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Monday, 14 June 2010

Moody's likely to downgrade Dubai's DHCOG, UAE Investment Companies, Banking & Investment - Maktoob Business

Credit rating agency Moody's is likely to downgrade Dubai Holding Commercial Operations Group shortly due to spillover risks from the restructuring at its parent Dubai Holding, a Moody's analyst said on Monday.

The potential move would further compound looming problems at Dubai Holding, which spans financial investments, hospitality and real estate and is owned by the emirate's ruler Sheikh Mohammed bin Rashid Al Maktoum.

"It is likely to be downgraded, it will be sooner (rather) than later," Martin Kohlhase, assistant vice president and analyst for corporate finance at Moody's, told Reuters.

Private equity sizes up Saudi potential

Private equity fund managers have long courted Saudi Arabia’s wealthiest families to fund overseas investments. But, as the oil-rich country’s economy expands and liberalisation takes hold, private equity firms have begun to discern opportunities inside the kingdom.

Government officials list the country’s economic advantages, starting with its natural wealth, and point to strong domestic demand, the presence of the region’s largest stock market and a burgeoning young population. But only three significant private equity deals were completed in Saudi Arabia last year, compared with 10 in the United Arab Emirates, says Zawya, a data provider.

Executives blame the lack of activity on unrealistic valuations by family businesses, stock market volatility, tight credit and risk aversion after the global financial crisis.

Qatar, Saudi Stocks Rise on Bets Losses Overdone, Oil Gains -

Qatari and Saudi Arabian stocks increased as oil approached $76 a barrel and investors speculated that declines spurred by the European debt crisis are overdone given growth prospects in the Gulf countries.

Masraf Al Rayan, a Qatar-based bank, gained the most in more than six months. Saudi Basic Industries Corp, the world’s largest petrochemical maker known as Sabic, advanced 2 percent. Qatar’s QE Index increased the most this month, rising 1.5 percent to 7,024.72. Saudi Arabia’s Tadawul All Share Index gained 1 percent to 6,325.31 as of 2:00 p.m. in Riyadh, the highest in three weeks. The Bloomberg GCC 200 Index advanced 0.4 percent.

“We expect companies will have sequential quarterly financial growth and will not be affected by a falling euro or a defaulting Greece,” said Yazan Abdeen, fund manager at ING Investment Management (Dubai) Ltd. “The extreme sell-off has eased and Saudi Arabia and Qatar have a lot of value and selective story growth.”

Dubai confronts its maturing wall of debt | beyondbrics |

Dubai World’s debt restructuring looks like it may still turn out to be an unlikely success - given the shock it gave global markets when it was announced last year - and has led to some tentative optimism in some quarters of the emirate. But Moody’s today poured cold water over any Pollyannas that might be left in the Gulf.

In a regional credit outlook report, the ratings agency pointed out that there is still $145bn of debt outstanding at just 24 Gulf corporate borrowers, and identified 2012 as a key year for regional debt markets.

The credit environment for corporate issuers in the GCC region will remain challenging, especially for selected vulnerable corporate issuers that need to address significant debt maturities by 2012, says Moody’s Investors Service in a new report on the GCC corporate sector.

Gulf Companies Face ‘Wall’ of Debt Due in 2012, Moody’s Says - BusinessWeek

Gulf Arab companies have $28 billion of debt maturing in 2012, about a fifth of liabilities outstanding among companies of the six-nation Gulf Cooperation Council, according to Moody’s Investors Service.

“The 2012 wall of maturing debt poses a major challenge for GCC corporates,” Martin Kohlhase, an analyst at Moody’s Middle East in Dubai, wrote in an e-mailed report today. “The majority of this maturing debt is held by entities based in Dubai and Abu Dhabi, especially investment holding companies and real estate developers and related companies.”

GCC companies have an estimated $145 billion of debt outstanding, Moody’s said. The GCC includes the United Arab Emirates, Saudi Arabia, Kuwait, Oman, Bahrain and Qatar.

Banks begin to sell Dubai World loans

Banks have conducted the first sales of loans they made to Dubai World, crystallising losses of nearly half the face value of the debt.

The move also makes it more likely that Dubai World will use a special law and tribunal set up to aid the conglomerate’s $23.5bn debt restructuring in an effort to avoid any potential for the new debtholders to block a deal the company is hammering out with its banks, according to people close to the talks.

A group of international banks, which hold as much as 60 per cent of the government-owned conglomerate’s senior-ranking loans, are in talks with the company to finalise the terms for a restructuring that would see debt repayments extended.

UAE banks may need liquidity injection - Emirates Business 24|7

UAE money supply sharply slowed down in the first four months of 2010, raising the prospect of fresh liquidity injection by the Central Bank, analysts said.

