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Tuesday, 31 August 2010

Dubai May Help Abu Dhabi Set Up Finance Hub as Emirates Diversify Economy - Bloomberg

Dubai International Financial Center, the tax-free business park for financial-services companies, will help neighboring Abu Dhabi set up its financial district if needed, its chief executive officer said.

“Our strategy is always to collaborate with Abu Dhabi and the federal authorities,” Abdulla Mohammed Al Awar said in an interview in Dubai today. “One financial center is not sufficient” for the Middle East, North Africa and South Asia region, and DIFC is prepared to share its experience of operating the center in the past six years.

Dubai set up DIFC in 2004 to attract international banks, asset managers and insurers to help diversify its economy. Abu Dhabi, the richest of the seven states that make up the United Arab Emirates and holder of about 8 percent of the world’s oil reserves, is also boosting investments in industry, tourist attractions and infrastructure to diversify away from oil.

MIDEAST STOCKS-Qatar seen as safe haven as index hits 3-mth high | Reuters

Qatar's index .QSI edged up to a three-month high on Tuesday, outperforming most Middle East markets as investors bet the country can best weather any shocks to the world economy.

Masraf Al Rayan (MARK.QA) climbed 1.4 percent, while Qatar Electricity and Water (QEWC.QA) and Qatar Telecom (QTEL.QA) (Qtel) rose 1 and 0.6 percent respectively, with the latter pair seen as attractive dividend plays.

Qatar's index gained for the 11th session in 12, rising 0.1 percent to its highest finish since May 18."

Qatar Developer Barwa Halts $9.2 Billion Projects on Property Market Slump - Bloomberg

Barwa Real Estate Co., Qatar’s biggest property developer by assets, halted planned projects worth $9.2 billion in the cities of Doha and Al Khor until the market improves.

“It is not a good time to start” because of a surplus of residential and office space in the country, Yousif al Khater said in an interview in the capital, Doha, today. The company is going ahead with developments that have already started, he said.

The 30 billion-riyal ($8 billion) Al Khor project, to be built in partnership with Kuwait’s Imtiaz Investment Co., would include 24,000 housing units and 250,000 square meters (2.7 million square feet) of office space in Al Khor, Qatar’s second- biggest city, according to the company’s website. Al Doha, a 2.4 billion riyal development in the capital, will include apartments, offices and retail.

Singapore Court Dismisses Dubai Drydocks's Lawsuit Against Millionaire Tan - Bloomberg

A Singapore court dismissed a suit by Dubai’s Drydocks World LLC against Singaporean tycoon Tan Boy Tee for breaching an agreement tied to a S$2.4 billion ($1.8 billion) takeover deal.

Drydocks, which sued Tan for breaching a three-year non- compete clause, relied on “hearsay evidence,” Singapore High Court Judge Lai Siu Chiu said in an Aug. 25 ruling, publicly released today. Dubai World’s ship-repair unit is appealing the decision, according to the ruling.

Drydocks sued Tan in May after coming across a Feb. 4 Otto Marine Ltd. statement which said Tan had taken a significant stake in the Singapore shipbuilder as part of a share placement that raised S$95 million. The purchase breached a non-compete clause in Tan’s agreement to sell Labroy Marine Ltd., a shipyard operator he founded, to Drydocks in January 2008, the unit of the Dubai state holding company claimed in its suit.

Dubai Shares Slumps to Lowest in Two Weeks on Global Growth Risk, Oil Drop - Bloomberg

Dubai shares declined to the lowest level in almost two weeks as slower-than-estimated growth in personal incomes in the U.S. stoked concern the pace of the global economic recovery is faltering. Crude oil dropped. Emaar Properties PJSC, builder of the world’s tallest skyscraper in Dubai, retreated for a second day. Dubai Islamic Bank PJSC, the United Arab Emirates’ largest Shariah-compliant bank, dropped 1.1 percent. The DFM General Index slipped 0.5 percent to 1,483.67, the lowest level since Aug. 18, at the 2 p.m. close in the emirate. The measure declined 1.9 percent this month. The Bloomberg GCC 200 Index of Persian Gulf stocks lost 1.2 percent this month.

“Poor economic reports out of the U.S. have a negative impact on the market,” said Ziad Dabbas, a financial analyst at National Bank of Abu Dhabi PJSC, the U.A.E.’s second-largest lender by assets. “Volume is low, indicating that investors are on the sidelines. During Ramadan, business is usually slow in the Gulf.”

U.S. stocks declined yesterday after government data showed personal incomes climbed 0.2 percent in July, less than the 0.3 percent projected in a Bloomberg survey of economists. The Standard & Poor’s 500 Index fell 1.5 percent. European stocks slumped before reports on U.S. property values and consumer confidence that may indicate threats to the recovery in the world’s largest economy are mounting.

GCC Market Analytics: Market Breadth: Part I


Market breadth refers to the level of participation behind market moves. There are several ways of measuring market breadth but in this series of posts I'm going to focus on something called the advance/decline percentage.

The advance/decline percentage is calculated on a daily basis and determines the proportion of stocks that are rising in value versus falling in value. The specific calculations is as follows:

Advance/Decline % = (# of Advancing Stocks - # of Declining Stocks) / # of Stocks

For example, if we have a hypothetical market that comprises of 10 stocks and 7 of these stocks have risen in value on a particular trading day then the advance/decline percentage will be:

(7 - 3) / 10 = 40%

This tells us that 40% more stocks were increasing in price than were decreasing in price. Alternatively, if a majority of stocks have fallen in value, say 8 stocks, then the advance/decline percentage will be:

(2 - 8) / 10 = -60%

In this case there were 60% fewer stocks rising in value than were falling in value.

So, as you can see, if the advance/decline percentage is greater than zero a majority of stocks are rising in value and if it is below zero a majority of stocks are falling in value. The zero level represents equality between the number of rising and falling stocks.

