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Sunday, 31 January 2010

Dubai Airports May Spend ‘Billions’ on Further Expansion Work

Dubai Airports, the government-owned airfield operator, plans to seek approval for expansion plans costing “billions of dirham” undeterred by the emirate’s need for a $20 billion bailout last year.

The company will make a recommendation on boosting capacity within the next few months, Chief Executive Officer Paul Griffiths said today in an interview in Singapore. He declined to elaborate further on the costs.

Dubai plans to press ahead with expanding its current airport and building a new one, even after having to get help from neighbor Abu Dhabi to pay off debts used to finance real- estate projects. Aviation generates as much as 25 percent of the emirate’s economy, according to Griffiths, as Dubai has invested in facilities and Emirates Airline to make up for a lack of oil reserves.

Dubai Shares Fall on U.S. Stocks Drop, Lack of Dubai World News

Dubai stocks retreated for the first time in three days after U.S. shares fell, oil closed at the lowest in five weeks and investors sought clarity on the restructuring of government-owned holding company Dubai World.

Emirates NBD PJSC, the United Arab Emirates’ largest bank by assets, declined to its lowest level since October 2007. Emaar Properties PJSC, the country’s biggest construction company, dropped for the first time in three days. The DFM General Index lost 1.1 percent to 1,582.23 at 1:13 p.m. in Dubai, bringing the slump this month to 12 percent. Crude closed at $72.89 a barrel in New York on Jan. 29.

“Stocks in the U.S. saw a sell down over uncertainty about the implications of a possible change in the monetary policy stance from quantitative easing to liquidity tightening,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. “We are also continuing to wait for clarity on the Dubai World restructuring. Until there is some clarity it will continue to be an overhang on the market.”

Oman eyes Dubai's stakes in Bank Muscat

Four Omani pension funds are interested in buying Dubai Holding's stake in Bank Muscat through a consortium, two officials close to the pension funds said on Sunday.

The pension funds want to buy the debt-laden conglomerate's entire stake in Oman's largest lender or a portion of it at "market price," one official said.

Last week, bankers and analysts said the debt-laden conglomerate was looking to sell the stake to meet its debt burden.

ADCB Owed Total of $2.7 Billion by All Dubai World Entities

Abu Dhabi Commercial Bank PJSC, the third-largest bank in the United Arab Emirates, has about $2.7 billion in outstanding loans to Dubai World entities, including those that aren’t affected by the company’s restructuring.

“This includes commitments to four or five different entities of Dubai World that are not involved in any restructuring,” Ala’a Eraiqat, the bank’s chief executive officer said in a telephone interview today. “Some of those entities have collateral and adequate cash-flows.”

ADCB may be owed $1.9 billion by Dubai World, making it the creditor with the largest exposure outside of Dubai, two people familiar with the companies said on Nov. 27. Eraiqat declined to comment on ADCB’s exposure to entities that are under restructuring.

Bahrain's Ahli United increases stake in Egyptian unit

Bahrain's Ahli United Bank said on Sunday it has closed the planned increase of its stake in its Egyptian subsidiary to 79.6 percent from 35.5 percent for $180 million.

"Our additional investment of 985 million Egyptian pounds reflects our confidence in the future economic prospects of Egypt," its chairman, Fahad al-Rajaan, said in a regulatory filing to the Bahrain Stock Exchange.

He also said the bank plans to make investments in corporate and retail banking at its Ahli United Bank Egypt

Union Properties reschedules $1.5 bln debt

Dubai's Union Properties agreed with creditors to reschedule 5.5 billion dirhams ($1.5 billion) in debt, its chairman told an Arabic daily on Sunday.

The third-largest developer by market value in the Gulf emirate has been hit hard by the financial downturn heightening concerns over its debt position.

In an interview with al-Ittihad, Khalid bin Kalban denied any talks of merger between Union Properties and Deyaar, but added an acquisition could be a solution if liquidity is available for either company.

Kuwait Made About 40% Return on Blackrock Since May, Saad Says

Kuwait Investment Authority, the emirate’s sovereign wealth fund, made about 40 percent profit on its $750 million investment in BlackRock Inc.’s capital increase in May, the fund’s chief Bader al-Saad told Al-Arabiya TV channel in an interview in Davos.

The sovereign wealth fund was among a group of investors that had bid for Cadbury Plc, he said. Cadbury later agreed to an offer from Kraft Foods Inc.END

Rents force rethink at DIFC as firms move

Dubai’s financial hub is witnessing a wave of departures as companies curb expenses and seek lower rents elsewhere during the global downturn.

At least 37 companies, including the international law firm DLA Piper, have cancelled licences in the past year or are in the process of doing so, according to accountants assisting them in leaving the Dubai International Financial Centre (DIFC). Before the beginning of last year, only 13 companies had formally dissolved its operations within the DIFC, the centre’s records show.

“It’s a clean-up of the system,” said Hisham Farouk, a partner at Grant Thornton UAE, a DIFC-licensed liquidator. “From our perspective, it’s just a cleaning-up of the market. You’re not seeing Deutsche Bank walk out.”

Saudi Regulator Fines Six Investors for Bourse Violations

The Saudi bourse regulator has ordered six investors to pay a total 278.1 million riyals ($74.16 million) for trading violations, it said in a statement on Saturday.

Like others in the Gulf region, Saudi Arabia's stock exchange has been dogged by allegations of being opaque and subject to manipulation of stock prices, and the regulator has slapped hefty fines on investors and executives found guilty of violations.

An appeals panel of the Capital Market Authority issued a final ruling in the case of the six men found guilty of violating trading regulations in transactions with shares in Tihama Advertising and Public Relations Co <4070.SE> in 2006, the CMA said in the statement on the bourse website.

Saudi Shares Decline as Price of Crude Oil Drops; Safco Tumbles

Saudi Arabian shares fell for a third day, led by petrochemical companies, as crude oil prices dropped to the lowest in almost six weeks, clouding the economic outlook for the world’s largest supplier.

Saudi Arabian Fertilizer Co., a unit of Saudi Basic Industries Corp. known as Safco, fell the most in three months. Rabigh Refining and Petrochemicals Co., a joint venture between state-owned Saudi Aramco and Sumitomo Chemical Co. of Japan, dropped to the lowest level in six months. Samba, the kingdom’s second-biggest bank, led declines among financial companies.

The Tadawul All Share Index slipped 0.5 percent to 6,221.16 in Riyadh, adding to losses since Jan. 26. The index is up 3.1 percent this month.

Saturday, 30 January 2010

Kuwait needs to end its bailout culture

Hostile global forces wreaked havoc on economies around the world in 2009. It is understandable, therefore, that financially despondent citizens should not want to hear the word that became synonymous with last year — bailout.

Except that is, in Kuwait. Indeed, many of its nationals are hoping to hear the term that so many of us have become utterly tired of. As the Kuwaiti government and parliament come to a binding agreement on whether to rescue its citizens from a tide of mounting debt, the rest of the GCC watches on with interest to see what lessons can be learned.

It was Kuwait's national assembly that recently caused the furore by voting in favour of a bill that could see the government assume responsibility of Dh85.8 billion worth of consumer debt.

DIFC debates when Dubai moves into post-crisis mode

The Dubai International Financial Centre has for a long time been the physical focus of financial business within the emirate, like the Square Mile of London or Wall Street in New York.

Despite, or maybe because of, the fall-out from the global credit crisis, DIFC these days has broader ambitions. It aims to be a centre of business knowledge within the Menasa region (Middle East, North Africa and South Asia). Given the geographical scale and diversity of that region, encompassing around two billion people and 25 countries, depending on where you draw the lines to Menasa, it is an ambitious challenge.

But DIFC is nothing if not ambitious, and last week advanced its cause as a regional intellectual powerhouse with its the latest conference in the Knowledge Series. These gatherings are a kind of low-key, one-day Davos, and aim to bring together financial practitioners from across the Menasa region to thrash out the big issues of the day.

Bahrain banker held over fraud (Repeat)

The chief executive of The International Banking Corp (TIBC) has been detained by Bahrain authorities on allegations of embezzling more than $2 billion, a news report said Wednesday.
The public prosecutor ordered the detention of the executive, who may not be named according to Bahraini law, after he was charged with breach of trust and theft following two days of interrogation, the Arabic-language daily Al-Bilad said.

In July, the Central Bank of Bahrain assumed control of Manama-based TIBC, which is owned by the Saudi-based Algosaibi Group. TIBC, which was engaged in Islamic banking and provided commercial loans, reportedly owes $2.07 billion.