Many banks are offering high interest rates of up to seven per cent on deposits to attract funds after negative growth in some months this year, but such offers have so far failed to reverse that trend, they said.

The situation has been complicated by a steep fall in government deposits with the country's 23 national banks and 28 foreign units and a sharp slowdown in the deposits of private establishments, says official data.

DIFC banks look to solve collateral problem - Emirates Business 24|7

The DIFC-based category one Indian banks are in talks with select local banks to find a solution to the vexing issue of how to take charge of collateral while giving loans to corporate houses in the UAE.

Though there are four Indian banks in the DIFC with category one licence that allows them to lend in foreign currency to corporates in the UAE market, being domiciled in the DIFC does not permit them to take charge of any collaterals based in the country, leaving the lending a bit risky for these banks. State Bank of India (SBI), Punjab National Bank, Axis Bank and IDBI Bank have got their category one licence in the last one year or so.

In an earlier interview, AJ Vidyasagar, Chief Executive of SBI's DIFC branch, has cited the shortcoming on the part of the DIFC-based banks in securing the loans though there is a huge potential to grow their loan book in this market. Talking to Emirates Business, Melwyn Rego, Executive Director & Head of International Banking, IDBI Bank, the newest entrant to the DIFC, said Indian banks are in talks with a few local banks to overcome the issue of taking charge of collateral against corporate loans.

IFIs in close scrutiny at Bahrain seminar - Arab News

Islamic financial institutions (IFIs), especially those competed with their conventional peers and have had an overexposure to the realty sector, were closely scrutinized at a seminar organized by the Bahrain Association of Banks (BAB) recently.

Experts who attended the seminar called upon Islamic banks and financial institutions to implement the code of corporate governance in an effort to raise the bar in ethical standards.

The half-day seminar, entitled "Corporate Governance in Islamic Banking: Improving Performance and Managing Risk," was part of BAB's continuous efforts to hold interactive programs for the banking and finance industry in Bahrain.

Bank Audi: Saudi stimulus measures driving growth

Bank Audi said stimulus packages launched in Saudi Arabia in the aftermath of the global financial crisis, among the most aggressive in the Arab MENA region, are increasingly driving economic growth in the kingdom.

The remarks were part of a report prepared by Bank Audi on the performance of the Saudi economy. The report, entitled “In an Environment Where Pent-up Opportunities Outpace Latent Challenges,” addresses the most important economic developments in 2009 and the first few months of 2010 on both the macro and micro levels, as well as the outlook for the rest of 2010 and the years to come.

“Saudi Arabia’s large accumulated reserves left it with a capability to somehow counter the spillovers of the crisis and secure relatively fast recovery. In parallel, the upturn in the oil sector, the kingdom’s principal growth engine, should leave the economy with one of its healthiest growth performance this year, with real growth expected at 3.7 percent as per recent IMF forecasts following no growth in 2009,” Audi said.

UPDATE: Saudi Annual Inflation Hits 12-Mo High Of 5.4% In May-CDSI -

Saudi Arabia's annualized inflation rose to 5.4% in May, its highest level since May last year, compared with 4.9% in April due to an increase in food prices and rents, data from the Central Department of Statistics & Information showed Sunday.

But it's still down from a record high of 11.1% in July 2008.

In the month, consumer prices came in at 0.6% for May versus a 0.3% rise seen in April, the CDSI said.

The cost of living index in the kingdom, the Arab world's largest economy, stood at 127.8 points last month, up from 127.1 points in April, and 121.3 points during the same period in 2009, the CDSI said.

The index for rent, fuel and housing-related services rose 9.4% in May compared with the year earlier period, and was 1.1% higher compared with April.

For food and beverages, the index was up 5.4% year-on-year and 0.1% on the month. Saudi Arabia, a mostly desert country with scarce water supplies, imports the bulk of its food needs.

"The price build up witnessed is of little surprise and is expected to continue and peak during the summer months," said John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi-Credit Agricole.

"Food prices are not expected to decline much in the next three months and rents are still adding to some upward pressure," he said.

The Saudi Arabian Monetary Agency, or SAMA, the country's central bank, said in February the kingdom could continue to face inflationary pressures during the first quarter of 2010 due to housing demand. But the pressures will be less than in the first quarter last year due to a stabilization in food prices, SAMA said.

SAMA's governor, Muhammad Al Jasser, has said repeatedly that the kingdom will see less inflationary pressure in 2011 and 2012.

Rising demand for housing in Saudi Arabia, which is expected to become more acute in the coming decade due to population growth, is keeping inflation rates at four times historic averages despite the global recession.

Economists expect the world's top oil exporter to see inflation ease in 2010, but it will still remain higher than its historic average of 1% as the government continues to post expansionary budgets.