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Thursday, 3 September 2009

Abu Dhabi Commercial Bank Sues Unit of Saad Group Over Loans

Abu Dhabi Commercial Bank, the United Arab Emirates’ third-biggest bank by assets, sued a unit of Saad Group, which is owned by Maan al-Sanea, a billionaire accused of falsifying documents to obtain $10 billion in funds for his personal use.

The complaint, filed yesterday in London’s High Court against Saad Trading, Contracting & Financial Services Co., “is part of a number of actions taken by the bank to protect its interests” related to Saad Group, Simon Copleston, the bank’s general counsel, said in an e-mailed statement. He declined to comment on the amount the bank is claiming in damages. Court documents weren’t immediately available.

Saad Group said in June that it was planning an “orderly restructuring” of its debt after it was affected by a “short-term liquidity squeeze.” At least three other banks have sued Saad trading over the past two months.

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National Bank of Abu Dhabi to Sell 5-Year Bonds (Update1)

National Bank of Abu Dhabi PJSC, the United Arab Emirates second-biggest lender by assets, plans to sell five-year bonds in dollars, according to a banker involved in the deal.

The notes may be priced to yield about 190 to 200 basis points more than the benchmark mid-swap rate, the banker said.

NBAD’s bond sale will be the first from a U.A.E.-based lender this year, following
the real-estate slump that increased the amount of bad debt in the banking system.

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Saudi Stock Market Weekly Report - 2-September-2009

Dubai Faces Credit Test As $1B Aviation Sukuk Deadline Looms

Dubai faces another crucial test of its credit worthiness with the maturity in November of a $1 billion sovereign sukuk, or Islamic bond, issued by Dubai Civil Aviation Authority, bankers say.

The bond, or Dubai Global Sukuk, matures on Nov. 4, according to Zawya.com's Sukuk Monitor service.

Bankers are concerned by a lack of guidance from Dubai on the sukuk, which matures a month ahead of a $3.5 billion Islamic bond issued by Dubai World's Nakheel. Repaying the Nakheel sukuk is seen as a key test of Dubai's ability to meet its immediate debt obligations.

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Dubai pride helps Nakheel to save face

It’s the property face of the Gulf’s business and tourist hub and the developer of palm-shaped islands visible from space - so Dubai will simply not allow property firm Nakheel to default on its huge $3.5 billion Islamic bonds which mature in December.

Just think of the bad publicity it would bring to the region, and there’s already been plenty of that. Another kick in the teeth is certainly not what Dubai needs. Plenty of critics have joined the ‘bash Dubai” bandwagon and several more are set to join the ranks at some stage.

But any default would mark a failure for Dubai World, the state-owned conglomerate, and a castrophe for Dubai’s government, which has ploughed billions of dollars over recent years into making Dubai what it is today.

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UAE Central Bank CAR Related Developments - Event Update - September 2009 (PDF)

According to the reports of a circular issued by the Central Bank of the UAE, the regulator has delayed banks’ deadline for increasing capital reserves from June 30, 2009 previously to September 30, 2009. Banks will now work towards maintaining their Capital Adequacy Ratio (CAR) to a minimum of 11% by the new deadline from the previously stipulated minimum of 10%. Under the latest guidelines, banks are also required to achieve an overall CAR of 12% by June 30, 2010, of which at least 8% must be Tier-I.

Moreover, the Central Bank has also changed the proportion of Tier 1 capital which banks need to set aside. The rule, which will initially require banks to maintain a minimum Tier-I CAR of 7%, was added as a measure of "prudence and caution", as per the cited quotes of the Central Bank. Until recently, banks in the UAE did not have a fixed target for Tier-I capital; guidance was derived from the understanding that Tier-II capital could not be no more than two thirds of Tier-I.

While the changes seem neutral for Abu Dhabi banks, because of the extensive assistance enjoyed by them in terms of Tier-I & Tier-II increase by the Abu Dhabi government, banks in Dubai may be the main benefactors of the recent developments. Moreover, by limiting Tier-I ratio (to Risk Weighted Assets) to 7% (and later on to 8%) banks may have the flexibility to raise as much as Tier-II capital as required to keep their CAR at self-stipulated comfortable levels, as long as they meet the Central Bank requirements.

We believe that even though, the intention behind these changes seems to be to provide banks a breather in the current financial crisis, a spur in lending however, just because of the deferment in the CAR is still not expected. Moreover, downward revision of the CAR, may lead rating agencies to reassess banks’ individual ratings.

