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Tuesday, 14 July 2009

NBK posts sharp Q2 profit drop on provisions

National Bank of Kuwait (NBK), the country's largest, posted a 32.7 percent fall in second-quarter net profit on provisions and a decline in the value of investments, but it expects good year results.

NBK Chief Executive Ibrahim Dabdoub also said in comments to Arabiya TV the bank had 2.8 million dinars ($9.73 million) exposure to troubled Saudi conglomerates Saad Group and Ahmad Hamad Al-Gosaibi and Brothers.

Shares of NBK, the country's largest by market value, rose 3.39 percent after the results, outperforming Kuwait's main index which ended up 1.94 percent.

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TAQA eyes $1 bln bond sale

Abu Dhabi National Energy Co (TAQA) has started investor meetings to raise at least $1 billion in bonds to finance investments and repay debt due next year, a company executive said on Tuesday.

TAQA is 75 percent owned by the government of Abu Dhabi and is one of the vehicles the emirate uses to invest oil money. Abu Dhabi holds most of the oil reserves and wealth in the United Arab Emirates.

The company had started a roadshow which had been received "very well", the executive said.

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Geithner says force of global recession receding

U.S. Treasury Secretary Timothy Geithner said Tuesday his country had a "special responsibility" to help guide the world through its worst recession in decades, and stressed that while a recovery was ongoing, setbacks were likely.

The prediction came as Geithner kicked off his first official visit to the Middle East, courting leaders of a Gulf Arab region that has seen its global financial muscle grow on the back of petrodollar fueled investments.

"The force of the global recession is receding," Geithner told Saudi business leaders in the commercial hub of Jiddah, noting that the International Monetary Fund has revised up growth forecasts in the second half of 2009 and into 2010. "Global trade is just starting to expand again," he said.

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Emirates Investment Services announces the latest profits of its Sukuk fund

Emirates Investment Services (“EIS”), a division of Emirates NBD, registered in the Dubai International Financial Centre and regulated by the Dubai Financial Services Authority, announced that the latest estimated value of the Emirates Sukuk Fund has risen 8.5% in the first three months of trading

The Shari’a compliant sukuk fund launched its first offer period in January 2009 and began trading at the start of March 2009.

The fund operates by buying Islamic bonds, or sukuk, issued by companies and governments based primarily in the Middle East and North Africa.

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Samba Q2 profit beats expectations

Samba Financial Group, the kingdom's second-largest lender by market value, beat expectations with a 1.6 percent rise in second-quarter net profit on Tuesday.

Second-quarter net profit was 1.243 billion riyals, compared with 1.224 billion riyals in the same period a year ago, the bank said in a statement on the bourse website. Analysts surveyed by news agency Reuters had expected on average net profit of 1.14 billion riyals.

Samba attributed the rise in net profit to "strong growth in core activities of the bank, among them special commissions and trading income", according to the statement.

Quarterly total operating profit fell 3 percent to 1.82 billion riyals in the quarter, the bank said. Net income from special commissions was up 9 percent at 1.305 billion riyals.

Earnings per share was 2.79 riyals in the first six months after 2.69 riyals in the same period a year ago. It gave no quarterly figures.END

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Makaseb Monthly Commentary for June 2009 (PDF)

  • The relationship between regional markets and the US has been very strong so far this year; the correlation of daily returns YTD is 87.5%, while that of weekly returns is 88.2%. From the lows hit in March, it is an incredible 93.9% (daily returns) and 94.4% (weekly returns). Effectively, since the March lows, about 89% of the returns of local markets are explained away by the performance of the S&P 500 Index.
  • The above pattern is not limited to the Middle East, with most global markets taking their cue from the US. However what is worth noting is that within emerging markets, the MENA region has under performed quite significantly so far this year as investors believe the region is more leveraged on a US recovery (due to the dependence on oil revenues) as opposed to other emerging markets where domestic demand is expected to provide a buffer in the absence of strong external demand.
  • In this context, the sentiment reversal has been predictably spectacular; "green shoots" is the nauseating by product of renewed analyst and strategist optimism. From being worried about deflation in the first quarter, amazingly, the concern shifted to runaway inflation by the second quarter, with no discernible change in economic conditions.
  • Inflation continues to retreat in the region as well, as evidenced by the experience of Saudi Arabia. From a peak of 10.9% last October, inflation has now dropped to 5.5% in May. Though this trend provides ample room for policymakers to stimulate, lower inflation is not exactly great for several types of businesses which have benefited from strong prices. Closer to home, more evidence continues to emerge about the impact of lower average oil prices. Qatar's GDP fell sequentially for a second straight quarter, falling 8.7% in the first quarter. On a running 12 month basis, Qatar's GDP growth is now in negative territory, down 4.1% over last year.
  • Market activity has fallen considerably with the advent of summer. The combination of low liquidity, and the strong possibility of a sell off in the US suggests that maintaining a low risk strategy for the next couple of months is the best course of action.