The Algosaibi Group announced in mid-2009 that it had discovered substantial irregularities at its financial services arm as well as widespread fraud in documents submitted to banks by TIBC.

Key shift in Kuwait is to become regional financial center - CEO

It is a key prospective economic and political shift for Kuwait to turn into a regional financial and trade center, a Kuwaiti corporate board chairman said.

"Turning Kuwait into a regional financial and trade center is one of the most significant expected economic and political changes," Al Hamra Company CEO Khalid al-Othman told KUNA.

He made the remarks following the inauguration of an exhibition entitled "Our Beautiful Country) late Thursday under the sponsorship and in the presence of Voluntary Work Center Chairperson Sheikha Amthal Al-Ahmad Al-Sabah.

The exhibition is a transitional tour of the times of Kuwait documenting its development through historical photographs, he said.

The 10-day event mainly aims to rally up support for efforts to embody the beauty of Kuwait by using interactive technology, he said, hailing Kuwaiti youth for taking exquisite and charming photos of Kuwait, he added.END

$750-mn fund for Indo-Saudi trade

A $750-million (about Rs 3,467 crore) fund will be created to facilitate private sector investment between India and Saudi Arabia when Prime Minister Manmohan Singh visits the Arab nation in February or March, the Saudi Arabian Ambassador in New Delhi, Faisal Hassan-al Trad, said in New Delhi on Friday. Of this corpus, $500 million (about Rs 2,308 crore) will be contributed by Saudi Arabia and $250 million (about Rs 1,155 crore) by India.

He said several pacts would be inked between India and Saudi Arabia during the visit, including an extradition treaty (that will take account of human rights protections in his country); a provision to enable Indian prisoners in Saudi Arabia awaiting trial to be tried in India; and an MoU on IT and science and technology.

Trad said it was a matter of some satisfaction that trade between the two countries had gone up 300 per cent between 2000 and 2008. Indian imports had gone up sharply mainly because of India’s energy needs, he said.END

Agility Postpones Hearings as it Seeks Settlement

According to reports, Agility asked U.S. Magistrate Christopher Hagy to reschedule today’s hearing. It has been the fifth time Agility requests the hearing to be rescheduled and it was postponed until February 8. However, judge Hagy wasn’t too happy as he reflected, “There’s a point at which this stops.” “It is our hope that it goes forward,” Assistant U.S. Attorney Barbara Nelan replied.

The reason Agility asked for the rescheduling is because of “ongoing negotiations” for a settlement. However, don’t completely bet on a settlement as Agility’s spokesman Dal Leibach revealed today that, “No agreement has been reached and there is no guarantee the discussions will result in an agreement.”

As a background, Agility was accused on November 17 in an $8.5Bn fraud and conspiracy case by the US government. The indictment will prevent Agility from bidding for contracts during the legal proceedings but the suspension doesn’t preclude it from completing current contracts. This is considered a severe blow for the company as it derives 75% of its EBIDTA from US government contracts (Cheuvreux estimates). Litigation risk is high as Agility stands to loss a minimum of approximately $136 million. In reaction, the share price has plummeted by more than 50% to KD0.600 fils from its last October levels of KD1.300.

Previous Related Articles:

1. Agility Indicted with $8.5B Fraud by US Government

2. Agility Fraud Case Implications END

Friday, 29 January 2010

Burkle seeks control of Barneys New York-WSJ

Supermarket mogul Ron Burkle and his investment vehicle Yucaipa Cos has proposed taking a controlling stake in U.S. luxury retail chain Barneys New York in exchange for a $50 million cash infusion, a source familiar with the matter told the Wall Street Journal.

A Yucaipa spokesman could not be immediately reached for comment. Details of the proposal were laid out in a Dec. 11 letter from Burkle to the former chief executive of Dubai's Istithmar World Capital, which owns the retail chain, the Journal reported.

Last November, Yucaipa purchased a large amount of Barneys debt from Citigroup Inc (C.N) at about 60 cents on the dollar, the Journal said.

Dubai World executive jet business shuts down

A subsidiary of Dubai World has shut down its executive jet management business, citing “commercial reasons”, in fresh evidence of belt tightening at the group as it seeks to restructure operations and postpone debt repayments.

Istithmar World Aviation Executive Jets, part of Dubai World’s investment arm Istithmar World, closed its doors in December, a month after the parent company Dubai World announced a major debt restructuring.

“For commercial reasons, Istithmar World decided last year to wind down its corporate jet management operation under Istithmar World Aviation. This decision has no impact on Istithmar World’s asset base,” a representative for the company said yesterday.

ADCB tops list of Dubai World’s creditors

Abu Dhabi Commercial Bank (ADCB) has disclosed the biggest exposure yet to Dubai World among local lenders as the conglomerate seeks to restructure as much as US$22 billion (Dh80.8bn) of debt.

The emirate’s third-largest bank has about Dh9bn in outstanding loans to the company, about half of which are supported by collateral and income streams from infrastructure and other projects, said Alaa Eraiqat, the chief executive.

“If I slice it down, the picture looks much better because of the ring-fenced income and collateral of some of these exposures,” he said.


The trend in rail traffic remains up, but is still showing signs of a weak recovery. In their latest report the AAR is reporting total carloads of 277K, up 3.9% year over year and down 11.1% compared to 2008. Intermodal traffic traffic was up 2.9%, but declined 4.4% compared to 2008. Breadth of the data continues to improve as 13 of the 19 commodity groups showed improvement. All in all, the data is fairly positive, but continues to show a weak rebound.

Bahrain 'a model of financial success'

Bahrain's successful economic policies have earned the nation a global recognition as a vital regional hub, His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Economic Development Board chairman, said last night.

The country has been able to attract investment despite the global recession, he said during a discussion on the role of capitalism on the sidelines of the World Economic Forum in the Swiss Alpine resort of Davos. Capitalism must now be based on the fact that societies, governments and businessmen have all common objectives, HRH the Crown Prince stressed. Harmony among all three is vital for future growth, he pointed out.

Bahrain sov wealth fund to move into bonds, stocks

Bahrain's sovereign wealth fund, which invests mostly at home, plans to diversify away from private equity projects and into stocks and bonds, its CEO said on Thursday.

Talal Al Zain also told Reuters that Mumtalakat expects to receive a credit rating this year, which would allow it to tap capital markets for funding, including Islamic bonds.

Mumtalakat, which has assets of around $10 billion, has investments in 35 companies. It holds stakes above 50 percent in more than 15 of those firms.

Aldar Debt Amounting to $2.3 Billion Cut by Moody’s

Aldar Properties PJSC, Abu Dhabi’s biggest real-estate developer, was cut to Baa2 from A3 at Moody’s Investors Service. About $2.3 billion of rated debt instruments are affected by the change.

Aldar’s ratings have been kept on review for a further possible downgrade as part of a study of government support for companies in Abu Dhabi and the United Arab Emirates initiated by Moody’s on Dec. 9, according to an e-mailed statement today.

Moody’s said the downgrade is based on “our expectation that unit and land sales volumes will be cumulatively much lower over the next 24 to 36 months than had originally been anticipated,” Martin Kohlhase, Dubai-based assistant vice president at the ratings company, wrote in the report.

Thursday, 28 January 2010

Abu Dhabi Fund to Woo Asian Investors to Middle East, Africa

Invest AD, the fund manager owned by Abu Dhabi Investment Council, is in talks to form partnerships with institutions in China and Southeast Asia as it seeks to attract investors to the Middle East and Africa.

The Abu Dhabi-based fund manager is looking to team up with asset managers including units of “large banks,” and “quasi sovereign and sovereign names” that also offer it access to investment opportunities in Asia, Mohammed Al Hashemi, chief executive officer of Invest AD’s investment management division, said in an interview.

“Many investment institutions have had a great deal of interest in the Middle East and Africa, and specifically the African continent; the asset prices there are cheaper than other zones around the world,” Al Hashemi said in Singapore today. “At the same time we are equally looking to Southeast Asia, China, the investment opportunities there.”

Will growing Iraqi production dent the oil price?

Iraq plans to almost quintuple its oil production capacity by 2017, which could be enough to overwhelm expected demand growth and weigh heavily on the oil price. But will Iraq achieve its ambitious targets?

