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Thursday, 4 March 2010

Dubai Index Gains Most in Week as DP World ‘Buy’ Restores Faith

Dubai shares climbed the most in a week as an analyst’s “buy” recommendation on DP World Ltd., the Middle East’s biggest port operator, helped boost investor confidence in the region’s companies.
DP World gained the most in almost two months after an EFG- Hermes Holding SAE report said the Nasdaq Dubai-listed company would rebound when parent company Dubai World reaches an agreement with creditors. Emaar Properties PJSC, developer of the world’s tallest skyscraper in Dubai, advanced the most this month. Deyaar Development PJSC, a Dubai-based developer, increased the most in more than a month. The DFM General Index added 0.7 percent, the most since Feb. 25, to 1,584.81, bringing the gain this week to 0.2 percent.
The comment on DP World is “a good proxy to the theme of recovering global world trade. We are going into the weekend on a positive note,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. The news points to the “firmness” of selective names in Dubai.

Abu Dhabi Companies Have Credit Rating Cut at Moody’s

Abu Dhabi companies, among the biggest borrowers in the Gulf region last year, were downgraded at Moody’s Investors Service today, citing the lack of an “explicit formal agreement” for government support.

Mubadala Development Co. and International Petroleum Investment Co. were cut to Aa3 from Aa2, Tourism Development & Investment Co. to A1 from Aa2, Abu Dhabi National Energy Co., also known as Taqa, to A3 from Aa2 and Dolphin Energy Ltd. to A1 from Aa3, Moody’s said in a report today. Emirates Telecommunications Co. was cut to Aa3 from Aa2. Aldar Properties PJSC was downgraded two levels to Ba1, below investment grade, and given a negative outlook, Moody’s said.

Moody’s decided to introduce a "moderate" distinction between the ratings of Mubadala, IPIC and TDIC “and that of the sovereign given that no explicit formal agreement exists obligating the government to support them under all circumstances,” Philipp Lotter and David Staples wrote.

Qatar Said to Back Prudential Plc’s $20 Billion Rights Offering

Qatar Holding LLC, part of the country’s sovereign wealth fund, plans to back Prudential Plc’s proposed $20 billion rights offering, according to a person with direct knowledge of the situation.

Qatar Holding, the Doha-based arm of the Qatar Investment Authority, offered to buy $1.5 billion of stock if Prudential shareholders decline to buy it in the offering, said the person, who declined to be identified because the talks are private. The fund is in talks about acting as a sub-underwriter for Credit Suisse Group AG, one of the sale’s managers, the person said.

Prudential said March 1 it would pay $35.5 billion in cash and stock for AIA Group Ltd., an Asian division of American International Group Inc. The British insurer is embarking on the biggest takeover in its 162-year history to expand in a region that it says is growing faster than its home market and benefits from higher rates of personal savings.

Kuwait's SPC committee to approve refinery-report

A previously stalled $15 billion project to build a 615,000 barrels per day (bpd) refinery in Kuwait is likely to be revived by a key technical committee at the weekend, a newspaper reported on Thursday.
The Al-Rai daily said, in an unsourced report, a decision on the new refinery was expected to be made when the technical committee of Kuwait's highest oil policy body meets on Sunday.
Officials have said the Supreme Petroleum Council has again reviewed pushing the al-Zour refinery project aimed at providing fuel supplies, most of which are now imported, to domestic power plants.

Sell the UAE banks paying big dividends? (Re-post)

UAE banks are being rapped for continuing to pay out high dividends at a time when the need to keep capital for future write-offs is only too obvious.
By contrast global but local banks like HSBC and Standard Chartered are already making big provisions in the region. HSBC raised its provisions in the Middle East five-fold to $1.3 billion for 2009, and posted its first-ever loss in the UAE of $3 million for the year.

Local and global

Standard Chartered Bank does not break down its provisions but overall they increased from $1.3 billion to $2 billion last year, doubtless also reflecting write-offs in the region.
Releasing a record $3.4 billion profit this week Standard Chartered said its exposure to ‘certain high profile entities’ is around $500 million in the UAE, adding that it did not expect ‘material losses’.
Should local banks have exercised similar caution? The UAE Central Bank had asked for cash dividends to be limited to 50 per cent of net profit for the year. Yet not all banks heeded this advice and some have even paid out more than their annual profits.
Dividend payments from the Bank of Sharjah, National Bank of Umm Al Quwain, Dubai Islamic Bank and United Arab Bank stood at 80, 85, 57 and 53 per cent respectively.
By contrast Emirates NBD paid out a 20 per cent dividend, and the very conservative National Bank of Abu Dhabi cut its dividend from 30 to 10 per cent.

