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Monday, 16 November 2009

Beleaguered Vegas Casinos See Reasons For Hope

The hard data points are at best mixed, but as the casino industry gathers for its annual Global Gaming Expo in Las Vegas this week, operators are seeing glimmerings of hope that the worst--at least for this downturn--may finally be over for suffering Sin City.

While every single significant industry metric here, from revenue-per-available room to table drop to occupancy rates, continues to drop, the rate of decline seems finally to be slowing. At the same time, any improvement will be from almost ludicrously easy comparisons, as resorts here begin to lap an abysmal year that began even before the financial crisis and market collapse of late 2008.

Third-quarter numbers for the big firms were far from robust. Ambitious but ultimately ill-timed expansion plans weighed down most with debt just as the cash flows needed to service the debt were pinched by visitors who either stayed away in droves, or spent less when they did come.

Iran oil revenue fund had $23.3 bln in 2006

Iran's Oil Stabilisation Fund had $23.3 billion in 2006, a 142 percent rise on the previous year, a state news agency said on Monday.

The fund grew by an average 25 percent a year since it was set up in 2000, ISNA said, barring a drop in 2001.

It said the account accumulated $666 million in interest by 2006 and that most of the Fund's lending was for industrial projects. Figures since 2006 have not been published. Iran, the world's fifth largest oil exporter whose economy is heavily oil-dependent, set up the reserve fund in 2000 to help protect the economy from market fluctuations.

Dubai Shares End Losing Streak on U.S. Economy; Bahrain Falls

Dubai shares rose for the first time in three days on signs the U.S. economy is recovering and as OPEC said it is “happy” with oil prices at current levels.

Emaar Properties PJSC, the United Arab Emirates’ biggest developer, climbed to the highest since Nov. 11. Dubai Islamic Bank, the country’s largest Islamic lender, also advanced. The Dubai Financial Market General Index gained 1.6 percent to 2,198.5. In Qatar, Doha’s DSM 20 Index added 1.8 percent.

Standard & Poor’s 500 Index futures rose 0.9 percent at 5:18 p.m. in Dubai before a report forecast to show U.S. retail sales rebounded in October. U.S. stocks last week climbed for a second week as the Group of 20 nations agreed to maintain economic stimulus efforts and profits at companies from Wal-Mart Stores Inc. to Walt Disney Co. beat analysts’ projections. The MSCI Emerging Markets Index jumped as much as 1.5 percent today.

Aabar Aims to Raise Daimler Stake to 15%, Chief Says

Aabar Investments PJSC “is in talks” to raise its stake in Daimler AG, the world’s second- largest maker of luxury cars, to 15 percent from 9.1 percent, the chairman of the Abu Dhabi government-backed investors said.

“We are thinking of increasing the stake,” Khadem Abdulla Al-Qubaisi said in a telephone interview today. “The timing will depend on the stock price.”

Aabar in March paid $2.7 billion for the stake in Stuttgart, Germany-based Daimler, becoming its largest shareholder. Aabar’s investment buttressed Daimler’s resources as the worst auto-industry crisis in decades forced the maker of Mercedes-Benz cars and trucks to cut working hours for assembly- line workers and close two plants in North America.

Qatar Said to Issue Bonds Due in 2015, 2020, 2040

Qatar, holder of the world’s third- largest natural gas reserves, plans to sell bonds denominated in U.S. dollars due in 2015, 2020 and 2040, according to a person familiar with the transaction.

The emirate will use the bond proceeds to provide “contingency funding” for state-owned firms, pay for infrastructure projects, and invest in the international oil and gas industry, according to the bond sale prospectus obtained by Bloomberg News.

Qatar may raise $5 billion by selling bonds, a banker familiar with the deal said last week. The country has an Aa2 rating from Moody’s Investors Service and an AA- from Standard & Poor’s. Qatar National Bank SAQ, Barclays Plc, Credit Suisse Group AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the sale, the prospectus says.

Saudi Capital Market Authority grants licenses for three SHUAA funds

SHUAA Capital Saudi Arabia cjsc (‘SCSA’), announced today that Saudi Arabia’s Capital Market Authority (CMA) has licensed three SHUAA funds in the Saudi market; the SCSA Morabaha Fund; SCSA Saudi Gateway Fund; and SCSA Saudi Islamic Gateway Fund.

The three funds will take a conservative approach to investment and will focus on listed Shariah compliant and conventional Saudi stocks as well as IPOs.

Following CMA’s approval, SCSA will announce the timeline to open subscriptions in the three funds for investors.

Dubai Plans to Issue $10 Billion Bond by Year-End

Dubai’s second half of a $20 billion bond program will be issued before the end of this year, chairman of the emirate’s Supreme Fiscal Committee said.

