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Monday, 15 March 2010

Dubai Stocks Fall on Concern Gain Is Overdone Given Debt Issue

Dubai shares dropped for the first time in three days, led by Emaar Properties PJSC, on concern yesterday’s gains outpaced growth prospects in the debt-laden emirate.

Emaar, the developer of the world’s tallest skyscraper in Dubai, retreated the most in more than two weeks. Arabtec Holding PJSC, the largest construction company in the United Arab Emirates, declined as much as 3.4 percent. The DFM General Index lost 1.4 percent to 1,722.27 at 12:21 p.m. in Dubai. The measure soared 3.7 percent yesterday after Sheikh Ahmed Bin Saeed al-Maktoum, chairman of the Dubai Supreme Fiscal Committee, said the government is “always behind” Dubai World.

“The market can’t sustain a 4 percent rise without a profit-taking bout,” said Vyas Jayabhanu, head of Al Dhafra Financial Brokerage LLC in Abu Dhabi. “Investors are still hoping for an amicable settlement to the Dubai World predicament.”

ADIA Says as Much as 45% of Assets Invested in Developed World

The Abu Dhabi Investment Authority, one of the worlds’ largest sovereign wealth funds, has invested as much as 45 percent of its assets in developed markets, the fund said in its first annual review.

“We began in 2009 to cautiously lift our exposure to higher growth markets, which proved effective as the recovery began to take hold,” Sheikh Ahmed bin Zayed Al Nahyan, the fund’s managing director said in the 2009 report. “Considerable uncertainty remains” in 2010, he said.

Abu Dhabi, capital of the United Arab Emirates and home to about 8 percent of the world’s proven oil reserves, is trying to diversify away from oil. ADIA and its Norwegian and Chinese peers are the three largest sovereign wealth funds in the world, managing over $1 trillion between them, Preqin Ltd said March 11. The emirate lent neighboring Dubai $20 billion last year to help it meet its debt obligations.

Report here

Dubai’s DHCOG to Avert Restructuring, JPMorgan Says

Dubai Holding Commercial Operations Group LLC, the investment company owned by Dubai’s ruler, will avoid debt restructuring as its balance-sheet and cash-flow profile appear “sufficiently strong,” JPMorgan Chase & Co. said.

“The company’s contractors, despite being owed a substantial amount of money, are likely not in a position to trigger a default,” Zafar Nazim, a London-based analyst at the bank, wrote in the report dated March 12. “We do not expect DHCOG to go through a restructuring.”

JPMorgan maintained its “overweight” rating on all DHCOG’s bonds with a preference for the 6 percent notes due 2017. “We are comfortable with the company’s ability to refinance its $555 million revolver, due July 2010, although terms under refinancing are expected to be unfavorable compared to those in the existing facility.”

IMF favours bank stress tests for Gulf banks

Gulf states should carry out regular stress testing of banks’ asset quality as part of assessing the stability of the financial sector, the IMF says.

Governments should periodically review assets to gauge any holes in bank balance sheets rather than pre-emptively pumping emergency funding into the banking system, as the UAE and Qatar did during the global financial crisis, said a report from the Washington-based fund.

“GCC countries should conduct periodic reviews of banks’ asset quality, in addition to stress testing, to determine whether the level of capital support is sufficient,” said the report by the IMF’s Middle East and Central Asia department.

UAE should learn to love its liabilities as well as its assets

Sovereign debt is the big issue of the second decade of the 21st century. Mohammed El-Erian, the chief executive of the US investment company Pimco, says the “simultaneous and significant deterioration in the public finances of many advanced economies” is comparable to the re-emergence of China as a factor that will dominate the global economic scene for many years to come.

I’m sure he is right. For example, US sovereign debt has gained more than 20 percentage points as a ratio to GDP over the past two years; countries which account for more than 40 per cent of world GDP now have fiscal deficits of 10 per cent or more.

This is a serious shock to the world economy, especially in the developed countries of the Americas, Europe and some parts of Asia. As Mr El-Erian points out, for most of the period since the end of the Second World War, public deficits were in the range of zero to 5 per cent of GDP, and most of the debtors came from emerging markets.

ADIA Annual Review.pdf 34 pages

Global Investment Loss Narrows as Provisions Drop

Global Investment House KSCC, which is restructuring $1.73 billion in debt, said its full-year net loss narrowed as the Kuwait-based investment Bank allocated less provisions to cover bad assets.

The loss was 148.8 million dinars ($516.7 million), or 122 fils a share, compared with 257.6 million dinars, or 225 fils a share, a year earlier, the company said in an e-mailed statement today. Global made 35.2 million dinars of impairment provisions last year, compared with 153 million dinars in 2008, it said in a separate statement to the Dubai bourse.

The company, which has defaulted on loan repayments, said in January it is in talks to sell “many” assets to help repay its borrowings. Global said today it made a 200,000 dinar profit from selling a stake in its real-estate finance unit in Egypt to Arab African International Bank.

Arabtec Cut to Hold at Deutsche Bank on Weak Backlog

Arabtec Holding PJSC, the largest construction company in United Arab Emirates, was downgraded to “hold” from “buy” by Deutsche Bank AG on concerns about its plans for expansion outside Dubai and a weak orderbook.