Because the daily advance/decline percentage moves very fast it is typical to use a moving average to smooth the results. For this series of posts I've applied a 20-day moving average to the raw daily advance/decline percentages.

Below is a chart of the DFM General Index and corresponding advance/decline indicator.

As you can see, the 20-day advance/decline indicator oscillates around the zero level (right axis). When the advance/decline indicator is above zero (green shaded area) this signifies that a greater number stocks are rising in value than falling. The more the indicator rises above the zero level the greater the proportion of stocks that are rising versus falling.

When the advance/decline indicator is below zero (red shaded area) this signifies that a majority of stocks are falling in value. The further the indicator is below zero the greater the proportion of stocks that are falling versus rising.

As you might expect, when the DFM General Index has been rallying it has been accompanied by a positive 20-day advance/decline percentage. In bear markets the 20-day advance/decline percentage tends to be negative with a majority of stocks falling in value.

There are two main ways to interpret and use the advance/decline indicator. The first is to use extreme advance/decline levels as an indicator of potential market turning points. The logic here is that when a very high percentage of stocks are participating in a market move this is unsustainable and will be followed by a market reversal.

The other main use is to look for divergences between the advance/decline indicator and market prices. For example, if market prices are making new lows but the advance/decline indicator is not then this might signify a bottom for the market and higher future prices. The logic behind this use of the advance/decline indicator is that where fewer stocks are participating in a market decline this shows a lack of support for that move and a likely turning point. The opposite is true for rising markets.

In future posts I will examine the validity of both uses of the advance/decline indicator on GCC equity markets. To begin with, however, I've tested a simpler use of the indicator which has yielded positive results across all GCC markets.

The chart below shows the performance of the DFM General Index under different advance/decline conditions:
(Note: Results are uncompounded and do not include fees or dividends)
The blue line in the chart above is the price of the DFM General Index since 2004. The green shows the performance of the Index when the advance/decline indicator was positive and higher than it was two weeks ago. The green shows the performance of the Index when the advance/decline indicator was negative and lower than it was two weeks ago.

I arbitrarily chose these rules but they seemed quite intuitive (to me at least). My reasoning was that if a majority of stocks were participating in a market rally and the number of stocks participating was increasing this would be bullish for the future price direction. On the other hand, if a majority of stocks were participating in a market decline and the number of stocks participating is that decline was increasing this would be bearish for future price direction.

The results above show that these simple rules were reasonably effective in identifying periods of increasing and decreasing market prices. The future performance of the DFM General Index when the advance/decline indicator was positive and higher than two weeks ago was bullish (green line). However, the future performance of the DFM General Index tended to be bearish when the advance/decline indicator was negative and lower than it was two weeks ago (red line).

These results were fairly consistent across all GCC markets and I'll present them in Part II. In Part III of the market breadth series I'll introduce a study which I'll use ongoing basis to monitor the advance/decline indicator and it's implications for future market price action.

Dubai International Financial Centre Plans to Cut Cost of Doing Business - Bloomberg

Dubai International Financial Centre plans to reduce the cost of doing business in the tax- free business park to encourage investments, the company said in statement to Nasdaq Dubai bourse today.

“During the first six months of 2010, the number of companies registered in the DIFC remained constant despite the economic downturn,” according to the statement. “While a small number of firms have withdrawn over the period from the center, a significant number of firms from across the world continued to join including first time entrants into the region.”

DIFC has 745 registered companies of which 297 are regulated and 374 are non-regulated, it said. The center also has 74 retailers.

Monday, 30 August 2010

Emirates President Says Buying American Airlines Parent AMR Makes No Sense - Bloomberg

Emirates, the biggest airline by international traffic, said it has no plan to acquire a stake in AMR Corp., denying speculation of a linkup with the parent of American Airlines.

“We certainly wouldn’t be doing that,” Emirates President Tim Clark said in a telephone interview today. “Us buying a stake in AMR? It wouldn’t make sense.”

AMR, owner of the second-largest U.S. airline, rose as much as 6.8 percent in New York trading after Theflyonthewall.com reported today that Dubai-based Emirates is in talks with the Justice Department to acquire a 49 percent stake. The shares of Fort Worth, Texas-based AMR climbed 20 cents, or 3.3 percent, to $6.24 at 11:32 a.m. local time. The company has a market value of $2.1 billion.

Citadel of Egypt May Sell Investment, List Taqa Shares as Market Improves - Bloomberg

Citadel Capital Corp. may sell at least one investment by year-end and list one of its oldest energy units by June, the chief financial officer of Egypt’s largest publicly traded private equity firm said.

Citadel, which invests in energy, mining, cement, agriculture, transportation and retail businesses across the Middle East and East Africa, posted a second-quarter loss of 95 million Egyptian pounds ($16.7 million), the second consecutive quarterly loss since the company listed on the Egyptian exchange in December. Profit for the three months was 300,000 pounds on a standalone basis, which excludes early-phase investments.

“We aren’t going to exit just to make the numbers look good,” Chief Financial Officer Ahmed El Shamy said in an Aug. 25 interview in Cairo. “But we are considering making these exits when we feel we can maximize value for our shareholders.”

Dubai Shares Lead Gulf Lower on Concern Recent Gains Overdone; Qatar Rises - Bloomberg

Dubai shares declined, leading a drop in Persian Gulf markets, on speculation recent gains are overdone given growth prospects in the emirate and before the Muslim Eid holidays next week. Qatar shares rose.

The DFM General Index lost 0.4 percent, the most since Aug. 25, to 1,490.52 at the 2 p.m. close in Dubai. The index has advanced 1.1 percent the past two weeks. Emaar Properties PJSC, builder of the world’s tallest tower, led the drop, falling the most since Aug. 25. Dubai Financial Market PJSC, the only stock market on the Arabian Peninsula to sell shares to the public, retreated the most in more than a month. Qatar’s QE Index gained 0.3 percent.

