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Monday, 15 June 2009

UAE Ctrl Bk Concerned About Bks' Saudi Grps Exposure

The United Arab Emirates' central bank governor said Monday he was concerned about local banks' exposure to troubled Saudi conglomerates Saad Group and Ahmad Hamad Al Gosaibi & Brothers, or AHAB.

"We are dealing with it and we are concerned about it," Sultan bin Nasser Al Suwaidi told reporters in Abu Dhabi without providing more details.

However, Al Suwaidi added that he doesn't expect defaults of regional family-owned conglomerates such as Saad and AHAB to become a major problem going forward.

"I don't take this to be a trend, it happens. I don't think the issue is default, it is a decree for freezing. We don't know the circumstance that led to this freezing," Al Suwaidi said.

A London-based Saad Group spokesman and an Al Khobar-based AHAB spokesman weren't immediately available for comment when contacted by Zawya Dow Jones Monday afternoon.

The U.A.E. central bank last week ordered local lenders to halt loans to Saad and AHAB and one of its units after they faced difficulties meeting some of their debt obligations.

The development has raised concerns that some family-run businesses in the oil-rich Gulf have been heavily hit by the fallout of the world financial crisis.

In the U.A.E.'s banking sector, things are looking up, however, Al Suwaidi said.

"The banking sector is doing well. Liquidity has improved so the situation is better than at the beginning of the crisis," he said. However, he added that "for 2009, I don't expect banks' performances to be better than in 2008."

Regarding the U.A.E. finance ministry's plans to start selling federal bonds in the future to help fund budgetary spending on infrastructure, Al Suwaidi said: "At the right time it will be good to issue a federal bond."

-By Maria Abi-Habib, Dow Jones Newswires; +9714 364 4962; maria.habib@dowjones.com

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Trouble in the Middle East's banking centre

For three decades, Bahrain has been the banking capital of the Middle East. It is home to 150 banks, employing more than 14,000 people.

However, it is also a close-knit, island community of only 740,000 nationals. Depriving a fellow Bahraini citizen of his or her livelihood is widely seen as a form of social betrayal.

So when news broke late last month that Gulf International Bank (GIB) had laid off 59 employees at its head office in Bahrain - almost a fifth of the total working there - it sparked demonstrations by fellow Bahraini bank staff and trade union activists.

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Borse Dubai has no plans to sell LSE stake

Borse Dubai has no plans to sell its stake in the London Stock Exchange Group and does not rule out increasing it, its chairman told Reuters in an interview.

Borse Dubai, which is wholly owned by the government of Dubai, holds a 21 percent stake in the LSE Group, making it the largest single shareholder, having acquired its holding as part of a complex three-way deal with Nasdaq and Europe's OMX group.

"It's a strategic investment and we will keep it as long as we feel we need to keep it," Essa Kazim said on Sunday, adding there were no current plans to sell.

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10 Best ETFs for a Changing Middle East

This past weekend's events in Iran and in Israel are good reminders that the Middle East is a region in transition. The 300 million citizens of the Middle East and North Africa (MENA) nations make up only about 6 percent of the world's population. But the Mideast plays a disproportionate role in world affairs as its hydrocarbon resources are central to global economic development, and its fractious regional politics often threaten global peace.

Economically, the region has seen strong growth in the past decade as crude prices stayed strong and most countries opened themselves up to foreign investment. Since 2000, growth has stayed above 5% in the region and the Middle East is now the second richest part of the emerging world, behind Latin America, - with GDP per capita now around $7,000.

Along with other emerging economies, output and shares in the Middle East crashed spectacularly in 2008. Mideast economies have been slower to recover in 2009, however, as low crude prices fed concerns over the ability for Middle Easterners to pay down debt accumulated during the boom. Much of the first quarter was dominated by speculation that Dubai - the high-flying capital of Arab capitalism - might default on its debt. Fears were abated only after its sister cities in the UAE bailed it out. Once the symbol of the Middle East's rising economic power, the architectural extravagance of Dubai risked being remembered primarily as an expensive folly.

