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Wednesday, 18 August 2010

Comment: aviation needs better management

Middle East aviation appears to be a picture of economic health: passenger growth is up 13 per cent, compared with 4 per cent worldwide. Freight is up 10 per cent, while the rest of the world is down slightly.

The region is buying aircraft and building facilities rapidly: Middle East carriers have ordered more than 500 aircraft, of which about 120 are scheduled for delivery this year, and some $30bn is slated for investment in airport projects.

This growth has come from several sources: business and tourist travel, expatriates are returning to the region more regularly, and labour demand combined with cheaper air travel has drawn more workers from Asia and elsewhere.

Appeal of sukuk spreads beyond strongholds

Malaysia and the Gulf have been the traditional strongholds of Islamic bond issuance, but the market is beginning to broaden to other countries, Muslim and otherwise.

On Monday Norton Rose, the law firm, revealed it had advised on a $10m mini-issue by International Innovative Technologies, a maker of industrial milling machines in north-east England. It raised $10m from Millennium Private Equity, based in Dubai.

Millennium will be the sole investor in the sukuk, which will be listed on the Cayman Islands Stock Exchange. The sukuk will pay 10 per cent a year and expire in 2014. It uses a musharaka structure, also known as profit and loss sharing, allowing Millennium an option to take a stake in IIT.

Muscat pins hopes on mobile phone fillip

Small is often beautiful. But in the case of the Muscat securities market in Oman, its performance this year has been flat and turnover, as elsewhere, has been low.

The absence of direction is partially a response to a solid performance last year, when the MSM gained 17 per cent.

Mohammed Murtadha, of Vision Investment Services in Muscat, says that average daily turnover this year has been only OR2.5m ($6.5m) compared with OR14m last year. In the summer months turnover has barely hit OR2m.

Deal of the day: Egypt’s EFG heads back to Lebanese banking | beyondbrics | FT.com

Lebanon’s banking sector has grown to 30 per cent of the country’s GDP and, in the IMF’s words, “weathered recent regional and global crises well”. With margins slimming at home, its next trick should be deeper regional integration.

To that end, today’s move doesn’t see a Lebanese bank shopping abroad, but rather Egypt’s largest investment bank by market value, EFG Hermes, shopping in Lebanon. EFG has responded to the breakdown of its merger with one Lebanese bank - Bank Audi SAL-Audi Saradar Group, in which EFG sold its stake in January - by buying a smaller one, Credit Libanais.

EFG plans to buy a 65 per cent stake in Credit Libanais for $542m, with an option for the next two years to purchase an additional 25 per cent. The price places a value of $834m on Credit Libanais’s total equity, which until now has been mostly owned by the Bahraini and Lebanese units of Capital Investment Holding.

Qatar Telecom's Ratings Cut to `A2' From `A1' at Moody's, Outlook Stable - Bloomberg

Qatar Telecom QSC, which provides telecommunications services in 17 countries from Asia to Africa, had its ratings lowered to “A2” from “A1” at Moody’s Investors Service today. The outlook is stable.

The rating action affects $1.5 billion of debt, it said.

Developer Emaar Leads Dubai Shares Lower as International Markets Retreat - Bloomberg

Dubai and Saudi Arabia shares retreated as stocks in Europe and China fell the first time this week, damping investor appetite for riskier assets. Crude oil fell to a more than one-month low. Emaar Properties PJSC, builder of the world’s tallest skyscraper in Dubai, dropped the most in a week. Saudi Basic Industries Corp., the world’s largest petrochemicals maker, declined 1.7 percent. The DFM General Index decreased 0.4 percent to 1,481.52 at the 2 p.m. close in Dubai. Saudi Arabia’s Tadawul All Share Index lost 0.7 percent to 6,121.06, the lowest in four weeks.

“We’re still tracking international markets,” said Marwan Shurrab, assistant fund manager and chief trader at Gulfmena Alternative Investments Dubai. “Ramadan is usually slow, but this year it’s coming during a global general lack of interest in equity markets.”

The Stoxx Europe 600 Index declined for the first time in five days, losing as much as 0.9 percent. The gauge has retreated 5.3 percent from this year’s high in April amid concern that European governments will struggle to reduce their budget deficits and speculation that the U.S. economic recovery may be flagging. China’s Shanghai Composite Index dropped after a central bank adviser said real-estate curbs shouldn’t be reversed. U.S. index futures also fell.

Barclays Capital Offers Islamic Repos in $1 Trillion Market - BusinessWeek

Barclays Capital, the investment banking arm of London-based Barclays Plc, is offering Shariah- compliant repurchase agreements to allow Islamic banks and investors manage their funds.

Barclays introduced the product worldwide two weeks ago and is focusing on clients in Malaysia and the Middle East, where the largest Islamic financial institutions are based, Harris Irfan, the bank’s Dubai-based head of Islamic finance products, said in an interview “The product is ready to go out the door,” he said in an e-mailed response to questions Aug. 17.

The Islamic repurchase agreements from Barclays will be based on a Shariah-compliant sale and repurchase agreement and the underlying assets used as collateral, typically sukuk, won’t violate the religion’s ban on interest. The International Islamic Financial Market, a Bahrain-based agency founded by the central banks of Bahrain, Indonesia and Malaysia, this week proposed allowing third parties to act as intermediaries between buyers and sellers of sukuk used as collateral for short-term funds.

