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Monday, 1 February 2010

Abu Dhabi Shares Gain Most This Year on Etisalat, Aabar Profit

Abu Dhabi shares jumped the most in more than a month after Emirates Telecommunications Corp., the United Arab Emirates’ biggest phone company, and Aabar Investments PJSC said full-year profit rose.

Etisalat climbed the most in a month after reporting a 3.9 percent increase in 2009 net income. Aabar, the Abu Dhabi that is the biggest shareholder in Daimler AG, advanced the most in three weeks after doubling profit. The Abu Dhabi Securities Exchange climbed 1.2 percent, the most since Dec. 14, to 2,665.04. The measure has gained 2.6 percent in the past four days, the longest winning streak since September. Dubai’s benchmark index gained 2.2 percent.

“Earnings are definitely giving the markets a boost,” said Mohamed Abu Ghoush, head of equity brokerage at Al-Ahli Bank in Doha, Qatar. “Markets are correcting from a series of declines in recent weeks.”

Dubai Bailout Rally Evaporates on Standstill Silence

Dubai’s failure to reassure investors its restructuring plan will succeed is causing the emirate’s benchmark stock index to drop the most in the world and forcing companies to scrap bond sales.

The Dubai Financial Market General Index lost 14 percent since Dec. 14, wiping out a rally sparked by Abu Dhabi’s bailout of Dubai World that day. Bonds of the state-owned company’s property developer Nakheel PJSC sank to 56 cents on the dollar from 67.5 cents, while credit default swaps on Dubai government debt trade at 493 basis points, the highest level since Abu Dhabi’s fund injection.

Dubai World, in talks to reschedule $22 billion of debt, failed to present an offer in a meeting with lenders in December and declined to say when a deal may be struck. Dubai Electricity & Water Authority said Jan. 17 it delayed a $1.5 billion bond sale as borrowing costs were too high.

UAE's Aabar Investments Q4 net profit rises 9 pct

UAE's Aabar Investments AABAR.AD on Monday posted a 9 percent rise in fourth-quarter profit, according to Reuters calculations, driven by a contribution from its parent company and returns from investments including a stake acquistion in Germany carmaker Daimler (DAIGn.DE: Quote, Profile, Research).

Net profit for the year increased 133 percent to 1.68 billion dirhams ($457.4 million) versus 721.6 million dirhams in 2008, the company said in a statement on Monday. It did not give a breakdown of quarterly results.

For the three months to December 31 net profit rose to 132.89 million dirhams ($36.15 million), up from 115.25 million dirhams in the same period last year.

Kuwait's 2010/11 budget to assume oil at $45 - paper

OPEC member Kuwait is expected to base its 2010/11 budget on a crude oil price of $45 a barrel, up 28.6 percent from the price used in the previous fiscal year, a newspaper reported on Monday.

In the 2009/10 fiscal year which ends in March, the world's fourth-largest oil exporter assumed its main revenue earner would fetch $35 a barrel.

A government's budget committee raised the price to $45 after the approval of the government's development plan, al-Watan newspaper said in an unsourced report.

Globalfoundries Aims for 30% of Chip-Foundry Market in 3 Years

Globalfoundries Inc., the chipmaker that merged with Chartered Semiconductor Manufacturing Ltd., aims to account for 30 percent of the made-to-order chip market within three years, its largest investor said.

“Am I setting very aggressive targets? Yes,” Ibrahim Ajami, chief executive officer of Advanced Technology Investment Co., Globalfoundries’ controlling shareholder, said in a Jan. 28 interview in Abu Dhabi. “We need to be a $5 billion company in the next two to three years.”

Globalfoundries was created after Advanced Micro Devices Inc. spun off its manufacturing unit, and boosted its capacity through ATIC’s purchase last year of Singapore-based Chartered. A 30 percent share would take Globalfoundries past United Microelectronics Corp., making it the world’s second-largest contract manufacturer of chips after Taiwan Semiconductor Manufacturing Co.

Changes in company ownership laws to boost UAE's recovery

A proposal to amend the rule regarding the 51-49 per cent ownership of companies will help support the UAE's recovery by attracting more foreign investors, according to a Dubai Chamber of Commerce and Industry report.

"The UAE Government is putting in place plans to continue making the country more attractive for foreign investors at a time of global economic instability," the Dubai Chamber said in the report released on Sunday.