“Low volumes are a continued testament to the lack of interest in local markets,” said Hassan El Salah, deputy head of institutional equities at Al Ramz Securities LLC, an Abu Dhabi-based brokerage. “We should see a pick up post-Ramadan.”

Kuwait Records Budget Surplus of $22.3 Billion in Fiscal Year 2009-2010 - Bloomberg

Kuwait recorded a budget surplus 6.44 billion dinars ($22.3 billion) in the fiscal year that ended March 31, according to data posted on the Finance Ministry website today.

Government income was 17.69 billion dinars, while spending was 11.25 billion dinars, the data showed.

Nakheel to Pay $408 Million to Creditors Next Month, Chairman Tells Bayan - Bloomberg

Nakheel PJSC, the Dubai World-owned property developer, plans to pay 1.5 billion dirhams ($408 million) of bills it owes to trade creditors next month, Chairman Ali Lootah was cited as saying by Al Bayan.

Nakheel plans to sell bonds by the end of the year to cover 60 percent of its total outstanding debt, the newspaper said. Some companies requested more time to study the settlement deals and Nakheel expects to receive approval from 95 percent of the firms by the end of the year, the newspaper said.

Nakheel PJSC, which is building palm tree-shaped islands off Dubai’s coast, said on July 14 a group of creditors unanimously supported a plan on altering the terms on $10.5 billion of loans and unpaid bills. The company expects to pay 40 percent of the money owed to trade creditors in cash and 60 percent through a tradeable sukuk, Nakheel said.

Iranian investment in UAE to surge: police chief

Lieutenant General Dahi Khalfan Tamim, Dubai Police Chief and Head of the Government’s Budget Committee, says he expects a surge in Iranian investment into the UAE as a result of the international economic sanctions imposed on Iran.

Lt Gen Dahi said he was also confident that Dubai had the means to ensure Iranian investors would operate within the parameters set down by the United Nations Security Council. The Dubai Police chief dismissed fears that Iran might take advantage of the opportunity to do business in the UAE, as a means to escape the UN’s economic sanctions.

He told Gulf News that Dubai was confident – from a security point of view – that Iranian investments in the UAE would not be used as a way to escape the sanctions. Instead the investments would help Iranian people overcome difficulties associated with sanctions on banks and trading with Iran, he said.

Sunday, 29 August 2010

Essdar eyes distressed deals, bank books for growth | Reuters

UAE-based Essdar Capital, which recently bought the senior debt of Oman's troubled $15 billion Blue City project in a distressed deal, is betting on its local expertise to tap more such opportunities, a top executive said.

Essdar, 35-percent owned by the ruler of Dubai's investment company Dubai Holding, bought Blue City's $655.5 million Class A debt via a tender offer earlier in June as part of investment in its Gulf-focused distressed debt fund.

The investment remains the fund's largest so far."

Qatar's Hassad Food to buy sugar project in Brazil-QNA | Energy & Oil | Reuters

Hassad Food, owned by Qatar's sovereign wealth fund, plans to acquire a sugar project in Brazil with a capacity to produce 25 million tonnes per annum, state-run Qatar News agency said, citing the firm's chairman.

Qatar, like other Gulf states, imports the majority of its food requirements, and securing future food supplies is seen as a priority by the government.

The acquisition in Brazil is expected to take place in two months time, Nasser al-Hajri told QNA, giving no further details of the project."

Abu Dhabi, Israel Shares Rise on Bernanke's Pledge on Economy; Oil Gains - Bloomberg

Qatar and Israel shares advanced, leading a rally in Middle East markets, after U.S. Federal Reserve Chairman Ben S. Bernanke pledged to safeguard the recovery of the world’s biggest economy. Oil gained.

The QE Index climbed 0.5 percent, the most since Aug. 22, to 7,195.88 at the 12:30 p.m. close in Doha, led by Qatar Islamic Bank SAQ, the Gulf state’s biggest Islamic lender. The TA-25 Index rose 0.5 percent to 1,145.31 in Tel Aviv. Avner Oil Exploration LP surged 6.6 percent after partners at the Leviathan site approved plans for an offshore gas and oil prospect. The Bloomberg GCC 200 Index of Persian Gulf stocks increased 0.4 percent.

The gains are “in line with the closing of U.S. markets on Friday,” said Haissam Arabi, chief executive officer of Gulfmena Alternative Investments in Dubai. Bernanke said “what investors worried about a double-dip recession wanted to hear.”

BUY OR SELL-Can Emaar escape Dubai's property woes? | Reuters

Dubai's Emaar Properties EMAR.DU, builder of the world's tallest tower, offers value for long-term investors, but opaque earnings make it difficult to gauge its diversification into malls and hospitality.

Emaar's second-quarter profit came in below forecasts at 802 million dirhams ($218.4 million), but this shortfall was due to a slower-than-expected handover of units from the 828-metre high Burj Khalifa, rather than a loss of value.

These revenues are now slated to be transferred to the second-half of 2010."

GCC Market Analytics: September Seasonality

September's just around the corner so I thought I'd analyse the historical performance of the GCC markets during this month.

For international equity markets September has been the weakest month of the year. On average, since 1950, the S&P 500 Index has lost about 1% during September. I wanted to see if this effect was the same for the GCC equity markets.

The chart below shows the average daily percentage change for each GCC market during each calendar month.


There are a couple of things of note. Firstly, aside from January, the first half of the year is typically the best period for GCC equity markets. The strongest months are February, March, April and August.

Secondly, the worst performing months, by some distance, are October and November. That's a big tendency to overcome for anyone who's advocating a year end rally.

As far as September is concerned, however, there isn't much to note apart from the strong performance of the Dubai market during this month. On the whole, though, September has tended to be a mixed month for GCC equities. The good news is that the data above doesn't seem to correspond with how international equity markets tend to perform during this month. Phew!

Enjoy.

P.S. As with the previous Ramadan Effect post I have to point out that we're dealing with a very small data set for this analysis. My data only goes back as far as 2004 for GCC equity markets so there have only been six or seven prior instances of each calendar month. It's hard to draw any concrete conclusions from such a small data set.

