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Tuesday, 28 July 2009

Dubai's opaque bond plan leaves investors wary

Foreign investors are unlikely to tap into a $10 billion (six billion pounds) Dubai bond unless officials give details such as whether it has federal backing, raising the prospect the central government may intervene again to support the emirate.

Dubai, one of the seven United Arab Emirates, propelled itself into the spotlight as a tourism hub during a six-year oil-fuelled boom, but the downturn rocked its foundations based on excess lending and a transient expatriate population.

The UAE's central bank took up the first tranche of a $20 billion bond issue in February and Dubai's new finance chief announced last week that the second tranche would be open to local and foreign investors.

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Rasmala launches Shariah compliant Saudi equity fund

Rasmala Investments Saudi announced today the launch of its Sharia Compliant “Rasmala Saudi Equity Fund”.

The new fund will predominantly invest directly in the Shariah Compliant securities listed on Tadawul. The fund is denominated in Saudi Riyal with a minimum subscription amount of SAR 50,000.

“We believe that the fundamentals of the Saudi economy will remain robust given the growth in spending by government entities.

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Abu Dhabi backs Branson’s space tourism push

Virgin GalacticImage via Wikipedia

Aabar, an Abu Dhabi state-linked investment vehicle, plans to acquire a 32 per cent stake in Virgin’s commercial space venture in the latest sign of the oil-rich emirate’s rising ambitions.

Aabar will pay $280m for the holding in Virgin Galactic, which was launched by Sir Richard Branson, the British entrepreneur, in 2004 to develop commercial vehicles that will enable wealthy individuals to travel into space.

The Abu Dhabi company has also committed to invest $100m to fund a “small satellite development capability”, a statement said.

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SEC accuses UAE citizen of insider dealing

The US Securities and Exchange Commission has named a citizen of the United Arab Emirates in connection with alleged insider dealing, the second such charge of a Gulf national in the past week.

The SEC complaint, filed in Manhattan on Monday, accuses Khaled Mohammed Sharif Al Sayed Al Hashemi of Abu Dhabi of buying 120,000 shares in Nova Chemicals, a petrochemical producer, in February in the run-up to a takeover. Nova was eventually acquired by International Petroleum Investment Company, an Abu Dhabi state investment vehicle, for $2.3bn on 6 July.

The SEC alleges that Mr Hashemi used an online brokerage account to buy Nova stock at $1.41 per share. On 23 February, the day of the takeover announcement, he sold the shares for an average of $5.24 per share, making $458,760 in profits, the SEC alleges.

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Result Update report on Emirates NBD. (Global PDF)

Emirates NBD (ENBD) announced its 1H09 results, reporting a net profit of AED2,111mn (EPS: 38fils). The results exhibit decline of 20%YoY in profitability while QoQ growth also declined by 32%. Even though, the net interest income (NII) of the bank declined by 11%QoQ, the rise in it on a yearly basis was significant, evident from a 33%YoY increase over 1H08. Growth in interest earning assets was slow but positive and that combined with improving spreads led to a coupling effect, pushing the NII to exhibit buoyancy. As per our calculations, ENBD’s net interest margin (NIM) grew by 42bps from 2.6% in 1H08 to 3.1% in 1H09. Increasing NIMs were seen in most banks for 1H09, driven by favourable repricing of loans. It is interesting to note that, ENBD’s NIM dropped on a QoQ basis, by a hefty 42bps from 3.3% in 1Q09 to 2.9% in 2Q09, driven by reduced differential between US$ LIBOR and EIBOR and due to upward pressure in the cost of deposits. Growth in earning assets remained slow (10%YoY and 6.6%YTD) due to controlled lending carried out by the bank amidst challenging times.

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Death of al Braikan reveals cost of investing

The arc of Hazem Khalid al Braikan’s short life story has yet to fully unfurl, but the end of it, at least, is starting to take shape.

On Sunday, the 37-year-old was found dead at his home just south of Kuwait City, a three-storey, tan-coloured villa surrounded by hedges and a few palm trees. A single bullet, apparently fired by Mr al Braikan, was found lodged in his head.

It was a sad end to his life. After all, the businessman turned accused con man appeared to have a passion for investing.

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Bad loans to mount, warns bank

Emirates NBD yesterday warned that bad loans could continue to mount before peaking next year, as customers continue to default on loans.

The UAE’s largest bank by assets saw second-quarter net profit fall 41 per cent and said non-performing loans could rise to 2 per cent of its overall loan book at the end of this year before peaking at about 2.5 per cent next year.

“We are taking a cautious view. The pressure will remain on non-performing loans,” said Rick Pudner, the chief executive of Emirates NBD. “We expect non-performing loans to peak in 2010. This has been on our planning radar in recent months.”

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SEC Sues Abu Dhabi’s Hashemi Over Nova Insider Trades

The U.S. Securities and Exchange Commission sued Khaled Al Hashemi, claiming the manager at Abu Dhabi Oil Refining Co. had inside information when he traded in shares of Nova Chemicals Corp. before it was acquired by an Abu Dhabi government entity this year.

