Wednesday, 21 July 2010
A curious trend is developing among powerful sovereign and state-backed investment funds: despite being super rich in mainly oil-generated wealth, they are tapping the private sector for more capital.
Qatar, Bahrain, Singapore, Abu Dhabi and Kazakhstan are among those that have been raising capital via bond sales, fund placements or bank loans.
The participation of private investors whose investment horizon is shorter may drive sovereign wealth funds to move away from typically orthodox and long-term investment strategies.
After a troubled start to the year, the regional debt market has regained some of its poise, with a series of large bond sales from governments and state-linked entities.
Although bond sales fell short of the activity seen during much of last year, the total value of conventional bonds issued in the Gulf almost doubled from the first three months of the year to $6.6bn in the second quarter, says a report by NCB Capital.
Gulf bond yields have also fallen to about 5.6 per cent, according to the HSBC-Nasdaq Dubai bond index, and are lower than before Dubai World, the emirate’s troubled conglomerate, announced its debt restructuring in late November.
The words trip off the tongue: algebra and algorithm, alkali and alcohol, nadir and almanac. These technical words of Arabic origin attest to the role played centuries ago by scientists working in the Middle East.
Yet today the state of research and development in the Arab world is parlous.
In 2004, the UN Arab Development Report characterised Arab universities as “either buried in dust or smothered by ideologies”. A Unesco report in 2005 identified the region as “the least research-and-development-intensive area in the world”.
Dubai stocks rose, reflecting gains in global markets, as better-than-estimated earnings from Apple Inc. eased concern about the global economic recovery. Kuwait shares advanced after oil rose to its highest in a week.
The DFM General Index advanced 1.4 percent to 1,531.36, the highest level since June 27, at the close in the emirate. Emaar Properties PJSC, the builder of the world’s tallest tower in Dubai, gained the most in almost two weeks. Drake & Scull International, the Dubai-based construction-engineering contractor, advanced to the highest since May 31. The Bloomberg GCC 200 Index rose 0.2 percent and the Kuwait SE Price Index increased 1.1 percent.
Global stocks are experiencing “a strong session” on “Apple’s results and economic data that eased investor concern that the world’s biggest economy may experience a double dip recession,” said Rabih Sultani, a Dubai-based fund manager at Duet Mena Ltd. “Dubai should continue to track global markets” pending local earnings at the end of the month, he said.
The trade winds of the Indian Ocean helped sailors move goods from the subcontinent to the Gulf and Africa. Despite strong trade and labour links, there has been an historic mismatch in the amount of investment flowing in the other direction, from the oil-rich Gulf to India. But the trade winds appear to be shifting, as evidenced by UAE telecoms operator Etisalat recent deal to take a 26 per cent stake in India’s second-largest mobile phone operator, Reliance Communications and today’s announcement by UAE’s Evolvence Capital that it will launch its third India-focused private equity fund.
Run by UAE national Khaled al-Muhairy, the Dubai-based alternative investments company was one of the first Gulf investment funds to target India during the pre-crisis boom as the Gulf searched far and wide to place surplus petrodollars.
Evolvence, which has already closed a $250m Indian-focused fund-of-funds and a $90m life sciences fund, will seek to raise $400m for Evolvence India Fund II as it focuses on mid-market targets in a broad range of sectors.
India, one of the world’s fastest-growing developing economies, is busy cultivating emerging markets of its own.
Oman is one to watch.
While Indian companies struggle to expand in neighbouring countries in south Asia, they are making considerable headway in the Gulf and Africa. Unlike their Chinese counterparts, many do so without government support.
Oman banking system outlook remains stable, says Moody's - Business Intelligence Middle East - bi-me.com - News, analysis, reports
The outlook for the Omani banking system remains stable, reflecting its remoteness from and relative resilience to the recent global economic turmoil, says Moody's Investors Service in its new banking system outlook on Oman.
The stable outlook also incorporates the challenges faced by the banks to expand their franchise and maintain good credit quality metrics in a small, narrow and highly concentrated market.
The global financial crisis posed minimal risks for the performance and ratings of Omani banks, as Oman is an introverted market and local banks have little exposure to western markets. The Omani economy remained resilient throughout the downturn and is likely to experience growth in 2010, which the rating agency believes will improve the Omani banks' operating conditions.