The share price estimate was lowered 20 percent to 2.4 dirhams ($0.65), Deutsche Bank said in an e-mailed note to clients today. Arabtec traded 4 percent higher at 2.33 dirhams at 12:15 p.m. in Dubai. The shares have slumped 13 percent this year compared with a 4.6 percent drop in the Dubai Financial Market General Index.

Arabtec “released a surprisingly weak backlog at 13.2 billion dirhams due to a contract cancellation in Dubai and a lower scope of works in Qatar and Saudi Arabia,” analysts Nabil Ahmed and Athmane Benzerroug wrote in the note dated March 13. The orderbook, excluding a project in Russia, fell short of an expected 17.7 billion dirhams, according to the note.

CityCenter, lead contractor dispute $492 million claim

MGM Mirage today disclosed that disputes have emerged involving hundreds of millions of dollars between its CityCenter joint venture and the $8.5 billion project's primary general contractor.

Perini Building Co. on Thursday delivered a notice of its intent to file mechanics’ liens totaling about $492 million against CityCenter. Those liens represent the builder's claims for payment against the resort complex on the Las Vegas Strip.

MGM Mirage said it would dispute the claimed amount and also signaled it has counterclaims over construction defects at the Harmon Hotel part of the project, where construction has been suspended. When work resumes, it's scheduled to be completed at 28 floors, rather than the planned 49 floors.

UAE NBAD to raise up to $1 bln with new bond-executive

National Bank of Abu Dhabi NBAD.AD, the United Arab Emirate's second biggest bank by assets, will tap markets to raise up to $1 billion, an executive at the bank said on Sunday.


"The bank is looking to raise anything between $500 million to $1 billion, depending on the response," the executive said, asking not to be identified. "The roadshows are underway."

Bank of America Merrill Lynch, HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), Barclays Capital (BARC.L) and National Bank of Abu Dhabi are mandated banks.

The issue is part of the bank's EMTN programme.

In February, the bank postponed plans to issue new convertible bonds in dollars and dirhams until market conditions improve. [ID:nLDE61G10P]END

What Happened To Kuwait’s Billionaires ?!

Forbes pulibshed their latest World’s Billionaires Ranking. What stroke me the most was the dropping out of most of Kuwait’s billionaires. In 2010, there is only one Kuwaiti (family) ranked, Al-Khorafi. But in the previous three years (2007-2009), Kuwait had three more people in the list, which are Qutaiba and Bassam Al Ghanim, and Mohammed Al Bahar.
My question is were these people that much affected by the financial crisis? And why did their wealth suffer in the year of the recovery (2009) rather than the year when the markets and the global economy were hit the most (2008)? I guess the Al Ghanim brothers were seriously hit by the Gulf Bank losses. But what about Mr. Al-Bahar? Why did the NBK’s Chairman’s wealth fall in 2009, a year when most markets witnessed substantial returns? NBK’s stock appreciated by more than 4% for the year. Were his other holdings hit that bad?END

Saudi Arabia Pulls Ernst & Young's Securities License

Saudi Arabia's Capital Market Authority, or CMA, said Sunday it revoked the securities-business license of Ernst & Young because of "several violations" of the kingdom's capital market law and implementing regulations, Zawya Dow Jones reported.

Ernst & Young Saudi Arabia Consulting was given a license to arrange and advise on activities in the securities business in the Arab world's largest economy in May 2006, CMA said in a statement posted on the Saudi bourse Web site. Ernst & Young wasn't immediately available for comment.

In recent months, the oil-rich kingdom's market regulator has asserted more control over the stock market, the Persian Gulf's best performer this year so far, in an effort to stamp out manipulative and speculative trading and attract more stable institutional and foreign investors.

The CMA issued its first prison sentence in August, locking up the former chairman of Bishah Agricultural Development Co. for three months, and it fined Prince Ahmed bin Khaled Al Saud, the chairman of Saudi Chemical Co., for disclosure violations in October.

The Tadawul, as Riyadh's stock exchange is known, has long been closed to the rest of the world through stringent foreign investment rules and has remained dominated by local retail investors.

Listed companies in Saudi are worth about $319 billion, almost as much as the rest of the Gulf markets combined.END

Dubai executive jailed as city gets tough on corruption

A senior Dubai executive has been given a hefty fine after being found guilty of abusing his position as a director of a local developer.

The verdict suggests an appetite for stiffer penalties against those pursued in the city's anticorruption drive.

Dubai, which is in the midst of a debt restructuring process after its real estate bubble burst, hopes the graft crackdown will send a message of zero tolerance.

Leading wealth fund reveals its strategy on investment

In a break from its traditional secrecy, one of the world's largest pools of capital, the Abu Dhabi Investment Authority , today publishes its first annual review listing its long-term results and investment strategy.

Many sovereign wealth funds (SWFs) have been criticised for a lack of transparency, and some western officials and politicians have in the past expressed concern over potentially politically-motivated investments in sensitive institutions and companies.

While several funds came to the rescue of western institutions during the financial crisis, pumping billions of dollars into stricken banks, the International Monetary Fund and two dozen leading SWFs in 2008 formulated a set of guidelines for statecontrolled investment funds, known as the Santiago Principles , to ease concerns over their motives.