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Tuesday, 2 February 2010

FT Alphaville » What on earth are oil investors thinking?

Over the last two trading sessions the two largest oil companies in the United States, Exxon and Chevron announced that in Q4 2009 they lost a combined $6.9 million day on turning crude oil into refined products. Wall Street traders reacted to this news yesterday by making NYMEX crude oil even more expensive than gasoline. To explain this seeming incongruity, an unidentified financial trader from Camp Mohawk Trading was quoted as saying. . . IT JUST DOESN’T MATTER, IT JUST DOESN’T MATTER!

Bahrain's Gulf Finance House in debt talks-sources



The Bahraini Stock Exchange suspended trading in shares of Manama-based Gulf Finance House GFHB.BH on Tuesday as it waited for the bank to confirm or deny a media report, without providing further details.

GFH is trying to refinance debt due in the next few weeks and is looking to raise cash in case negotiations fail, sources familiar with the Islamic investment house said.

A source at one of the arrangers said that GFH had approached it to roll over or extend the arranger's portion of $300 million in financing, but that it had made no decision as yet and was monitoring the situation at GFH very closely.

Abu Dhabi Will Not Meet 7% Economic Growth Target



Abu Dhabi won’t reach its growth target of an annual 6 percent to 7 percent over the next 20 years, said Mohamed Omar Abdulla, undersecretary at Abu Dhabi’s department of economic development.

“We have to make downward adjustments in terms of the growth,” Abdulla said in an interview today in Abu Dhabi. ”The average growth will be 6 to 7 percent according to the vision; this will not be the case.”

The Abu Dhabi Economic Vision 2030 set growth targets of 7 percent through 2015 and 6 percent thereafter. Abu Dhabi, which holds almost 90 percent of the United Arab Emirates’ oil reserves, is forecast to lead the Gulf state’s economic recovery as its smaller neighbor Dubai seeks to restructure $22 billion in debt.

U.A.E. Shares Climb, Led by Banks, Developers; ADCB Leads Gains



United Arab Emirates stocks rose, with Abu Dhabi’s index climbing for a fifth day, as Al Bayan reported the chairman of Dubai’s supreme fiscal committee said the emirate’s banks have overcome the global liquidity crisis and resumed lending.

Abu Dhabi Commercial Bank PJSC, the third-largest bank in the U.A.E., is headed for the highest close in more than a month. Sorouh Real Estate PJSC, the emirate’s second-biggest property developer, added as much as 4.3 percent. Abu Dhabi’s ADX General Index gained 0.8 percent to 2,685.68 at 1:24 p.m. in the emirate, bringing the five-day advance to 3.3 percent. Dubai’s measure added 0.4 percent as the emirate’s biggest bank, Emirates NBD PJSC rose for a second day.

Sheikh Ahmed bin Saeed al-Maktoum commented on Dubai banks at the opening of a new branch of Noor Islamic Bank, according to the newspaper.

Banker calls for Dh25bn boost



A top banker called for up to Dh25 billion in further government injections into banks yesterday, raising fears the financial sector has yet to emerge from the recession.

Banks want the cash to revive lending to businesses and consumers after setting aside ever larger amounts of money to cushion against unpaid loans.

Hussain al Qemzi, the chief executive of the Dubai-based Noor Islamic Bank, said the banking system could need as much as Dh25 billion on top of Dh120bn already spent on shoring up bank finances since 2008.

Darn it, these binoculars aren't any better than than the ones they have over at S & P (Re-post)




Last week S&P dropped its rating of Commercial Operations Group of Dubai Holding. Dubai Holding you may know is owned directly by Sheikh Mohammed, and the COG contains Dubai Properties and Jumeriah a very well known hotel group with properties all over the world. Dubai quickly retaliated quixotically by having Emirates NBD, the largest bank in Dubai, unsubscribe to the S&P service. That’ll teach ‘em. Personally I think the guys at S&P probably high fived themselves when Emirates NBD dropped them. These guys helped drive the world over the cliff in 2004-2007 by issuing AAA ratings on securities that have turned out to be anything but. To have Dubai keep itself in the headlines for an extra day by “dropping S&P” after having themselves been dropped is the kind of publicity they want.

In the coverage of the tit for tat though I think something has been lost. S&P did not lower its rating because it was concerned about the figures, it dropped it altogether because it did not believe it was even getting reliable figures upon which to judge the creditworthiness at all. A conspiracy theorist explanation for this would be that there is some secret set of books that Dubai Holding uses to manage its own affairs and another that it presents to the outside world. Such a theorist would suspect Dubai Holding of bad faith and trying to mislead S&P who felt the numbers they were being given were misleading and so decided to drop coverage. It’s a possible explanation but I think it is an enabling fiction. If it were true then it would mean that Dubai has a handle on what is going on in its own finances but is seeking to obfuscate them from the rest of the world. I think the real answer is that Dubai itself has no idea what it’s true financial state is.

I recognize that my evidence for this is as circumstantial as the conspiracy theorist argument for a dual set of books. Here is my evidence. There is the letter from Nabulsi to the FT claiming that Sheikh Mohammed is promptly informed of any changes to the financial status of his holdings and a denial that anything is held back. Methinks the gentleman doth protest too much. Then there is the pledge of Abu Dhabi to shore up Dubai, the commitment of $10 billion and then the surprise reversal putting Nakheel outside the ring in November. This makes me think that perhaps Abu Dhabi was not initially informed of how dire the circumstances were and knowing what the cost of not informing them would have been Sheikh Mohammed was himself probably not informed. The summary termination of Sheikh Mohammed's lieutenants, this could have been in response to the revelations that conditions were actually much worse at the DIFC etc. than the Sheikh had been made aware. Then there is the passage of the fraud law with heft prison terms but amnesty for those who pay the money back. This is the kind of thing you would do if you weren't really sure where the money had gone and thus you actually hoped it had been stolen rather than simply lost because then you would have a chance of getting it back.

