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Wednesday, 28 July 2010

Sentiment towards UAE stocks improves

The United Arab Emirates’ bourses are in a funk. Abu Dhabi and Dubai’s stock markets are the two worst performers in the Gulf this year, having lost 7 per cent and 16 per cent of their values respectively.

During the past three years the MSCI UAE index has now shed 23.5 per cent, the most in the region after Bahrain’s small, illiquid bourse.

The near-term outlook is hardly encouraging, either. The anaemic summer trading volumes will make it hard for markets to find traction, and Dubai’s financial problems are likely to continue to cast a cloud over the country for the foreseeable future."

Gulf’s budget carriers aim high

Five years ago, low-cost airlines’ regional market share by passengers was only 1 per cent, as the pioneer, Sharjah-based Air Arabia, ramped up operations after its 2003 launch.

Yet today, Air Arabia, which is listed on the Dubai stock market, is competing with a host of other private-sector airlines in Kuwait, such as Jazeera, Saudi Arabia’s Sama and NAS, Bahrain Air and Dubai’s state-owned Flydubai. There are also plans to relaunch RAK Airways in Ras al-Khaimah, another member of the United Arab Emirates.

The low-cost carriers have seen their market share grow to between 6 and 8 per cent in 2009, according to industry participants and analysts. Airlines from outside the region are getting in on the act too: Air India Express, for example, serves the busy Gulf-India routes that have proved so lucrative for Air Arabia."

Dubai Shares Rise Most in Week as Emaar Rated Overweight at Morgan Stanley - Bloomberg

Dubai stocks rose the most in a week as Morgan Stanley initiated Emaar Properties PJSC with an “overweight” recommendation and European stocks advanced in early trading boosted by earnings.

The Dubai Financial Market General Index climbed 0.9 percent, the most since July 21, to 1,512.9. Emaar, the builder of the world’s tallest tower and the company with the highest weighting in the benchmark, also rose the most this week. Drake & Scull International PJSC, an electrical and plumbing company, advanced after winning four contracts. The Bloomberg GCC 200 Index rose 0.4 percent at 2:33 p.m. in Dubai.

“The rally today is driven by positive global sentiment,” said Saad Al-Chalabi, institutional trader at Al Ramz Securities in Abu Dhabi. Morgan Stanley’s note on Emaar “helped lift the stock,” he said."

Dubai Investments Q2 profit falls 32 pct, UAE Conglomerates, Industry - Maktoob Business

UAE conglomerate Dubai Investments Co posted a 32-percent drop in second quarter net profit on Wednesday, after being hit by a loss on the fair value of its investments.

The firm made a net profit of 196.3 million dirhams ($53.46 million) for the three months to June 30, it said in a statement.

That was down from 287 million dirhams a year earlier."

UPDATE 1-U.S. may dismiss charges against Agility unit | Reuters

Kuwaiti logistics firm Agility (AGLT.KW), facing U.S. fraud charges over military supply contracts, said the government wants to dismiss the indictment against one of its subsidiaries.

"The United States Attorney's Office in Atlanta moved to dismiss the indictment against Holdings, an Agility subsidiary," the firm said in a statement to the Dubai bourse on Wednesday.

"While the prosecutors' motives for seeking this dismissal at this time are unknown ... this request for dismissal comes after motions filed by Holdings to discover the government's evidence against it."

Marcellus Shale drilling drives economic growth - Editorial Columns | Centre Daily Times - State College, PA | Penn State, Nittany Lions, weather, news, jobs, homes, apartments, real estate

While still in its infancy, the environmentally responsible development of clean-burning natural gas from Pennsylvania’s portion of the Marcellus Shale formation continues to create tens of thousands of good-paying jobs and drive economic activity and growth during some of the most challenging economic conditions in decades.

The overwhelming benefits of the production from the Marcellus, which is considered by experts to have the potential to be the second largest natural gas field in the world (second only to one in Qatar), are benefiting all Pennsylvanians.

And while the first Marcellus well was developed in 2004, here’s a snapshot of how far we’ve come in just a few short years and how we intend to achieve even more.

Defaults undermine new Islamic bond issues and Islamic finance � ArabianMoney

Investors who believed Islamic bonds would somehow be better protected against adversity have had their confidence undermined by four defaults that have returned issuance to the 2005 level of $2.5 billion so far this year.

Yields on sukuk or Islamic bonds are rising – and therefore bond prices are falling – despite a decline in traditional debt interest rates. Bloomberg reported that the average yield on GCC sukuk is 6.99 per cent by comparison with 5.35 per cent for non-Islamic GCC bonds.

Some lenders question Dubai's shortfall guarantees - Business Intelligence Middle East - - News, analysis, reports

Dubai's pledge to cover gaps in Dubai World's debt repayment plan has become a sticking point for lenders, some of whom want state guarantees to fall under British -- not local -- law, bankers close to the matter said.

The issue arose at Dubai World's all-creditor meeting on July 22, creating another hurdle as the group seeks to push through restructuring proposals.

At stake are Dubai's shortfall guarantees to plug any gap left after asset sales to fund the conglomerate's plan to repay US$14.4 billion in bank debt."

Wall St. WTF: Here's the plan: we liquidate Dubai World in slow motion and hand out the money starting to my left, if the creditors agree they can sit between us...

