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Monday, 19 July 2010

Qatar confident of property recovery

Many real estate developments in the Gulf may have been killed off by the financial crisis, but Qatar is pressing ahead with its grandiose property projects.

Despite delays, the $20bn Pearl development on reclaimed islands beyond the West Bay area of Doha is continuing, and the first ring of towers will soon be completed. Officials say Qatar is also progressing with plans to build the 21 sq km Lusail City to the north of the Qatari capital.

However, official optimism and continuing projects cannot mask the fact that the Qatari property market has been hurt by the fallout from the financial crisis.

Aviation - From Nothing to a Global Hub for Aviation -

Karim Sahib/Agence France-Presse — Getty Images

Emirates Airlines aircraft at Dubai International Airport. Dubai has opened another airport designed to handle 120 million passengers a year.

NEW YORK — Attention airline passengers: While some of you were fuming right along with the Eyjafjallajokull volcano in Iceland this past spring, others were finding a new route to international destinations that avoided the ashy Atlantic skies entirely. So, while many regions of the world took a hit in April and May, Middle Eastern carriers carried on, showing a 19 percent increase in passenger volume over last year.

On top of that, the number of their passengers choosing to fly premium class went up 25 percent — “a race to the top,” according to the International Air Transport Association, the lobbying organization and trade group based in Montreal and Geneva.

Global shifts in economic circumstances have created new opportunities, and aviation industry insiders say many of these, both short- and long-term, promise to be in the Middle East.

U.A.E. Shares Climb on Second-Quarter Earnings, Aabar; Saudi Shares Gain - Bloomberg

Shares in the United Arab Emirates advanced, leading gains in the Gulf, as positive second-quarter earnings in Abu Dhabi increased confidence in local stocks.

Abu Dhabi Islamic Bank, the second-biggest bank complying with Islamic banking rules, rose the most in almost three months after second-quarter profit jumped 56 percent. Emirates NBD PJSC, Dubai’s biggest bank, advanced the most since April. Abu Dhabi’s benchmark advanced 0.3 percent to 2,534.29, the highest level since June 28, and Dubai’s DFM General Index climbed 0.7 percent. Volume on the measure was 44 percent below its three month average.

“Regional markets are marginally higher” than global markets today “as some slightly better earnings numbers are compensating for low summer trading volumes,” said Mark Friedenthal, a fund manager at Abu Dhabi Commercial Bank PJSC.

Kuwait's Global wins $250 mln Dubai ruling, Kuwait Investment Companies, Banking & Investment - Maktoob Business

A Dubai court has ordered the National Bank of Umm Al Quwain to repay Kuwait's Global Investment House $250 million, Global said on Monday.

Global's chief executive, Bader al-Sumait, said in a statement the money from the UAE bank will be used to repay the company's restructured debt.

In December, Global reached a deal with creditors to reschedule $1.7 billion in debt, and entered into new three-year facilities with each of its 53 lending banks.

Doha Bank Q2 beats forecast but bad loans rise | Reuters

Qatar-based Doha Bank (DOBK.QA) posted a second-quarter net profit of 299.7 million riyals, a 5.4 percent drop from the year-earlier period but ahead of analysts' expectations.

Analysts polled by Reuters had expected Qatar's fifth-largest bank to post an average of 274.7 million riyals for the second quarter. [ID:nLDE66605M]

Total non-performing loans as at June 30, 2010 rose to 1.04 billion riyals from 851 million at the end of Dec. 31, 2009.

U.A.E.’s Du to Profit as Competition With Etisalat Intensifies - BusinessWeek

Du, or Emirates Integrated Telecommunications Co., probably increased profit in the second quarter as it intensified competition with the United Arab Emirates’ other state-controlled phone company.

Du’s net income may have almost doubled to 114 million dirhams ($31 million), according to an average estimate of five analysts on Bloomberg. By contrast, competitor Emirates Telecommunications Corp. yesterday reported a 21 percent drop in profit from a year earlier to 1.9 billion dirhams ($545 million). Du typically releases quarterly results within a month of the end of a quarter.