Qatar First Investment Bank acquires a stake in a Leading Turkish based healthcare provider | Al Bawaba

Qatar First Investment Bank (QFIB) announced that along with ARGUS Capital, a London based private equity house, acquired a 40% minority stake in Memorial Health Group (MHG), one of the leading healthcare providers in Turkey.

MHG began operations in February 2000 and is among the top two 'class A' healthcare groups in Turkey, offering high quality service with well respected physicians and state-of-the-art equipment. MHG offers a full range of medical services covering 41 branches of medicine including, but not limited to, general surgery, cardiology, cardiovascular surgery, organ transplants, neurosurgery, da Vinci robotic surgery and orthopaedics.

MHG's main hospital complex is located in Okmeydani in Istanbul, a 55,000 square meter facility with a 214 bed capacity. In addition, MHG also operates two other complexes, one on the Asian side of Istanbul in Atasehir district with 143 bed capacity and the other in the Bahcelievler on the European side with a 114 bed capacity. MHG also operates a complex in Antalya with a 132 bed capacity in addition to two outpatient polyclinics both located in Istanbul.

U.A.E. Investor May Seek to Buy 10% of National Bank of Kuwait, Qabas Says - Bloomberg

An investor from the United Arab Emirates is interested in buying a 10 percent stake in National Bank of Kuwait, Al-Qabas reported, without saying where it got the information.

A representative for the Emirati investor may visit Kuwait this week to look at the possibility of the stake purchase, the newspaper said. An investment company with shares in NBK is in talks with other shareholders to gather the 10 percent required for sale, according to Al-Qabas.

National Bank of Kuwait doesn’t have any knowledge that shareholders of the bank received offers for a 10 percent stake and there are no negotiations with the bank on this, the lender said in a statement to the Kuwait Stock Exchange on Aug. 19.

Busier days forecast for markets - The National Newspaper

Analysts expect trading on UAE exchanges to pick up this week as the country’s addition to a major global stock index approaches.

The FTSE will add the UAE to its Global Equity Index Series as a secondary emerging market next month. While the move was announced almost a year ago, the upcoming inclusion of listed companies in the UAE was something to watch, said Ali Salaam, the director of MENA equities at Credit Suisse in Dubai.

“There’s reason to be optimistic,” he said."

GCC Market Analytics: Weekly GCC Index Analysis

Weekly Index Analysis for week ending 26th August 2010 (25th August 2010 for Saudi Tadawul Index).

Enjoy.

Top Dubai landlord in new ratings row - The National Newspaper

The Dubai Multi Commodities Centre (DMCC) hit back yesterday after Standard & Poor’s (S&P) said it expected the company to have cash management problems this year.

The DMCC, which owns the Dubai Gold and Commodities Exchange and developed the 87-building Jumeirah Lakes Towers project on Sheikh Zayed Road, yesterday objected to the assessment by the global credit ratings agency.

It said all of its debt was retired when it finished repaying a US$200 million (Dh734.5m) Islamic bond in May."

Saturday, 28 August 2010

Saudi Shares Gain Most in One Month on Oil Price Rally, Bernanke Comments - Bloomberg

Saudi Arabian shares rose the most in a month, after U.S. and European markets advanced and oil prices rallied on a pledge by U.S. Federal Reserve Chairman Ben S. Bernanke to maintain the U.S. economic recovery.

Saudi Basic Industries Corp., the world’s largest petrochemicals maker, known as Sabic, advanced to the highest since Aug. 23 after oil prices rose by $1.7 a barrel in the past week. The Tadawul All Share Index gauge gained 0.9 percent, the most since July 27, to 6,055.54, at the 3:30 p.m. close in Riyadh. The gauge pared its loss since the start of August to 3.6 percent.

“The market is reacting positively to a higher close for oil over the weekend,” said Anas Kassem, an investment analyst at Ajeej Capital in Riyadh, “in addition to Bernanke’s speech yesterday which helped western markets bounce back at the end of a difficult week.”

Hedge-Fund Manager Yan Swiderski Pushes the Envelope in Emerging Markets - Barrons.com

AS AN AVID WINDSURFER IN HIS YOUTH, Yan Swiderski would listen to BBC shipping forecasts from his home in England to learn about wind conditions off a point on the northwest shore of Spain. This particular stormy coast, protruding into the Atlantic, is known as Finisterre.

Swiderski, 48, thought of Finisterre when it came to branding the London-based emerging-markets investment firm he teamed up with in 2002. "Literally meaning 'at land's end,' it captures much of the emerging-markets story, looking out from the old world across stormy waters to a new one," he says.

As its performance attests, Finisterre Capital has navigated those waters well. Since its inception in April 2006 through July 2010, the firm's $720 million flagship Global Opportunity Fund, which Swiderski manages with the help of six analysts, has generated annualized returns exceeding 13.6%. The fund has beaten both emerging-market equity and fixed-income benchmarks by roughly five percentage points a year in this time.

GCC Market Analytics: Weekly GCC Trend Analysis


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Notes:
1. In the "Current Trend Conditions" section the short-term, medium-term and long-term trend values are determined by dual moving averages. The trend value is "Up" when the the shorter length moving average is greater the longer length moving average. The trend value is "Down" when the the shorter length moving average is less then the longer length moving average. For more information on dual moving averages see previous post here.
2. Dual moving average parameters are specific to each index and time-frame (short, medium and long).
3. The "Outlook" value can be "Very Bullish," "Bullish," "Neutral," "Bearish" or "Very Bearish." The value is determined by the historical performance of the index when the same short, medium and long-term trend conditions were in evidence in the past.
4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past
5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

The Associated Press: The 'new Dubai'? Libya open for business

In the outskirts of this city, Libya's second largest, row after row of sand-colored concrete apartment blocks and villas are sprouting from the desert. Hundreds of kilometers away, construction cranes dot the Mediterranean skyline of the capital, Tripoli.

