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Tuesday, 16 June 2009

Dubai's Emaar says Saudi deal still conditional

Emaar PropertiesImage via Wikipedia

Dubai developer Emaar Properties EMAR.DU said on Tuesday a deal signed with Saudi Arabia's Kingdom Holding 4280.SE was still conditional and would focus solely on managing the development process.

In a statment on the Dubai bourse website, Emaar said it was too early to envisage the level of income from the project as it was still in feasibility study stage.

Emaar on Sunday denied it was investing in a development by Saudi Arabia's Kingdom Holding that will feature what would be the world's tallest tower, but said it was in a deal to offer management services against a fee.

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Investment Dar wins lawsuit against CBK

Kuwait's Islamic firm Investment Dar said on Tuesday it has won a lawsuit against Commercial Bank of Kuwait (CBK) to suspend the sale of a stake in Boubyan Bank.

"The court ruled ... to suspend trading in Boubyan Bank shares which belong to Investment Dar and its related firms which amounted to 221,425,059 shares and are temporarily registered under the name of Commercial Bank of Kuwait," Dar said in a statement on the Kuwaiti bourse website.

The court halted the deal until it rules in another lawsuit filed by Dar against CBK, for which the hearing is set on Sept. 9, 2009.

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GCC – Receive 2Y SAR IRS (PDF)

•GCC IRS curves have bearish flattened recently

•Expectations of an imminent shift in monetary policy seem premature

•We therefore see some value in the shorter-end of the IRS curve

Kingdom of Saudi Arabia – Interest rate cut (PDF)

•SAMA cuts the reverse repo rate to 0.25% from 0.50%

•Credit growth in Saudi has been weak as banks have kept funds with SAMA

•The rate cut should encourage banks to resume lending

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Aldar Properties PJSC Credit Research (PDF)

•Strong association with Abu Dhabi sovereign; competitive strength in local market

•Government projects and investment property portfolio support the business

•We expect leverage levels to remain elevated, though liquidity remains comfortable

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Funding the deficits (PDF)

The Arab states of the Persian GulfImage via Wikipedia

The main theme in the region is the issuance of bonds. Saudi Arabia’s market regulator the Capital Market Authority launched the Sukuk and Bonds Market. Saudi officials have stated foreign investors will be able to invest in the bond and sukuk offerings. Oman announced it will be issuing a sovereign bond to fund its budget following a 56% drop in oil revenues in Q1 this year. Also, UAE officials have announced that they will be launching the first sovereign bond without giving any further details

With the oil price outlook more uncertain this year as opposed to the high oil prices in 2008, Gulf States are expected to run fiscal deficits in 2009. This is the right approach, as infrastructure projects need to continue despite the economic downturn. Higher government spending will help pick up some of the slack in the economy. This will also have longer term benefits for Gulf economies as better infrastructure can lead to productivity gains in the future. Deficits, however, need to be funded and GCC states will be using the bond market to fund their deficits. It is worth noting that these bonds will be USD denominated. This is because regional debt capital markets are not deep enough and local currency liquidity is relatively tight. Issuing local currency bonds right now to fund the deficits could drain liquidity and crowd out the private sector.

However, Gulf countries need to gradually move towards funding themselves in local currencies. This also applies to the UAE. According to UAE officials the UAE is planning to issue its first sovereign bond. No further details have been made available; however the fact that the UAE will seek a sovereign rating suggests that the bond issuance is more likely to be in foreign currency (ie USD) rather than AED. Even though a foreign currency bond will help the UAE fund its budget without draining local currency liquidity, it will not help with the longer term needs of the country. Longer term the entire region would benefit from deeper debt capital markets that will make it easier for corporates in the region to fund their operations in local currency, providing alternative sources of funding. And for this to happen, establishing a local currency government benchmark yield curve should be a priority.

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US hotel chain files for bankruptcy

In one of the biggest real-estate bankruptcies in the current slump, the Extended Stay Hotels chain filed for Chapter 11 protection on Monday, collapsing under the debt from its $8bn top-of-the-market buyout by Lightstone Group in 2007, reports the WSJ. Creditors include some key US banks and possibly US taxpayers, one of the lenders was Bear Stearns, whose stake was assumed by the Fed after Bear collapsed in March 2008.

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Capital flows to commercial property 'will halve' this year

Global capital flows into commercial real estate will drop by 40 per cent this year as investors wait for the price correction to run its course in most markets of the world, according to a projection by Tony M Horrell, International Director and Chief Executive of the European Capital Markets Group at Jones Lang LaSalle, the global real estate services firm.

From about $378 billion (Dh1.47 trillion) overall global flows into commercial property last year, Horrell said: "It wouldn't surprise me if this year we were $200bn or so".