My guess is that the figures available to the powers that be in Dubai are no more reliable than those which were presented to S&P. As a result the restructuring of Dubai Inc. is going to be massively more complicated than anyone would normally expect which is why there remains radio silence on issues such as the Dubai World standstill request. A conspiracy theory is often comforting because it means that someone actually is in control. I think the reality in Dubai Holding is the reality of the world at large, it is unmanaged chaos.END

Damas saga puts spotlight on governance



For a family business with its origins in Syrian jewellery, Damas has come a long way since it set up in Dubai more than 50 years ago. After becoming the Gulf’s leading gems retailer, it expanded into Europe and Asia and in 2008 launched a $271m initial public offering.

But the shock announcement in October that Tawhid Abdulla, the chief executive and one of three brothers instrumental in building the business, had conducted $165m in unauthorised transactions, has sent the once thriving company into a tailspin.

It has also raised questions about the ability of tightly held family businesses to adapt to the rigours of public listing, as well as the role of the regulator at the Dubai International Financial Centre

Qatar changes tack to boost financial centre



Qatar Financial Centre has launched an overhaul that will see the gas-rich emirate refocus its efforts on attracting asset management and insurance companies in a bid to compete with other regional financial centres.

The centre is making a third of its staff redundant as it launches what it hopes will become a new phase of its development. It was established in 2005 and has lured many international financial institutions to the city – even if neighbouring Dubai has become the regional hub of choice for the majority of banks.

The move comes amid government preparations to finalise the long-delayed unification of three regulatory agencies governing finance in the emirate: the QFC’s regulator, the stock market and central bank’s supervision of the local banking industry.

PFI - UAE gets keen on PFI



Citigroup (C.N) is believed to have won an advisory mandate to arrange finance to fund the building of the US$1bn-1.5bn New York University (NYU) campus in Abu Dhabi. The proposed scheme will be the latest major construction project financed in the emirate via a UK style private finance initiative (PFI) procurement route.

STOCKS

Two construction schemes obtained PFI finance last year, the US$400m Paris-Sorbonne university campus and the US$1bn Zayed university campus. The Yahsat space satellite was financed on a PFI basis in 2008. Mubadala acts as the client for these schemes. However a plan to fund the US$2bn plus Tawam hospital via the PFI route has recently been dropped.

Unlike the three schemes which have already been financed with bank debt, Mubadala is looking at options for debt funding NYU via a bond issue to diversify its funding sources.

PFI involves a special purpose vehicle (SPV) being granted a long term concession to finance, build and then operate an asset. In return, the SPV receives annual payments for making the asset available for use.

Al-Suwaidi Says No Need for New Liquidity to Banks



United Arab Emirates Central Bank Governor Sultan bin Nasser al-Suwaidi said there was no immediate reason for the government to provide further liquidity to banks.

“When there is a need, then of course we will consider, but there is no need for the time being,” al-Suwaidi told reporters in the capital, Abu Dhabi. “The liquidity is good.”

Banks in the U.A.E. faced a shortage of funds after the global credit crunch blocked their access to foreign money and as investors betting on a currency revaluation withdrew cash from the emirate. The government offered liquidity facilities, lowered the repurchase rate and is discussing a proposal to guarantee bonds issued by local lenders.

Bader Al-Saad Rethinks, Redesigns & Rebuilds KIA




Business leaders from around the world gathered at Davos, Switzerland for the annual meeting of the World Economic Forum under the theme: “Improve the State of the World: Rethink, Redesign, Rebuild.” Bader M. Al-Saad was successful in implementing the “Rethink, Redesign, Rebuild” theme to the Kuwait Investment Authority during his six-year tenure as the Managing Director, and I applaud him for that. His efforts were recognized as the Institutional Investor listed him as one of the Top 5 Middle East Most Influential Financiers.

Pre- Al Saad, the sleepy bureaucratic KIA was run without any clear vision or objectives. Its investments where highly concentrated in U.S. Treasuries with only 2.5% in real estate and 1.5% in private equity funds. In late 2003, upon his appointment as managing director, Mr. Al-Saad commissioned a study comparing the fund’s investment practices with those of the Yale and Harvard endowments and hired Mercer Investment Consulting to review the KIA’s strategic asset allocation and draft a new investment program. Since then, the KIA has been increasing its exposure in emerging markets, decreasing its allocations to traditional asset classes, and increasing its allocation to non-traditional and uncorrelated asset classes. Today, about $32 billion or 15% of the fund is invested in emerging markets, buyout funds, and hedge funds.

“Returns in 2009 may prove one of the best for the Authority” Al-Saad said during an interview in Davos with Al-Arabiya TV. How good was 2009? Well, remember the public outcry against the $5 billion capital injection into Citigroup and Merrill Lynch? In December 2009, the KIA sold its stake in Citigroup for $4.1 billion and made a profit of $1.1 billion. As for its stake in Bank of America, Al Saad said that he still expects the KIA to make a profit on its investment, despite the 35% loss. Moreover, last May the KIA invested about $750 million in BlackRock Inc.’s capital increase, and to date it has achieved a 40% return on its investment. Going forward, the KIA will focus on investments in the financial, insurance, and services sector and targetcountries with growth rates between 8-10% mainly in Asia and Latin America.END