Sinopec swoops on oil explorer — or does it? (Addax update 1)

China’s resources drive continues apace, despite the resounding failure of Chinalco’s bid to acquire a big stake in Rio Tinto. According to weekend reports - initially in the Sunday Times - Chinese state-owned oil group Sinopec is stepping up its race to secure access to global oil reserves with an “audacious” £4.8bn bid for Addax Petroleum, a London-listed group with fields in Iraqi Kurdistan and Nigeria.

Bloomberg reports on Monday that a spokesman for the Hong Kong-listed unit of China Petrochemical Corp, Sinopec’s official name, denied the unit has bid for Addax, though did not rule out the possibility that its state-owned (and unlisted) parent company has made a bid. Needless to say, the Beijing-based parent company has not taken any steps to clarify its position - and Addax isn’t talking either.

Addax, which is listed on the Toronto Stock Exchange and has a market cap of C$6.9bn said on June 9 only that preliminary talks were underway with third parties expressing an interest in a “potential transaction” with the company. The company announced on June 1 it had started crude-oil exports from the Taq Taq license area in the autonomous Kurdish region in northern Iraq.

Global's Jordan Weekly Market Report - June 11, 2009 (PDF)

Chinese bid £5bn for UK oil explorer

Sinopec, the Chinese state oil group, has made an audacious £4.8bn bid for Addax Petroleum, a UK-listed group with fields in Iraqi Kurdistan and Nigeria, report the Times. Sinopec is understood to have tabled the indicative offer last week, trumping an earlier bid by the Korean National Oil Corporation. The FT adds that much is now up to Jean-Claude Gandur, president and CEO of Addax, who has a say in the votes of almost 40% of the shares.

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Mubadala Buys Istithmar’s Stake in SR Technics Group

Mubadala Development Co., an investment arm of the Abu Dhabi government, bought Dubai government-owned Istithmar PJSC’s stake in SR Technics Group, a Swiss provider of technical services for the aviation industry.

Mubadala bought the 30 percent stake for an undisclosed sum, raising its stake to 70 percent, an official for the company said in response to questions from Bloomberg today. Dubai Aerospace Enterprises continues to hold the remaining 30 percent, Mubadala said.

Dubai Aerospace, along with Abu Dhabi’s Mubadala and Istithmar, bought 90 percent of the Swiss company for $1.3 billion in 2006, as part of a United Arab Emirates plan to build a domestic aerospace industry.

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Global's GCC Islamic Index–Weekly Brief dated June 11, 2009 (PDF)

NBK’s Camel Grows a Little Beard!

National Bank of Kuwait (NBK) finally found middle ground and struck a deal with Commercial Bank of Kuwait (CBK) to buy 19.1% of Boubyan Bank (Islamic). The total consideration is around KD 120M; valuing Boubyan Bank shares at 550 fils/share . CBK made KD 27M in the deal. NBK has an authorization until June 21 from the Central Bank to buy up to 40% of Boubyan Bank’s shares.

Investment Dar used to own the Boubyan Bank stake which it used as collateral for loans from CBK. The financial tsunami (god how much I hate this word!) caused highly leveraged Investment Dar to default on various loans. Consequently, they lost their buyback option on the Boubyan Bank stake and the title transferred to CBK.

According to Bloomberg.com, Investment Dar said in a statement today that it has filed three lawsuits with the Kuwaiti judiciary against Commercial Bank of Kuwait. The first accuses CBK of “fraud and dishonesty,” the second is to prevent CBK dealing with the shares and the third lawsuit demands the return of the shares to Investment Dar.“Investment Dar warns the National Bank of Kuwait, or any other party, against getting involved in this dispute so as not to subject its reputation and the interests of its clients and shareholders to risk,” Investment Dar said in the statement.

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ADX aims to introduce ETFs before end-2009

The Abu Dhabi Securities Exchange (ADX) said yesterday it is still pushing ahead with an ambitious plan to introduce exchange trade funds (ETF) and the first ETF could be listed before the end of 2009.

ADX Deputy Chief Executive and Director of Operations Rashed Al Baloushi said the introduction of ETFs, the first in a regional bourse, had been planned in the first quarter of 2009 but had been held up by the global financial crisis.

"ADX is fully committed to the ETF market and working closely toward the successful creation of an adequate platform," he told Emirates Business. "But due to market conditions it has been postponed awaiting the global capital markets to bounce back hopefully before the end of this year."