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Oman Economic Review - August 2009 (PDF)

Omani economy witnessed a significant GDP growth rate in 2008 thanks to increasing Omani crude oil prices which averaged US$101.1/bbl for the year. As per Omani official provisional estimates, GDP reached RO23.04bn in 2008 as compared to RO16.01bn, or 44% growth rate. On CAGR basis, Omani GDP scored a record growth rate of 22.7% over the period 2003-08. As a result of the robust economic growth over the period, GDP per capita followed the same trend reporting a high CAGR of 17.6%. Per capita GDP increased significantly from US$9,190.4 in 2003 to a record level of US$20,648.6 by the end of 2008.

Looking forward, the Omani economy might be facing the challenge of sustaining economic growth for 2009 and 2010. However, on the bright sight are the prudent government policies on the monetary and fiscal fronts. Both polices are expansionary amid a scenario of looming recession for the world economy. Moreover, reaping the benefits of diversification plans will help sustain marginal economic growth. Finally, the declining inflation level is another factor that might help mitigate the impact of the financial crisis. Thus Omani economy is estimated to report a marginal real growth of 1.9% for 2009 before recovering by the end of 2010.

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Aabar's foreign investments raise profits to Dh1.73b (Updated from initial reports on 1st September,2009)

Aabar Investments Wedensday said the company had reported a net profit of Dh1.73 billion in the second quarter this year, compared with a Dh585 million net profit in the corresponding period a year earlier.

"The profit is mainly due to gains made from our investments in Daimler and Atlantia - an Italian toll road operator,"
a spokesman for Aabar told Gulf News by telephone.

On March 22, Aabar acquired 9.1 per cent of the share capital of Daimler, the maker of Mercedes Benz cars.

Aabar clarified in a statement that there was no net loss suffered by the company during the second quarter and there had been "a misinterpretation of the financial results of quarter 2, 2009 by some analysts as mentioned in some media reports."

Aabar's spokesman said the media reports had
"looked at only the cost of financing that Aabar used to acquire the assets without considering the profit those investments generated."

Shares on Aabar fell 4.94 per cent to Dh2.47 a share on the Abu Dhabi Securities Exchange on Wednesday, in line with the bearish sentiments on the market.

The total shareholders' equity in Aabar at the end of June 2009 stood at Dh10.94 billion, up from Dh9.20 billion at the end of the fiscal first quarter in March, the spokesman added.

On the company's latest acquisitions, the spokesman said Aabar had agreed to purchase for an undisclosed sum a 32 per cent stake in Virgin Galactic, a US company that plans to send non-astronauts into space from 2011.

"This deal is not yet completed. Payment of money for the stake purchase is subject to approval by US regulatory authorities," the Aabar spokesman said.END

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Gulfmena will introduce a public equities fund next quarter

Gulfmena Alternative Investments (Gulfmena), a fund and asset manager specialised in the Middle East and North Africa (Mena) markets, will launch a new fund next quarter, said a company statement.

The firm will introduce its flagship investment strategy through “Gulfmena Arab Opportunities Fund”, a macro-directional (market-directional) absolute return public equities fund.

The first Mena hedge fund of its kind, the Fund seeks to adopt Global Investment Performance Standards (Gips) from the start.

With one bound, banks leap free from falling Eibor

Hello, and welcome back to the latest episode of “As the interbank rate turns.”

In our last instalment, regular readers will recall, the Central Bank decided that if banks in the UAE weren’t going to accurately report the interest rate they charge each other for short-term loans, then it would take control of the process itself.

In the past, banks have been trusted to poll each other and compile what is known as the Emirates interbank offered rate, or Eibor.

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The eventful life of Khalid bin Mahfouz

Few Saudis outside the ruling family have merited an obituary in The New York Times, but -lived a controversial life and was a participant in extraordinary events in the Arab world.

Khalid, who died on August 16 in Jeddah after a long illness, was born into wealth and power as the heir to Saudi Arabia’s biggest financial institution, the National Commercial Bank (NCB). For 30 years he oversaw NCB’s development as a modern, global finance house.

But ultimately he surrendered his family’s control of NCB.
Khalid lived through, and was directly touched by, events of huge international significance: the oil shock of 1973 and subsequent sharp rise in crude prices; Saddam Hussein’s invasion of Kuwait in 1990; the scandal-ridden collapse of the Bank of Credit and Commerce International (BCCI) in 1991; and al Qa’eda’s attacks on America in 2001.

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Shuaa Securities sees fewer brokers in UAE

The brokerage industry in the UAE should probably be halved, as too many firms are unable to cope with the fallout of the economic crisis, the head of one of the country’s largest brokerages said.

“I think that for the UAE market having nearly 100 brokerage licenses is overkill,” Mohammed Ali Yasin, chief executive of Shuaa Securities, told Reuters TV.

“In general shrinking it to somewhere near 50 is maybe closer to what the market needs,” he said.

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Rakeen takes over stalled project

Rakeen has taken control of one of the largest property developments in Ras al Khaimah from insolvent owner Khoie Properties, bringing relief to hundreds of investors in the project.