DP World Profit Beats Estimates as Trade Rebound Revives Container Traffic - Bloomberg

DP World Ltd., the world’s fourth- largest port operator, reported a better-than-expected first- half profit as the number of containers it handled grew 7 percent because of rebounding global trade.

Net income, including separately disclosed items, rose to $176.6 million from $175.3 million a year ago, the Dubai government-controlled company said in a statement to Nasdaq Dubai today. That beat the $157 million median estimate of three analysts, according to data compiled by Bloomberg. Profit after tax from continuing operations jumped 10 percent to $206 million, the company said.

The result “is a reflection of returning container volumes” and cost management, Chief Executive Officer Mohammed Sharaf said in the statement. “Uncertainty remains over the sustainability of global trade volumes.” DP World expects second-half results to be stronger than the first due to a seasonal increase in trade, income from new terminals and better non-container revenue, he said.

DP World Profit Beats Estimates as Trade Rebound Revives Container Traffic - Bloomberg

DP World Ltd., the world’s fourth- largest port operator, reported a better-than-expected first- half profit as the number of containers it handled grew 7 percent because of rebounding global trade.

Net income, including separately disclosed items, rose to $176.6 million from $175.3 million a year ago, the Dubai government-controlled company said in a statement to Nasdaq Dubai today. That beat the $157 million median estimate of three analysts, according to data compiled by Bloomberg. Profit after tax from continuing operations jumped 10 percent to $206 million, the company said.

The result “is a reflection of returning container volumes” and cost management, Chief Executive Officer Mohammed Sharaf said in the statement. “Uncertainty remains over the sustainability of global trade volumes.” DP World expects second-half results to be stronger than the first due to a seasonal increase in trade, income from new terminals and better non-container revenue, he said.

Two of the Cheapest Stock Markets in the World

Every year, I go to the Agora Financial Investment Symposium in Vancouver, both as speaker and attendee. It's jampacked with people from all over the world who gather at the Fairmont Hotel to share ideas. As soon as I walk into that grand old railway hotel, I know there will be some surprises. This year was no different.

Ideas were not in short supply, but some ideas were more common than others. More than a few speakers spoke well of gold and oil. Most had dim views of the economy and the stock market. And there were at least a handful whose best ideas hailed from some emerging market.

A couple of my favorite ideas came from investors based in Dubai and Moscow. Whole markets rarely go on sale, but here we have two examples of stock markets trading for about 6 times earnings."

Wall St. WTF: Even if the volume goes to zero we can still hang out here right? I mean, we don't want to let these awesome leather couches go empty...

There have been some articles recently about the plight of brokers in both Dubai and Abu Dhabi. Initially these were reports of how volumes were tapering off as we move into Ramadan. While business networking takes off during the Iftar hopping season (I wish there was an analog to this in the West) trading on the regions exchanges tends to slack off. This volume decline and the economic effect it is having on the brokerage industry in the Emirates has attracted the attention of both Bloomberg and The National as well it should because it says something about Ramadan, more about the brokerage industry in Dubai and a great deal about what the function of equity markets in the region is and what it could be.

There are any number of reasons why people would want to scale back their trading during Ramadan. Perhaps in the same way that you shouldn’t go grocery shopping while you’re hungry maybe you shouldn’t go stock shopping while you are denying yourself basic sustenance. Maybe that dry feeling you get in your mouth when you’re betting the ranch on Saudi Livestock is particularly arid when you can’t drink anything till sundown. Or maybe people feel closer to Islam generally and so are less comfortable making or taking non-Sharia compliant margin loans. Perhaps the speculative nature of trading GCC shares seems a little too close to gambling for people to be comfortable during Ramadan. Perhaps the generally higher level of sobriety keeps people away from buying shares. Or maybe this year as Ramadan falls in August everyone is simply in Marbella or the Cote ‘d Azure or Geneva so no one is around. It’s been interesting to watch the number of people logging onto my blog from the marina in Monaco spike. Whatever the reason, volumes are seasonally light.

The articles in the press don’t stop there. Volumes in the Emirates have fallen off a cliff putting an extremely serious squeeze on the brokers forcing a great many of them to close their doors. Personally I have mixed emotions about this. I think I met with 80%-90% of the brokerages in existence between 2005 and 2008. The market structure was extremely fragmented, there were something like 95 brokers registered on the DFM and the largest one had a market share of under 15% the top ten were less than 30%. As a person trying to sell connectivity to the DIFX in November of 2005 this was deeply tragic because it meant I literally had to meet with everyone.

Palestinian Authority, This Is Private Equity and We Are Here to Help - Deal Journal - WSJ

Abraaj Capital has become one of the first private equity firms to open an office in the Palestinian Authority as it seeks to capitalize on expected growth in a region that has been riven by conflict.

The Dubai firm hired an executive, Fayez Husseini, a senior vice president for business development from telecoms company FRiENDi Group, to launch the operation in the West Bank city of Ramallah.

It has earmarked $50 million for investment in the region, with Husseini expected to identify and execute 20 to 25 deals in the next four years. The firm said the Palestinian economy was expected to expand 7% this year and that it would be investing in small and midsize enterprises, which has been the focus of the Palestinian government.