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Bahrain SWF makes senior appointments

Bahrain Mumtalakat Holding Company, the country's sovereign wealth fund, yesterday announced three significant senior management appointments to its management team.

Joining Mumtalakat as Chief Operating Officer is John Knight, whose role is to bring organisational best practices to Mumtalakat. With more than 25 years experience in corporate law, business management, and risk management responsibilities, Knight will be responsible for overseeing Mumtalakat's corporate functions. Knight will look after finance, risk management, technology, operations, legal affairs and human resources.

Serge Lepine has been appointed as Mumtalakat's Chief Investment Officer and will be responsible for the strategic asset allocation of Mumtalakat's funds as well as the management and long-term development of Mumtalakat's investment portfolio.

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Deyaar's former CEO released on Dh2m bail

Former CEO of Deyaar Real Estate, Zack Shahin, was yesterday released on Dh2 million bail after appearing at Dubai Criminal Court on charges of corruption and embezzling $26.6 million (Dh97.9m).

Shahin, 43, an American citizen of Lebanese origin, appeared with Muhammad Khalfan bin Kharbash, 52, a former UAE Minister of State for Finance and Industry, the company's former president. Bin Kharbash faces the same charges, and both of them deny the accusations.

A warrant has been issued for the arrest of JD, an Indian national, who is on the run. Others have been charged on other counts but their cases are being heard in a different court.

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DFM to abolish T+2 system

The Dubai Financial Market (DFM) will implement a new settlement system based on delivery of shares against payment, as opposed to the current T+2 system, by which payment can be made up to two days after the transaction.

The DFM also wants to create a system for trading rights shares that have been allocated, but not delivered to those entitled to these shares. Approval has been sought from the Securities and Commodities Authority (SCA), DFM Executive Chairman Essa Abdulfattah Kazim, told Emirates Business.

"The trading of rights shares, which means a capital increase that allows shareholders to expand their shareholding at relatively lower prices, will give shareholders the opportunity to preserve their rights, especially those who are not subscribing to the capital increase," Kazim said.

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Qatar Gas Transport raises $950m to buy tankers

Qatar Gas Transport, the world’s largest shipper of liquefied natural gas, raised about US$950 million (Dh3.48 billion) to buy 25 LNG tankers in the latest sign that confidence may be returning to the region’s stalled debt markets.

The “Tranche III debt” was raised from 17 international and regional banks, said the company, also known as Nakilat.

Regional bond and syndicated loan issues are seeing renewed interest from international investors who fled local debt markets last year for safe-haven investments such as US treasuries. Qatar, Bahrain and Abu Dhabi have all issued sovereign debt recently, followed by fresh bonds from government and semi-government-owned companies including Mubadala Development, Abu Dhabi’s strategic investment arm, and the property developer Aldar.

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Investor disquiet over health of Saudi family firms

When the share price of Britain’s biggest home builder, Berkeley Group Holdings, started falling last Tuesday, stock watchers may have guessed it was yet another round of bad housing news moving the market.

But by the end of the day it emerged the real cause for the slide lay thousands of kilometres away in Saudi Arabia, where Saad Group, a huge conglomerate run by the Saudi billionaire Maan al Sanea, had just instructed Citigroup to sell 16.1 million of Berkeley’s shares.

The Saad Group has suddenly found itself in the international spotlight as it sells assets overseas to help raise capital at home. At the same time, it is seeking to restructure its debt after having its accounts frozen last month by the Saudi central bank.

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Funds bargain-hunt UK properties

Gulf investors have started buying up some of London’s trophy office buildings as prices dip to 25-year lows.

Al Salam Bank in Bahrain is the latest to enter the market with the purchase of Milton Gate in the City of London for US$220 million (Dh807.8m).

It acquired the seven-storey building from the UBS Triton Fund in a 50-50 partnership with the private equity firm Evans Randall, the bank said in a statement yesterday on the Dubai Financial Market website.

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Six Flags files for bankruptcy

Dubailand logoImage via Wikipedia

Six Flags, the US theme park giant that planned to develop one of Dubailand’s largest attractions, is seeking bankruptcy protection after its shares slumped 86 per cent in a year. The fate of the multibillion-dollar Six Flags project in Dubai was unclear yesterday, after the theme park operator filed a petition in a Delaware bankruptcy court that listed assets of US$3 billion (Dh11.01bn) and debts of $2.4bn.

