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Wednesday, 13 January 2010

UAE growth estimates slashed on Dubai debt

Economists are scaling back their estimates for economic growth in the United Arab Emirates this year amid fears that Dubai World's debt problems could stymie the flow of much needed credit and weigh on fragile investor confidence.

HSBC Middle East Ltd. has lowered its 2010 gross domestic product forecast for the Middle East's second-largest economy to 2% from 4.1%, while Standard Chartered Bank has slashed its growth estimate to 3% from 4.5%.

"Our view is that the events at Dubai World will have an impact on the U.A.E.'s growth as they influence confidence and will lead to both lower economic sentiment and credit growth for 2010," said Marios Maratheftis, an economist at Standard Chartered Bank. "Without the Dubai World events, growth could have been at 4.5% for 2010."

New queries on lenders’ merger

Amlak and Tamweel once controlled more than half of Dubai’s booming mortgage market, but for more than a year the country’s two largest Islamic lenders have been closed to new customers while they crept toward a merger.

Now the creation of a judicial panel to hear disputes involving the two lenders and their creditors is expected to clear the way for the tie-up. But the new panel’s precise legal remit has not been made public and lawyers fear it may be usurping a function better provided by the country’s court system.

“In my opinion, the judicial committee is more of a pre-emptive move to help keep the situation under control, should some of the creditors choose to push for their claims,” says Khalid Howladar, the senior credit officer of structured and Islamic finance at Moody’s Investors Service.

Mubadala extends its range with latest financing accord

Mubadala Development, the investment arm of the Abu Dhabi Government, has entered the aviation components financing sector with a US$100 million (Dh367m) deal with Air Berlin.

Mubadala will provide financing for the purchase of 12 spare engines for the German carrier, it confirmed yesterday. The arrangement was tied to a 10-year engine-servicing contract between Air Berlin and SR Technics, an aircraft maintenance, repair and overhaul (MRO) firm based in Switzerland that is controlled by Mubadala.

Homaid al Shemmari, the associate director of Mubadala Aerospace, said the transaction illustrated the progress on the firm’s MRO strategy, which calls for developing SR Technics and another Mubadala affiliate, Abu Dhabi Aircraft Technologies, into leading players in the maintenance business even as the industry is dragged down by the economic downturn.

Dubai lines up with Luxembourg

Dubai hopes to give its mutual funds business a boost after striking a co-operation deal with Luxembourg that could funnel more business to the emirate’s financial services sector.

The financial centres of Dubai and Luxembourg yesterday agreed to work together in the areas of funds, wealth management and Sharia-compliant products. It comes as the Dubai International Financial Centre (DIFC) prepares to cut registration fees in a bit to attract more tenants.

The accord, signed by the DIFC and Luxembourg for Finance, the agency that promotes the Duchy’s financial sector, is part of the DIFC’s strategy to grow by facilitating financial transactions between major financial hubs in the East and West.

National approach needed for share market regulation

There is a shake-up going on in UAE stock markets, kicked off by the announcement of a merger between the Dubai Financial Market (DFM) and NASDAQ Dubai.

For the sake of market transparency and integrity it cannot happen a moment too soon, if the current situation involving Aabar and Arabtec is anything to go by.

At least on the regulatory front, the DFM could do with an immediate injection of the rigorous sanctions NASDAQ Dubai has at its disposal. The Aabar-Arabtec affair also further advances the argument that Emirates Securities and Commodities Authority (ESCA), the UAE federal watchdog, should also be in on the merger.

Samba Financial: Ending 2009 Smoothly


Samba Financial Group (SAMBA AB) posted their FY 2009 results with a marginal increase of 2.4% in their net income and EPS from the previous year. Q4 wasn’t a big contributor to the full year earnings as it added only added SAR826 million (down 31% QoQ and up 1.1% YoY) to the overall figure of SAR4,4454 million in profits. This translates into an EPS of SAR 0.928 for Q4 and SAR 5.067 for the year.

Profits were mainly driven by an increase in their core banking performance and their non-interest income; lifting their operating income by 1.4% YoY to SAR7,110 million. Although Samba recorded lower-than-expected provisions of SAR230 million, they are being more risk averse in other areas such as decreasing their loan book. This brought-down the Loan/Deposit ratio from 73% in Q4 ’08 to 57% in Q4 ’09, thus, capping any big jump in their net interest margin or net income.

