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Tuesday, 4 May 2010

$25bn in Gulf M&A activity forecast for 2010

Mergers and acquisitions have always proved an elusive quarry for the Gulf’s bankers, but this may be changing. In the first quarter of this year, mergers and acquisitions in six Gulf Cooperation Council countries has amounted to $3.6bn, a figure close to the total amount of M&A activity for 2009, according to research released today.

And this first quarter figure, compiled by Mergermarket statistics, doesn’t even include the Bharti Airtel mega acquisition of Kuwaiti Zain’s African telecoms operations, valued at $10.7bn, to be completed later this year.

Are Gulf countries bucking the trend, and is this evidence of more merger activity a sign of things to come?

Dubai Shares Rise to One-Week High on Debt Optimism, Contracts

Dubai’s benchmark index advanced to the highest level in a week on investor optimism about Dubai World’s debt talks and as two companies received contracts.

Drake & Scull International PJSC, the construction company, rose the most in more than a month after its Omani unit got two contracts and National Central Cooling Co. jumped the most in seven weeks as Asharq Al-Awsat reported the company got a contract in Saudi Arabia. Emirates NBD PJSC, one of the main creditors to Dubai World, gained the most in a week. The DFM General Index increased 0.3 percent to 1,742, the highest since April 27.

Dubai World, one of the emirate’s three main state-owned holding companies, and Nakheel PJSC are seeking to renegotiate borrowings of $24.8 billion. Creditors will respond in two weeks to the company’s debt proposal, Al Bayan reported today, citing a banker it didn’t identify. Dubai World and its creditors have reached preliminary agreements on all outstanding technical details, the newspaper said.

Bahrain Sees No Reason to Raise Interest Rates Yet

Bahrain’s central bank is unlikely to raise interest rates for “some time” because faster economic growth probably won’t push up inflation soon, Governor Rasheed al-Maraj said.

“We don’t see any sign of overheated economic activities or higher inflation rates that could cause us to change our interest rate,” he said in an interview today in the capital, Manama.

The economy of the smallest Gulf Arab kingdom may expand 4 percent this year, compared with 3.2 percent in 2009, the governor said, as the global economic recovery boosts oil prices. The Central Bank of Bahrain last cut its key interest rate by a quarter of a percentage point to 0.5 percent on Sept. 15, as lower oil prices slowed economic growth.

Political risks to watch in the United Arab Emirates

The cloud over the financial future of Dubai after the Dubai World debt crisis is the overriding risk to watch in the United Arab Emirates this year.

Added to that are some lingering worries about an escalation of Iran's nuclear dispute with Western powers, a long-running territorial row with Iran and Islamist extremism. DUBAI DEBT AND FINANCIAL WOES

The United Arab Emirates' economy is expected to grow by 2.5 percent this year, the slowest pace in the Gulf Arab region, as large debts burdening state-linked firms in Dubai weigh on a recovery following the Dubai World debt crisis.

Saudi Arabia IS boosting output | FT Energy Source |

Saudi Arabia IS boosting output | FT Energy Source |

One of the big questions as oil prices hover above $80 — prompting all kinds of concerns – is what Saudi Arabia will do.

The country’s oil minister, Ali al-Naimi, has been talking up the price range of $70 - $80 for many months now, declaring it to be ‘beautiful’ and ‘perfect’. Saudi Arabia is the only country with significant spare production capacity, and it’s also very alert to the risk of high prices destroying demand.

Well, it seems to be* walking the talk. Surveys of Opec output for April show that Saudi went substantially above its own production quota level - this from the country that often produces less than its quota, to compensate for its fellow Opec members’ transgressions.

BSE starts trading at new floor

The Bahrain Stock Exchange (BSE) held its first trading session at its new premises at the fourth floor of the Financial Mall at Bahrain Financial Harbour (BFH) yesterday.

BSE chairman Rasheed Al Maraj and director Fouad Rashid visited the trading floor and welcomed the brokers and investors on the first trading session at the exchange's new premises.

"BSE's relocation to Bahrain Financial Harbour is considered a strategic step in which we seek to support our plans and efforts to provide a variety of advanced services and financial instruments," said Mr Rashid.

Union Properties' first quarter results give hope to shattered Dubai housing market

Shares of Dubai's second largest real estate developer Union Properties lifted the Dubai Financial Market (DFM) Monday, a day after Union Properties reported strong results for the first quarter of this year.

The DFM rose by 0.72 percent and ended at 1,736.61 points. Shares of Union Properties jumped 6.13 percent, closing at 0.48 dirham (about 0.13 US dollar).

On Sunday, Union Properties reported a 66-percent-increase in net profits to 13.6 million dollars.

Vinci, Qatari Diar In Qatar Parking Lot Joint Venture

French concessions and construction company Vinci SA (DG.FR) and the state-owned investment company Qatari Diar have agreed to create a joint venture to run parking lots in the Persian Gulf state, Vinci said Monday.

Qatari Diar will hold 51% and Vinci the remaining 49%, the company said in a statement.

The creation of the joint venture, called QDVP, is "a first fulfillment of the strategic partnership between Vinci and Qatari Diar," Vinci said.

Civil action brought against former Dubai minister

A lawyer acting for a defendant in a high-profile court case probing alleged corruption in Dubai on Monday opened a case against the former chairman of an Islamic bank for allegedly concealing a $501m fraud.

Habib al-Mulla, the lawyer for Omair Mooraj, a former executive at Dubai Islamic Bank, filed the civil suit against Mohammed bin Kharbash, a former finance minister who was previously the bank’s chairman, as well as three other senior bank officials. The suit claims the men covered up the alleged fraud.

The court filing calls on the public prosecution to “start legal proceedings” against the senior DIB managers and to pay damages to Mr Mooraj. Mr bin Kharbash declined to comment on the case on Monday.

Awkward questions about oil

Last week, an unexpected warning came out of Saudi Arabia.

It was delivered by Khaled al-Falih, head of Saudi Aramco, the kingdom’s state-owned oil company, and his message was blunt.

Unless the world’s top oil producer tackles inefficiencies in its energy system, the kingdom’s stockpile of crude for export is in danger of falling by as much as 3m barrels per day by 2028, he said.

Al Rajhi turns to untapped sukuk

After a fivefold increase during a run from 2000 to 2006, the Saudi stock market lost two-thirds of its value in downturns in 2006 and 2008.

It is little surprise, then, that falling trading volumes have dented revenues at Al Rajhi Capital, the kingdom’s largest brokerage by market share. Al Rajhi Capital is the investment banking subsidiary of Al Rajhi Bank, the largest commercial bank in the Gulf Co-operation Council countries by market capitalisation, and the largest Islamic bank in Saudi Arabia.

“Our brokerage is our biggest business, so low volumes directly affect us, even though we are the current market leader,’’ says Marcus Andrade, chief executive officer. He says many risk-averse investors have shunned equities for commodities.