“It will happen by the end of the year,” Sheikh Ahmed bin Saeed Al-Maktoum, who is also the chairman of Emirates Airline, told reporters at the Dubai Air Show today.

Dubai set up a $20 billon fund to help state-related companies through the credit crisis. The fund borrowed the first $10 billion by selling bonds to the United Arab Emirates’ central bank in February. Dubai, the second-biggest of seven sheikhdoms that make up the U.A.E., and its related companies earlier borrowed more than $80 billion to transform the economy into a tourist and financial services hub.

GCC Banking Sector Report - November 2009 (PDF)


· Profitability down, revival expected for full year 2009
The GCC banks (under our coverage ex-Bahrain) experienced a significant profit decline in 3Q09 as compared to the previous year; down 9%YoY for the quarter and down 13%YoY for the 9M09. We expect GCC banks to roll out a growth of 13 – 15% in 2009, not because of spectacular 4Q09 earnings but due to dismal 4Q08 performance weighing in on the 2008 bottom-line.

· Net interest income is robust
The top-line of the banks in the GCC improved significantly, despite the economic woes haunting their respective countries. Figures reveal that NII grew 13%YoY for the 3Q09 and an even higher 19%YoY for the 9M09 periods.

· Provisions play havoc with earnings
Heavy provisioning remained the theme common to all banks in the GCC as deteriorating asset quality went unhindered and turned into the biggest nightmare for the lenders in the GCC. Aggregate provisions taken by the GCC banks increased approximately 3-folds in the 3Q09 on a YoY basis and more than doubled YoY for the 9M09 period. Provisions in 3Q09 which remained relatively unchanged QoQ, eroded 22% of the aggregate total income (net-interest income + non-interest income) of GCC banks.

· Spreads are headstrong but are expected to come under pressure
The spreads of banks in the 9M09 on the whole remained headstrong and contributed majorly to the improvement in the NII. Spreads have increased despite a decreasing interest rate scenario, given that banks are less willing to lend while demand still exists, focusing more on managing the quality of existing loans rather than lending in a challenging economic environment; while the capacity to lend exists, the willingness does not.

· Recommendation – OVERWEIGHT on Qatar & UAE; MARKETWEIGHT on others
We maintain a positive outlook on the GCC banking sectors of Qatar and UAE underpinning our stance with an OVERWIEGHT rating. We however remain skeptical over the relative positioning of the remaining banks in the region. While most banks in Kuwait and a few in Oman seem expensive, many banks in UAE and Qatar seem attractive on a comparative basis.

Bank Sarasin offers Islamic wealth management

There is no better time to sell "responsible" financial products such as Islamic products than today as lessons of a financial crisis buoyed by an irresponsible systemic phenomena are still fresh on the minds of investors.

And the recent deterioration of wealth is no obstacle in doing so as regions, such as the Middle East and Asia, continue to rake growth.

"Some wealth has been destroyed but new wealth is being created as we go along. Wealth and asset management requirement in the GCC is growing as wealth is being created in GCC and Asia. So the bank continues to grow to cater demand from our clients," Fidelis M Goetz, Head of Private Banking Division, Bank Sarasin & Company, told Emirates Business.

Mena hedge funds to see 15% returns

Hedge funds in the Middle East and North Africa (Mena) are expected to generate more than 15 per cent returns in 2010, said fund managers. Mena-based hedge funds have been capturing an increasing interest from global investors.

Mena markets are likely to outperform other emerging markets in the coming year and this growth would percolate to hedge funds as well, fund mangers told Emirates Business. Markets in the region have underperformed most other emerging markets this year.

Globally hedge funds are up 15 per cent year to date, as represented by the Credit Suisse/ Tremond Fund Index and are on track to "post their best annuall returns in 10 years", according to a hedge fund update.

UAE debt market key to financial security (Interview. Apologies for the delay)

As a veteran of the US Securities and Exchange Commission (SEC), Paul Maco has had a unique role in helping to shape debt markets.

When he started out in the New York SEC office as an enforcement lawyer in the late 1970s, debt instruments such as bonds went largely ignored in favour of the more popular equities markets. However, when US interest rates started pushing 20 per cent, markets began to create short-term lines of credit to create more flexibility in the capital markets.

“This was the very beginning at looking at the combination of different types of financial instruments in order to address a real market volatility,” Mr Maco said. “There was this transformation, really, in the modern financial markets, but there wasn’t a lot of focus being paid to it at the SEC.”

Hedge funds face growth hurdles in region

Hedge funds are being held back in the Gulf by limits imposed by regional bourses on trading in derivatives, a senior manager says.

