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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.