Overall, Samba’s results were decent and better than the two banks that announced the same day: Banque Saudi Fransi which recorded a decline of 43% in their net income and Saudi Hollandi Bank which reported a loss of SAR440 million. Samba trades at SAR 54 and a reasonable 2010 P/E of 10 times earnings, but a hefty P/B of 1.93. The stock traded up 8.64% in the week leading to the earnings announcement, but went down -1.82% the day after earnings were announced. Bank of America maintained their “Buy” recommendation and target price of SAR 70/share. Deutsche Bank upgraded the stock from “Hold” to “Buy” and upped their target price from SAR 59 to SAR 65.

Forget Dubai: Two Timely Opportunities To Invest In The Middle East

Investors hold to a myriad of catchphrases, proverbs and beliefs about everything from the traditional Santa Claus Rally to buying when there’s blood in the street… or passing up on immediate investments into any country that builds the world’s tallest building.

Admittedly, there is some truth in that last one – at least in the short term – but it doesn’t necessarily hold for the long haul. If it did, the United States stock market would have peaked decades ago.

Of course, the U.S. hasn’t held that claim to fame for some time. And on January 4, 2010, Dubai officially opened its 160-story Burg Khalifa, stealing thunder from the previous tallest building in Taiwan.

Dubai Financial Center to Cut Fees in Bid to Attract More Funds

Dubai International Financial Centre, a tax-free business park, plans a “substantial” cut in fees on asset managers this year to attract more funds and become internationally competitive.

“We want a substantial share of the mutual funds industry,” especially those investing in the Middle East and North Africa, DIFC Chief Economist Nasser Saidi told reporters at a conference in Dubai today. DIFC is also looking to attract real estate investment trusts and funds complying with Muslim banking law, he said.

He declined to specify the size of the cuts that cover levies imposed by DIFC, regulator Dubai Financial Services Authority and the park’s bourse, Nasdaq Dubai Ltd. The move to lower regulatory, registration and listing costs for funds follows a review submitted to the regulator on Sept. 30.

Fitch Affirms Saudi Arabia at 'AA-' with Stable Outlook

Fitch Ratings has today affirmed Saudi Arabia's Long-term local and foreign currency Issuer Default ratings (IDRs) at 'AA-', both with Stable Outlooks. The Country Ceiling is affirmed at 'AA' and the Short-term foreign currency IDR at 'F1+'.

"Saudi Arabia's strengths have come to the fore amid the global slowdown and financial crisis," says Charles Seville, Director in Fitch's Sovereign team. "The financing flexibility offered by the government's balance sheet - built up by saving past oil revenues - has enabled it to forge ahead with spending plans without raising borrowing."

A strong government balance sheet is one of the chief supports to the ratings. Sovereign net foreign assets were estimated at 132% of GDP at end-2009 and are conservatively-managed and valued. Consolidated general government debt was just 6% of GDP. In absolute terms, net foreign assets are second only to Japan's in the 'AA' category. They are also among the strongest in relation to GDP and current account receipts, but remain weaker compared to other major Gulf Cooperation Council (GCC) oil producers, particularly measured against government spending.

Qatar Nat'l Bank Q4 net up 65 pct, beats forecast

Qatar National Bank QNBK.QA, the Gulf state's largest lender, made a fourth-quarter net profit of 1.07 billion riyals ($294.1 million), according to Reuters calculations, up 65 percent and beating forecasts.

The bank posted a net profit of 4.2 billion riyals for 2009, up 15 percent from 2008, the lender said in a statement on Tuesday.

The statement did not give quarterly earnings figures, which Reuters calculated based on earlier statement and Reuters data.

HEDGE FUNDS PLACE RECORD BETS ON OIL

The total net long positions by large speculators showed record bets on energy prices. Crude prices have risen 17% over the last month and over 100% in the last year as big money has poured into oil as the dollar has weakened and the global economy has strengthened. Unlike small speculators, who lack the firepower to move prices and have generally been on the wrong side of trades, the large speculators tend to be the market movers. This latest data shows a continued allocation into energy by large hedge funds and institutional traders.

Kuwait's Global optimistic about 2010

Kuwait's Global Investment House (GLOB.KW) said it was optimistic about growth this year and signalled the worst is over, after shareholders gave the nod to its $1.7 billion debt plan on Tuesday.

Global, which defaulted on most of its debt in December 2008, said it sees a "huge improvement" in its full-year 2009 earnings despite booking higher provisions in the fourth quarter, its managing director said.

Global is one of the largest investment companies in the Gulf Arab state and was hit hard by the global financial crisis and its aftermath.