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Thursday, 18 June 2009

UAE cenbank issues new bank governance rules

The United Arab Emirates' top regulator on Thursday issued a draft of new corporate governance guidelines for its banking sector, the first update in seven years in a region that has been criticised as lacking transparency.

The Central Bank's guidelines are the latest efforts by authorities in the Gulf region to restore confidence in local banks, caught in a deep downturn as a result of the global economic and credit crisis.

Last year Dubai, one of seven emirates in the UAE, launched an anti-corruption drive, resulting in several high-profile arrests.

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Gulf International Bank LT2 extension – more banks may follow

•GIB announces that it will not call its USD 400mm LT2s and will launch a tender offer at USD 77

•We think the offer is attractive for investors who need liquidity

•However, GIB’s action sets a precedent for other GCC banks not to call their bonds

Saudi Stock Market Weekly Report - 17-June-2009

GCC Stock Market Review – June 2009 (PDF 44 pages)

G20 can take lessons from Islamic finance

Islamic finance can provide some suggestions to the G20 countries to consider asset-backed financing, securitisation of real assets, avoidance of excessive leverage and intelligent use of derivatives, said Rushdi Siddiqui, Head of Islamic Finance, Thomson Reuters. "While the world economy is worth trillions, the Islamic finance industry is approaching the

$1 trillion (Dh3.6trn) mark. So it may not yet be a true global heavy weight, but lessons can be shared," he said.

Thomson Reuters has its regional headquarters in Dubai, with 600 staff in 68 countries across the Middle East and Africa. Following are excerpts from the interview with Siddiqui.

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Qatar's QIA made $7bn profit in first quarter of 2009

Qatar's prime minister said the country's sovereign wealth fund realised $7 billion (Dh25.69bn) or $8bn in profits from its investments in the first quarter of 2009.

Sheikh Hamad bin Jassem Al Thani also stressed that Qatar Holding's – main investment arm for sovereign wealth fund Qatar Investment Authority (QIA) – investment gains over the first quarter contrasted sharply with losses of more than $4bn last year.

Like most sovereign wealth funds run by the Gulf nations, the QIA is largely secretive about its financial situation. Thani said the country's investments are not only in the eurozone but also in Asia.

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Surge in Arab central bank deposits: AMF

Arab Monetary FundImage via Wikipedia

Arab central banks more than doubled their deposits with the Arab Monetary Fund (AMF) in 2008 and the bulk of the deposits were channelled into bank deposits and securities abroad.

From around $2.66 billion (Dh8.3bn) at the end of 2007, the deposits with the AMF by 17 Arab central banks jumped to nearly $5.63bn at the end of 2008, the Abu Dhabi-based financial institution said in its annual report, obtained yesterday.

It showed the bulk of those deposits were placed in bank deposits and "safe investment tools" abroad in line with the AMF's "conservative" investment policy.

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Brokerage directors 'flee' UAE leaving investors with losses

Directors of a brokerage firm in Dubai that acted as a portfolio and hedge fund manager have allegedly fled the country – leaving behind a number of high net-worth investors with losses.

The customers who lost their capital used the company to invest in the commodities markets.

KomBench DMCC, a brokering member of the Dubai Gold and Commodities Exchange (DGCX), ceased operations after its main directors were said to have left the country. The directors are believed to be in India, and the firm’s operations there are understood to be not doing well.

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Mashreq wins right to some Algosaibi assets

The financial chaos triggered by crises within the two high-profile Saudi conglomerates – Saad and Algosaibi groups – has taken a new turn, with Dubai-based Mashreq bank having won a court order to attach the US assets of The International Banking Corporation (TIBC). The corporation is fully owned by Algosaibi Group. Details on the order or size of outstandings due to Mashreq were not available.

John Lossifidis, Head of Mashreq-bank's International Banking, said: "The bank confirms it is aware of a payment default from one of its corporate customers in Saudi Arabia, and is working with the client and its advisors along with regulatory authorities and other banks to reach mutually agreeable terms. In order to protect client confidentiality Mashreq is not prepared to give any more details on this matter. The bank has every reason to expect this issue will be resolved. The impact of any such default on the bank is minor."

TIBC is yet to respond to queries from Emirates Business. TIBC is believed to have met its creditors to request a temporary standstill period to enable its external advisers, Ahmad Hamad Algosaibi & Brothers Company, to gather review and assess information regarding its financial commitments and future.

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Emirates Steel to spend Dh6 billion

State-owned Emirates Steel Industries is set to invest Dh6 billion for the second phase of its UAE plant expansion, the company's chairman said on Wednesday.

Phase two of the expansion will boost the plant's capacity to three million tonnes per annum by 2011, Hussain Al Nowais told reporters. The firm has just completed its Dh3 billion phase one expansion, he said.

"The first phase of the...expansion will lift our production from 650,000 tonnes per year to two million tonnes [per year]," Al Nowais said.

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Banks show strong interest in Ipic loan

Abu Dhabi Government-owned International Petroleum Investment Company (Ipic) has received a positive response to its $3.5 billion (Dh12.8 billion) syndicated loan, with up to eight banks looking to join the deal as bookrunners, banking sources close to the deal said on Wednesday.

The banks are looking to commit $400 million each, the sources said, joining co-ordinating bookrunners Bank of Tokyo-Mitsubishi UFJ, HSBC and Santander.

The loan, which will be used to finance Ipic's recent acquisitions, as well as for general corporate purposes, was launched in May.

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Qatar Airways warns Boeing on delays

Qatar Airways chief executive officer Akbar Al Baker on Wednesday warned Boeing that the airline could scrap its order for Boeing 787s if the plane manufacturer doesn't quickly resolve issues related to delivery delays.