About €50bn of dry powder is waiting on the sidelines for investment into commercial property once re-pricing in key markets is complete, he told Emirates Business in an interview.

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Sukuk issuance down by 21.5%

The number of sukuk issued this year, until June 14, stood at 69, a 21.5 per cent decline over the 88 Islamic bonds issued during the same period last year, exclusive Emirates Business research reveals.

The amount raised during the same period, however, witnessed a more moderate decline of 9.4 per cent, from $9.35 billion (Dh34.33bn), to $8.46bn from January 1 until June 14, this year.

Nevertheless, with conventional debt sour-ces having all but dried up, appetite for sukuk issuance remains good, said experts. "Given the credit squeeze from the banking sector, I feel sukuk issuance will gain in preference during the year," Raghu Mandago-lathur, Senior Vice- President – Research, Kuwait Financial Centre (Markaz), told Emirates Business.

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New SCA rules for custodians

The Securities and Commodities Authority, headed by Minister of Economy Sultan bin Saeed Al Mansouri, has approved a decision to regulate activities of custodians in the field of securities.

The decision has allowed brokerage firms to trade to their own accounts. The SCA will establish a training centre at the authority's headquarters to train brokers, financial analysts and execute investors awareness programmes. The decision outlines the requirements to receive a license that would allow the practising of custodian, procedures to apply for the license and legal action in case of any violations of the rules, where January 3, 2010, will be the last date for firms to settle their issues according to this draft.

The paid capital should not be less than Dh50 million. Applicants need to submit a bank guarantee of Dh20m.

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DFSA strengthens oversight on firms

Dubai International Finance Center.Image via Wikipedia

The Dubai Financial Services Authority (DFSA) has beefed up supervision systems as "a structured and proportionate response" to developments both, within the Dubai International Financial Centre (DIFC), and globally.

In a "heightened regulatory environment", the DIFC's regulator has introduced, among other initiatives, an annual "controls questionnaire" for Category 4 entities, which undertake the financial services of advising and arranging. About half the 250-plus firms authorised by the DFSA are in this category.

The questionnaire asks for a self-evaluation in aspects of management and control within a firm that the DFSA views as critical. It is intended to assist a firm identify action that it may need to take to meet regulatory requirements.

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Ritz Carlton and Limestone House at DIFC delayed

Union Properties has pushed back the completion date of Limestone House and Ritz Carlton Hotel at Dubai International Financial Centre to year-end, citing restricted assistance from banks, Emirates Business has learnt.

In a letter e-mailed to investors, the Dubai-listed developer said: "The overall effect of the financial crisis and difficulties facing Union Properties and those involved in the completion of our developments has resulted in a delay in the original anticipated completion date. Taking all things into consideration today, the expected completion date of Limestone House is now revised to the end of 2009. Moreover, at this stage we cannot guarantee this date, this is just our best estimate based on the present stage of completed works and the information we are getting from those involved.

"The position also affects the opening of the Ritz Carlton Hotel, which has also been delayed, which is most disappointing. This too is now expected around the end of the year."

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Many UAE banks have not fully disclosed losses

An exclusive survey of bankers conducted by Emirates Business reveals that a majority of them believe that many UAE banks have not fully disclosed their losses.

Thirtyfive per cent of bankers polled believe that up to 25 per cent of the banks in the country may still be hiding their losses while another 20 per cent said that between 25 and 50 per cent of the banks may be doing so.

Despite losses, all bankers surveyed believe that the industry remains strong despite the crisis. One hundred per cent of the polled bankers said "yes", when asked if the banking industry is strong.

Bankers also expect to witness an increase in defaults. A top official of a large local bank based in Abu Dhabi said that while non-performing loans (NPLs) as a percentage of the sector's loanbook are very low at present, the risk of NPLs rising is significant.

Survey snapshot

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Dubai Police help smash money laundering ring

Police have arrested a Dutch suspect for his involvement in a money laundering operation spread across several countries.

Major General Khamis Mattar Al Mazeina, Deputy Chief of Dubai Police, told Gulf News in an exclusive interview that the Dutch man was arrested upon a request from Interpol.

M.J.H. is suspected to be part of a European gang that took part in a drug trafficking operation, dealing narcotics from South America to many countries including Europe and South Africa.

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Amlak Finance posts loss of Dh69m to cover defaults

Amlak Finance, the largest mortgage lender in the Middle East by market value, said yesterday it lost Dh69 million (US$18.8m) in the first quarter of this year as it set aside funds to cover future potential losses on its property lending book.

The results were better than in the previous quarter, when the Dubai-based firm lost Dh204m. But they were worse than in the first quarter of last year, when the company reported Dh127m in net profit.