Negative attitudes towards short-selling and the fragmented nature of regional stock markets also represent obstacles to the industry in the region, said Haissam Arabi, the chief executive of Gulfmena Alternative Investments.

“There are many structural hurdles,” said Mr Arabi. “In terms of instruments, there are limited products, the cost is too high and you are not allowed to the market until you get your finance licence.”

ADCB adopts international best-practice governance

Abu Dhabi Commercial Bank (ADCB) decided two years ago to take what must have seemed a big step at the time: it hired the International Finance Corporation (IFC), a private-sector arm of the World Bank, to look at its corporate governance practices.

In some ways, the decision to bring in the IFC was the extension of a process that began in 2004, when the Government-controlled bank underwent a sweeping internal restructuring. Divisional roles were clarified, as were decision-making methods and the system of reporting to the board of directors.

Improving corporate governance – rules intended to foster efficient decision-making and root out conflicts of interest – was a big part of the move. Still, it was an unconventional thing to consider at the time given that the local economy was booming, markets were sky-high and the impetus for conformity to higher standards was not quite the priority it is today.

U.S. bets Canada's wheat pricing war unsustainable on Saudi

Canadian wheat origins have so far managed to grab a pole position in supplying the Saudi market through aggressive pricing tactics, but such a policy can not be sustained in the long run, U.S. Wheat Associates said.

Saudi Arabia became the biggest addition in years to the global wheat buyside after it decided to gradually phase out wheat cultivation as of last year and up to 2016 to save water resources.

This means a lot for U.S. wheat farmers who face sagging exports amid ample global supplies of less-expensive wheat from other nations and comparatively higher U.S. shipping costs.

AIRSHOW-FACTBOX-Civil orders at Dubai Air Show

Following is a rolling summary of orders and commitments for jetliners at the Dubai Air Show, which is being held from Nov. 15 to Nov. 18.

Business is expected to be sharply lower compared with the same event two years ago when the battke between Airbus and Boeing produced plane orders estimated at $85 billion and a total air show haul in excess of $150 billion.

* Libyan Airlines select CFM engines to power seven firm, five option Airbus A320 family aircraft. The firm part of the order is worth $95 million at list prices, CFM says. CFM is a joint venture of GE (GE.N) and Safran (SAF.PA).

Airbus, Boeing Call Recovery as Airlines End Deferrals of Jets

Airbus SAS and Boeing Co., the biggest commercial-plane makers, predicted airlines will emerge from a slump next year as the global economy rebounds from the worst recession in decades and fuels air travel.

Airlines have stopped pushing back deliveries, Airbus Chief Operating Officer John Leahy said at the Dubai Air Show yesterday. Boeing, estimates economic growth in 2010 will help airlines repair their balance sheets, Randy Tinseth, Boeing’s marketing chief for commercial planes, said.

“Next year will be a year of recovery, and in 2011 airlines will return to profitability,” Tinseth said. “The last air show in 2007 was absolutely a year about orders, and this year is more about working with our customers.”

Rolls-Royce and Airbus orders fail to calm industry nerves

Rolls-Royce said it had won an order to supply engines to 12 Airbus A350 aircraft being bought by Ethiopian Airlines. Separately, it announced an order from Air China for engines for 20 Airbus A330 aircraft, bringing the total sale to $2bn (£1.2bn) – at list price. It did not say how much it would actually receive.

Few expect the total of announced orders to reach more than a fraction of those announced at the last Dubai Airshow in 2007, at the peak of the Gulf emirate's investment-fuelled euphoria and global liquidity.

The Middle East has been less severely affected by the recession than most regions, with local airlines still announcing expansion plans. Air Arabia, the Sharjah-based low-cost airline, said it would add six planes to its fleet next year.

Emirates Weighs Share Sale Amid Signs of Recovery

Emirates Airline, the biggest Arab airline, said it may be ready to sell shares to the public in two to three years as the global air-travel market shows signs of recovery and Middle Eastern carriers expand their business.

“Because the market is going towards growth, within two to three years from now would be excellent,” Chairman Sheikh Ahmed bin Saeed Al-Maktoum said in an interview at the Dubai air show, referring to a timing of an initial public offering. Any decision would rest with the government, led by Sheikh Mohammed bin Rashid Al-Maktoum, he said.

Sheikh Ahmed said at the last Dubai show in 2007 that the government would probably sell about 20 percent to 30 percent of the airline in an IPO, seeking to raise as much as $9 billion. Emirates has since been hit by the global slump in air travel. In the six months through September, the carrier’s sales fell 13.5 percent on lower passenger and cargo yields.