YES, says David Cline
Iraq has recently agreed service contracts for several large-scale oil projects. These include output commitments that, if met, would boost Iraqi oil output to remarkably high levels. These contracts could almost quintuple Iraq's production capacity by 2017 to 11.75m barrels per day (mb/d), close to the International Energy Agency's projections for Saudi Arabia. We calculate that an equivalent rise in Iraqi output could cater for most of the anticipated growth in global oil demand in the next eight years, assuming that this rises by 1.5 per cent per annum.
This would leave only a modest need for extra oil from other sources. The IEA is not expecting material growth in non-Opec supply, but it forecasts a significant rise in Opec output of natural gas liquids. In addition, Opec nations other than Iraq, especially Saudi Arabia, have oil output capacity that is currently 6.2mb/d above actual production.
Sceptics claim that politics, security, inadequate infrastructure and potential Opec quota constraints will prevent any large and rapid build-up in Iraqi capacity. All these are challenges, but the figures cited above are underpinned by binding contracts with expert oil companies that have commercial incentives to deliver agreed output levels within contractually defined timeframes. This points to a considerable upwards force on output capacity.
It is unclear whether Iraq will agree to an Opec quota being re-imposed, and at what level a new quota might be set. The issue is bound to be divisive and could ignite old rivalries, threatening Opec's effectiveness, to the detriment of oil prices. Also, a rise in Iraq's capacity on such a scale would be seen as a significant headwind for prices, even if it did not translate into rising output. Spare capacity in Opec is a closely-watched parameter because it gives one indication of oil market tightness.
These factors point to Iraq being an emerging force on oil prices that could become a major influence until the end of the decade. Those expecting the imminent return of China-fuelled oil price increases may be disappointed.
David Cline is head of European oils (equities) at RBS

NO, say Richard Savage and Alex Martinos
After years of glacial progress, Iraq recently grabbed the attention of oil-market watchers by striking deals with international companies to boost production from several giant oilfields. The output targets being discussed - pushing production from 2.5mb/d to 12mb/d within the next decade – are substantial and, if achieved quickly, would have a real impact on the balance of global oil markets.
Iraq undoubtedly has enough oil - that has long been known - but the scale of these plans, set out by oil minister Dr Hussain al-Shahristani, is quite new.
A major, rapid production increase, as envisioned by Dr al-Shahristani, is not entirely unprecedented - Russia managed something comparable in the 1990s, although this was a recovery to previous levels, not a new high. However, in the case of Iraq it must be seen as highly unlikely. Even though the worst of the post-invasion strife seems, thankfully, to have passed, the country still faces a raft of challenges.
Upcoming elections, the withdrawal of US forces, unresolved disputes with the Kurdish minority and ongoing security concerns are likely to ensure progress is slow, and Iraq remains a tough place for the oil industry to operate. Companies looking to raise production may face logistical and technical problems resulting from the neglect of the country's oilfields and infrastructure, while a rapid upturn in activity could push oilfield services costs sharply higher. Moreover, the 12mb/d target is, arguably, inflated after a licensing process that encouraged competing companies to set high production targets for each field, with limited economic penalties if these are subsequently missed.
On balance, while new Iraqi production may come onstream in the coming decade, it is likely to flow at much less dramatic rates. A slower output increase (the IEA sees production creeping past 3mb/d by 2014) is likely to see Iraqi oil helping to offset increasing non-OECD demand and declining non-Opec production, rather than flooding the markets in the near-term. As such, Iraq represents only a limited threat to today’s relatively stable high oil price.
Richard Savage and Alex Martinos are energy analysts at Mirabaud Securities

Will Iraq succeed in boosting oil production to levels that could have a material impact on the oil price? Leave your comments here - we'll use the best ones in the magazine!

Tamweel, Amlak Merger Delay Is ‘a Concern,’ Tamweel Chief Says

The delay in the planned merger of Tamweel PJSC and Amlak Finance PJSC, two United Arab Emirates mortgage lenders, is “becoming a concern” and hampering communication with shareholders, Tamweel’s chairman said.

“We are slightly concerned that the timeline is becoming too long,” Sheikh Khaled Bin Zayed al-Nehayan said in an interview at the World Economic Forum in Davos, Switzerland, late yesterday. “My hope is that it is going to happen in the first quarter, although I have been proven wrong many times.”

Tamweel and Amlak shares have been suspended since November 2008, when the country’s federal government said it planned to merge the two companies and inject new capital after the global credit crunch blocked their access to new funding. Tamweel plans to seek the market regulator’s approval next week to hold an annual meeting of shareholders to inform them of the progress on the merger, Sheikh Khaled said.

U.A.E Shares Climb as Earnings Restore Confidence, Asia Gains

United Arab Emirates shares gained as earnings boosted investor confidence and Asian markets ended their longest losing streak since 2004. Sorouh Real Estate Co, Abu Dhabi’s second-biggest property developer by market value, added the most in more than three weeks after reporting an increase in operating profit. Dubai Investments PJSC, the holder of stakes in more than 40 companies, rose to the highest in a week. The DFM General Index, which has dropped 11 percent this year, advanced 2.2 percent to 1,599.43 at the close in Dubai. Abu Dhabi’s ADX General Index added 1 percent, the most in almost four weeks.

“International markets experienced positive movement and Asia is trading higher, not to mention our markets have been penalized lately,” said Ali Taqi, director of asset management at AT Capital Management in Dubai. “Results in the U.A.E. have been in line with expectations, and in some cases have beaten estimates.”

Asian stocks ended their longest losing streak since 2004, European shares and U.S. index futures rallied and the yen fell after Federal Reserve policy makers said America’s economy is in a recovery. The MSCI Asia Pacific Index rose 0.8 percent, the first gain in nine days. The Dow Jones Stoxx 600 Index climbed 1.2 percent, the most since Jan. 4, as of 10:27 a.m. in London. “The worst of the storm has passed,” U.S. President Barack Obama said in his State of the Union address last night. Crude oil gained 1 percent to $74.37 a barrel.

Turquoise Iran Investment -Jan2010.pdf - Google Docs

Turquoise Iran Investment -Jan2010.pdf - Google Docs

Abraaj Capital, Palestine Investment Fund Launch $50 Million Private Equity Fund for Palestine SMEs

The Palestine Investment Fund (PIF), a publicly owned investment fund which aims to strengthen the Palestinian economy through key strategic investments, and private equity group Abraaj Capital announce the first closing of a US$50 million private equity fund dedicated to Palestine.

The private equity fund will focus on investing in small- and medium-sized enterprises (SMEs) in Palestine across a range of sectors and stages of maturity. Abraaj is the largest private equity group in the Middle East and North Africa, with offices in six countries.

With a first closing at US$15 million, the private equity fund is the first of its kind dedicated to the Palestinian economy. The initial commitments from the sponsors – PIF and Abraaj – will be supplemented by funds raised from investors in further closings planned later this year.

Koreans eye billions in Gulf deals

South Korea’s biggest industrial contractors have set their sights on billions of dollars worth of oil and gas business in the Gulf this year, their executives say.

Key contracts up for grabs include a natural gas project and chemical plant in Abu Dhabi and new refineries in Saudi Arabia.

Contractors have been drawn to a flood of energy investment in the region as opportunities in East Asia and other areas decline, said HP Kong, the executive vice president and head of marketing at Samsung Engineering.

Dubai reshuffle signals light at end of tunnel

The shake-up at the top of Dubai Inc announced last week may at first glance look like the work of a bureaucratic paper shuffler, but in fact it holds the key to the future economic strategy of the emirate.

It is a sign that, while there is still much to do in resolving individual corporate problems within Dubai’s debt-buffeted structure, there is light at the end of the tunnel that the emirate entered with the decision last November to restructure Dubai World.

The creation of five top-level committees to oversee government strategy – in the fields of economy; security and justice; social and community areas; infrastructure and environment; and health and safety – is a key indicator that Dubai Inc has drawn a line under the financial crisis, and is beginning to plan how the emirate will emerge from the other end.

Big gains from growth of small business

Humble factories, small trading companies and workshops are vital cogs in most economies, and particularly developing countries. Yet in the Gulf they have often been overshadowed by sprawling state and family-owned conglomerates.

Rather than small and medium-sized enterprises, many Gulf governments have often focused their ample financial resources on supporting state-owned “national champions” to diversify their economies.

The emphasis may be about to change, as governments realise that a more vibrant SME community could be instrumental in weaning locals away from state jobs, diversifying economic output and creating work for young populations – strategic aims for all the Gulf countries.

Jadwa funds fly high after turbulence

Asset managers live and die by their funds’ performances but, after last year’s turbulent financial markets, some local players can still hold their head high when they meet their investors.