Capital base

The important point is that once capital is paid out as a dividend it can not be recalled. So if bank provisions rocket in 2010, as many analysts say will happen as the full impact of the local real estate crash becomes apparent, then banks will be left short of capital and have to raise more funds, or be forced into rapid mergers and marriages of convenience.
For investors receiving their dividends now may therefore come at the cost of lower future profits and lower share prices later. It is also an argument for selling shares in the banks that have made what appear to be inadequate provisions against bad loans.
Of course without sight of the banks’ loan books it is impossible to tell the true position. If things go badly managers will just argue that they were being too optimistic. But that will hardly help shareholders.END

Standard Chartered declares $10b exposure to UAE loans

Standard Chartered on Monday said its exposure to UAE entities accounted for $10 billion (Dh36.8 billion) of the $14 billion value of its Middle East and South Asia (MESA) corporate loan portfolio. However, it assured investors that it did not expect "material losses."

"Certain high profile entities within this portfolio have experienced stress," the bank said in its annual earnings release.

"Our exposure to these entities is around $500 million. The resolution process is ongoing, but in the event losses arise, we do not expect they would be material."

Abu Dhabi bill payments would create "more liquidity"

Bank liquidity will improve if government departments and private-sector companies pay their bills sooner, a top banker says.

Andre Sayegh, the chief executive at First Gulf Bank (FGB), called today for a change in mindset, and where possible in contracts, to increase liquidity and give the economy a boost.

“Take the [Abu Dhabi] budget. It is released, they have the money, it is just a matter of paying faster. That would improve … the money circulating in the country,” Mr Sayegh said.

Creative realism needed for property

Dubai’s property woes are not intractable, despite the prevailing opinion.

Some creative thinking and a sense of reality will go a long way to unlocking billions of dollars stuck in the market.

The new contracts being signed by investors in the Park Towers project in Dubailand will see them become co-owners of the land with the developer, Gulf Investments, and are a small step towards breaking the deadlock.

Danske Bank Takes Control of New York Building From Dubai World

Danske Bank A/S took control of a 104-year-old office building in New York’s Times Square from Istithmar World PJSC, the second loss of a Manhattan property by the Dubai World unit in three months.
Istithmar defaulted on the mortgage, said Henrik Hoffmann, executive vice president for group credits at Danske Bank, Denmark’s largest lender. The Copenhagen-based company hired Jones Lang LaSalle Inc. to sell the property, the site of the former Knickerbocker hotel, he said.
“It’s very rare that a prime corner of Times Square comes up for sale,” saidDan Fasulo, managing director of research firm Real Capital Analytics Inc. in New York. “There will be a plethora of interested buyers.”

Trying to get a few more seconds out of my 15 minutes of fame.

So after an illustrious career in finance I have finally made the FT. So if you didn't already know who I was, now you do. I agreed to let the FT use my real name in an article about middle eastern blogs.

Naturally the day they publish this what do I have up? A joke articleabout the recent assassination in Dubai. So to give you a sense of what this blog is all about I'm going to publish a list of some of the more popular articles.

There is one on the logic behind the Arabtec Merger.

One of the DIFC, the the Damas Heist and the DFSA.

I also wrote one about expat schadenfreude.

And a post which comes as close as I have to explaining why I am doing this.

Enjoy, and feel free to comment or email me at

Thank you friend readers for your unseen but everfelt presence.

Nakheel 2010 bond prices rule out repayment

Troubled Dubai World unit Nakheel's 2010 bond prices indicate that investors have ruled out full repayment, with a deep discount or radical restructuring the most likely options, analysts said.

Dubai surprised global markets with the depth of its debt problems in November, then again a month later when it paid in full $4.1 billion of Nakheel's debt. This time around, however, investors do not expect any pleasant surprises.

"The market is expecting a restructuring from Nakheel. They are not really expecting a 100 percent redemption," said Mohieddine Kronfol, managing director at Algebra Capital in Dubai.

Atic gets ready for chip challenge

On the wall of Ibrahim Ajami’s office in Abu Dhabi, a web of geometric patterns cut into what looks like a bronze-gold disc is set in a dark wood frame. But, rather than a piece of modern art or a vinyl record, the object is a wafer, a slice of pure silicon semiconductor material worth about $6,000, which is at the centre of Mr Ajami’s ambitions.

A pristine wafer, made up of integrated circuits, is the end product of the semi-conductor industry. A 300 millimetre wafer may contain 200 dies and each die may contain up to 2,000m transistors.

Produced in conditions 100,000 times cleaner than a medical operating theatre (see picture) by tools that cost up to $600m apiece, each wafer takes about three months to manufacture.