“With mobile penetration at above 200 percent, the companies are competing more aggressively in the U.A.E.,” said Nishit Lakhotia, a Bahrain-based analyst at Securities & Investment Co. BSC. Du “has invested heavily in infrastructure, enhancing network coverage.”

U.A.E. Bank Earnings May Be Hurt by Dubai World's Debt Plan, Analysts Say - Bloomberg

Dubai World’s $23.5 billion debt restructuring will hurt second-quarter earnings at three of the six biggest banks in the United Arab Emirates, analysts said.

Earnings at Emirates NBD PJSC, the U.A.E.’s biggest lender by assets, will likely decline 45 percent to 468 million dirhams ($127 million), according to the median estimate of three analysts surveyed by Bloomberg News. Profit at third-ranked Abu Dhabi Commercial Bank PJSC will drop 40 percent to 182 million dirhams and by 63 percent to 166 million dirhams at top Islamic lender Dubai Islamic Bank PJSC, the survey showed.

Provisions for bad loans will remain high and banks will set aside money to cover part of the loan losses from Dubai World in the second quarter, said Murad Ansari, a Riyadh-based analyst at EFG-Hermes Holding SAE. Revenue growth also slowed as lending “has yet to show any sign of recovery,” he said.

Emirates group nears deal with Reliance

Emirates Telecomunications is close to buying a 26 per cent stake in Reliance Communications, India’s second-largest mobile operator, people familiar with the negotiations said.

In an attempt to overcome a number of regulatory hurdles, the two groups are also considering merging Reliance with Swan Telecom, the Indian company in which the United Arab Emirates-based group holds a 45 per cent stake.

The deal – which is estimated to be worth about $3bn – would give the government-controlled group known as Etisalat a big step up in the world’s fastest-growing large mobile market with more than 600m subscribers.

Milestone for investors’ rights - The National Newspaper

Yesterday’s decision by a Government committee to raise the price paid to minority shareholders in Aabar Investments sets a precedent for shareholders’ rights and paves the way for new regulations on mergers and acquisitions, lawyers believe.

The committee, comprising representatives of the Emirates Securities and Commodities Authority (SCA), the Federal Ministry of Economy and the Abu Dhabi Department of Economic Development, told International Petroleum Investment Company (IPIC) to raise its Dh1.45 per share offer for Aabar to Dh1.95. IPIC, a government-owned investment vehicle that owns 70 per cent of Aabar, made the Dh1.45 offer last week as part of a plan to buy the rest of the company and take it private.

The UAE currently has no regulations explicitly covering takeovers. Given the lack of legal clarity, the Government’s decision on IPIC’s offer was closely watched because of its implications for minority shareholders. Some investors criticised the Dh1.45 price as too low, given that Aabar shares had traded at above Dh2 in recent months. The price also valued the company at less than half its book value.

SCA plans raft of new rules for nation’s markets - The National Newspaper

The Emirates Securities and Commodities Authority (SCA) plans to introduce a set of rules by the end of the year aimed at tightening the regulation of financial markets.

The rules will cover trading on margins, market making and short selling.

“We’ll introduce it as a package to the market,” said Ibrahim al Zaabi, the deputy chief executive at SCA.

IPIC raises offer for Aabar after SCA ruling - The National Newspaper

The International Petroleum Investment Company (IPIC) agreed yesterday to raise its takeover offer for the Abu Dhabi-listed Aabar Investments by more than 34 per cent, handing a victory to minority shareholders in an unprecedented test of the country’s stock market regulations.

The Emirates Securities and Commodities Authority (SCA), the body that oversees local exchanges, announced the increase from Dh1.45 to Dh1.95 a share after talks with the Ministry of Economy and Abu Dhabi Department of Economic Development on the fairness of the deal.

The shares of Aabar, which is majority-owned by IPIC, opened at Dh1.55 on the Abu Dhabi Securities Exchange (ADX) yesterday and closed up 8.3 per cent at Dh1.57 after the announcement.