There are myriad funds that invest in the Middle East. Some focus on sectors such as petrochemicals or banking, others on larger markets such as the United Arab Emirates and Saudi Arabia. However, most funds concentrate either on the Middle East and north Africa region (Mena), or the narrower Gulf Co-operation Council country markets.

According to figures compiled for the Financial Times by Lipper, the mutual fund data provider, the best-performing non-sector-specific Gulf-focused fund last year was Jadwa Investment’s Jadwa GCC Equity, which returned 29.6 per cent, compared with the 9.2 per cent average of 47 funds registered by Lipper. The MSCI GCC Index rose 15.9 per cent last year.

Comment: Turkey is a tempting target

Turkey’s economy took a beating last year. Gross domestic product in the first nine months dropped a whopping 8 per cent. Unemployment is in double digits and government finances in deficit. By these measures, the year ahead looks challenging.

With the country’s political leaders looking southwards to the Middle East and seeking to ease relations with neighbours such as Syria, investors from the Arab world are eyeing Turkey. The country could also provide some Arab countries with a road map of reform to follow, especially those without significant oil reserves.

Middle Eastern investment in Turkey by non-private equity firms has been substantial. The largest foreign direct investment in Turkish history was the $6.6bn purchase of Turk Telecom in 2005 by Saudi Oger.

Rivals Taxi as Iraqi Airways Rebuilds

Iraqi Airways, which since 2004 has leased used jetliners, recently ordered new aircraft from Boeing Co.

In a potentially hopeful sign for Iraq's battered economy, foreign airlines are increasing service to the country as its national airline is rebuilding after two decades of war, sanctions and neglect.

Flying in Iraq remains difficult due to continuing security concerns and because airports and air-traffic control systems are just starting to be modernized.

Islamic finance "safe" billing is myth: Qatar regulator

Despite being billed as a safer alternative to traditional banking because assets must underpin deals, Islamic bondholders have found they may not have any more legal safeguards than conventional counterparts in the event of default.

Such issues were highlighted after sukuk -- or Islamic bonds -- had the first ever defaults last year.

Sukuk, one of the flagship products in the $1 trillion Islamic finance industry, are structured as profit-sharing or rental agreements and returns are derived from underlying assets because Islamic laws prohibits paying or earning interest.

The Davos Agenda: Sending a message to Beijing and missing Dubai

1) Had a quick aside with a journalist friend from the gulf; we quickly agreed on the most notable absence from the proceedings -- Dubai. Shouldn't be surprising, given how extraordinarily savvy they've historically been at branding themselves and generally speaking the vocabulary of globalization. Call them the Tiger Woods of the World Economic Forum.

2) Conversation with a senior member of the official U.S. delegation. Their highest priority here on the foreign policy side -- getting a strong message across to China. Apparently they've been given pretty broad parameters to talk tough on cybersecurity in particular. To quote: "Google isn't such a big deal, but what it represents is enormous." The Obama administration wants Beijing to understand there are serious consequences if there's no change in behavior.

3) Breakfast with one of the American CEOs; he's most worried about regulatory policy globally and limitations on capital flows accordingly. I suspect we'll see a huge amount on this issue over the course of the meeting -- after all, the world economic forum has historically been the voice of globalization. With a few exceptions this year, it still will be. But the challenges are getting harder to ignore -- all sorts of signals that the world is now moving in a different direction.

Ian Bremmer will be blogging from Davos this week sending reports and commentary from inside the World Economic Forum.

Gulf Gap in Davos Belies Booming Saudi Arabia, Qatar Economies

The program for this year’s World Economic Forum in Davos features no speakers from Qatar, Dubai or Abu Dhabi in any of the conference’s 230 events. Five spots are occupied by Saudis and four by Kuwaitis.

“I think the absence of the Middle East is quite conspicuous,” said Ibrahim Dabdoub, chief executive officer of the National Bank of Kuwait, interviewed in the conference center in the Swiss village. “It’s a pity that Gulf involvement is so low.”

Especially for anyone looking to make money. Six weeks after Dubai almost defaulted on $4.1 billion in debt, the region as a whole is set to prosper.

Wednesday, 27 January 2010

Dubai’s Emirates NBD Discontinues Use of S&P Ratings

Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, dropped Standard & Poor’s Investors Service as a rating company.

Emirates NBD will utilize the services of Fitch Ratings, Moody’s and Capital Intelligence, it said in an e-mailed statement today.

Dubai Holding Commercial Operations Group LLC, the investment company owned by Dubai’s ruler, on Jan. 25 dropped S&P as its rating company because of a “lack of understanding of the business, its operations and relationship with the Government of Dubai.”

Abu Dhabi National Energy Co. ended its relationship with S&P last year after the state-controlled power producer’s long- term credit rating was put on negative watch.END

Kuwait, Qatar Shares Drop for Second Day; Dubai’s Index Rises

Kuwaiti and Qatari shares declined for a second day as oil traded below $75 a barrel and on concern that China and the U.S. will accelerate plans to unwind stimulus measures. Dubai’s benchmark index gained.

Zain, Kuwait’s biggest phone company, fell to the lowest since May. Masraf Al Rayan, Qatar’s fourth-largest bank by market value, dropped for a second day after reporting a lower profit on Jan. 26. The Kuwait Stocks Exchange Index lost 1.3 percent, the most in more than three weeks, to 6,975.1. Qatar’s Doha Securities Market 20 Index declined 1.1 percent to the lowest level in six months.

In Europe, the Dow Jones Stoxx 600 Index has fallen 2.3 percent this year as the U.S. called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth. U.S. stocks fell in the final hour of trading yesterday as investors speculated that the Federal Reserve may signal more plans to unwind stimulus measures. Oil traded below $75 a barrel before a report forecast to show U.S. crude inventories rose.

Kuwait, Dow in unofficial settlement talks-paper

Kuwait is in unofficial talks with Dow Chemical Co (DOW.N) to avoid paying a $2.5 billion penalty for scrapping a $17.4 billion petrochemical deal, a Kuwaiti newspaper said.

"There are friendly unofficial negotiations with Dow Chemical to settle the $2.5 billion penalty before reaching arbitration," daily newspaper al-Rai said on Wednesday, citing oil sources.

Kuwait has offered to pay about $250 million, or 10 percent of the penalty, the paper said.

The world's fourth-largest oil exporter scrapped the petrochemicals deal with Dow in December 2008, a month after signing it, due to criticism in parliament.END

Oman says uncovers US$220 mln investment fraud

Thousands of investors have been swindled out of a total of 88 million rials (US$220 million), Oman's prosecutor's office said on Wednesday, in what one analyst said could be the Gulf Arab countries biggest securities portfolio fraud.

"So far, as many as 3,254 people fell prey to the swindlers and the total amount swindled by the cheats so far stands at 88.4 million rials," the public prosecutor's office said in a statement.

The statement said five of seven people suspected of involvement in the securities portfolio fraud were in custody while two were still at large. It did not name the suspects.

National Bank Oman hires Dubai Bank chief as CEO

National Bank of Oman NBO.OM(NBO) said on Wednesday it named Salam Al Shaksy of Dubai Bank as its new chief executive, as the sultanate's third-largest lender seeks to bolster its international profile.

Al Shaksy will replace Murray Sims, whose contract expired, at the helm of NBO, the bank said in statement.

No replacement for Al Shaksy at Dubai Bank has been announced. Dubai Bank was not available to comment.

Head of Bahrain bank detained for embezzling 2 billion dollars

The chief executive of The International Banking Corp (TIBC) has been detained by Bahrain authorities on allegations of embezzling more than 2 billion US dollars, a news report said Wednesday. The public prosecutor ordered the detention of the executive, who may not be named according to Bahraini law, after he was charged with breach of trust and theft following two days of interrogation, the Arabic-language daily al-Bilad said.

In July, the Central Bank of Bahrain assumed control of Manama-based TIBC, which is owned by the Saudi-based Algosaibi Group. TIBC, which was engaged in Islamic banking and provided commercial loans, reportedly owes 2.07 billion US dollars.

The Algosaibi Group announced in mid-2009 that it had discovered substantial irregularities at its financial services arm as well as widespread fraud in documents submitted to banks by TIBC.

Investigations revealed that some signatures attributed to Suliman Hamad Algosaibi, chairman of TIBC's parent company, were forged and had been computer-generated, al-Bilad's report said.

Investcorp swings to H1 net profit on hedge funds

Bahrain- and London-listed Investcorp INVB.BH (INVBq.L) swung to a first-half net profit as its hedge fund business recovered from the financial crisis.