Global Investment House KSCC rose for a second day to the highest in almost one month after the Kuwaiti bank said it repaid $50 million to creditor banks and a Dubai court ordered National Bank of Umm Al-Qaiwain to return $250 million to the lender.
The shares surged 8.9 percent to 61 fils, the highest level since June 24, as of 11:06 a.m. in Kuwait.
Global has so far repaid $78.9 million of the principal amount, or 46 percent of total repayments due by Dec. 10, as part of a debt restructuring agreement reached in December last year, the bank said in a statement yesterday.
Abu Dhabi plans to start building a state-of-the-art microchip foundry in the capital as early as the end of next year as global demand grows.
Advanced Technology Investment Company (ATIC), which is owned by the Abu Dhabi Government, holds a majority stake in Globalfoundries, a maker of semiconductors in which the US company Advanced Micro Devices (AMD) divested its majority holding in March last year.
ATIC has recently pledged US$3.6 billion (Dh13.22bn) to double Globalfoundries’ capacity at its facilities in Dresden and New York. This should increase Globalfoundries’ overall production to about 200,000 silicon wafers a month by 2012. Semiconductors, the microcircuitry of which is essential to the functioning of modern electronic goods, are made from silicon wafers.
Ras al Khaimah’s Government investment body is trying to attract businesses and foreign money into the emirate as it focuses on economic growth at home, it said yesterday.
The RAK Investment Authority (RAKIA) said it had generated almost US$3 billion (Dh11.01bn) in foreign investment and attracted 6,500 businesses since its launch less than five years ago.
“We sit in the middle of the energy centre of the world. We sit in the middle of the world,” said Sheikh Saud bin Saqr, Crown Prince and Deputy Ruler of Ras al Khaimah, explaining a variety of measures had been introduced to make Ras al Khaimah more appealing as a destination for business and investment, including free zones and tax exemptions.
Growth in Islamic financing in the U.K. has been hampered by an economic slump and what Moody’s Investors Service describes as a lack of government support.
HSBC Amanah, a unit of Europe’s biggest bank, says Malaysia and the Middle East have better growth prospects. Lloyds Banking Group Plc, the U.K.’s largest mortgage lender, stopped offering home financing that complies with Shariah law because the overseas underwriter withdrew, Emile Abu- Shakra, a spokesman at the bank in London, said in an interview yesterday. The Birmingham-based Islamic Bank of Britain said income from Islamic transactions dropped to 3 million pounds ($4.6 million) last year, from 8 million pounds in 2008.
Growth in the industry in the U.K., Europe’s largest market for products complying with the religion’s ban on interest, has been hurt by a lack of regulations, according to Moody’s. The U.K. Treasury yesterday reiterated the previous government’s 2008 position a sovereign sukuk sale, which would provide a benchmark for issuance, didn’t offer “value for money.”
A dearth of Dubai home sales and foreclosure auctions is stalling a recovery because buyers aren’t able to gauge how far prices have fallen during the market’s two-year slump.
“There are very few transactions at the moment,” said Craig Plumb, head of Middle East research at broker Jones Lang LaSalle Inc. “We are not going to see the bottom of the market until we see transactions through the foreclosure process.”
Home prices in the sheikhdom have dropped about 50 percent from their peak two years ago and Credit Suisse estimates a further decline of as much as 20 percent. Though at least 70 foreclosure cases have been filed under Dubai’s 2008 mortgage law, none has resulted in the sheikhdom’s first auction, said Jody Waugh, a partner at law firm Al Tamimi & Co.
A few years ago Christopher Nolan, whose current film Inception is turning into one of this summer’s blockbusters, directed a thriller about two rival magicians. Set in London at the beginning of the 20th century, The Prestige tells the story of how two magicians obsessed with creating the very best stage illusion engage in fiercely competitive one-upmanship. It all ends tragically.
In the corporate sector, Boeing and Airbus have been engaged in a ferocious game of one-upmanship for leadership in the global commercial aircraft market. Airbus came from nowhere, challenged its US rival, and ultimately overtook it. Boeing’s head of commercial aircraft, Jim Albaugh, now says he is “very confident about how we are positioned to regain – and retain – leadership in this business”.
Mr. Albaugh on Monday pulled a plump rabbit out of his hat on the opening day of the Farnborough Air Show. He announced that Boeing had won an impressive order for 30 of its 777 widebody airliners from Emirates, the Dubai-based carrier that is already the 777’s single largest customer.