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Thursday, 7 January 2010

Gulf Shares Rise for a Third Day; Oman Leads Advance as Bank Muscat Climbs

Bankers expect details on Dubai World debt revamp

Dubai World [DBWLD.UL], the state-owned holding company grappling to restructure about $22 billion in debt for its property units, could unveil some details about its plans as early as Thursday, bankers said.

Dubai sent shockwaves through global markets on Nov. 25 when it said it would request a standstill on billions of dollars of debt linked to Dubai World and its property units Limitless and Nakheel [NAKHD.UL], developer of three palm-shaped islands.

"We have been notified internally that Dubai World is likely to let creditors know its debt restructuring plans today," an Abu Dhabi-based banker said, without elaborating.

A report in Alrroya Aleqtissadiya quoted an unidentified banking source saying that Dubai World would "answer its creditors electronically today (Thursday)".

Dubai World has set up a website to communicate securely with creditors, bankers said, adding that although there are indications of an imminent announcement to creditors, no detailed plans were likely to be presented.

"There will likely not be many details, but they (Dubai World) want to let the creditors know they'll keep servicing their debts," said a banker in Dubai.

"I hope there is no absolute standstill. Dubai World is servicing its debts, and I expect the restructuring will just extend maturities. It's likely going to be a friendly rescheduling," the banker said.

Dubai World disappointed creditors last month by making little progress in its intention to request a formal standstill but said it would pitch a proposal in January. [ID:nLDE5BK1FS]

"The consensus is that the whole process will take some time, so if there was some sort of announcement it's likely to only be a preliminary update," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"I doubt there will be any real substance at this stage."

A $10 billion lifeline from wealthier neighbour Abu Dhabi helped Dubai World stave off default on a $4.1 billion Islamic bond from Nakheel and provided enough funds to service debts until April.

But Dubai's debt dilemma remains potent, with further upcoming maturities from other prominent members of Dubai Inc, the network of government-owned companies, likely to affect investor sentiment.

"It's important to note that the debt situation in Dubai is little changed from what it was before the announcement of the standstill request," said Daniel Broby, chief investment officer at Silk Invest, an asset management company.

"The Nakheel 2009 was a little different to other portions of debt within the group: firstly it was the largest sukuk structure in the Emirate, and secondly it carried the guarantee of the parent. Other tranches of debt do not."

A Dubai World spokesperson said in December that the company was aiming to have a restructuring plan in place by April. In December, a special tribunal to hear cases submitted against Dubai World was set up by decree.END

MENA Economic Report - January 2010 (PDF 1.42mb)

The Middle East and North Africa (MENA) region is feeling the impact of the world recession as well. The year 2009 came with unfavorable circumstances for this region, which was once at odds from the international economy. Again, the effect of the crisis differed from a country to another, depending on its economic conditions. Economies that are oil based were strongly hit in their current accounts, as their trade balances depended on oil exports.

Other countries, where services receipts are the main sources of national income, have been hardly hit by the current stagnation of the world economy and are awaiting for any signs of recovery. However, few countries showed real resilience to the recession and have managed to optimize the current situation to get least affected by the world turmoil.

Dubai Downturn Sends Ripples Throughout Arab World -

Mahmoud Tamimi's friends call it the ''Dubai syndrome'' -- the insatiable longing for a city he loves but was forced to leave. Back in Dubai, the 31-year-old had a good job, nice apartment and a $3,700 monthly salary, dozens of times what he'd ever made before.

Then, early last year, the Jordanian of Palestinian origin was laid off as Dubai's economy plunged. With his residency permit tied to his job, he couldn't stay. He now squeezes into a two-bedroom apartment with his wife, daughter and seven other family members in a poor neighborhood of Jordan's capital, vainly looking for work.

Dubai's downfall is not only hurting the city-state and the financiers who bet big on its promises.

Unpaid Japan firms to stop Dubai Metro work

A consortium of four Japanese general contractors and one Turkish firm will suspend construction of the Dubai Metro as early as Thursday, citing the delay in payment from the Dubai government, the Nikkei reported in its Thursday evening edition.

The rail system was partially opened this past fall. Its full completion, originally slated for this spring, is now expected to be pushed back until the end of the year for a number of reasons, including design changes.

The consortium members--including Obayashi Corp, Mitsubishi Heavy Industries Ltd. Mitsubishi Corp. and Kajima Corp -have decided to halt work for the time being, placing priority on talks with the Dubai government to secure back payments.

The consortium received roughly Y490 billion worth of orders to build the metro from Dubai's Roads & Transport Authority, with the work starting in 2005. But the actual construction expenses are expected to total almost twice as much.

As of the end of October, the consortium's accounts receivables were estimated at more than $5.2 billion (about Y480 billion).END

Indonesia says UAE fund plans to invest $5.2 bln

The UAE's Middle East Coal (MEC) plans to invest $5.2 billion in infrastructure in Indonesia's East Kalimantan including a power plant, a railway and a smelter, the head of Indonesia's investment agency (BKPM) said.

The projects in the province on Borneo island include an around 140-km railway, a 1,400 megawatt coal-fired power plant and an alumina smelter, Gita Wirjawan said late on Wednesday.

Wirjawan confirmed the plans in a mobile phone text message to Reuters, adding: "as for the railway project, the land clearing has been done in the past months and the first stone will be laid in March."