On Wednesday, the investment house said net profit in the six months ended Dec 31. was $60.2 million, after a $511 million net loss a year ago.

It said its hedge fund business posted income of $96.6 million in the first half versus a loss of $398.1 million.

Buy Oil Stocks… No Matter What

We really don't know as much about the oil market as we think we do.

There are many numbers out there, but most of these involve a lot of guesswork. For example, we really don't know just how much oil the world will need. The US Department of Energy says we'll need 106.6 million barrels a day by 2030, but how does it know? It can't know. The DOE can't know what the world will look like in 2030.

We don't really know how much oil we're discovering or how much will actually come to the market any time soon. We don't really know how much it will cost to get this oil.

Amlak, Tamweel Merger Gets Cash Allocation, Al Itihad Says

The Dubai ministerial committee in charge of reviewing and developing strategies for Amlak Finance PJSC and Tamweel PJSC allocated 2 billion dirhams ($545 million) to the country’s mortgage lenders once they have merged, Al Itihad reported, citing an unidentified person familiar with the matter.

The United Arab Emirates, of which Dubai is a member, will provide half the amount and Dubai’s government the other half, according to the committee’s ruling, the newspaper said.

The formal merger proceedings won’t start until both companies have accepted the terms, Al Itihad said.END

Wall St. WTF: Cloak and Dagger, Smoke and Mirrors

As you might imagine there are a lot of conspiracy theories floating around about the Dubai crisis. I want to talk about two in this post one implausible the other completely plausible.

The first theory that has been posted both as a comment and as an email to me is about the Abu Dhabi refusal to back Nakheel and the subsequent debt standstill by Dubai at the end of November. This touched off a global panic for a few days that was not as obvious in the US on account of the Thanksgiving holiday. More immediately it touched off a panic in the Nakheel Sukuk market. The bonds traded down to $0.44 on the dollar, slowly drifted back up to around $0.65. Then in late December Abu Dhabi rode to the rescue and paid off in full.

The theory is that the Abu Dhabi and Dubai planned the whole thing so that they could knock down the price of the bonds and then buy them back more cheaply and then pay them off and avoid default. I think there is zero chance that this is what happened. For one thing, if they were really serious about that then they could have used much harsher rhetoric and threatened an actual default rather than requesting a standstill agreement and that would have driven the bonds much lower. Also if they were so interested in buying back as many bonds as they could get their hands on why did they halt trading on the DIFX? All they did was force the trading to go on in London where, as it turned out, it was easy for hedge funds to get at them. Additionally the increased borrowing costs for all the other Dubai entities that have resulted from the Abu Dhabi bail-out two step are sure to dwarf whatever could have been saved with this clever sleight of hand. No, I don’t think that’s what happened.

No I think what happened was more along the lines of the official narrative. Abu Dhabi got skittish about rescuing the more farfetched of the Dubai property ventures and drew a ring around the things it would save. Nakheel was outside that ring. Abu Dhabi miscalculated however because the very next Nakheel Sukuk to come due had a clause which enabled the bondholders to go after the international assets of Dubai World in event of default. This would have involved massive public humiliation for all involved and so Abu Dhabi paid off.

The other conspiracy theory that has been both posted as a comment and emailed to me, anonymously in both cases but I did some sleuthing and I think the person might actually be connected to one of the parties involved. It has to do with my favourite topic: the Damas heist.

I wrote in an earlier blog post about a curious “unauthorized transaction” in which Damas lent $80 million to a private equity vehicle by the name of Dubai Ventures. Dubai ventures never paid interest on the loan which then accrued to something like $84 million at which point the loan was converted to equity. When the PWC forensic accountants going through the “unauthorized transactions” came upon this vehicle they inquired as to what was in the holding company and were told that what was in the fund were $20 million shares of Damas itself. This is really a mystery and in my original article I theorized that someone must have made off with the missing $64 million, perhaps to buy yachts or Ferraris with it.

Readers of this blog have posited a different and to their eyes a more benign theory. Their theory is that when the book building process was underway for Damas during it’s IPO there was not enough interest to make the offer a success. The Abdullah brothers who control Damas made a call to someone friendly at Dubai Holding who agreed that its private equity subsidiary Dubai Ventures would make a substantial subscription to the IPO on condition that Damas make Dubai Ventures whole. The “loan” and its conversion to equity were Damas keeping up their end of the bargain. The fact that a mere $20 million worth of shares remain in the vehicle is accounted for by the fact that Damas shares have declined substantially since the IPO, not because the funds were stolen outright.

This theory has the ring of truth to me. In the summer of 2008, as the global financial crisis gathered steam it was important for Dubai to not have a failed IPO in the DIFC. The Abdullah brothers were connected and well known and for their IPO to fail would have been particularly difficult. The powers that be probably thought that Dubai Ventures would be able to sell the shares in the aftermarket for a small profit and no one would be the wiser. Unfortunately Damas shares began to sink almost immediately and so there was never a chance for Dubai Ventures to get out but not to worry because the Abdullah brothers made them whole with the money of the other Damas shareholders. Ultimately they rode the shares all the way down until they got their call from PWC.

So what do you think? Was this not a fraud but rather an honest attempt to avoid embarrassment for the brothers Abdullah and more generally the DIFC and Dubai? Their hearts were pure when they put the transaction together but things did not work out as planned and as a result the shareholders are out $60 million? Not to worry though the Abdullah brothers plan to sell a yacht or two and pay it all back. No harm, no foul?

You know my answer to this. The issue is not whether their intentions were noble or not, what matters is whether or not they broke the law. Is there a law against this sort of thing in the DIFC? There sure as hell is. This plan was meant to conceal from the other investors that there was not enough interest in the IPO to justify the price being paid by the non-Dubai Ventures Shareholders. This scheme, if it took place, violated the DIFC Markets Law in several ways. Specifically The DIFC Markets Law, Part 8: Prevention of Market Misconduct, Chapter 1: Market Misconduct: Section 36(a): “contributing a misleading appearance of trading in or price for a security,” Section 38: “engaging in conduct relating to investments that is misleading” and Section 41: “a person in the DIFC shall not induce a person to deal by concealing material facts.”

So what is being done about this? Nothing. The DFSA is monitoring the situation but not conducting its own inquiry. The big international shareholders in Damas are emerging market mutual funds who claim to their investors that they have market knowledge in frontier markets so they will not bring a case because it would undermine their claims to know what they are doing. The inaction of the DIFC and the DFSA is not costless to Dubai. By undermining the integrity of the DIFC, the venue not only for this $80 million fraud but for the $80 billion restructuring of Dubai Inc. Their inaction puts Dubai as a whole at risk in order to spare the Abdullah Brothers and Dubai Holding some embarrassment. / Middle East / Economy - IMF revises UAE projections

The International Monetary Fund has revised downwards its economic projections for the United Arab Emirates, forecasting flat growth this year as Dubai’s moribund real estate market and debt restructuring drag on continuing growth in the oil-rich capital of Abu Dhabi.

In the IMF’s last regional outlook report published in October, it had predicted 2.4 per cent growth for the economy in 2010, before Dubai sent global markets tumbling in November when it said it would seek to delay $26bn of debts at state-owned conglomerate Dubai World, dragging down the emirate’s reputation and eventually prompting a bailout from neighbouring Abu Dhabi.

“We expect flat growth – as the result of continual drag and a contraction in Dubai from the property crisis and positive growth in Abu Dhabi,” said Masood Ahmed, the IMF’s director for the Middle East.

Dubai looks to Qatar for natural gas

Dubai may start importing up to 37 billion cubic feet per year of natural gas from Qatar as early as September.

Qatargas 4, a liquefied natural gas (LNG) joint venture between Qatar Petroleum and Royal Dutch Shell, has decided to ship half the plant’s planned output to China and Dubai instead of North America, Gerrit-Jan Smitskamp, Shell’s regional vice president for finance, said yesterday in Doha.

About 40 per cent of the LNG from the project would go to China, and about 10 per cent to Dubai, where market conditions for gas exporters are more favourable than in the US and Canada.

Bank battens down hatches in a storm

Being a bank in the UAE lately has been about as easy as staying adrift in a leaky boat during a nasty storm.

Property loan books have felt the brunt of price declines in Dubai, estimated at up to 50 per cent in some places. Corporate lending has not provided much shelter, either, due to defaults last year at several large regional firms. If banks thought retail loans might rescue them, they were wrong. Defaults on everything from credit cards to mortgages rose last year, bankers say.

