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Thursday, 20 August 2009

Volkswagen / Porsche

The short-sellers have guts. Despite being pulverised in last autumn’s short squeeze on Volkswagen ordinary shares – when Porsche suddenly revealed it had options to increase its VW stake from 50 to 70 per cent – they are back for another round. Short interest in VW has doubled since June, according to Dataexplorers. But the shorts’ bet looks safer this time. For months, VW ordinaries had floated around €240 a share, way above any conceivable fair value thanks to Porsche’s options and the resulting stock shortage. Now, they are crashing to earth, down 40 per cent since details last week of VW’s compromise merger with debt-laden Porsche.

The trigger was Porsche. As part of last week’s deal, it sold 10 per cent of itself and most of its VW options to Qatar Holding. The Qataris plan to exercise options over 17 per cent of VW’s shares. Hence VW’s free float, which had technically been almost 27 per cent, drops below 10 per cent, probably knocking the shares out of Germany’s DAX index and reducing their Euro Stoxx index weighting by two-thirds. Cue selling by index and benchmark funds. Meanwhile, Qatar Holding paid €80 per share for its options – roughly what analysts consider fair value. The shares will probably slide towards that level.

VW’s non-voting preference shares, by contrast, have been climbing – partly on speculation that, after long playing second-fiddle to the voting shares, they could now replace them in the DAX. That could reduce their average historical discount to the ordinary shares. The biggest gainers, however, have been Porsche shares, after VW revealed the hefty price it would pay for Porsche assets. Porsche’s controlling families have seen ambitions to control VW thwarted. But, set to emerge debt-free and with perhaps 40 per cent of the combined VW/Porsche, they may not have done too badly after all.END

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Saudi Saad, Gosaibi debt talks hit stalemate

Unravelling money trails left by two Saudi firms mired in massive debt restructuring will likely take years, sources said, after initial talks to track down billions of dollars in unpaid obligations ended in disappointment.

This week's talks, convened to assess a complex array of contracts, liabilities and legal claims related to Ahmad Hamad Al-Gosaibi and Brothers Co (AHAB) and Saad Group, drew some 100 bankers, lawyers, creditors and accountants.

The firms' debt troubles and ensuing legal battles have sent shockwaves through the Middle East's financial sector, calling into question the region's regulatory framework and lending practices.

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Saudi mulls first nuke power plant

Saudi Arabia, the world's top oil exporter, is looking at building its first nuclear power plant, an official told an Arabic-language daily on Wednesday.

Minister of Water and Electricity, Abdullah bin Abdul-Rahman al-Husayen, told the Al-Watan newspaper: "The kingdom is working on building a pilot plant fuelled by nuclear energy" to generate electricity.

In May French's Economy Minister Christine Lagarde said Saudi Arabia and France were close to finalising a civilian nuclear energy cooperation agreement.

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Dubai World $60 Bln Liabilities A Sign Of Emirate's Debt Woe

Emirate of DubaiImage via Wikipedia

Government-owned Dubai World holds almost $60 billion in liabilities on its balance sheet, raising concerns that the sheikdom's debts may be far greater than initially thought, recent figures show.

At the end of last year, the conglomerate had 217.8 billion U.A.E. dirhams ($59.1 billion) in liabilities against AED365.8 billion in assets, according to a statement posted on NASDAQ Dubai's Web site on July 31.

The figures may indicate that the total debt held by Dubai and its government-related entities greatly exceeds the official $80 billion announced last year when the emirate started to come to terms with the global financial crisis.

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Zain: To Buy or Not to Buy? (Re-post)

We have been screaming sell on Zain since it broke the KD 1.200 level. Moreover, every analyst I speak to agrees with me that Zain is overvalued; the latest report I read by CREDIT SUISSE (17 Aug) valued the stock at KD 0.800. However, something seems to be wrong and the stock keeps soaring! What is driving the stock up? Is it the rumors about the sale of their African Operations or is it the sale of part of the company? Even with Vivend’s deal the stock isn’t worth KD 1.500 (click here for details). I lost track of all the rumored deal, but it seems the latest one is Indian Reliance which is offering to buy a the African operations of the company.

Whatever it is driving the stock up is just making it more expensive! Zain is considered the most expensive Telecom stock, valued at EV/EBITDA of 7.32x against the GCC aggregate of 5.83x and MENA aggregate of 5.59x.

42% think UAE economy will suffer further in 2010

Some 42.6 percent of people who took part in an online poll think the state of the UAE economy will be worse in 2010 than this year.

The findings of an Arabian Business poll run counter to predictions by the governor of the UAE Central Bank who said earlier this week that the UAE economy would recover from a contraction to see strong growth in 2010.

Sultan Nasser al-Suweidi said the UAE’s economy was solid and that oil price rises would support economic growth next year.

Habtoor eyes stakes in UK banks

Dubai-based Al Habtoor Group, a stakeholder in Barclays, has up to $1.3 billion (Dh4.77 billion) to invest in British banks and hotels in Europe, its chairman said yesterday. The company, one of the United Arab Emirates' largest family businesses, was one of several Middle East investors that bought into Barclays in 2008 as the lender looked to boost its capital to weather the financial crisis.

"If there is opportunity in a good English bank share, we are also ready to study it and to buy some shares," Khalaf Al Habtoor said.

UK banks were an attractive option due to the "transparency of English law" which left "no grey areas", Habtoor said. "We are not speculative buyers."END

Dubai airport passenger traffic up 12.6% in July

Dubai International Airport saw a 12.6 per cent rise in international passenger traffic and 1.9 per cent in international freight in July, said the CEO of Dubai Airports.

"The Middle East continues to demonstrate vibrant growth during the global economic downturn and Dubai International Airport is at the epicentre of that growth," said Paul Griffiths.