Most of the Dh69m in losses were attributable to an effort to set aside money in preparation for future loan defaults, the company said.

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Abu Dhabi, New York firms in equity deal

An Abu Dhabi private equity firm has formed a partnership with the US company that built the US$1.7 billion (Dh6.24bn) Time Warner Center in New York to work on several new projects in Abu Dhabi and Riyadh.

The two companies hope to take advantage of cheaper land and housing shortages in both cities.

Gulf Capital, the investment company, and Related Companies, based in New York, plan to build up to five mixed-use property developments in the next five years worth as much as Dh5bn each.

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Tighter regulation for property brokers

New rules concerning how sellers offer property are on top of the agenda for property brokers.

Currently, sellers can offer property through as many agents as they like, leading, brokers say, to inflated prices. Instead, Dubai agents would like to be able to charge sellers a fee to deter them from listing with others.

“The best thing they could do is try and control sellers,” says Gregory Antioch, a senior sales negotiator at Smith and Ken Real Estate. “At the moment, if a buyer goes through three or four different agents, the property owner thinks ‘great, I can force the price up’. But if they set a standard by which agents could charge sellers for listing their property, then people would think twice.”

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Tourism body in partnership deal with Ascot racecourse

Abu Dhabi Tourism Authority (ADTA) has entered a partnership with England’s Ascot Racecourse, including a branding agreement during the nearly 300-year-old Royal Ascot thoroughbred racing event which starts today.

The sponsorship marks the first time that Abu Dhabi’s name has been directly associated with horse racing in the UK. Dubai is already a familiar brand on the British race calendar.

Under the deal, the second day of the five-day Royal Ascot, will be designated Abu Dhabi Day, during which the Emirate’s tourism brand will be displayed on starting stalls, staff jackets racecards and pennants. ADTA will also sponsor one of the races during the £1.3-million (Dh7.8m) King George VI and Queen Elizabeth Stakes on July 25th. That race will become known as the Abu Dhabi International Handicap Stakes, and be accompanied by ADTA-branded saddlecloths, jackets and a Bedouin tent.

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UAE steps in for lenders exposed to Saudi firms

The UAE is taking measures to deal with bank loans made to Saudi Arabia’s troubled Saad and Al Gosaibi groups, as central bank governors warned that lenders across the region could be owed money by the two family-run conglomerates.

The Central Bank plans to publish information about bank lending to the two companies as “soon” as they move to restructure their debt, the governor, Sultan al Suwaidi, said yesterday.

“We are dealing with it. Everybody is concerned,” Mr al Suwaidi told reporters at the Arab Monetary Fund in Abu Dhabi.

Dubai firm says partner bankruptcy won't halt park

Six Flags: Darien LakeImage by Dalboz17 via Flickr

Tatweer, a leisure developer owned by Dubai's ruler, said on Monday the bankruptcy of its partner Six Flags (SIXF.OB), one of the world's largest theme park operators, will not delay a multi-billion dirham project.

New York-based Six Flags, which operates or owns 20 parks in North America, said on Saturday it filed for Chapter 11 bankruptcy protection as it struggled with a $2.4 billion debt burden and faced a looming cash payment of $300 million.

"The chapter 11 announcement from Six Flags has no impact on our theme park plans or their openings," Tatweer said in an e-mailed reply to Reuters questions.

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States nurture brands to take marketing edge

When it comes to developing a global brand, Dubai has long stood out above the rest in the Middle East. As the emirate enjoyed its stratospheric rise it became synonymous with adjectives such as “awe-inspiring” and anything preceded by “the world’s largest”.

In the west, many were ignorant of the fact that Dubai was only one of seven city states in the United Arab Emirates – not a nation in its own right.

By contrast, a mention of Abu Dhabi was until recently met with a curious, “where is that?” in spite of its being the wealthiest and largest member of the UAE. For years, Abu Dhabi was happy to sit in the shadow of its neighbours, while Dubai, which has limited and depleting hydrocarbon resources, went full tilt to market itself to the outside world.

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Qatar breaks from high-pressure surge

Skyline of DohaImage via Wikipedia

In Doha the cranes are whirring and the headhunters are still busy, but Ibrahim Ibrahim, an adviser to the emir, says Qatar is taking a break from headlong growth.

As secretary-general of the general secretariat for development planning, Mr Ibrahim’s job title sounds like that of a Soviet functionary. The Qatari government is engaging in central planning on a heroic scale as it manoeuvres through the global crisis but the economic hand dealt the country is the envy of any red-blooded capitalist.

Qatar has been the fastest growing economy in the Gulf for about a decade. But, as oil prices headed north and gas exports increased, inflation spiralled. So the breather brought about by the financial crisis is generally welcomed by economists.

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