As if that is not enough, they are also coping with competition for deposits that has made bringing in new money more costly. That, in turn, has pushed some lenders to increase rates on loans and revise how they calculate interest on variable-rate mortgages, a move that has caused considerable tension with customers.

The Gulf: After the credit shock, a year of stabilisation is in prospect

The Gulf is starting to recover from its worst year since the late 1990s – the last time oil prices collapsed and the region experienced a sharp downturn.

After initial, misplaced optimism that the region would be protected from the credit crunch, the downturn hit all six Arab Gulf states far harder than had been expected, as oil prices declined and credit vanished.

After a five-year petrodollar boom that shaped the world’s perception of the Gulf as a cast-iron investment destination, the region came crashing to a halt. Nominal GDP fell by a fifth.

Will Dubai Be a Drag on Gulf Region?

With a dazzling display of fireworks that lit the night sky for miles around, Dubai officially added “world’s tallest building” this month to its trophy case of superlatives.

The inauguration was intended to send a bravura message: Dubai, after a brush with default last year, was back. But for many investors, the silvery steel needle that soars half a mile into the sky will remain a fitting symbol of the hubris that led to the wealthy city-state’s burst property bubble.

Will the tarnish in Dubai spread to other oil-rich Gulf economies?

Tuesday, 26 January 2010

IMF raises 2010 Middle East growth forecast to 4.5%, expects contraction in Dubai

The IMF raised its forecast for economic growth in the Middle East this year to 4.5% from 4.2%.

The economies of the region may expand 4.8% in 2011, the Washington-based lender said in an update of its World Economic Outlook released today. Economic growth in 2009 was 2.2%, according to the report.

The IMF kept its baseline petroleum price forecast for 2010 unchanged at US$76 a barrel. It raised its projections for next year by US$3 to US$82 a barrel, the report said.

Record provisions drag UAE's ADCB to Q4 loss

Record provisions dragged Abu Dhabi Commercial Bank ADCB.AD (ADCB) to a much wider fourth quarter loss than expected, highlighting the scale of the debt crisis among the regional companies to which it is exposed.

Abu Dhabi's third largest bank by market value posted a fourth quarter loss of 1.2 billion dirhams ($326.7 million) after booking impairments of 2 billion dirhams in the last period alone. Overall in 2009 it booked provisions of 3.86 billion dirhams.

ADCB and Emirates NBD, the Gulf state's largest bank by assets, are the only United Arab Emirates banks negotiating with indebted state conglomerate Dubai World [DBWLD.UL], which is grappling to restructure about $22 billion in debt.

Iran sees possible gas link to Kuwait

Iran has the infrastructure in place to consider expanding its gas export options to markets in Kuwait, the head of Iran's gas transport company said.

Reza Almasi, the head of Iran's Gas Transportation Co., told the semiofficial Mehr News Agency that Kuwait was keen to link up to gas transport systems in Iran.

"Iran's gas transportation network has already expanded to (the port city of) Khorramshahr in southern Iran and it's possible to further extend the network to Kuwait," he said.

Dubai eyes Bank Muscat stake sale to pay debt-bankers

Dubai Holding, the conglomerate owned by the ruler of the Gulf Arab emirate, is looking to sell its stake in Bank Muscat as it offloads low-profile assets to meet its debt burden, bankers and analysts said on Tuesday.

Dubai Holding, which has $1.25 billion in debts maturing in the first half of 2010, is in focus after state-owned Dubai World shook global markets and investor confidence in November by saying it would delay repaying $26 billion in debt.

Bankers and analysts say Dubai Holding, whose listed assets include a stake in Oman's Bank Muscat and HSBC, could quietly seek to sell off low-profile, foreign-listed assets.

Qatar to produce 77mtpy LNG by year-end

Qatar’s oil minister said on Tuesday that the country would hit its production target of 77 million tons per year (tpy) of liquefied natural gas (LNG) by the end of 2010.

Qatar’s Abdullah Al-Attiyah said phase 1 of the Shell Pearl gas to liquids (GTL) project would come online by the end of the year.

He said current LNG production by Qatar was at 54 million tons per year.

He also said the country would award gas development contracts for the Barzan gas field this year.

Al-Attiyah said the contract awards had been delayed because of costs.END

New concerns emerge about Dubai's transparency

In the weeks since Dubai World shocked world markets with an announcement it needed to delay repaying $26 billion in debts, Dubai has sought to reassure leery investors it remains the Middle East's boomtown, albeit one temporarily facing some tough times.

The image revamp, however, has hit a roadblock as a leading ratings agency withdrew its ratings of a company owned by Dubai's hereditary ruler, citing among other reasons the "lack of market transparency."

In response to Standard & Poor's announcement, Dubai Holding Commercial Operations Group -- whose debt load is seen as the next litmus test of Dubai's ability to pay its bills -- accused the ratings agency of issuing "inaccurate statements" and a "lack of understanding" about its business. It also dropped the firm.

Investing in Palestine

I arrived Saturday afternoon in Port Moresby, the capital of Papua New Guinea, after a week on the West Bank and a 36-hour voyage that started in Ramallah, the West Bank city that serves as the administrative capital of the Palestinian National Authority, and involved eight time zones, five airports, four flights, three airlines, and two bags, which missed my connection in Sydney but arrived two days later on the Monday Air New Guinea flight. The only bright spot was when Emirates Airlines upgraded me to first class on the nine-hour Bangkok to Sydney segment, which entitled me to a private suite nearly as big as my first apartment in New York, plus as much 2000 Dom Perignon as I cared to drink.

I was in Palestine to help the Palestinian Investment Promotion Agency (PIPA) develop a new strategy and corresponding organizational structure. I am not going to talk about “the Palestinian Question” here, I promise. It’s been making people crazy for at least 3,000 years (the Arabic word for Palestine is “Philistine”), and if people as smart as Tony Blair and George Mitchell can’t come up with anything intelligent to say about it I am not even going to try. It reminds me of the old question, beloved of preadolescent Catholic schoolboys: “Sister, Sister, if God is all-powerful can he make a rock so heavy he can’t lift it?” We have our answer. With respect to Israel and Palestine, He has already done so.

It is refreshing, therefore, that the Palestinian Prime Minister, Salam Fayyad, first appointed in 2007 and reappointed in 2009, has adopted an entirely pragmatic approach to improving the lot of people in Palestine which, although it doesn’t ignore the wider political realities, concentrates on practical measures to develop the economy and create durable institutions. In his August 2009 working plan for the Palestinian National Authority, entitled “Palestine – Ending the Occupation, Establishing the State,” Prime Minister Fayyad sets out a two-year working plan to develop the infrastructure and institutions of a state, including separation of powers, a stock market, and a free market economy.

Dubai Stocks Fall to December Low as Oil, Global Markets Drop

Dubai’s shares fell to their lowest in more than a month, leading the drop in the Gulf, as oil declined and stocks retreated globally amid mounting concern that China is stepping up measures to cool its economy.

Emaar Properties PJSC, the United Emirates’ biggest developer, retreated to its lowest in more than a month. Union Properties PJSC tumbled 10 percent after Credit Suisse Group AG yesterday slashed its share-price estimate. The DFM General Index dropped 3.6 percent to 1,556.08, the lowest since Dec. 9. The measure has fluctuated so far this week, alternating between losses and gains of as much as 5 percent.

“Volatility will continue” as any weakness in global markets leads to a “selloff” in the U.A.E. and good news leads to “some buying from day traders,” said Julian Bruce, director of equity sales at EFG-Hermes Holding SAE, the biggest publicly traded Arab investment bank. The longer-term performance will depend on fourth-quarter earnings and “if and when we see some developments in the Dubai World debt restructuring,” he said.

Nomura paints a negative outlook for Gulf equities (Re-post)

The combined stock markets of the six Gulf Cooperation Countries are worth around $690 billion, about the same size as Hong Kong.

But the oil and gas reserves of the GCC are worth $30 trillion at current prices, not far short of the market capitalization of all the stock markets of the world. This is a considerable mismatch between paper and hard assets, and ought one day to be important.

Poor immediate prospects

However, the immediate outlook for Gulf equities is not good, according to Nomura whose distinguished local forecasting record includes spotting and warning about the bubble in Arabian equities in 2005 which nobody else did, apart from Marc Faber.