"In particular, the government is planning to issue revised company, industry and investment laws that will significantly change the country's business landscape. The aim of the revised laws [which are in the final stages of being approved] is to make it easier for foreign investors to do business in the country and provide maximum protection for their investments."

Expats to invest in UAE markets through funds

The funds industry needs to be developed to allow expatriates to invest in local markets and help reduce trading volatility, financial experts say.

Investment vehicles such as social security funds open to foreign residents could encourage expatriates to put their savings into markets, rather than sending their remittances home.

A greater presence of local institutional investors in markets would also ensure more longer-term stability than that provided by foreign short-term investors from outside the region, experts say.

Baghdad signs final deals for biggest oilfields

Baghdad has finalised the last of 10 contracts with foreign firms that last year won the right to develop some of the country’s biggest oilfields.

The Russian company Lukoil and Norway’s Statoil yesterday signed the final version of a 20-year development contract for West Qurna Phase 2, a “supergiant” oilfield in southern Iraq containing 12.9 billion barrels of reserves.

The flurry of deals signed last month could set Iraq on the path to becoming the world’s top oil producer, said the country’s oil minister, Dr Hussain al Shahristani. “We can’t find a reason to prevent Iraqi production becoming higher than any other OPEC state or even states outside OPEC. We expect that to happen in the next six to seven years,” Dr al Shahristani said on Saturday.

Arbitration & mediation in the Arab world: a growing phenomenon

Alternative dispute resolution (ADR) mechanisms in the Arab world have been growing hand in hand with the resurgence of various countries as members of the fast growing club of successful emerging markets. The flexibility of arbitration, mediation and other ADR methods, as well as their speed, efficiency and confidentiality, have made them more attractive to investors and parties in contracts of an international nature. Consequently, a significant number of Arab countries have been busy updating and enhancing their laws and regulations on arbitration and mediation in particular. There is momentum behind ADR in the region.

Furthermore, the global economic downturn has led to a significant increase in the number of disputes in various sectors, and this in turn has provided an impetus behind the need to enhance the procedures applied by the various arbitration centers in the Arab world.

This development is not solely linked to the realities of modern commerce. In fact, the conciliatory approach and the notion of deferring to a neutral and objective personality for a decision, that ultimately underline all forms of ADR, are well steeped in Arabic and Islamic traditions.

Qatar may help real estate after banks-experts

Qatar, whose energy wealth enabled it to spend its way out of the global downturn, may move to prop up real estate operators after bailing out its banks, sector experts believe.

The Gulf Arab state's economy is expected to grow 16 percent thanks to new energy projects and its status as the world's biggest producer of liquefied natural gas.

The government's help for banks in 2009 included taking 14.4 million riyals ($3.96 billion) in real estate loans off their books to spur more lending .

DP World mulls $884 million IPO of Australian unit

Port operator DP World, DPW.DI part of Dubai World DBWLD.UL conglomerate, is considering a A$1 billion ($884 million) initial public offering (IPO) by spinning off some of its Australian assets, a media report said on Monday.


DP World is expected to retain a substantial stake in the new listed entity, to be called DP Australia, the Australia Financial Review said in an unsourced report.

DP World's Australian unit was not immediately available for comment.

Qatar: Positive Outlook

Beginning the year negatively by shedding 6% from the index and performing only better than Dubai, Qatar comes next in my 2010 GCC outlook review.

Reading the first couple of lines, one might think that investors should reverse all positions and exit the Doha SM. However, I would recommend doing the exact opposite; overweight Qatar. It has the highest expected GDP growth, strong government support, moderate inflation levels, and cheap valuations. Qatar is the hottest place to be in 2010!

With a 47% increase in LNG exports, Qatar is expected to record the highest GDP growth globally (14%). The growth of 14% surpasses all GCC nations, BRICS, emerging and developed markets. The increase in LNG exports and GDP growth will have a direct affect on banks and petrochemical companies and will definitely enlarge overall corporate bottom line earnings.

Qatar had one of the highest inflation levels of 17% in 2008; nevertheless, Qatar is expected to record an increase of 1% only in inflation.
Strong economic prospects accompanied with relatively low valuation calls for a strong buy. DSM expected 2010 P/E is at 9.8x, higher than Dubai and Kuwait only which both have valid reasons to justify such low P/E multiples. Moreover, Qatar has both high dividend yields and ROE of 4.5% and 18% respectively.

Qatar and Saudi Arabia both have a positive outlook.
Our next stops will be Dubai and Kuwait.