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Thursday, 29 October 2009

EurasiaNet Eurasia Insight - Kazakhstan: A Showpiece of Energy Wealth Rises in the Western Desert

EurasiaNet Eurasia Insight - Kazakhstan: A Showpiece of Energy Wealth Rises in the Western Desert

UPDATE: UAE Aabar 3Q Profit Soars On Daimler Investment Gains

Aabar Investments PJSC (AABAR.AD), the largest shareholder in Daimler AG (DAI.XE), Thursday said its third-quarter profit soared as the value of its investment in the German automaker increased.

Profit for the period surged to 1.18 billion U.A.E. dirhams ($323.9 million), or AED0.38 a share, from AED19.9 million a year earlier, the company said in a statement on the Abu Dhabi exchange's Web site.

The Abu Dhabi-based investment firm reported AED6.98 billion in gains from Daimler shares, which outweighed a widened loss in derivatives linked to the carmaker.

Aabar, which is majority-owned by the Abu Dhabi government's International Petroleum Investment Co., in March became Daimler's biggest shareholder when it paid 1.95 billion euros ($2.80 billion) for a 9.1% stake in the world's second-biggest luxury-car maker.

Between March and September Daimler shares gained almost 50%. They closed down 5.3% at EUR33.22 Wednesday.

In its statement Thursday, Aabar said losses from derivative financial instruments amounted to AED3.51 billion during the third quarter, compared with AED2.25 billion during the second quarter.

Flush with cash from years of soaring oil prices, Aabar, IPIC and other Abu Dhabi sovereign investors are targeting foreign assets to extend their influence outside the Middle East.

Aabar said a "series of symbolic investments" during the third quarter "have reinforced Aabar's position in the market as a major investor".

The company said it will "continue to evaluate opportunities and projects in its pipeline through to the end of 2009".

Aabar shares last traded 1.5% lower at AED2.62 in a broadly negative market.

Former DIFC chief says Dubai needs more support

The former CEO of Dubai International Finance Centre (DIFC) Authority has said he believes more state intervention is required to ensure Dubai’s recovery from the global financial crisis.

Nasser Alshaali, now CEO of UAE-based boat and yacht maker Gulf Craft, said the fallout from the downturn caught Dubai by surprise and that further policy changes were needed to bolster the emirate’s path out of the crisis.

“Dubai was definitely hit very, very badly. You talk to the businessmen and they’re all shocked. In the fall of 2008 and the spring of 2009, there was an air of desperation. We thought we were immune,” he told Arabian Business in an interview.

Gulf needs time to warm to long-term bond issues-Mubadala

The Gulf Arab region needs a proven secondary fixed income trading market and strong local bids before issuers warm to longer term maturities, a senior executive at Abu Dhabi-owned investment fund Mubadala says.

The region, cushioned by its oil wealth, had traditionally been averse to tapping international markets for debt. But that has changed in the past decade with Dubai taking a lead by using debt to finance its rise to a regional hub.

'This is a developing economy and before you can develop longer term issuances, you need to spend time with investors,' Matthew Hurn, head of group treasury at Mubadala, said on Wednesday.

DIC May Raise $550 Million Loan to Refinance Debt, Bankers Say

Dubai International Capital LLC, a private equity investor controlled by the emirate’s ruler, may raise a $550 million loan to repay existing debt, two bankers familiar with the transaction said.

The two-year loan may pay 400 basis points above the London interbank offered rate, said the bankers who didn’t want to be identified before the deal is complete.

The loan is in the general syndication stage after the company received commitments from banks with which it has relationships, according to one of the bankers. The lenders have an option to extend the loan for another year, the same banker said.

Mashreqbank PSC, Noor Islamic Bank, Standard Chartered Plc and Royal Bank of Scotland Group Plc are arranging the debt.

Anand Krishnan, Dubai International’s chief executive officer, wasn’t immediately available to comment when contacted by Bloomberg News today.END

U.A.E. Shares Fall Most Since August, Lead Drop in Arab Stocks

United Arab Emirates shares tumbled the most since August, leading Arab markets lower, after Dubai Financial Market PJSC and Arabtec Holding PJSC were among companies reporting a decline quarterly profit.