Executive director Tarek Fadlallah went immediately for the jugular in his presentation to a conference at the Dubai International Financial Centre this morning, and pointed out that 70 per cent of corporate profit growth in the recent boom came from credit-related sectors where business prospects are now lousy.

All the same, with oil prices relatively strong he saw a moderate recovery in corporate earnings. But credit conditions remain challenging, local investors have been bruised and foreign investors scared by the Dubai debt crisis.

His view is that GCC stock markets will remain range bound over the next 12 months. They have not bounced back to the same degree as other emerging markets, but then Mr. Fadlallah was even less confident about the immediate outlook for those markets.

Aside from the real estate crash and its trail of bad debts, he worried about the impact of growing competition on traditionally high Gulf profit margins, and a failure to make progress in improving middle management, transparency in corporate governance and market reforms.

Nasdaq parallel

By way of an historical parallel Nomura offers the Nasdaq crash in 2000 and subsequent market performance compared with the post 2005 performance of Gulf stock markets.

The Nasdaq crash can be seen as like an emerging market cycle. But it is arguable that the Gulf stock markets could be close to a bottom, or at least base building for their next manic phase, doubtless when oil prices next take off.

The 1998 Gulf stock market crash was every bit as dramatic as 2005, and what goes around will come around again. If it is another seven year cycle then sat here in 2010 that might not be so far off, 2012 in fact.

So at some point in the not too distant future there will be a great time to buy Gulf stocks. They are real asset backed to a unique degree, and as inflation picks up in the forthcoming global recovery that is likely to be a great strength.END

Treasury aims to remove obstacle to Islamic bond issuance

The government will seek to remove one of the final technical obstacles to the issuance of Islamic bonds, the Treasury said on Friday.

Islamic finance professionals in the UK, which hosts five stand-alone Islamic banks, were optimistic that if Parliament votes in favour next month to regulate sukuk as bonds rather than investment vehicles, it would encourage the growth of a market that has struggled for traction.

If passed, the measure could save issuers of Islamic bonds up to 10,000 pounds a year, a spokesman for the Treasury said.

POLL-Global sukuk sales seen down in 2010, Dubai crisis weighs

Global sukuk issuance will be weaker than expected this year, with some analysts seeing a drop of as much as a fifth from 2009, as Dubai's debt crisis and an expected rise in borrowing costs weigh on sentiment, a Reuters poll shows.

The majority of 12 Islamic bankers and industry experts surveyed expect issuance to range between $15 billion-$17 billion in 2010, down from a similar poll in October which estimated over $20 billion in sales this year.

Global sukuk issuance totalled $19 billion last year, of which the United Arab Emirates accounted for a fifth, according to Thomson Reuters data.

Telecoms watchdog to remove price leash

Etisalat and du are on course to set their own prices for the first time, opening the door to cheaper phone bills for consumers but lower profits for the rival telecommunications operators.

The Telecommunications Regulatory Authority (TRA) yesterday outlined proposed regulations that will free the companies from seeking the watchdog’s approval before changing their prices.

The proposed regulations, which the TRA said could be enforced by the end of the year, would also prevent du and Etisalat from engaging in anti-competitive behaviour such as predatory pricing.

Ansari steps down as Dubai Int'l Capital exec

Sameer al-Ansari, the chief executive of Shuaa Capital, will step down as executive chairman of Dubai International Capital, according to a statement from the investment vehicle on Monday.

DIC -- a unit of Dubai Holding which is owned by the emirate's ruler -- said Ansari would remain on the board of DIC as non-executive chairman.

"This change is made as Mr. Al Ansari wishes to focus on fulfilling his duties as the chief executive officer of Shuaa," Dubai International Capital said in a statement.

Ansari was appointed to the top job at Shuaa Capital in August after Dubai Banking Group, controlled by another Dubai Holding arm, became the investment bank's biggest shareholder.END

Morgan Stanley teams up with Orascom

Morgan Stanley is teaming up with Orascom Construction Industries, an Egyptian company, to form a joint venture that will invest in infrastructure in the Middle East and Africa.

Officials declined to discuss the details of the 50/50 venture, but it is expected to be a fund with the partners looking to invest several hundred million dollars in projects across the regions. The venture will also be seeking investments from third parties.

The two groups are hoping to tap into the need for improved infrastructure throughout the Middle East and Africa. Both are regions where populations have been rapidly expanding while infrastructure, including transport systems, water and power generation, is often lacking or in a state of decay.

Djibouti feels effect of Dubai investment mix

There is no obvious connection at first glance between the grubby, low-rise streets of Djibouti City, capital of the east African state of Djibouti, and the spectacular modern high-rise landscape of Dubai.

However, a brief examination of most of the prominent businesses in the tiny state reveals its heavy dependence on investment from the once-rich, now-struggling emirate in its port, logistics and tourism sectors.

The country is the most fully developed example of a strategy pursued by Dubai World, Dubai’s government-controlled investment vehicle, to boost trade in a series of developing countries and capture some benefits for Dubai’s businesses. Dubai World’s port operator, DP World, operates Djibouti’s ports and airports. Jebel Ali Free Zone Authority (Jafza) runs a free-trade zone near a new container port. Dubai World’s customs operation runs Djibouti customs and Nakheel, its property arm, has built a luxury hotel.

Pragmatic DP World puts decline in container handling into broader perspective

Full-year profits at DP World, one of the world's largest container terminal operators, are set to fall after it handled 8 per cent fewer containers in 2009 than in 2008, says Robert Wright in London .

But the Dubai-based company, controlled by debt-laden Dubai World, said in a trading statement that it had performed less poorly than the overall container ports market because of its emphasis on faster-growing emerging markets.

It also saw only a 6 per cent fall in throughput at its core terminals in Dubai, which account for a disproportionate share of profits.

Airline flies in the face of jet-set image

When the leaders of the US automobile industry were summoned to Washington following the collapse of Lehman Brothers in 2008 to discuss their companies’ travails, they were castigated for flying to the US capital in private jets.

In a period of some austerity, private jets are the symbol of corporate – and individual – excess. Except perhaps in the Middle East.

According to Mark Pierotti, chief operating officer of AJA, a start-up executive airline, there are about 380 private jets operating in the Middle East and north Africa.

Iraq catches eye of investors with patience

It may have taken months of haggling and brinkmanship but Iraq’s general elections are now due to take place early in March. They will determine the 325 members of the Council of Representatives, who are in turn due to elect a president and prime minister.

Many investors in the country argue it is not who wins the elections that is important, or even the precise level of unrest that surrounds the polls, so much as the fact that elections take place at all. Having patience and taking a long-term view in Iraq are paramount, they say.

“We tend to look at micro trends and ignore the macro. The overall trend continues to move forward,” says Adam Such, a former commander of a US military unit that fought in Iraq after the invasion of 2003. Mr Such is now executive vice-president of C3 Invest, a California-based private equity fund.

Monday, 25 January 2010

Get Briefed: Prince Alwaleed Bin Talal (Interview)

Prince Alwaleed Bin Talal Bin Abdul Aziz Alsaud is chairman of investment company Kingdom Holding, which went public on the Saudi stock exchange in 2007. He is the world's 22nd wealthiest person, according to the 2009 Forbes World's Billionaires list.

Kingdom Holding contains his investments in companies such as Citigroup ( C - news - people ) and News Corp. ( NWS - news - people ), as well as Four Seasons Hotels and Fairmont Hotel management companies, among many others.

Alwaleed joined the Singapore government investment arm and several other investors in a $12.5 billion capital injection for Citigroup in January 2008; the size of his personal investment is undisclosed. He is also an investor in mainstream technology companies like Apple ( AAPL ), Motorola ( MOT ) and AOL.

$100 mn Oman India investment fund to be launched soon

A $100 million Oman India fund that will invest in various sectors in both countries is expected to be launched shortly. Oman is looking forward to invest in India's small and medium enterprises.

'The joint investment fund whose corpus will be contributed equally by both countries will be launched soon,' Oman's Minister of Commerce and Industry Maqbool Ali Sultan told IANS while he was here for a trade summit organised by the Confederation of Indian Industry.

In November 2008, India's largest commercial bank State Bank of India (SBI) and Oman's State General Reserve Fund (SFRF) signed a memorandum of understanding (MoU) to promote a joint investment fund with a $100 million corpus to be contributed equally.

Shell & Big Oil's Exploration Challenge

The oil business used to be simple. Find oil. Drill hole. Sell oil. Buy Stetson and private jet.