Speaking to reporters at the Paris Air Show, Al Baker said: "Boeing is doing things too late. If they don't play ball with us, they'll be in for a very serious surprise."

He said Qatar Airways has the right to "walk away" from the deal if "the delay is unreasonable".

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OPEC could ‘define oil price’ with Russia, says minister

Russia should join OPEC so the oil exporters’ group could dictate the price of oil, a senior executive of the country’s second-largest oil producer said yesterday.

An enlarged OPEC including Russia would control 51 per cent of world output and could do away with oil futures by returning to fixed contract prices, said Leonid Fedun, the vice president of Lukoil.

“We could define the price precisely. We could decide that tomorrow the oil price would be US$100 per barrel. Unfortunately, Russia’s political leaders did not go this route,” he said in an interview published in Russia’s Kommersant newspaper. He added: “Russia should join OPEC and move to direct contracts. Then we will jointly control 51 per cent of world output and we can dictate the price by directive.”

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Shuaa row a test for regulators

Shuaa’s stock fell 4.7 per cent yesterday as the investment bank’s largest shareholder warned that its public feud with Dubai Banking Group over a Dh1.5 billion (US$408 million) convertible bond will test the UAE’s regulatory regime.

The dispute between Shuaa and the Dubai Banking Group (DBG) involves the bond that Shuaa issued to DBG in 2007.

The market regulator was forced to intervene in the row on Tuesday, suspending trading in Shuaa stocks after the Dubai-based bank said it was issuing 250 million shares to clear the debt – but DBG said it would refuse to accept them.

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Bond law to boost economy

The Federal National Council (FNC) yesterday passed new legislation regulating the issuance of government debt, in a crucial step towards developing local bond markets and easing the international credit squeeze.

The move comes as regional economies increase spending to stoke economic growth and try to develop their capital markets while oil-fuelled budget surpluses shrink.
“Every government has to borrow, even if it has enough money, so it doesn’t use all of its financial resources in infrastructure projects,” Obaid Humaid al Tayer, the Minister of State for Financial Affairs, said at the Federal National Council yesterday. “The debt is for infrastructure, not salaries.”

The new government bonds will be designed to create a benchmark debt pricing system, against which other local borrowers such as large companies will then be able to issue their own bonds, giving them access to new sources of capital.
“The goal behind this law is to create a bonds market, where bonds can be issued for five, 10 or 30 years, as is the case in developed countries,” Mr al Tayer said.

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Looking beyond the age of oil

The candidacy of an oil-producing country to host the headquarters of the world’s recently formed renewable energy agency has “special meaning”, according to Dr Hermann Scheer, a key figure behind the establishment of the International Renewable Energy Agency (Irena).

“It is a serious ambition to look beyond the present energy age,” he said. “It has a special meaning if the bid comes from an oil-producing country. It is a good sign that an oil-producing country gives the signal that the way we should go is for renewable energy.”

But Dr Scheer, who is chairman of the World Council for Renewable Energy, was careful to emphasise that his comments must not be interpreted as an offer of support for any of the contending parties.

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Leighton, Abu Dhabi Abandon Venture on Market’s Slump (Update1)

Leighton Holdings Ltd., Australia’s largest construction company, and a developer of tourism-related buildings in Abu Dhabi abandoned a venture that was expected to generate revenue of at least $1.5 billion within five years.

Leighton, a Sydney-based company controlled by Hochtief AG of Germany, and the Tourism Development & Investment Co. agreed to create the venture in December 2007. TDIC is the development arm of Abu Dhabi’s tourism authority.

“After a strategic review of TDIC’s business model and due to the changing economic climate, it became more commercially viable for TDIC to retain the flexibility to work with different contractors,” Lee Tabler, TDIC’s chief executive officer, said in an e-mailed statement today. “Therefore the joint venture was never progressed.”

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Saudi struggles to spur credit amid crisis

Further cuts in official Saudi interest rates or reserve requirements for banks are unlikely to prove enough to see off a growing crisis in bank lending that centres around trust in borrowers, analysts said on Wednesday.

The Saudi Arabian Monetary Agency (SAMA), will likely follow Tuesday's surprise move to slash its deposit rate for banks holding cash at the central bank with an aggressive cut in its benchmark repo rate to kickstart lending, economists said.

But signs that the domestic money market is beginning to seize up are at heart about concerns that troubles brewing at two Saudi conglomerates will spread and monetary measures will not provide the necessary boost to banks' confidence.

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Saudi bonds hope to add liquidity

Saudi Arabia unveiled the latest in a series of innovations to its capital markets earlier this week when it opened a regulated bond and sukuk (Islamic bond) market. The move comes at an opportune time.

Many Saudi banks are at the limits of their credit capacity, with loan-to- deposit ratios exceeding the limit imposed by the central bank. Bank loans extended in 2008 equalled the total of the previous two years, according to Mohammad al-Jasser, the central bank governor.

In February, Mr Jasser urged commercial banks and companies seeking financing to tap the debt markets.

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Artistic impression down on the farm

A piano stands in the corner of the hall where the management and workers hold meetings at the Sekem farm in the Nile Delta, about an hour’s drive northeast of Cairo.

It is an unusual sight in a country where culture is often seen as a luxury to be enjoyed only by the well-off, and pianos are not found much outside schools, theatres and places of entertainment in the main cities.

But the Sekem Group, Egypt’s foremost producer and exporter of organic food to Europe and the US, is not a typical Egyptian enterprise.

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