Dubai Financial Market, the only Gulf Arab stock market to sell shares to the public, and Arabtec, the biggest construction company in the U.A.E., slumped the most since Aug. 17. Arkan Building Materials Co. fell to a two-year low after the construction-supplies maker reported earnings. Sorouh Real Estate PJSC, Abu Dhabi’s second-biggest developer, dropped the most in more than two months as quarterly profit slid.

“Markets were bid higher in anticipation of a good third- quarter, and now that these numbers have materialized investors are taking profit,” said Mark Friedenthal, a fund manager at Abu Dhabi Commercial Bank. “Global sentiment is now deteriorating.” Dubai’s index has gained 34 percent this year.

GCC Weekly Markets Report - 29/10/2009 (PDF)

Saudi Stock Market Weekly Report - 28-October-2009

Dubai debt regains favour as new bond issue sells briskly

Dubai received a warm welcome from international investors on Wednesday as the emirate prepared to fill orders of about US$2 billion (Dh7.34bn) for its new Islamic bond.

The issue was more than three times oversubscribed, although bankers said the five-year bonds were likely to yield about 6.6 per cent and 5.6 per cent depending on the currency. By comparison, the five-year Abu Dhabi bond due in 2014 yields 3.85 per cent.

“It is only logical that investors expect a higher return for taking on Dubai risk,” said Chawan Bhogaita, who heads credit research at the National Bank of Abu Dhabi.

Dollar recovery pushes up rates

The window for Dubai to climb back into the global credit markets is open, but it is may not be open very wide for very long.

Dubai managed to sell slightly more than US$1.9 billion (Dh6.97bn) in Islamic bonds, or sukuk, yesterday, drawing a surplus of orders by offering investors a risk premium to help it re-enter the bond market for the first time in more than a year.

The sukuk are part of a new, $6.5bn bond programme designed to help Dubai refinance an estimated $85bn in debt owed by the Government and the companies it controls. The new bonds come on top of $10bn Dubai has already borrowed from the Central Bank and another $10bn it hopes to borrow before the end of the year.

Banks hold key to better corporate disclosure

The Gulf has a long way to go in corporate disclosure and unlike developed economies in the West, the key driver here may well be banks rather than the regulators.

The message from speakers at this week's Reuters Middle East Investment Summit was clear. There has been improvement, there is a long way to go, more transparency is essential and the banks will demand it before they risk any more cash on the region's businesses.

Banks across the region, as well as their international counterparts, have been badly burned by the wave of corporate defaults that came in the wake of the economic downturn, and future lending is likely to depend on greater transparency from lenders.

Saudi monthly credit growth comes to halt in Sep

Credit growth in Saudi Arabia almost came to a halt in September compared to August as banks in the biggest Arab economy dealing with a debt crisis of family firms remained cautious, official data showed on Wednesday.

Bank credits were almost flat, reaching 721.6 billion Saudi riyals ($192.4 billion) in September after 721.4 billion riyals in August, the Saudi Arabian Monetary Agency (SAMA) said.

In August credit growth was up almost 2 percent compared to July, the data on SAMA's website showed.

GFH eyes 40 percent income from investment management

Bahrain-based Islamic lender Gulf Finance House GFHB.BH (GFH) wants between 30 to 40 percent of its revenues to come from its investment management division, the chief executive of the unit said.

The lender is trying to diversify its revenue stream by expanding its asset management and entering investment banking advisory services through a joint venture under discussion with Australia's Macquarie Group (MQG.AX: Quote, Profile, Research, Stock Buzz).

"Transactional income is great, but it's lumpy and it depends on activities and deals in that particular financial year, so what we want to do is build an annuity base so we got a more certain income structure," Ted Pretty told the Reuters Middle East Investment Summit in Manama.

Saudis drop WTI oil contract

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separatedfrom the global oil market this year.

Gulf companies show signs of recovery

After a difficult year, Gulf companies are beginning to show signs of recovering from the downturn, with third-quarter earnings figures making largely heartening reading.

The results for 385 companies that have reported so far indicate an overall 25 per cent year-on-year decline in profits, according to figures compiled by EFG-Hermes. This is a marked improvement from the 48 per cent slump in the second quarter.

Quarter on quarter, earnings rose 7 per cent between July and September. While this is less than the 14.4 per cent jump in the second quarter, it still indicates an improving trend.