Unauthenticated research data hurts regional economy (Interview)

As writing 'research reports' evolves as a part of the larger business strategy of investment management groups and as "deadlines" force some speedy gathering of data, Khaled Al Muhairy, the Evolvence Capital Chief Executive Officer, is not a happy man. Castigating the alarming frequency with which the agencies are publishing reports, he warns that such fancy data is being published even as many of these investment groups do not have dedicated research groups based in the region.

Al Muhairy expects an upturn in the economy in the Gulf after the holy month of Ramadan and cites the rising oil prices as one of the indicators in this regard. Evolvence Capital is interested in private equity, real estate and hedge funds. The company has significant investments in the pharmaceuticals business in India, as well.

How has Evolvence Capital performed in the past six months? Do you see the situation improving now?

We do not have products that have gone below cost. Yes value has come down in certain investments. Our pharmaceutical companies are doing well in a relatively recession-free India. Our investment into education is doing well. I am not particularly excited by private equity. We have slowed down a bit but we are still deploying capital.

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Saudi Arabia sets up special panel for Algosaibi case

Saudi Arabia has created a special panel in connection with the restructuring of heavily indebted Algosaibi conglomerate, whose accounts remain frozen, said a company official.

The precise role of the panel, a response to the country's biggest financial crisis since the global economic meltdown, was not immediately clear.

"The government committee that was formed is continuing its works and it summons the interested (parties) whenever the need arises," Mohamed Salem Al Hindi, Vice-President of Ahmad Hamad Algosaibi and Brothers (Ahab), told Al Hayat newspaper.

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DFSA to shake up rules to attract more fund managers

Dubai is moving to attract a bigger share of the regional funds industry as the emirate seeks to boost its appeal as an international financial centre.

The Dubai Financial Services Authority (DFSA), which regulates the Dubai International Financial Centre (DIFC), has set up a panel to review its rules to make the DIFC more attractive for investment managers and potential international investors.

Paul Koster, the chief executive of the DFSA, said: “The panel will take this opportunity to shape the funds regime in a way that best serves the needs of the industry and investors as well as continuing to promote the DIFC as a centre of excellence in funds management.”

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Nabucco gas pipeline ‘inevitable’

Map of Nabucco Gas PipelineImage via Wikipedia

The Nabucco pipeline project, which would link Caspian and Middle-Eastern gas suppliers to Europe, bypassing Russia, took a major step forward when five countries agreed on gas transit terms.

The deal in Ankara, the Turkish capital, was signed by the five Nabucco member countries after months of delay amid concerns that Moscow was buying up crucial central Asian gas supplies as Europe hesitated in presenting a unified front on energy.
The deal will allow the Nabucco consortium, led by the Austrian energy group OMV, to proceed with crucial negotiations for gas supplies for the €7.9 billion (Dh40.37bn) project.

Despite widespread doubts about Nabucco’s viability, the European Commission president, Jose Barroso, said the project’s completion was now “inevitable rather than just probable” and “of crucial importance for EU’s and Turkey’s energy security”.
Recep Erdogan, the Turkish prime minister, said at yesterday’s signing ceremony: “The Nabucco project is being labelled a pipe dream. This project will be a success story that will prove the doubters wrong.”

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Etisalat, du to ring in growth

The region’s telecommunications companies are expected to report continued growth in subscribers and revenues in second-quarter results due in the next few weeks.

The sector is viewed by many investors as a safe haven during tough economic times, as the underlying demand for mobile and internet services continues to grow and regional operators boost their presence in high-growth emerging markets.

Etisalat’s profits are expected to show marginal growth compared with adjusted figures from the previous year. But an exceptional gain of almost Dh1 billion (US$272 million) in the second quarter of last year, related to the sale of a stake in its Saudi network, mean overall net profits will appear down year on year.

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Even before the July 13 signing of an intergovernmental agreement to formally launch the Nabucco pipeline, the project received a potentially important boost from Turkmenistan, which pledged to ship an unspecified amount of natural gas via the long-planned route.