Al Hashemi, a citizen of Abu Dhabi who may still be working at AORC, earned illicit profits of $458,760, the SEC said in a complaint filed today in Manhattan federal court. He may also be employed as an administration director by the Abu Dhabi Tourism Authority. Both AORC and the tourism agency are state-run.

Nova Chemicals, Canada’s largest chemical maker, agreed on Feb. 23 to be acquired by Abu Dhabi’s International Petroleum Investment Co. for about $499 million in cash to gain financing required by lenders. Shareholders received $6 per common share.

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Kuwait Investment Authority mulls Zain stake sale, says paper

Zain GroupImage via Wikipedia

Kuwait Investment Authority (KIA), the Gulf state's sovereign wealth fund, could consider selling its stake in mobile operator Zain if the price is right, newspaper al-Rai said on Monday.

KIA, which owns a 24.61% stake in Zain, has not received any offers from Etisalat, to date, the paper added.

"The KIA has no objection to discussing any offer to buy its stake in Zain whether made by the UAE's Etisalat or others under the condition that the offer would be serious and with attractive returns," daily Rai said, citing unnamed sources.

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Kuwait financier saga shows weak regulation

The apparent suicide of a Kuwaiti broker, sued for fraud by U.S. regulators in a case linked to Kuwait's ruling family and its top investment firm, shines an unwelcome light on the weak regulatory environment in the Gulf Arab state.

Kuwaiti Hazem Khalid Al-Braikan, 37, who had been at the centre of a financial scandal that erupted last week, was found dead on Sunday, days after being sued by the U.S. Securities and Exchange Commission over suspicious stock trades.

His sudden death sent shockwaves through the financial sector in the world's biggest oil-exporting region, already hard hit by the global crisis and facing concerns about transparency.

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BakuImage via Wikipedia

The Azerbaijani government’s recent decision to make state-owned gas distribution company Azerigaz part of the mammoth State Oil Company of the Azerbaijani Republic (SOCAR) signals that Baku wants to transform SOCAR into an "economic symbol" similar to Russia’s Gazprom or Kazakhstan’s KazMunaiGas, experts say.

Reasons for President Ilham Aliyev’s July 1 order remain hazy, however. No information was released that suggested that Azerigaz was losing money. The day before, at Azerigaz’s request, Azerbaijan’s Tariff Council had agreed to increase the consumer retail price of gas to a profit-making 100 manats ($124.36) per 1,000 cubic meters.

Some energy analysts had hoped that the takeover would mean greater efficiency at Azerigaz, a company of several thousand employees with a reputation for non-transparent management.

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Mumtalakat banks on transparency

After publishing its second set of annual results last week, and with an international rating on the way, Bahrain Mumtalakat Holding Company seems determined to earn a reputation as the most transparent sovereign wealth fund in the Gulf.

“Unlike most of the funds in the region, we do not get our income from oil revenues,” says Talal al-Zain, chief executive. “But what also differentiates us, and makes us more of an investment company, is the level of transparency we strive for.”

Transparency can prove a double-edged sword, however. Its latest results show that Mumtalakat made a BD69.3m ($183.8m) loss last year, which it attributes to BD370m of impairment charges for Gulf International Bank and Gulf Investment Company. Both financial institutions, which are jointly owned by the governments of the Gulf Co-operation Council, were hit hard by the credit crisis last year.

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Gulf’s eye needs to be kept on goals for home

Abu Dhabi by SPOT SatelliteImage via Wikipedia

It feels as though Abu Dhabi has barely been out of the news in recent weeks, particularly in the British media.

The coverage has stretched across tabloids, broadsheets, radio and television. But the column inches have not been tucked away in sombre business sections; rather, attention has focused on the back pages.

With the English football season enjoying its summer break, scribes turn their attention to the transfer market – who is buying whom and spending what. And Manchester City, the club bought by Sheikh Mansour bin Zayed Al Nahyan last year, has been on a shopping spree that has eclipsed the elite of the English Premiership.

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Dubai’s airlines run risk of overcapacity

HAMBURG, GERMANY - JULY 28:  Tom Ender s (L), ...Image by Getty Images via Daylife

Airlines – in particular Emirates – are synonymous with Dubai. From the rebadging of Arsenal’s Highbury football stadium in London to high-profile purchases of giant Airbus A380 aircraft, Dubai has used its flag carrier as a pillar of a decades-long marketing effort to project an image of dynamism and club-class luxury.

Emirates has enjoyed a number of advantages over its competitors. Its base at Dubai airport, along with others in the Gulf, is a 24-hour operation, which means aircraft time is not wasted on stand overnight. The emirate also levies little or no corporation tax on profits.

Emirates “has managed to find its niche as this long-haul, low-cost carrier which is almost the holy grail of the airline industry. If you can operate long-haul at low-cost then you are likely to be very profitable”, says David Kaminski of Flight International, a trade publication.

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