The airport has recorded the highest monthly growth rate since May 2008 (13.8 per cent) and the second consecutive month of double-digit growth in passenger traffic this year following the 10.3 per cent rise in June.

Ramadan timings for GCC bourses

Most GCC stock markets announced trading hours during Ramadan except the UAE bourses.

However, trading hours in UAE markets remained unchanged during Ramadan last year. Trading hours will remain unchanged at Saudi Arabia's stock market during Ramadan. The market will continue to be open from 0800 GMT to 1230 GMT.

Qatar's stock exchange will keep its usual trading hours during Ramadan. It will open from 0700 GMT to 0930 GMT. Trading hours at Muscat Securities Market will also remain unchanged from 0700 GMT to 1000 GMT.

However, the Kuwait Stock Exchange said it has reduced trading hours in Ramadan to start from 0740 GMT to 0945 GMT.

The Bahrain Stock Exchange will open from 0600 GMT to 0830 GMT.END

Gulf funds keep powder dry awaiting correction

GCC funds are holding on to their cash as they prepare for a possible correction in market valuations. This is in stark contrast to a global trend of a reduction in cash holdings in response to a positive sentiment.

Cash levels have continued to stay high, in some cases exceeding 25 per cent, during the past one year, fund managers told Emirates Business. In boom times, cash levels were negligible or even negative. "We are positive on the GCC markets but we have raised our cash levels to around 15 per cent from eight per cent a month ago in our Arab Falcons Fund," said Baldwin Berges, Director at asset management firm Silk Invest.

Globally, portfolio managers have started to increase cash utilisation. Average cash balances have fallen to 3.5 per cent from 4.7 per cent in July, their lowest level since July 2007, according to a fund managers' survey by Bank of America Securities-Merrill Lynch. Only Europe has bucked this trend.

Nakheel package did not have to cost so much

The bill for keeping the nation’s second-largest property company, Nakheel, afloat this December is US$4.05 billion (Dh14.87bn). But it could have been a lot lower.

On December 14, Nakheel will have to pay back the money to investors who bought its $3.52bn in Islamic bonds, or sukuk, as well as the profits that are due to them – another $528 million.

Normally, a company might decide to refinance that kind of debt by borrowing the money to pay off investors from someone else, such as banks or even the same investors who lent it the money in the first place. If the company had oodles of cash sitting around, it might try to pay off some of the debt.

Earnings at Investcorp swing into the red

Investcorp, a large asset manager listed in Bahrain and London, saw global economic woes drag its full-year earnings into the red for the first time.

The company that once owned Gucci and Tiffany before floating them on the New York Stock Exchange, also posted a US$269.5 million (Dh989.87m) loss in the January to June period following massive write-downs of its private equity and real estate investments.

Investcorp called the past year “the most challenging since its formation in 1982”.

Some thoughts on the course of… (Re-post)

important stuff like stocks and oil this week…

This week is Options Expirations Week. These weeks are traditionally extremely volatile for important securities like oil futures, and stock index futures.

Now the volatility in oil futures prices may belie an actual drive to push prices much higher to the 80’s level. No one really knows where prices will top out… But you already knew that of course. You did?

Nippon Oil sees good chance of Iraqi deal

Japan's Nippon Oil Corp and partners have a good chance of winning a contract to develop the Nassiriya oilfield but negotiations are continuing over the financial terms of the project, Iraqi officials said Wednesday.

Japanese state banks backing the consortium in its bid for the super giant oilfield will meet Iraqi Oil Ministry and Finance Ministry officials next week in Istanbul, said deputy Iraqi oil minister, Ahmed al-Shamma.

The head of the legal and commercial section of the Iraqi Oil Ministry's Petroleum Contract and Licensing Directorate, Sabah Abdul Kadhim, said there were "good developments" in the discussions with the Japanese but "no final deal."

New Iraq oil field bids in works

Iraq could re-offer deals to develop up to five oilfields, an Iraqi oil official said on Wednesday, after just one contract to exploit the country's large hydrocarbon reserves was awarded in a June auction.

A decision on whether to re-offer the fields is due to be taken by October or November, said Sabah Abdul Kadhim of Iraq's Petroleum Contract and Licencing Directorate.

"The Oil Ministry is studying whether to re-offer some of the fields to give qualified oil firms a second chance," he told the news agency Reuters, but declined to give details on whether terms of the long-term development contracts would be different.

Fears of debt default by Dubai ease

Dubai’s economy may still be in the doldrums, but investors are becoming increasingly optimistic that the credit-laden city-state will manage to avoid defaulting on its international debt.

The price of state-owned developer Nakheel’s $3.5bn Islamic bond maturing in December has risen from a low of 63.5 cents to the dollar in February to more than 90 cents in August. Other sovereign and corporate bonds in the emirate have also done well, rallying across the board.

To an extent, Dubai’s multitude of Islamic and conventional bonds has been helped by improving risk sentiment globally. The yield of a wider index of United Arab Emirates bonds and sukuk compiled by Nasdaq Dubai and HSBC has also tightened – from a peak of more than 11 per cent early this year to below 7 per cent.

First insider trader is jailed in Saudi

A crackdown on trading irregularities in the Arab world’s largest stock market has led to about 400 cases of suspected market manipulation in the past three years being investigated by Saudi Arabia’s regulator.

In a signal of intent by Saudi authorities on Tuesday, a prison sentence was given for the first time in the country’s history to a defendant convicted of insider trading.

Najm-Eddine Ahmad Najm-Eddine Dhafer, chairman of Bishah Agricultural Development, was given a three-month jail sentence, fined SR100,000 ($26,660) and ordered to repay another SR52,690 that he made in profit.