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Sunday, 21 February 2010

Kuwait Stocks Gain for 2nd Day on Credit Suisse Upgrade, Zain

Kuwait benchmark index advanced for a second day as Credit Suisse Group AG raised the country’s shares and Al-Rai reported Zainmay sign a letter of intent for the sale of most of its African assets by the end of this week.
Zain, the country’s biggest phone company, rose to the highest since October. Al-Rai didn’t say where it got the information. Kuwait Cement Co., the nation’s largest cement maker, climbed 4.2 percent. The Kuwait Stock Exchange Indexincreased 0.3 percent to 7,418.9, bringing the gain for the month to 5.6 percent.
Credit Suisse on Feb. 19 lifted Kuwait’s stocks to “neutral” from “underweight,” citing the government’s spending plan for economic development, and “undemanding” valuations and lower borrowing costs. The country plans to increase spending by about 34 percent in the fiscal year starting April 1, according to a copy of the draft budget sent to parliament earlier this month.

Saudi Central Bank Says Inflationary Pressures ‘Slight’ in Q1

Saudi Arabia, the Arab world’s largest economy, may see inflation pressures ease in the first quarter as the prices of food and beverages stabilize, the central bank said.
“Inflationary pressure in the kingdom is expected to continue during the first quarter of 2010 but at a lesser level than in the fourth quarter of 2009,” the central bank wrote today in its quarterly inflation report. Some pressures will persist due to housing costs, the central bank said.
Inflation in the kingdom slowed to 5.1 percent in 2009 compared with 9.9 percent in 2008 as crude prices fell from a peak of $147 and the global economic crisis crimped consumer demand. Since July, inflation has held at around 4 percent. Central bank governor Muhammad al-Jasser said last month conditions were still not ripe for interest rate increases.
The Gulf Arab state is currently finalizing a mortgage law that is expected to kick-start lending in the country and boost the real-estate sector.END

There is No Easy Way Into Africa (Re-post)

Why would Bharti Airtel pay USD10.7 billion to acquire a loss making entity?
Bharti Airtel (BHARTI IN), plans to add 45 million to its 120 million subscribers by their recent acquisition plans. Bharti believes that they can successfully run a company with small ARPUs (Average Revenue Per User) in a low margin industry by using the same strategy they use in India, the “Indian Model”. This model is applied by outsourcing most of the operating activities, including IT, network operations and more. They see that this model can be applied in Africa as well, hence turning the losses into profits.
Bharti sees itself as a “minute factory”; where they can extract high revenues, even though the ARPUs are low, by producing more minutes. To better understand this model, imagine telecom networks as factories producing minutes, whereby they try to maximize network utilization by maximizing the minute of usage per subscriber (MOUs). MOUs are a function of tariffs, so by gradually reducing the tariffs the consumption of minutes increase.
The USD10.7 billion offer disappointed Bharti’s shareholders and the share price fell after the announcement. Bharti defended their decision by stating that they are seeking less competitive markets than India, higher ARPUs and lower penetrations.
Although the penetration rate in India is 45% and the penetration in Africa is 36%, there is more room for growth in India as 650 million Indians are non-mobile users, as compares to 300 million in Africa only.
Given the profile and track record of Bharti, they me be able to do a better job than Zain; but is it worth USD10.7 billion? We just have to wait and see…

Mashreq confident of cases against Ahab and Saad

Dubai-based Mashreq Bank, which has lodged cases with the Dubai Courts' Commercial Court against Saudi family-owned firm Ahmad Hamad Algosaibi and Brothers Company (Ahab), and billionaire Maan Al Sanea and his Saad Trading for a combined Dh2 billion, is confident of its cases here as well in the US, a bank official toldEmirates Business.

"We are very confident of our case both here and in the US," the official said, adding the bank had filed the lawsuits "to recover the funds owed to Mashreq".

The bank, the largest in Dubai by market capitalisation (as of February 17, 2010), made provisions of Dh2.1bn for bad loans, including those to the Saudi family groups, in 2009, 480 per cent more than the Dh362 million it provisioned in 2008.

Most firms here are transparent (Interview)

All in all the worst is over. We are unlikely to see the magnitude of rating action of 2009, Philipp Lotter, Senior Vice-President, Moody's Middle East, told Emirates Business. "In fact, most of the companies that we rate are good as regards transparency," he said. However, transparency still needs to be improved but that is not a Gulf-specific issue. Parts of Europe were not transparent some years back. That comes with the gradual development in the market, he added.

So there are chances that some ratings may face downgrades in the near term because of the economic circumstances. Abu Dhabi government-related entities are also under review for downgrades. "There is a chance that some or all those ratings may face downgrades over the near term," he said. "What we are looking in Abu Dhabi is the willingness and not the ability to support."

Further explaining the aim of a credit rating exercise, Lotter said: "The objective is fairly unemotional. If you have a couple of 'AA' and 'A' ratings, you are not giving investors a choice as to how they want to structure their portfolio."

Saudi Shares Extend Longest Winning Streak Since September

Saudi Arabian shares extended the longest winning streak since September, led by Banque Saudi Fransi and Al Rajhi Bank, as oil gained for a fourth day and profits at European banks hinting at economic recovery.
Al Rajhi Bank, the largest bank in Saudi Arabia by market value, and Banque Saudi Fransi each advanced to the highest level since October. The Tadawul All Share Index gained for a seventh day, adding 1 percent to 6,474.66, the highest level since Oct. 27.
“General risk sentiment is better,” said Phon Vilayoune, senior manager of credits and emerging markets at Samba Financial Group in Riyadh. “The lack of any bad news from Dubai also helps.”

Bahrain 'hub for Islamic finance'

Leading global companies are selecting Bahrain over the other financial centres is a sign of the stride the kingdom has made over the last four decades.

News that consulting giant Deloitte has opted to base its new Islamic Finance Knowledge Centre (IFKC) in Bahrain reflects the kingdom's track record as the most established financial centre in the Gulf and a global hub for Islamic finance, Economic Development Board (EDB) chief operating officer Kamal Ahmed said.

"As the first country in the region to establish a finance industry more than 40 years ago and a pioneer of Islamic finance, Bahrain is the ideal location for Deloitte to base IFKC.



Rail traffic eased a bit last week as the weak recovery and winter storms slowed rail traffic to a halt.  The AAR reports that carloads declined 8.1% year over year and were down 19.2% versus 2008.  Intermodal traffic was a bit stronger and saw a 0.5% rise year over year.  Intermodal was down 12.5% versus 2008.   Breadth was a bit weaker when compared with last week as just 10 of the 19 carloads were up year over year.  The AAR has the details:
“Ten of the 19 carload freight commodity groups were up in comparison with the same week last year, led by a 24.9 percent jump in loadings of metals and products. Other commodities registering double digit gains were motor vehicles and equipment, up 15.0 percent, and primary forest products, up 13.8 percent. Commodities showing sharp declines included coal, down 16.3 percent; crushed stone, sand and gravel, down 18.9 percent; and pulp, paper and allied products, down 13.2 percent.”
Source: AAR