Wall St. WTF: ESCA Gives Aabar Shareholders a ham sandwich.

I once walked into a classroom in college and was startled by something written on the board. Someone from the last class had written the following elegant proof (apologies to the Shariah compliant, I'm trying to be true to the facts):

Nothing is better than happiness
A ham sandwich is better than nothing
A ham sandwich is better than happiness

I’d like to offer my own proof for in honor of the ESCA decision on the IPIC de-listing.

Nothing is better than the rule of law
Half a Dirham is better than nothing
Half a Dirham is better than the rule of law.

What I mean by this is that while 1.95AED is certainly a better price than 1.45AED the shareholders have no say in the decision either way. Whether IPIC or ESCA decide the price it is still a take it or leave it deal for the shareholders and they have no choice but to accept what is, in the end, an arbitrary decision which differs only who is making it and at what level. The wishes of the minority shareholders themselves are never taken into consideration. You have to remember the context, 1.45 AED is 50% of book, 1.95 AED is still only 67% of book. Usually holding companies like Aabar trade at about 1 times book in other markets. KKR for example is trading just under 1 times book as of Friday. Even though the shareholders are getting a better deal than the one IPIC offered them, it’s still not a great deal.

Massive 777 order for Boeing coming at the Farnborough Air Show, but it won't be new revenue | Seattle Times Newspaper

Boeing will make headlines at the Farnborough Air Show with a giant order of 777s from Dubai flag carrier Emirates, according to a person familiar with the details.

That's huge news for Emirates. But for Boeing, it won't truly be new revenue.

Similar to the deal Airbus got at the Berlin Air Show last month, this order is a replacement for a 2007 order from airplane leasing company DAE
Capital -- led by CEO Bob Genise, formerly of Bellevue-based aircraft
lessors Boullioun Aviation Services.

In Berlin, Emirates shocked rival airlines by announcing a massive order for 32 Airbus A380 superjumbo jets, worth $11 billion at list prices, or more like $6 billion in real money after standard discounts. That was in addition to the 58 A380s Emirates had previously ordered.

But trade magazine Airfinance Journal soon revealed that the order was part of a complex swap. The Dubai government was working out the consequences of the global economic crisis and the bursting of its real estate bubble in 2009. Faced with a collapse of financing for DAE Capital, Dubai decided to cut the lessor's ambitious growth plans and negotiated a transfer of its 2007 Airbus sales commitments to Emirates.

Emirates didn't want smaller airplanes. Hence a 100-airplane order for 70 single-aisle A320s and 30 widebody A350s from the leasing company in 2007 switched to that order for 32 superjumbos in 2010.

In terms of dollar value, it's a wash for Airbus. But it sure beats a canceled order.

Now similarly for Boeing. In 2007, DAE Capital had ordered 70 single-aisle 737s,15 widebody 787 Dreamliners, ten 777s and five 747-8 freighters.

Emirates wants only 777s. The math suggests that to keep Boeing more or less whole, the carrier that aims to rule the airline world will take more than 40 of them.

Qatar highest rated in GCC: QNB Capital

Qatar is currently the highest rated GCC (Gulf Co-operation Council) country with top ratings from all leading agencies – Moody’s, Standard & Poor’s, Fitch and Capital Intelligence, QNB Capital said in its forthcoming Qatar Economic Review.

S&P had recently raised the country’s sovereign long-term foreign and local currency ratings to AA from AA-, while affirming the short-term ratings at A-1+ with outlook stable.

“S&P mentioned the upgrade was based on the government’s strengthening fiscal and external balance sheets, with strong growth prospects spurred by new liquefied natural gas projects in 2010–12,” QNB Capital said.

Bahrain Plans Bourse to Lure Sukuk From London: Islamic Finance - BusinessWeek

Bahrain, the Middle Eastern country with the largest number of Islamic banks, aims to grab a greater share of sukuk trading from the U.K., Dubai and Malaysia with a bourse dedicated to securities that adhere to Shariah law.

