcise the cancer of violent extremist terrorism,” he said.

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Forecasts brighten for Gulf GDPs

Gulf economies will fare better than expected this year if oil sustains its rally for the rest of the year, creating an extra US$114 billion (Dh418.64bn) windfall for the region.

Some regional economists are considering upgrading their GDP forecasts if oil maintains its gains and budget surpluses are bigger than expected.

“I have upgraded my forecast because oil at $60 a barrel will allow Saudi Arabia to cross the $400bn mark in terms of the size of its economy, which will grow rather than contract to the extent we expected initially,” said Dr John Sfakianakis, the chief economist at SABB, the bank based in Riyadh.

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Bazaars feel the wind of change

The crowded stone alleys of Tehran's main bazaar, a labyrinth of plates and carpets, spices and DVDs, have long been a conservative stronghold in Iran.

The bazaaris still wield economic and political power, albeit to a lesser extent than in 1979, when they were a strong force behind the Islamic revolution. But many appear to be turning against Mahmoud Ahmadi-Nejad, who will seek a second term as president in a hotly contested election tomorrow that has the economy at its core.

"Some are supporting Ahmadi-Nejad but they are few - he has lost his support in the bazaar," says Abbas, sitting behind the counter in his sock and underwear shop.

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Nakheel Bond ‘Litmus Test’ for Moody’s Dubai Ratings

Nakheel PJSC, which has to repay a $3.5 billion Islamic bond in December, will be a “litmus test” for the six Dubai-owned companies assessed by Moody’s Investors Services Inc., the ratings company said.

“What happens at Nakheel will affect the six ratings that we have for Dubai,” Philipp Lotter, a Dubai-based analyst at Moody’s, which does not have a rating for Nakheel, said at a conference in the sheikdom. Nakheel “does not have the stand alone capacity to repay its bond. Our assumption at the moment is that the government will step in.”

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 program, 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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Map of KazakhstanImage via Wikipedia

Foreign investors and Kazakhstan’s business elite have been shaken by the arrest of one of the country’s most respected and successful entrepreneurs. As investors look on nervously and some of the country’s top executives protest openly, a probe of all state companies has been ordered. So great has been the controversy stirred by the arrest of Mukhtar Dzhakishev, former head of the state nuclear agency, that President Nursultan Nazarbayev felt compelled to intervene.

Dzhakishev was fired as head of Kazatomprom on May 21 and officially arrested four days later on suspicion of stealing state property. (His wife insists he was actually arrested on May 21).

According to the National Security Committee (NSC), he is accused of appropriating as his personal property 60 percent of Kazakhstan’s uranium deposits worth tens of billions of dollars. The NSC says Dzhakishev committed the alleged crimes in collusion with fugitive banker Mukhtar Ablyazov, his longtime associate. Separately, Ablyazov is accused of running an organized crime ring at BTA Bank, which he owned until the financial institution was forcibly nationalized in February.

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UAE tells banks to cut ties to Saudi Saad, AHAB

Banks in the United Arab Emirates have been directed by the central bank to stop lending to troubled Saudi businesses Saad Group and Ahmad Hamad Al Gosaibi Group & Brothers (AHAB), bankers said on Wednesday.

The central bank issued a circular to banks on Tuesday not to open any new facilities with the named Saudi groups until further notice, bankers in Abu Dhabi said.

"It was more of a cautionary directive," said a senior banker at Union National Bank. He added that it is unlikely that any banks or companies in the UAE would have any exposure to those groups.

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UAE's MAG says intends to buy Continental plant

Continental AGImage via Wikipedia

A Gulf-based group is pressing ahead with plans to buy a strike-hit tyre factory in France and has plans to produce 3 million tyres a year with around half its current workforce.

United Arab Emirates-based industrial and property group MAG said on Wednesday it had submitted a letter of intent to Continental AG to begin due diligence on buying the Claroix plant in northern France which had been slated for closure.
"We have yesterday sent a letter of intent to Continental ... the objective is to regulate the relationship until we reach a final agreement," MAG vice-chairman Fawaz Sabri told Reuters.

Germany-based Continental said on May 6 it was ready to hold talks with MAG on selling the Claroix plant, a move which could bring an end to France's most high-profile industrial dispute.

Initial story here.

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MENA Markets Performances

Location of QatarImage via Wikipedia

In the table below are the performances of the MENA equity markets listed from the top YTD performance to the lowest. It is interesting to see that the Qatari market is one of the worst performing markets YTD but looking at the table it seems that it is gaining by soaring 12% this month only. I’m not sure if those market will sustain these levels of growth or will we see a correction soon?

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Opportunities in store for property investors

You do not need to be a seasoned property developer or investor to feel the stress in the Middle East and North Africa property market. Office rents and house prices have plummeted as supply suddenly seems to outweigh demand. Disputes between developers, contractors and buyers have multiplied.

It is easy to get swept away with the headlines, especially in a global downturn. Tucked away in the barrage of bad news are some good opportunities, not so much because prices and construction costs have fallen; simply because they have been overlooked, even during the boom.

Real estate has always been a dominant asset class. But investors have generally focused on the mid- to high-end residential market, and on malls, hotels and offices.

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Qatari bail-outs boost local bourse

The cities of QatarImage via Wikipedia

Qatar’s most recent intervention in its banking sector has been met by hearty applause from investors, who have sent the Doha Securities Market into positive territory after heavy losses earlier this year.

Last month, Sheikh Hamad bin Jassem al-Thani, Qatar’s prime minister, offered to buy up to $4.1bn of commercial banks’ property investments, to “support the real estate sector...and allow banks to continue to play their vital role” in the country’s development.

The intervention followed one in March, when the government bought nearly the entire domestic equity portfolio of the banking sector. And late last year the country’s sovereign wealth fund spent $5.3bn on equity stakes in local banks.

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Gulf insolvency laws go on trial

After almost a decade of healthy growth rates, strong profits and only a few blips to speak of, the Gulf’s corporate world has entered uncharted waters and several companies have foundered.

In Kuwait, two leading investment companies have already defaulted, and analysts warn that many more might be bankrupt. In the United Arab Emirates, two property developers in Ajman and Ras al-Khaimah have admitted they are insolvent, and across the emirates many other companies are said to be struggling to meet their commitments as cash flows are sapped by the crisis.

Even in Saudi Arabia, where the corporate world was expected to fare relatively well in spite of the economic headwinds, two leading family-owned groups have run into difficulties, triggering a rash of ratings downgrades and hushed speculation.

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False news shock - Heritage Oil edition

Heritage Oil plcImage via Wikipedia

Here’s another example of false news shock - the tendency of erroneous news to move markets even though it has proved to be wrong. It concerns an exploration company called Heritage Oil, which has found a serious amount of oil in Kurdistan.

Shortly after 2.00pm BST on Wednesday its shares went into reverse:

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