Judge puts brake on al Sanea case

A judge has ordered a halt to evidence gathering in a dispute between Ahmad Hamad Al Gosaibi and Brothers and the Saudi billionaire Maan al Sanea, saying he was not convinced the hearing should be in his court.

“I am very, very concerned that these cases do not belong here,” said the New York state Judge Richard B Lowe at a hearing late on Tuesday, according to a Zawya Dow Jones report.

The judge’s demand relates to cases originally filed last summer by the Dubai-based Mashreqbank against Al Gosaibi and a Bahraini banking subsidiary called The International Banking Corporation (TIBC).

Central bank sees moderate growth

Banks will have to make further provisions for bad loans this year although its economy will see moderate growth, the UAE’s central bank governor said on Wednesday.

The global financial crisis sent the second largest Arab economy into a downturn last year and analysts expect Dubai’s debt problems to hinder its recovery in 2010.

“The situation globally seems to have stabilised, which reflects on the UAE’s economy,” Sultan Nasser al Suweidi told Al Arabiya television.

P&O in UK return as Dubai plans London float

Delivering a much-needed vote of confidence in UK markets, DP World said it would seek a second primary listing on the London Stock Exchange "to address its continued disappointment with the [Dubai] market's valuation of the company".

DP World, the world's fourth-largest port group, floated on the Nasdaq Dubai in November 2007 but, after a brief rally, the shares dropped beneath their $1.30 list price. The stock rose 4pc to 44 cents on news of the dual-listing plans, valuing the business at $7.34bn (£4.5bn).

The company is four-fifths owned by Dubai World , the property conglomerate that sent shockwaves round the region after threatening to default on its debts last year. Insiders said Dubai World is considering raising cash in a UK listing by selling down its stake. Marketing in the company will now begin, which could also result in new equity being issued. A DP World spokesman said no decision had yet been made.

GCC Returns: It’s All About Relativity

2009 was a good year for the GCC and the world, but how good? Well, only “relatively good!” The global financial crisis took its toll on the GCC market as it was hurt by the dull impact of the declining oil prices and the overall economic slowdown. As the recession reduced demand for oil, prices dropped to as low as $32.70 a barrel on January 20th 2009, after touching a record $147.27 a barrel in 2008. In 2009, the weakening dollar bolstered the investment appeal of commodities, and the “Chinese effect” has helped push oil prices back to the 80’s range.


Beyond Dubai: What's Ahead for the Middle East This Year?

When the 818-meter Burj Dubai tower, the world's tallest building, opened for occupancy with lots of fanfare on January 4, it was proclaimed to be a crowning achievement of the emirate of Dubai, with its bold plans to establish itself as a regional trade and services hub. The $4 billion tower included an Armani hotel, an observation deck, homes, offices and more, and was nothing less than "a symbol of Dubai's can-do spirit," according to the building's owner, state-owned Emaar Properties.

Among Dubai's creditors, though, the can-do spirit is wearing a little thin. Last November, Dubai World, one of the largest government-owned conglomerates, announced it would not meet billions of dollars of debt repayment obligations. In response, credit ratings agencies such as Moody's and Standard & Poor's downgraded the debt of several Dubai government-related entities to junk. "Dubai's corporate landscape is now effectively a high-yield market," Moody's wrote in a December note to clients. In mid-December, Abu Dhabi threw a $10 billion lifeline to Dubai -- but the latter is still saddled with debts of nearly $100 billion, which it must face squarely in the coming year.

Dubai's problems are not the only woes among the economies of the Middle East. Last summer, two vast family-owned conglomerates in Saudi Arabia defaulted on billions of dollars of debt repayments, highlighting lack of transparency and lax lending practices in the region. And in the past year or so, some $500 billion of planned infrastructure projects in the Gulf have been abandoned or temporarily halted as funding has dried up. Meanwhile, the Middle East's real estate market has slumped -- most notably in Dubai, where prices halved in the year following their August 2008 highs.

Hopes pinned on recovery in Gulf

For much of 2009, Arab stock markets as a whole significantly underperformed other frontier and emerging markets, despite relatively healthy oil prices.

Investor wariness was reinforced by a series of shocks in the Gulf in particular. Last year began with investment company defaults in Kuwait, and ended with a debt restructuring in Dubai. In between, the traditional summer lull was shattered by the defaults of two leading Saudi family groups, virtually unheard of in the Middle East.

Over the past 12 months, the MSCI Arabian Markets index chalked up a gain of only 15.7 per cent, compared to the 69.5 per cent rally of the Emerging Markets index. Excluding the Gulf bourses, the MSCI Frontier Markets has risen 22.4 per cent over the same period.

In a nutshell, Iran fears losing pistachio crown to US

Iran has been a pistachio producer since the fifth century BC and the days of the Achaemenid Empire. Aficionados of the Iranian nuts ascribe their dominant position in global markets to superior taste and quality.

Iranian farmers fear, however, that they are losing top position to, of all countries, the US, an arch political foe .

Alarm bells rang in 2008 when heavy frosts meant Iran's exports fell behind those of the US . Exporters say they managed to catch up in 2009 and are now marginally ahead of the US, but they fear other fundamental problems will cause them to lose their leading position.