The multibillion dollar construction frenzy taking place is the latest and most visible sign of Libya's drive for growth. It's a push that largely ignored the global financial meltdown that left other oil-rich Arab nations stumbling over the last couple of years, and reflects how Libya is tapping its oil wealth to reshape a country isolated for years by sanctions and international disdain.

Libya is "really trying to become, for lack of a better term, a new Dubai." said Carlos Caceres, a representative of the Los Angeles-based engineering giant AECOM working in Benghazi. He was referring to the United Arab Emirate sheikdom whose stratospheric rise was rivaled only by its staggering debt woes.

Friday, 27 August 2010

GCC Market Analytics: GCC Movers & Shakers

A quick look back at this week's big gainers and losers.

Enjoy.


Saudi Arabia outlook positive, inflation persists-IMF | Reuters

The outlook for Saudi Arabia's economy is positive as it confronted the global financial crisis handily, the International Monetary Fund said on Friday, noting gross domestic product not related to oil will likely grow 4.5 percent this year.

The fund's executive board also said the country's banking system is fundamentally sound, and the credit outlook has recently improved.

But the board, which had bilateral discussions with Saudi Arabia in July, said 'vulnerabilities remain, especially from the volatility of oil prices.'"

Abu Dhabi Investment, Apollo Are Among Bidders for Stake in BHF, FTD Says - Bloomberg

Deutsche Bank AG selected Abu Dhabi Investment Co., Apollo Global Management LLC, Permira Advisers LLP and LGT Group for the second round of a sale of BHF-Bank AG, Financial Times Deutschland reported, without saying where it got the information.

LGT of Liechtenstein has the best chances to win the bidding, the newspaper said. Abu Dhabi Investment, or ADIC, which has been cooperating with BHF in the fund business since 2009, is considered an unlikely buyer for political reasons, the FTD reported. The private-equity firms have only an “outsider chance” to win the bidding, FTD said.

Deutsche Bank spokesman Michael Lermer declined to comment when contacted by Bloomberg News.

Thursday, 26 August 2010

Analysis: Dubai World sale of crown jewels seen as last option | Reuters

Dubai World's willingness to sell prized assets such as ports operator DP World to pay down its debt pile is considered such a drastic move that analysts see it more as a last-resort bargaining tactic.

Documents obtained by Reuters this week revealed the surprising news that the debt-laden conglomerate was willing to let go of "strategic assets" such as DP World, Jebel Ali Free Zone and Dubai Maritime City (DMC) as part of a $19.4-billion fundraising effort as it tries to reach a restructuring deal with creditors by October 1.

By displaying its willingness to put these assets on the block, Dubai World is effectively offering creditors an insurance policy that if the restructuring plan runs into trouble, it will sell core, strategic assets.

Nakheel Trade Sukuk Fair Value Is Estimated in Low 60 Cents, JPMorgan Says - Bloomberg

Nakheel PJSC’s proposed sukuk to settle trade creditor claims is estimated to have a fair value in the low 60 cents to the dollar, JPMorgan Chase & Co. said.

The property company, controlled by state-owned Dubai World, will be able to make almost all coupon payments on the five-year Islamic bonds although “we are less confident about Nakheel’s ability to redeem the principal in 2015,” JPMorgan analyst Zafar Nazim wrote in a research note e-mailed today. Nakheel will face the risk of running out of cash in 2015 unless it starts new developments and sell land in three to five years, the report said.

Nakheel, which is building palm tree-shaped islands off Dubai’s coast, said on July 14 a group of its creditors unanimously supported a plan on altering the terms on $10.5 billion of loans and unpaid bills. The company expects to pay 40 percent of the money owed to trade creditors in cash and 60 percent through a tradeable sukuk, it said.

Dubai Can Cut Costs 30% After Spending Like `Arabian House,' Khalfan Says - Bloomberg

Dubai’s Chief of Police and head of the budget committee Dahi Khalfan said the emirate can cut spending by 30 percent, five months after it pledged to save $1 billion this year in government expenses.

“We have been extremely spoilt,” Khalfan said late yesterday in an interview. “In our budget we spend like an Arabian house, with all its generous hospitality.”

Dubai in March ordered government departments to curb spending this year to reduce the size of the emirate’s expected 6 billion dirham ($1.6 billion) budget deficit. Departments were told to reduce spending by 15 percent to save about $1 billion. Further savings could be made in “construction, events and activities, travel costs, hospitality and official missions outside the country,” Khalfan said.

Dubai Shares Rise Most in a Week on Dubai World Debt Optimism, Asset Sales - Bloomberg

Dubai shares rose the most in more than a week on optimism Dubai World is closer to resolving its debt restructuring after the state-owned holding company said it may raise as much as $19.4 billion by selling assets.

Emaar Properties PJSC, the developer of the world’s tallest skyscraper in Dubai, advanced the most in more than a month. Emirates NBD, the United Arab Emirates largest bank by assets, rose 1.2 percent. The DFM General Index climbed 0.9 percent, the most since Aug. 17, to 1,497.47 at the 2 p.m. close in Dubai, bringing the weekly gain to 0.4 percent. The Bloomberg GCC 200 Index increased 0.1 percent.

“News regarding Dubai World is being taken well by local investors and they are piling in to make a quick turn,” said Dubai-based Julian Bruce, director of equity sales at EFG-Hermes Holding SAE. “The reports are an indication of progress.”

Union Properties Agrees to Sell Dubai Ritz-Carlton Hotel at Lowered Price - Bloomberg

Union Properties PJSC agreed to sell the Ritz-Carlton hotel development in Dubai for less than the asking price of 1.5 billion dirhams ($410 million), Chairman Khalid bin Kalban said.

Dubai’s third-biggest developer by market value plans to sign the sale agreement in the next ten days, bin Kalban said by phone today. He declined to identify the buyer of the hotel, located within the Dubai International Financial Center, or disclose terms of the deal until the contract is signed.