The Bahrain Financial Exchange, scheduled to open in October, will start trading in Islamic debt next year, Chief Executive Officer Arshad Khan said. Eight sukuk valued at about $2.9 billion trade on the existing Bahrain Stock Exchange, compared with 20 at a face amount of $16 billion listed on Nasdaq Dubai, data on exchange websites show. The London Stock Exchange has attracted $17.7 billion from 26 securities.

Issuers are favoring the most-active markets to ensure investors can trade their securities, with General Electric Capital Corp., the world’s biggest non-bank finance company, listing $500 million of Shariah-compliant debt sold in November in Malaysia, London and Dubai.

UAE stocks as the Trade of the Decade? « ArabianMoney

Today ArabianMoney editor Peter Cooper is flying to the other side of the world to give a presentation to the largest gathering of independent investors in the world in Vancouver.

This event is hosted by Agora Financial, publishers of many financial newsletters. He will be arguing that UAE bourses now represent the best global stock buying opportunity of this decade.

This presentation will explain how the Dubai and Abu Dhabi stock markets just have to be close to an important bottom, and that the time to buy stocks again must be very close.

The very fact that so many people reading this column will roll their eyes in amazement and say that things really are bad is one very good reason to be optimistic. For when the consensus is so low that is often the stock market bottom.

Market bottom indicators

We have the classic signs of a market bottom: low price-to-earning ratios; negative press; big announcements make no difference to stock prices; 11 brokers closed this year; a top broker just resigned; volume is down 90 per cent; everybody is talking about how much they lost on Dubai property; capital spending is lower; interest rates are falling; hotel room rates are down; foreign fund managers have given up; there was a capital flight after a property crash; Swiss bankers are very negative.

The Dubai Financial Market was the world’s best performing stock market in 2005, and the worst in 2006! There was then a 50 per cent retracement by 2008 before the renewed plunge that year. It looks like a classic double top. Consider this chart from

Surely from these levels a serious recovery is likely. The only question is how long it takes for this breakout. However, the UAE market moves on a seven-year cycle. The previous low was in 1999 post Asian Financial Crisis.

So on that reckoning we are only two years away from another peak. That might sound incredible but just look at how steep the upturn was in 2005. There is no reason why history should not repeat itself as it so often does.

Market spikes

From the experience of 2005 this phase can be readily spotted. It might well happen again as the result of a sudden and dramatic lift in the oil price when the US gets into its second or third stimulus package and sets off dollar inflation. Or it could be down to some sort of comprehensive peace initiative in the region – rather less likely perhaps.

You also have to consider the excellent business fundamentals of Dubai. The commercial economics that delivered faster growth than China from 2003-8 have not died, despite the real estate crash.

Airport passengers and cargo grew last year by 9.2 per cent and 5.6 per cent respectively against the global downturn. Duty free sales in the UAE airports are actually larger than for the whole of Japan.

The Jebel Ali super port was one of the least impacted by the recession. Multinational companies and banks continue to choose Dubai as their preferred location in the region.

Tourism numbers are holding up even if hotel rates are down sharply. A lot of very wealthy people live in the UAE, both citizens and tax exiles and they continue to spend money. Officials say the population of Dubai is still growing as people move back from neighboring emirates thanks to lower rental prices.

Debt solution in sight?

The Dubai debt problem is also well known now, and being addressed. Indeed, the final sign-off on the $23.5 billion Dubai World debt rescheduling post Ramadan could be the trigger for a big rally in Dubai stocks and doubtless Abu Dhabi would move in tandem.

Have we not already seen green shoots in the desert? On June 27th the second Dubai airport opened; there was an $11.5bn aircraft order for Airbus; and two schemes to restart 46 construction projects that are 60 per cent complete. The new strata law is good for local real estate.

Now the local stock market is ignoring these catalysts but if past precedent is any guide they will work. History has a habit of repeating itself, and stock markets do eventually rise again after having fallen.

The only caveat is that global stock markets look about to take a major tumble. Yet that works too as both global and local markets would then hit an important bottom, perhaps in October. But true that would be a month or so after the end of Ramadan.