Turkmenistan needs 16 billion cubic meters (bcm) of gas for domestic consumption. Ashgabat also sells 40 bcm annually to the Russian state-controlled conglomerate Gazprom and will soon sell 40 bcm per year to China. In addition, Turkmen officials agreed on July 11 to sell 14 bcm per year to Iran. But the country’s leader, Gurbanguly Berdymukhemedov, insists there’s plenty left over to pump into the Nabucco route once it’s completed.

Turkmen officials have expressed interest in Nabucco in the past, but Berdymukhamedov’s July 10 statement was the clearest yet on Ashgabat’s intent to export via the route, which is supported by the United States and European Union. [For background see the Eurasia Insight archive].

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Europe in $560 bln solar energy Mideast plan

Twelve European companies launched a $560 billion initiative on Monday to plant huge solar farms in Africa and the Middle East to produce energy for Europe.

The consortium says the massive proposal could provide up to 15 percent of Europe's electricity needs by 2050.

Engineering giants ABB and Siemens, energy group RWE and financial institution Deutsche Bank are among the companies which signed a protocol in Munich.

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UAE stocks in trouble July 13th (Re-post)

"After peaking on a closing basis on June 14th, less than a month later the Abu Dhabi ADX index has lost -14.41%, and the Dubai Financial Market General Index (DFMGI) has lost a whopping -29%

In comparison to Dubai, Abu Dhabi has been overperforming. The ADX DFM Ratio today closed at 1.57, and it looks like a breakout beyond March levels may be on the cards. Abu Dhabi market volumes have been quite small lately, so it is probably only a matter of time before the banks and Etisalat, follow ALDAR, SOROUH, and AABAR downwards. Remember, we mentioned AABAR will make or break ADX on July 6th, and the stock has closed firmly below the LAST STAND LEVEL.

Unlike some market commentators elsewhere, this blog has been clear about the market trend since July 1. There has been nothing confusing about the markets, in which most significant stocks are in the process of completing a classic 1 2 3 reversal after peaking in mid June. On June 16th, this post appeared on the blog."

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Islamic insurers work to build Saudi business

Islamic scholars in Saudi Arabia have long looked askance at the insurance industry. They fear it combines riba, or the collection of interest payments, with gharar, or gambling – both forbidden to the pious.

Saudi talk shows and websites abound with questions about insurance, particularly life assurance, which is still viewed with suspicion. But two recent changes have opened new possibilities in this conservative kingdom.

First, newly launched Islamic insurance products are beginning to catch on. Second, since joining the World Trade Organisation in 2006, Saudi Arabia has opened the industry to foreign investment in takaful, sharia-compliant co-operative insurance.

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Much-needed consolidation

Dubai Holding {{lang|ar|دبي القابضة}}Image via Wikipedia

The announcement of the merger of Dubai Holding’s three real estate entities with Emaar Properties is likely to be received with equal amounts of relief and concern.

The relief comes from the government finally pushing though consolidation in the bloated corridors of Dubai Inc. Personal and business rivalries in the government’s sprawling commercial arms helped Dubai’s expansion in the growth years but have exacerbated the ongoing bust.

Bungled execution is however raising as many questions as it answers. Hence the concern.

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Sector takes out cover for future growth

Insurance is all about correctly measuring and managing risk, but – like almost every corner of the financial industry – the Gulf’s insurance sector has been thumped by the credit crisis.

The spreading economic malaise has affected premium growth and made international insurers wary, while the local industry contends with drooping capital adequacy rates and tumbling investment portfolios – which have largely been placed in local stock markets and property.

This has resulted in a harsh comedown after ebullient growth in recent years both for local insurers and international companies.

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Iraq offers to supply half of Nabucco's gas

Iraq has offered to supply enough gas to fill half the capacity of the proposed Nabucco pipeline, giving the project a boost even as heads of government met to sign a historic agreement approving the plan.

The offer from Nouri al-Maliki, Iraq's prime minister, to supply 15bn cubic metres of gas a year by 2015 helps address the greatest obstacle to the 3,300km pipeline from eastern Turkey to Austria: the prospect of there not being enough gas to fill it.

José Manuel Barroso, pre-sident of the European Commission, said the signing of the Nabucco agreement in Ankara by the leaders of five countries on the pipeline's route - Austria, Bulgaria, Hungary, Roman-ia and Turkey - could "open the door to a new era in the relationship between the European Union and Tur-key, and indeed beyond".

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