These days, you have to corral an army of engineers in the desert to build an enormous factory to transform natural gas into a liquid to be used like oil. The capital cost of Royal Dutch Shell's Pearl gas-to-liquids plant in Qatar is a cool $18 billion or more—10% of its market capitalization. Like Chevron's Gorgon liquefied-natural-gas project offshore Australia, it shows what big integrated oil companies are capable of.

But have they neglected bread-and-butter exploration for lower-risk, lower-return engineering projects? Certainly, investors are unimpressed. A decade ago, the international oil companies, or IOCs, accounted for 79% of energy-sector market capitalization and nearly all its net income. Today the figures are 53% and 62%, according to Sanford C. Bernstein. Shell trades at a discount of 13% and 36% respectively to the 2010 forward price-to-earnings multiples at Petroleo Brasileiro and BG Group. But their estimated five-year average output growth is 5% and 9% compared with Shell's 3%, around the IOC average.

Dubai Holding suffers S&P ratings blow

Standard & Poors on Monday downgraded and removed its rating of Dubai Holding Commercial Operations Group, an investment vehicle owned by the ruler of Dubai, citing insufficient information.

Dubai Holding’s non financial arm, which spans real estate, business parks and hospitality interests, was lowered from BB+ to B on the grounds that group is likely to have weaker cash flow than previously expected, S&P said in a release.

DHCOG, which includes hotel chain Jumeirah and Dubai Properties, has been hit hard by Dubai’s recession and real estate crash. Many analysts expect it to face debt repayment problems this year after another Dubai state-linked conglomerate, Dubai World, said in November that it would call a standstill on $26bn in debts.

Dubai Stocks Gain Most in 3 Weeks on Speculation Drop Overdone

Dubai’s index gained the most in more than three weeks, leading Gulf markets higher, on investor speculation that declines this month are overdone given growth prospects.

Emaar Properties PJSC, the United Emirates’ biggest developer, added the most since Jan. 3. The Dubai Financial Market, the only Gulf Arab stock market to sell shares to the public, gained the most in more than a month. The DFM General Index rose 2.8 percent, the most since Jan. 3, to 1,614.3. The measure closed at the lowest since Dec. 9 yesterday.

Declines of 10 percent this month have left the 32 companies in Dubai’s benchmark index valued at about 5.1 times estimated earnings, data compiled by Bloomberg show. That compares with 12.9 times for the MSCI Emerging Markets Index. Dubai’s 14-day relative strength index closed yesterday at 29. A reading below 30 indicates a security is poised to gain, according to some technical analysts.

Saudi Arabia: Positive Outlook

As promised last week, I will discuss the 2010 macro outlook of the major GCC countries. Since Saudi Arabia is the largest economy in the GCC, I will begin with it.

Overall, Saudi’s economy is improving due to the hike in oil prices which increased export revenues and market sentiment.

The CPI decreased sharply from 11.1% in July ‘08 to 3.4% in October ’09, mainly due to the recession and the reduction in imported inflation. Credit Suisse estimates the nominal GDP to return to pre-crises levels in 2010. The rise in nominal GPD is higher than the increase in inflation, thus, boosting real GDP growth to 2.6% in 2010 and 4.7% 2011. Also, the fiscal and current account balances are expected to grow at a rate of 12% and 19% respectively.

Looking at the chart above, Saudi Arabia has the highest net external assets/GDP ratio of 80%. This constitutes a 70% positive difference from the Global EM. It is estimated that Saudi’s foreign assets to be around USD395 billion in ’09 and will grow by 25% in ‘10. Moreover, Saudi is considered a low leveraged economy where the government debt accounts for only 15% of the GDP.
One of the strong drivers of growth in Saudi Arabia is the implementation of their government-spending plan. This plan is focused on infrastructure projects with 63% of the total budged expenditure allocated to such projects. According to Bloomberg, in 2009 the Saudi Arabian General Investment Authority (SAGIA) announced that they will execute a USD400 billion infrastructure projects spending spree over the next five years. This year Saudi announced a USD144 billion planned expenditure in their 2010 budget. Government spending accounts for 30% of the total GDP.

On the equities side, Tadawul All-Share index’s listed companies are expected to show an increase of 30% in their 2010 bottom lines which beats its GCC peers.
Having said all that, I believe that Saudi Arabia will show positive returns this year especially in the consumer and banking sector.

S&P pulls Dubai Hldg unit rating, cites weak cash

Standard & Poor's on Monday withdrew its rating on a unit of Dubai Holding, which is owned by the ruler of Dubai, saying the division's cash position was "materially weaker" than it expected.

The ratings agency cut Dubai Holding Commercial Operations Group (DHCOG) to B from BB+ and said it opted to withdraw it due to a lack of timely information and documents, renewing scrutiny over the financial health of the emirate.

Dubai rocked global markets on Nov. 25 when it asked for a delay in repaying $26 billion in debt linked to its state-owned Dubai World conglomerate and its property units.

"Dubai on Lake Michigan: The Emirate of Chicago, Sheikh Richard M. bin Richard J. Al Daley Ruler"

Ever since I established an email address ( connected to this blog I have been getting all kinds of email. Some have emailed me suggestions for things to write about and other have suggested things I should stop writing about altogether. Some have encouraged me and others have suggested my talents may lie elsewhere. These emails I take in their stride. Then there are some that concern me, one recent commenter suggested that I am an ex-DIFC insider who was terminated and is taking my revenge. This is untrue but it gets at the question of motive. I have tried to address that before but I have thought of a better way to make that point.

I am originally from the City of Chicago which I think has a lot in common with Dubai. Both are the commercial centers for their regions, and aspire to be truly global cities. They are similar generally and there are many specific things they share as well. Both are ruled by absolute monarchs who derive their power from their fathers. These men are at their core honest champions of their cities but both are surrounded by questionable people and are often given bad advice. Both have political machines that reward the friends and punish the enemies not of the City but of the machine. The ruler though himself clean decides who among his associates can get rich, and just how rich.

I have written about Naser Nabulsi who fired the head of the DFSA for not playing ball with him politically. In Chicago we have the Cook County Board President firing the political supporters of his rivals. Chicago's problems are so deep that it seems we need watchdogs to watch the watchdogs.

I have written about Dr. Omar appropriating for himself wealth that should belong to the DIFC bondholders and ultimately to Dubai itself. In Chicago we have a state representative who has stolen art from a public university to adorn her office and refuses to return it. We have City Employees setting up a fake charity, compelling thier subordinates to donate to it, and paying themselves the money.

I have written extensively about the Dubai financial crisis at the level of municipal finances. Chicago faces its own fiscal problems. I have suggested Dubai equitize assets, Chicago faces the same tough choices of privatizing city services and infrastructure.

Similarly in the same way that Dubai looks to Sheikh Khalifa to save it Chicago looks to Barak Obama to deliver federal support to the city.

So you see, fiscal irresponsibiity, dishonest politicians, patronage, cronyism, self dealing none of these things are unique to the Dubai experiance or the Arab experience or even the emerging market experience.

They are part of the human experience.

There are two important differences between Chicago and Dubai. One is that in Chicago there is almost always a US attorney who, if he throws enough Chicago politicans in jail, can become a Senator. Thus the feds are always out there hunting the Chicago politicians. The feds are usually a few steps behind and usually require something like a bitter ex wife as a star prosecution witness to get anything done but the crooks in government have to sleep with one eye open.

The other is that Chicago has a realtively free press. Not entirely, the City and the State Government do initimidate the press to some extent and the press sometimes tries to play kingmaker by glossing over the problems of one candidate and focusing on those of another. But now and again there have been true heroes who have emerged like Mike Royko who point out when the Emperor has no clothes. Though his columns were sarcastic you could tell how deeply he cared about Chicago.

Though I am no Royko to be sure, I care deeply about both Dubai and Chicago. One is my home and the other a place where I spent some of my most productive years. Both are a complex mix of deep flaws and great potential . The potential of each can only be realized if the flaws are identified and addressed. Dubai has a generational opportunity inside this crisis. There is an opportunity for Dubai to save itself if Sheikh Mohammed can only convince himself to limit his own power and make everyone, including himself, equal before the law. If Sheikh Mohammed can save Dubai and reassure foreign investors by instituting a more limited monarchy, that model can be followed by other monarchs in the region to benefit not only investors but the Arab world writ large. I think that bloggers in the region have a part to play aiding the reformers by pointing out the errors of the current system.

I know it makes some people unhappy to read my criticism but in the face of the present crisis, which threatens both Chicago and Dubai, the silence of reasonable people is far more destructive than my or any words can ever be.END