Six Flags and Tatweer, the owner of Dubailand and part of Dubai Holding, signed an agreement in March last year to develop “thrill-driven” parks across the Gulf region.

“Six Flags are a strong consumer brand with world–class attractions that Tatweer remains committed to bringing to Dubai. While we are aware of the restructuring, we do not comment on the financial details of any of our partners,” Tatweer said.

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Trustee seeks clarity from Saudi's Saad on sukuk

The trustee of a US$650 million Islamic bond, or sukuk, issued by Saudi's Saad group said on Sunday it had requested clarity from the troubled group over the bond's status.

Citicorp Trustee Company said in a note to holders of the Golden Belt 1 Sukuk Company, a special purpose vehicle registered in Bahrain, that it had requested Saad to provide it with funds to secure against liabilities.

Saad Group is undergoing debt restructuring after it said last month it ran into unspecified difficulties and parts of it were downgraded to junk status by Moody's.

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UAE to have aircraft parts factory

The investment arm of Abu Dhabi emirate, Mubadala Development Co, said on Sunday work will begin on June 29 to build a factory to produce composite parts for aircraft, to become operational in 2010.

Mubadala said in a statement that the project, called Strata, has already agreed deals to supply parts to manufacturers including Europe's EADS and Airbus, FACC of Austria and Italy's Finmeccanica subsidiary Alenia Aeronautica.

"Initial contracts valued at more than two billion dollars have already been agreed with these partners," the statement said.

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Serco wins £245m Dubai airports deal

Support services group Serco has won a 10-year, £245m contract to provide air traffic control at Dubai’s airports. The emirate is attempting to transform itself into the world’s biggest airport hub.

Dubai Airport is already the world’s 11th-busiest cargo airport and 20th-biggest in terms of passengers carried. Maktoum Airport, a new facility under construction in the desert south-east of the city, is projected to become the world’s busiest when it is completed in 2017, with a capacity of 160m passengers. Atlanta, the world’s busiest passenger hub, has a capacity of 90m passengers.

There have been fears that Maktoum would be abandoned after the tightening of credit caused a sharp downturn in Dubai’s construction sector last autumn. But Dubai Airports says the first terminal at the site, with a capacity of 7m-9m passengers, is on schedule to open next June, though details of the remaining facilities are still being finalised.

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Emaar denies contract to build tallest tower

Dubai developer Emaar Properties denied on Sunday that it was in a deal with Saudi Arabia's Kingdom Holding to supervise and develop a large project that will feature the world's tallest tower.

Emaar shares surged 7.18 percent a day after Kingdom Holding Co said it had appointed the Dubai-based developer for the project, with a total investment of at least 100 billion riyals ($26.7 billion).

"Emaar ... will not invest in any projects of this sort," it said in a statement emailed to the news agency Reuters.

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SWFs and big pharma

Sovereign wealth funds in Asia and the Middle East have invested in carmakers, oil companies, farmland and, more disastrously, western banks. Yet one potentially appealing sector has been left out of their buying spree: pharmaceuticals.

Most big drug groups are well-run businesses with strong cash flows and solid long-term prospects – just the kinds of companies that strategic investors with an eye to the future should like. True, expiring patents will put pressure on billions of dollars of blockbuster drug sales over the next few years. Yet the industry has been in a similar position before. In the 1960s and 1970s, drugmakers seemed to face the spectre of a broken innovation model as research productivity plummeted. Yet, by the 1980s, new approaches to drug development opened the way to a series of new blockbusters and two decades of bumper profits.

US broker in landmark Baghdad move

The rebuilding of Iraq’s capital markets is set for a boost as Auerbach Grayson, a New York-based brokerage, becomes the first international company to sell Iraqi securities since the 2003 invasion.

Auerbach Grayson has signed an agreement with Rabee Securities, a Baghdad brokerage, through which it will provide research, trade execution and intelligence on companies traded on the Iraq Stock Exchange to US institutional investors.

Rabee is run by Shwan Ibrahim Taha, a former senior fund manager with Templeton Asset Management who also once ran a hedge fund for George Soros.

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