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Sunday, 20 December 2009

Gulf to keep spending high in 2010 as oil prices up

Gulf Arab states are likely to keep their large spending packages in place next year, even as major economies withdraw stimulus, as higher oil prices give the world's top oil exporting region enough room to support a fragile recovery.

The global financial crisis slashed income for top Arab economies -- Saudi Arabia and the United Arab Emirates -- making them drain reserves as they embarked on massive spending plans to help emerge from this year's downturn.

But with oil prices more than doubling from last December's lows of around $32 a barrel, most Gulf governments expect to book budget and current account surpluses this year and are more upbeat about 2010.

U.A.E. Shares Fall to Weekly Low on Concern Over Bank Results

United Arab Emirates’ shares dropped to the lowest in a week, led by Emirates NBD PJSC and National Bank of Abu Dhabi PJSC, on concern slowing economic growth and Dubai World debt restructuring will hurt banking earnings.

Emirates NBD fell the most in a week as the country’s largest bank by assets was cut to “sell” at Goldman Sachs Group Inc. Dubai Islamic Bank PJSC and NBAD dropped more than 2 percent. The DFM General Index lost 2.6 percent to 1,831.41, its lowest close since Dec. 13. The index has slumped 13 percent since Dubai World, the state-owned holding company, said on Nov. 25 it would seek a “standstill” agreement on debt repayments. Abu Dhabi’s ADX General Index fell 0.9 percent to 2,749.08.

“The economic outlook is still uncertain and we don’t know how badly Dubai’s debt problem will hurt banks’ balance sheets,” said Chamel Fahmy, senior regional sales trader at Beltone Securities Brokerage in Dubai. “They will probably need more provisioning to cover their positions. I will stay away from the banking stocks.”

Singapore approves Abu Dhabi chip deal

The Singaporean high court has given final approval for Chartered Semiconductor Manufacturing to be purchased by Advanced Technology Investment Company (ATIC), an investment firm fully owned by the Abu Dhabi Government.

ATIC paid S$5.6 billion (Dh14.65bn) for Chartered, which manufactures customised chips for Microsoft, Broadcom and Qualcomm. The acquisition includes US$2.2bn (Dh8.07bn) in debt and convertible bonds, while S$2.5bn will go towards Chartered’s common shareholders. “The acquisition process is now completed,” said Jim Norling, the chairman of Chartered Semiconductor.

ATIC will combine the manufacturing divisions of Chartered within its Globalfoundries business, a joint venture with the US microchip maker Advanced Micro Devices (AMD). ATIC controls a majority stake in the joint venture.

Clarity the key in Dubai saga

Dubai has the perfect opportunity today to demonstrate the extent of its recently renewed commitment to transparency.

Late last Thursday, after most people had packed up at the office for the weekend, a news item appeared on the UAE official news site in Arabic. Hurriedly translated into English, it seemed to suggest that Dubai had passed a law requiring government-related companies to hand over “surplus income” to the central exchequer.

There was lots of room for confusion. A government-related company could be interpreted as municipal departments such as the Roads and Transport Authority (RTA) or Dubai Customs or the Immigration Department.

It could also be taken to mean commercial operations such as Dubai Holding, Investment Corporation of Dubai (ICD), or Dubai World.

To further confuse matters, a clarification was later issued which suggested that ICD, which controls municipal entities such as Dubai Electricity and Water Authority, was included in the new law while Dubai Holding and Dubai World were not.

This interpretation also leaves gaping chasms of uncertainty. What, for example, would it mean for Emirates Group, the entity that runs Dubai’s profitable flagship airline and which is controlled by ICD? Does Emirates have to hand over all its profit to the Government? And what would that mean for its continuing fleet expansion?

If it just affected municipal entities such as the RTA, it was a sensible bit of budget control and to be applauded in tough financial times, lawyers said. If, on the other hand, it applied to a wholly commercial business such as Emirates, they emphasised it could be seen to cloud the controversial issue of sovereign ownership.

Perhaps it was just a mis-translation; what the linguistics experts call intra-lingual interference. It should be definitively clarified as soon as possible.END

Full repayment is option for Dubai

Dubai could fully repay all of the bank debt owed by the property and ports conglomerate Dubai World, financial leaders in London were told during the recent visit by two of the emirate’s top officials.

People present at talks between UK and Dubai leaders said the possibility of repaying all bank loans in full was discussed as a medium-term possibility during talks involving Sheikh Ahmed bin Saeed Al Maktoum and Mohammed al Shaibani of the Dubai Supreme Fiscal Committee.

“They made clear there were a number of options the Government of Dubai saw as feasible and desirable for Dubai World and repayment in full was one of them,” said a person at the talks who declined to be identified because the meetings were private.

Can CityCenter Save Las Vegas?

You can't escape CityCenter. Celebrities arrived in droves to bask in its opulence. Local newspapers declared it a masterpiece. Casino executives heralded the crowning example of what can be accomplished when vision, brilliance and sheer will are combined with $8.5 billion.

Towering over the heart of the Las Vegas Strip, CityCenter--a joint venture between gaming giant MGM Mirage ( MGM - news - people ) and Infinity World, a subsidiary of Dubai World--opened this week under a dazzling display of fireworks and glitz. The property encompasses 67 acres between the Bellagio and Monte Carlo casinos, and features four hotels, including its flagship, Aria, which is complete with 4,004 rooms, a casino, shops, restaurants, nightclubs and lounges and an Elvis-themed Cirque du Soleil production.

The other hotels include a 400-room Mandarin Oriental resort and a posh nongaming hotel called Vdara. (Still to come is the Harmon boutique hotel, which will open late next year). There's also a massive shopping mall called Crystals, featuring only luxury-brand stores like Dior ( CHDRF.PK - news - people ), Louis Vuitton and Cartier.

The Law of Gravity in Dubai (Slideshow)

Dubai's ambition to become the financial capital of the world is resting on a precarious mountain of debt. Fears that it will be unable to repay its loans have brought anxiety and inertia to this once-unstoppable empire. But life goes on even as some plans and projects falter. The Burj Dubai, the tallest building in the world, continues to soar half a mile into the sky as a reminder of Dubai's dreams.

Saudi stocks maintain upward momentum

Gulf stock markets surged this week, driven by Abu Dhabi’s $10 billion bailout for property conglomerate Dubai World.

Saudi Arabia’s benchmark Tadawul All Share Index (TASI) continued uptick, closing on Saturday 0.81 percent higher at 6,203.85 points. Tadawul is currently 28.1 percent higher than the year’s start, according to the weekly report of Riyadh-based Bakheet Investment Group (BIG).

Saudi shares, which rallied last week pulled by the banking sector, sustained the upward pace on Saturday, the first day of trading in the week.