Last week there were some seemingly minor developments in the Dubai World saga. These were the Nakheel restructuring plan and the presentation of the Dubai World restructuring plan to the general lending community outside the Lenders Committee which had blessed the proposal back in May. On the surface of it this presentation carries with it no new news, the proposal is more or less identical to what the big lenders agreed.

I’ve written about this before at length, but to summarize, the lenders will be asked to roll their loans out into tranches of five and eight years. There will be no haircut on principal but the interest rates will be cut to 1% on the 5 year tranche and between 1-3.5% on the eight year tranche. Apparently the 8 year tranche will have several choices for the lenders on repayment type and the degree to which there is a “shortfall guarantee.” Presumably the more risk the lender takes the higher the rate. It seems kind of a Hobson’s Choice to me because even 3.5% is substantially below a market price for that risk and the word is that there is some question as to whether the guarantees would be enforceable in UK courts.

So what is different about this announcement than the one that was made in May? Well, several things. One is that the lenders are not in a position to negotiate the terms, it is a take it or leave it deal. The big banks had an opportunity to challenge Dubai on the nature and structure of the deal back in May but they were more concerned about not taking too big an immediate loss. They successfully blocked Dubai’s opening gambit of a partial write down of principal but conceded on the structure of the deal and on concessionary interest rates. By doing this they basically enabled the government of Dubai to drain the DFSF, channel the vast majority of the funds to Nakheel, and through Nakheel to the Sukuk holders and the local contractors which had trade claims against Nakheel. The Nakheel creditors, who are also mostly local are getting a much better deal than the creditors of the parent company. Well that’s what happens when you put immediate loss avoidance ahead of your long term strategic interests but considering that this decision was made by western banks it should come as no surprise.

Saudi Arabia May Be Proper Forum for al-Sanea Suit, Judge Says - BusinessWeek

Saudi Arabia may be a more appropriate location for claims in a lawsuit filed in the Cayman Islands against Saudi billionaire Maan al-Sanea by members of the kingdom’s Algosaibi family, according to a court decision.

In the lawsuit, the Algosaibi group alleged Al-Sanea misappropriated $9.2 billion from the group’s units in part to fund his Saad Group of Companies. Al-Sanea has denied any wrongdoing, saying Algosaibi was aware of the borrowing. Smellie stayed the litigation until a committee appointed by the Saudi government rules on related petitions made there by the Algosaibi family. Smellie’s decision couldn’t be immediately confirmed in Cayman Islands electronic records or by a clerk contacted at the courthouse.

Units of the two Saudi family groups have borrowed at least $15.7 billion from more than 80 regional and international banks, including Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to documents provided by lenders.

Persian Gulf Sukuk Yield Premium Widens on Fourth Default: Islamic Finance - Bloomberg

Yields on Islamic bonds from the Persian Gulf are climbing even as rates on regular debt decline, after four defaults in the past 16 months prompted investors to demand higher returns.

The average yield on sukuk sold by Gulf Cooperation Council issuers rose 38 basis points to 6.99 percent yesterday from this year’s low on April 15, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index. The average yield on the HSBC/NASDAQ Dubai GCC Conventional US Bond Index, made up of notes that don’t comply with Muslim tenets from Qatar to Saudi Arabia, fell 24 basis points in the same period to 5.35 percent. The spread between the two has widened 62 basis points to 164.

International Investment Group KSCC, an Islamic financial company based in Safat, Kuwait, said on July 26 it was unable to pay $152.5 million to bondholders who demanded immediate repayment after it defaulted on a $200 million Islamic bond. Persian Gulf companies have $28 billion of debt maturing in 2012, Moody’s Investors Service said in a report on June 14. Dubai-based companies have $10.4 billion of obligations maturing that same year, according to Moody’s."

RasGas ships first LNG to Brazil

DOHA: RasGas Company Limited (RasGas), Qatar’s major liquefied natural gas (LNG) supplier, yesterday announced the sale of an LNG cargo to Petrobras, the biggest company in Brazil and a powerful player in global energy markets marking the first shipment of Qatari LNG to Brazil.
“The South American market for LNG is growing,” said Khalid Sultan Al Kuwari, RasGas Marketing Executive in a news release. “RasGas’ increasing presence there demonstrates our determination to extend the global reach of Qatari LNG and to maintain the flexibility, reliability and safety that characterises the company’s operations. We’re delighted to supply LNG on a spot basis to this new market and we look forward to the possibility of continuing our relationship with Petrobras in the future.”
The LNG cargo was loaded on to the Express, Petrobras’ short-term chartered LNG vessel at Ras Laffan Port bound for either Pecem LNG Terminal in the north-eastern state of Ceara or Guanabara Bay LNG Terminal in Rio de Janeiro.

Soros set to buy stake in Bombay exchange

George Soros, the billionaire investor, is in final talks to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange, as foreign investor interest in India’s fast-growing financial markets rises, people close to the matter said.

Soros Fund Management is planning to pay about $40m for its stake, valuing Asia’s oldest bourse at about $1bn, said a person involved in the negotiations.

The deal is the latest in a series of strategic investments in India’s stock and derivatives exchanges, which are diversifying into new asset classes and embracing new technologies to attract so-called “high-frequency” traders.