“Everything has been agreed, all that remains is the drafting of contracts,” bin Kalban said.

Qatar Exchange Drafts Rules to Start Trading in Bonds, CEO Andre Went Says - Bloomberg

The Qatar Exchange, the Persian Gulf country’s equity market, must draft new listing rules before trading in bonds and Islamic debt can begin, according to Andre Went, the bourse’s chief executive officer .

“We are drafting new rules for the bonds,” Went told a seminar in the Qatari capital of Doha late yesterday. The rules would relate to information disclosure and the size of the bonds by issuers, he said.

Went declined to say when bond or sukuk trading will begin. In February, he said that bond trading may begin before the September introduction of the NYSE Euronext Universal Trading Platform, called UTP.

GCC Market Analytics: UPDATE - Saudi Tadawul Index: Watch Out Below?

In a previous post I highlighted how the price level of the Saudi Tadawul Index was sitting rather precariously on a long-term support trend line.

Well, a few weeks have past so I thought I'd take another look to see what's happened:




As you can see, the Index price level has recently broken below the support level. Does this mean Saudi stock prices are heading lower? As I mentioned in the last post, I don't place too much emphasis on this type of analysis. However, I know there are many traders and market analysts out there that do and they'll being interpreting this situation as distinctly bearish.

It's interesting to note that in the most recent Weekly GCC Trend Analysis report the outlook for the Saudi Tadawul Index was very bearish with the short, medium and long-term trends all pointing down. Perhaps the confluence of this and the trend line break above do suggest tough times ahead for Saudi stocks. Something to keep in mind anyway.

Alliance Medical Board Said to Agree to Begin Sale of Dubai-Owned Company - Bloomberg

Alliance Medical Ltd.’s board has agreed to sell the company to help repay debt following a demand by the senior lenders of the U.K.-based medical imaging company, a person with knowledge of its restructuring said.

Alliance Medical’s adviser, Blackstone Group LP, has begun contacting potentially interested parties, the person said, declining to be identified because the information is private. Senior lenders of Alliance Medical will simultaneously begin work on an alternative debt-restructuring proposal to the one suggested by Alliance’s owner, Dubai International Capital LLC, and junior mezzanine lenders on July 15, the person said.

Spokesmen for Dubai International Capital and Alliance Medical, based in Warwick, England, declined to comment. A call to Blackstone’s office in London wasn’t answered.

Wednesday, 25 August 2010

FT.com - Tehran exchange extends advance

While the Middle East’s stock markets languish in the summer heat, still unable to recover from the financial crisis, one bourse has kept on gaining – the Tehran Stock Exchange.

The TSE has gained 53 per cent so far this year – after climbing 29 per cent last year – and now has a record market capitalisation of $81bn across about 350 companies. This comes in spite of the dire state of the Iranian economy, a tightening international sanctions regime and the most severe global financial crisis in generations.

Fund managers say the stock market has primarily benefited from a lack of investment alternatives for Iranians. Property, long the most popular asset class, has struggled for two years, and falling interest rates have made bank deposits less attractive – particularly in light of high inflation.

Factbox: Key points of Dubai World restructuring plan | Reuters

State-owned conglomerate Dubai World's creditors have been told the company is in need of 'urgent' restructuring as it seeks agreement on a multi-billion dollar debt plan.

A final restructuring proposal, presented to creditors on July 22 and obtained by Reuters, showed that Dubai World is eyeing sales of its prized assets to cut its debt.

Following are the key new elements of the debt proposal."

FT.com - Salalah expands its shipping hub role

A rebellious backwater until the late 1970s, Oman’s southern Dhofar region enjoys the summer monsoon rains or khareef, when Middle Eastern tourists flock to cool off in the verdant hills around Salalah, the provincial capital.

The area has other attractions – for port operators. Salalah is only seven hours sailing time from one of the world’s main trade routes, the straight line between Colombo in Sri Lanka and the Gulf of Suez.

In 1996 APM Terminals, a unit of Denmark’s AP Moller-Maersk, decided to develop the old Raysut harbour near Salalah, giving global shipping a new address.

Turkey joins the Islamic bond revival | beyondbrics | FT.com

Kemal Ataturk, the founder of modern Turkey, was famously no fan of his country’s Muslim roots and culture, and once reportedly wished “all religions at the bottom of the sea”.

One wonders what he would have made of news that a Turkish bank that adheres to sharia, which prohibits interest, is about to sell the country’s first Islamic bond, known as sukuk.

A smattering of Islamic banks - known as “participation banks” in Turkey to assuage secularists - have popped up in recent years, many of them owned by large Gulf-based Islamic financial institutions. But they remain miniscule in size compared to their conventional counterparts.

Is There A Ramadan Effect?

We're now well into the Muslim holy month of Ramadan. In this post I'll take a look at how the GCC markets tend to behave prior to, during and after Ramadan.

In my six years living in Dubai the two comments I hear most with regards to Ramadan and the stock market are:

  1. Nothing much happens during the Ramadan and equity prices don't move much
  2. After Ramadan the market tends to be bullish with stock prices increasing
It's not difficult to see the perceived logic in these comments. Many people tend to take holidays during Ramadan so there are less traders and investors active in the market resulting in subdued price action. However, when everyone returns after Ramadan there is renewed activity in the market which tends to result in increasing stock prices.

I want to test these ideas to see if and to what extent they're accurate. To do this I've looked at the Dubai, Saudi and Kuwaiti equity markets. Specifically, I've analysed the direction of prices (did they go up or down) and the volatility or prices (how much did they move) for each market index during Ramadan, 20 trading days prior to Ramadan and 20 trading days after Ramadan.

Firstly, let's take a look at the percentage change in the DFM General Index during, prior to and after Ramadan.