Rakeen, the development arm of the Ras al Khaimah Investment Authority (RAKIA), said yesterday it would ensure that the rights of investors in the US$800 million (Dh2.93 billion) La Hoya Bay project were protected. About half of the 800 investors are from the UK.

“The RAK Court’s decision to appoint Rakeen as custodian of Khoie Properties is a significant step that promotes and protects the welfare of investors and property buyers,” said Dr Khater Massaad, the chief executive of RAKIA.

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Comment: Bond markets need nourishing

The credit crisis has breathed new life into the Middle East’s young bond markets, both of the Islamic sukuk and conventional variety. Companies realise that a healthy local currency bond market can provide an alternative source of funding to bank loans and equity issuance.

An active sovereign bond market would give governments an additional policy tool to control domestic credit. It would facilitate implementation of open market operations of the region’s central banks, and make it possible for them to use quantitative easing, as in more developed countries.

The appetite for local currency bonds has been rising and the recent surge of issuance by governments and their subsidiaries is helping the development of the region’s debt markets.

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Change set in train for Dubai

Even last year, the infamous commute between the northern emirate of Sharjah and Dubai’s Jebel Ali port and industrial zone could mean drivers spending up to four hours a day in their cars.

The combination of deadlocked traffic and rocketing property prices combined to form a powerful disincentive to doing business in Dubai.

So it is with some irony that, as the city’s new metro opens next week, its traffic problems have eased, having fallen victim to the sharp economic downturn.

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Fitch: On UAE Revised Bank Cap Adequacy Guides

Fitch Ratings says today that the Central Bank of the UAE's (CBUAE) revision of minimum capital adequacy requirements for the country's banks may lead the agency to reassess banks' Individual ratings, if they lower their capital ratios too near to the revised minimum levels. Fitch believes that the CBUAE's circular of 30 August 2009 has increased uncertainty within the banking system following the Ministry of Finance's (MOF) October 2008 announcement which had stipulated higher capital requirements.

The CBUAE has now stated that banks only need to have a minimum Tier 1 capital ratio of 7% (included in a minimum total capital ratio of 11%) at end-September 2009 and 8% (total capital ratio of 12%) by end-June 2010. The new temporary rules, which were effective on 31 August 2009, apply to national and foreign banks and will be reviewed at the start of 2011. The CBUAE had previously required a minimum Tier 1 capital ratio of 6% and a total capital ratio of 10%.

In October 2008, the MOF had stipulated minimum Tier 1 capital ratios of 11% by end-June 2009 and 12% by end-June 2010 (no minimum for total capital ratios) for national banks to gain access to Federal government liquidity support programmes. However, at the time of the MOF announcement, and since, the CBUAE made no announcements that its minimum capital requirements had changed. The clarification of the regulator's (CBUAE) requirements appear to have been made as a means of helping to stimulate bank lending, which virtually dried up during H109 as banks tried to meet the MOF's target capital ratios, faced funding constraints and became more cautious as the global economic crisis started to hit the region.

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Emirates Steel seeks $600 mln market funding

Emirates Steel, owned by the government of Abu Dhabi, will tap markets for about $600 million in the first quarter of next year to fund expansion and consolidate debt, its chief financial officer said on Wednesday.

The company, which is held by Abu Dhabi Basic Industries Corp., also expects to complete a $700 million bridge loan extension by mid-October, pushing it back to next August. Emirates Steel took up the $700 million loan in May 2008 to fund the first phase of development at its Mussafah factory.

The second phase, expanding the plant, is due for completion by 2011.

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UAE economy needs more stimulus, exec says

The United Arab Emirates has seen the worst of the financial crisis, but the government needs to provide further stimulus to accelerate recovery, a top executive said on Wednesday.

Marwan Shehadeh, managing director of Al-Futtaim Capital, the investment arm of UAE-based Al-Futtaim Group, said there were positive signs around improving oil prices, which would eventually have a positive impact on Dubai.

But Shehadeh does not expect recovery to be "immediate", saying there needed to be "further government stimulus" similar to those initiated by countries like the U.S., China, Japan, Qatar, Saudi Arabia, Egypt and Morocco.

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Index row hits Saudi stock exchange

Sluggish trading during Ramadan has been enlivened by a spat between MSCI Barra, an index supplier, and Saudi Arabia’s Tadawul stock exchange.

At issue is a demand that Tadawul allow the index provider unimpeded access to the data it collates and how MSCI sells that data on to end-users such as fund managers.

Tadawul is demanding payment for that information and says it has signed agreements with other index providers, such as Standard & Poor’s, to provide alternative indices. MSCI has said it may be forced to discontinue its indices containing Saudi securities.

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