As you can see, price movements during Ramadan (approx. 20 trading days in duration) have tended to be positive with the DFM General Index increasing in value in 5 out of the last 6 years. The 20 trading days following Ramadan have also been positive but less so than during Ramadan and with only 3 of the last 6 years producing price increases. The average price change in the 20 trading day prior to Ramadan has been slightly negative.

Let's take a look at the same data for the Saudi and Kuwait indexes:




For both Saudi and Kuwait the average price change during Ramadan has been positive whereas the price change in the 20 days after Ramadan has been negative, significantly negative in the case of Kuwait with only one post Ramadan period producing an increase.

On average, the 20 trading days prior to Ramadan have both been positive, outperforming Ramadan price increases for Kuwait and underperforming for Kuwait.

Given the above results I think we can say the following with regards price direction during and around Ramadan:

  1. Index prices have tended to rise during Ramadan
  2. Index prices during Ramadan have tended to perform better than the 20 days following Ramadan
I think this debunks a lot of what I'm used to hearing people say about Ramadan and stock prices. If anything, based on the above analysis, Ramadan is often a reasonable month for stock prices whereas the period following Ramadan is often not.

Next, let's look at the volatility of price changes during, prior and after Ramadan. To do this I calculated the percentage range of index price movements during the three periods. For example, if an index was trading at 100 at the beginning of Ramadan and achieved a high of 125 and a low of 75 during Ramadan, the percentage range would be 50% ( [High-Low] / Starting Value = [125-75] / 100)

The percentage range is just a way of determining the volatility of price changes. High percentage values tell us that prices moved significantly whilst low percentage ranges tell us that prices were quiet, moving in narrow ranges.

Again, let's start by looking at the results for the DFM General Index:


As you can see, I've formatted the table so that high percentage ranges are in dark green and lower values are in light green. What do the results tell us? Well, the average price range prior and during Ramadan were very similar, 12.35% versus 12.89%. However, the range following Ramadan was significantly greater indicating an increase in volatility during this period.

The same results apply to the Saudi and Kuwaiti Indexes as well:


The range of prices during the 20 trading days after Ramadan are higher than the price changes during and prior to Ramadan. For Saudi and Kuwait the average price range was also higher during Ramadan than in the period prior to Ramadan.


Putting It All Together

Continuing the list of observations above we can now note the following:

  1. Index prices have tended to rise during Ramadan
  2. Index prices during Ramadan have tended to perform better than the 20 days following Ramadan
  3. Index prices tend to increase in volatility during the 20 days following Ramadan

Based on this analysis price movements during Ramadan are not particularly muted in terms of either direction or volatility. The 20 days after Ramadan tend to produce more volatility but not necessarily on the upside as is often thought.

Following Ramadan I'll update the above tables to see if this year's index price movements are in-line with the above results. An important thing to note when interpreting the above results, however, is that we're dealing with only a few data points. The market data that I have available only goes back to 2004 so we're only looking a six data points for each index (2004 to 2009). This isn't enough to assign much confidence in the results. Certainly not enough to based trades upon.

That said, I think we can say that the typical views about Ramadan and stock price movements are not borne out by the analysis above.

Enjoy.

Qatar Leads Gulf Markets Lower on Global Growth Concern; Bahrain Advances - Bloomberg

Qatar shares declined the most in almost six weeks, snapping seven days of gains, as a record plunge in U.S. home sales and slowing export growth in Japan fueled concern the global economic recovery is faltering.

Industries Qatar, the Gulf Emirate’s state-controlled petrochemical and steelmaker, lost 1.3 percent and Qatar Islamic Bank SAQ retreated the most in more than a week. Qatar’s QE Index slipped 0.8 percent to 7,143.2, the most since July 15, at 12:07 p.m. in Doha. The Bloomberg GCC 200 Index fell 0.7 percent.

“Declines in global markets have reflected negatively on investor sentiment,” said Ziad Dabbas, a financial analyst at National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second-largest lender by assets. “It’s Ramadan, and that means trading is slower than usual.”

Exclusive: Dubai World prized assets on sale to cut debt | Reuters

Dubai World DBWLD.UL believes it can raise as much as $19.4 billion from selling key assets over eight years, or almost double the current price, if creditors back its restructuring, a document obtained by Reuters showed.

The struggling state-owned conglomerate, which needs to get creditors to agree to its proposal by October 1 in order to go forward with the plan and clean up its balance sheet, thinks sales right now would generate a maximum of $10.4 billion, according to the document, which was obtained on Wednesday.

As a further incentive to creditors burned by the group's ambitious expansion in boom times, it is offering bankers a 'consent fee' of between $150,000 and $800,000 for agreeing to the proposed plan."

Turkey's first Islamic bond offer oversubscribed-sources | Reuters

Turkey's first Islamic bond offering, from lender Kuveyt Turk, fetched a yield of 5.25 percent on Tuesday and was oversubscribed by investors, sources familiar with the matter said.

Kuveyt Turk, which is majority-owned by Kuwait Finance House (KFIN.KW), launched the three-year $100 million sukuk on August 17, paving the way for more Turkish companies to tap the growing Islamic finance market.

The sukuk, which was primarily bought by financial institutions, is the first sukuk ever out of Turkey and the first bank sukuk originating from Europe, said Rizwan Kanji, senior debt capital markets attorney at law firm Norton Rose, which structured the deal."

Dubai-Owned Alliance Medical May Be Put Up for Sale Today, Times Reports - Bloomberg

Alliance Medical Ltd., a U.K. hospital scanner business owned by Dubai International Capital LLC, is likely to be put up for sale today, the London-based Times reported, without saying where it got the information.

The company’s lenders wrote to its directors on Aug. 23 asking them to look at a sale and the board will probably approve that request this morning, the newspaper said.

Both Deloitte, which is advising the banks, and Blackstone, Alliance Medical’s adviser, have valued the company at 300 million to 340 million pounds ($460 million to $525 million), compared with the 600 million pounds Dubai International paid in 2007, the Times said.

Sovereign Sukuk Beating Company Debt First Time Since May: Islamic Finance - Bloomberg

Sovereign Islamic bonds from Asia to the Persian Gulf are beating returns on corporate sukuk for the first time in three months as accelerating economic growth and rising oil revenue shore up state finances.

Government debt that complies with the religion’s ban on interest gained 1.7 percent so far this month, according to the HSBC/NASDAQ Dubai Sovereign US Dollar Sukuk Index, more than the 1.1 percent advance in bonds issued by companies. The last time the sovereign notes performed better was in May, when they dropped 0.5 percent compared with a loss of 2.3 percent on corporate debt.

Malaysia’s Lembaga Tabung Haji fund, France’s BNP Paribas Investment Partners and Duet Mena Ltd. in Dubai forecast government debt will outperform until property prices in the Persian Gulf recover from a slump that prompted credit-ratings companies to downgrade corporate bonds. Average oil prices of $78 a barrel will support fiscal surpluses in the Middle East this year, Moody’s Investors Service said on Aug. 3.

Tuesday, 24 August 2010

Saudi Shares Falls Most in 2 Months on Growth Risk, Oil Drop; Sabic Slides - Bloomberg

Saudi Arabian shares retreated the most in two months, leading a decline in Persian Gulf markets, after global equities fell on concern the global economic recovery is faltering. Oil declined for a fifth day.

Saudi Basic Industries Corp., the world’s biggest petrochemical maker known as Sabic, dropped to the lowest since July 4. Its Saudi Kayan Petrochemical Co. unit fell 5.7 percent to a 10-month low and Jabal Omar Development Co., a Saudi real- estate developer, slid the most in two months. The Tadawul All Share Index declined 1.5 percent to 6,018.27 at the 3:30 p.m. close in Riyadh, the biggest slump since June 29. The Dubai Financial Market General Index lost 0.5 percent and the Bloomberg GCC 200 Index slid 0.7 percent.

“A stream of negative news from international markets over the past week has pushed buyers to the sidelines,” said Amro Halwani, a trader at Shuaa Capital PSC in Saudi Arabia. “Sentiment on oil is still murky. This is pushing nervous investors to dump petrochemicals.”

Islamic Development Bank Aims to Sell $1 Billion of Sukuk to Fund Projects - Bloomberg

The Islamic Development Bank, a Saudi Arabia-based multilateral lender, plans to sell $1 billion of Islamic bonds to fund development projects in its member countries, Vice President Abdul Aziz Al Hinai said today.

The five-, seven- and 10-year sukuk, part of the IDB’s $3.5 billion Medium-Term Note program, will be issued in the fourth quarter and listed in London and Kuala Lumpur, Al Hinai told reporters in the Malaysian capital after registering a separate ringgit issuance on the local exchange. CIMB Group Holdings Bhd. and four international banks will manage the sale, he said.

Global sales of sukuk will pick up in the second half of the year and rise above the total in 2009, as more companies and governments tap the market, said Badlisyah Abdul Ghani, head of CIMB’s Islamic banking unit. Issuance will climb to as much as $25 billion from about $20 billion last year, he said.

Dubai's Government Has No Current Plan to Seek Credit Rating, Sell Bonds - Bloomberg

Dubai’s government has no “current” plan to seek a credit rating and “no specific plans” to sell bonds, a spokeswoman for the emirate’s Department of Finance said in an e-mailed statement today.

The department “continually assesses its financing options,” the statement said.

UAE stock markets need more liquidity - Daman CEO | Reuters

Stock markets in the United Arab Emirates need additional liquidity from government funds to counter slumping volumes and muted investor activity, the chief executive of Dubai-based Daman Investments said. 'I think there should be a program for creating sustained activity including pension funds and government funds,' Shehab Gargash told reporters on the sidelines of a conference late on Monday.

'If you have the ability to prompt the market, use it because your market is a very easy and quick reflection of the health of the economy.'

UAE markets, which include the two domestic bourses, Dubai Financial Market DFM.DU (DFM) and Abu Dhabi Securities Exchange are the worst-performing among Gulf peers so far this year with lack of institutional participation hurting liquidity."

Sawiris Pushes Vimpelcom Deal as Debt Mounts, Options Dwindle - Bloomberg

Egyptian billionaire Naguib Sawiris, chairman of the Middle East’s biggest mobile-phone operator Orascom Telecom Holding SAE, says nothing drives him more than being told something’s impossible.

“When I go anywhere and someone says ‘impossible,’ I laugh,” he told a gathering of young businessmen in Cairo last month. “In 90 percent of the cases, the impossible happens. A key feature in an entrepreneur is self-confidence. He must believe he’s Superman.”

The 56-year-old is trying to practice what he preaches. Undaunted by his failure to forge a deal with South Africa’s MTN Group Ltd. in June, Sawiris is now in talks to merge his phone business with Russia’s OAO VimpelCom, two people familiar with the matter said on Aug. 20. The transaction would create an entity valued at more than $25 billion.

Aldar's Sukuk Rebounding on Bets for Abu Dhabi Support: Islamic Finance - Bloomberg

Aldar Properties PJSC’s Islamic bonds, the worst-performing debt among Abu Dhabi-linked companies, are rebounding on speculation the government will support the company.

The 5.767 percent convertible Islamic notes due in November 2011 from Abu Dhabi’s biggest real-estate developer rose 1.81 cents on the dollar from a 16-month low reached on Aug. 11, cutting the yield to 9.589 percent from 11.142 percent, according to data compiled by Bloomberg. The securities probably will advance to par, according to Algebra Capital Ltd.

“I think the government will support Aldar,” Mohieddine Kronfol, a managing director at Algebra Capital, the Dubai firm that is 40 percent owned by San Mateo, California-based Franklin Resources Inc. with more than $300 million of assets under management, said in an interview on Aug. 19. The company has “enough money to last for a year-and-half, but beyond that they have to come up with a credible funding plan,” Kronfol said.