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Tuesday, 31 August 2010

Dubai May Help Abu Dhabi Set Up Finance Hub as Emirates Diversify Economy - Bloomberg

Dubai International Financial Center, the tax-free business park for financial-services companies, will help neighboring Abu Dhabi set up its financial district if needed, its chief executive officer said.

“Our strategy is always to collaborate with Abu Dhabi and the federal authorities,” Abdulla Mohammed Al Awar said in an interview in Dubai today. “One financial center is not sufficient” for the Middle East, North Africa and South Asia region, and DIFC is prepared to share its experience of operating the center in the past six years.

Dubai set up DIFC in 2004 to attract international banks, asset managers and insurers to help diversify its economy. Abu Dhabi, the richest of the seven states that make up the United Arab Emirates and holder of about 8 percent of the world’s oil reserves, is also boosting investments in industry, tourist attractions and infrastructure to diversify away from oil.

MIDEAST STOCKS-Qatar seen as safe haven as index hits 3-mth high | Reuters

Qatar's index .QSI edged up to a three-month high on Tuesday, outperforming most Middle East markets as investors bet the country can best weather any shocks to the world economy.

Masraf Al Rayan (MARK.QA) climbed 1.4 percent, while Qatar Electricity and Water (QEWC.QA) and Qatar Telecom (QTEL.QA) (Qtel) rose 1 and 0.6 percent respectively, with the latter pair seen as attractive dividend plays.

Qatar's index gained for the 11th session in 12, rising 0.1 percent to its highest finish since May 18."

Qatar Developer Barwa Halts $9.2 Billion Projects on Property Market Slump - Bloomberg

Barwa Real Estate Co., Qatar’s biggest property developer by assets, halted planned projects worth $9.2 billion in the cities of Doha and Al Khor until the market improves.

“It is not a good time to start” because of a surplus of residential and office space in the country, Yousif al Khater said in an interview in the capital, Doha, today. The company is going ahead with developments that have already started, he said.

The 30 billion-riyal ($8 billion) Al Khor project, to be built in partnership with Kuwait’s Imtiaz Investment Co., would include 24,000 housing units and 250,000 square meters (2.7 million square feet) of office space in Al Khor, Qatar’s second- biggest city, according to the company’s website. Al Doha, a 2.4 billion riyal development in the capital, will include apartments, offices and retail.

Singapore Court Dismisses Dubai Drydocks's Lawsuit Against Millionaire Tan - Bloomberg

A Singapore court dismissed a suit by Dubai’s Drydocks World LLC against Singaporean tycoon Tan Boy Tee for breaching an agreement tied to a S$2.4 billion ($1.8 billion) takeover deal.

Drydocks, which sued Tan for breaching a three-year non- compete clause, relied on “hearsay evidence,” Singapore High Court Judge Lai Siu Chiu said in an Aug. 25 ruling, publicly released today. Dubai World’s ship-repair unit is appealing the decision, according to the ruling.

Drydocks sued Tan in May after coming across a Feb. 4 Otto Marine Ltd. statement which said Tan had taken a significant stake in the Singapore shipbuilder as part of a share placement that raised S$95 million. The purchase breached a non-compete clause in Tan’s agreement to sell Labroy Marine Ltd., a shipyard operator he founded, to Drydocks in January 2008, the unit of the Dubai state holding company claimed in its suit.

Dubai Shares Slumps to Lowest in Two Weeks on Global Growth Risk, Oil Drop - Bloomberg

Dubai shares declined to the lowest level in almost two weeks as slower-than-estimated growth in personal incomes in the U.S. stoked concern the pace of the global economic recovery is faltering. Crude oil dropped. Emaar Properties PJSC, builder of the world’s tallest skyscraper in Dubai, retreated for a second day. Dubai Islamic Bank PJSC, the United Arab Emirates’ largest Shariah-compliant bank, dropped 1.1 percent. The DFM General Index slipped 0.5 percent to 1,483.67, the lowest level since Aug. 18, at the 2 p.m. close in the emirate. The measure declined 1.9 percent this month. The Bloomberg GCC 200 Index of Persian Gulf stocks lost 1.2 percent this month.

“Poor economic reports out of the U.S. have a negative impact on the market,” said Ziad Dabbas, a financial analyst at National Bank of Abu Dhabi PJSC, the U.A.E.’s second-largest lender by assets. “Volume is low, indicating that investors are on the sidelines. During Ramadan, business is usually slow in the Gulf.”

U.S. stocks declined yesterday after government data showed personal incomes climbed 0.2 percent in July, less than the 0.3 percent projected in a Bloomberg survey of economists. The Standard & Poor’s 500 Index fell 1.5 percent. European stocks slumped before reports on U.S. property values and consumer confidence that may indicate threats to the recovery in the world’s largest economy are mounting.

GCC Market Analytics: Market Breadth: Part I

Market breadth refers to the level of participation behind market moves. There are several ways of measuring market breadth but in this series of posts I'm going to focus on something called the advance/decline percentage.

The advance/decline percentage is calculated on a daily basis and determines the proportion of stocks that are rising in value versus falling in value. The specific calculations is as follows:

Advance/Decline % = (# of Advancing Stocks - # of Declining Stocks) / # of Stocks

For example, if we have a hypothetical market that comprises of 10 stocks and 7 of these stocks have risen in value on a particular trading day then the advance/decline percentage will be:

(7 - 3) / 10 = 40%

This tells us that 40% more stocks were increasing in price than were decreasing in price. Alternatively, if a majority of stocks have fallen in value, say 8 stocks, then the advance/decline percentage will be:

(2 - 8) / 10 = -60%

In this case there were 60% fewer stocks rising in value than were falling in value.

So, as you can see, if the advance/decline percentage is greater than zero a majority of stocks are rising in value and if it is below zero a majority of stocks are falling in value. The zero level represents equality between the number of rising and falling stocks.

Because the daily advance/decline percentage moves very fast it is typical to use a moving average to smooth the results. For this series of posts I've applied a 20-day moving average to the raw daily advance/decline percentages.

Below is a chart of the DFM General Index and corresponding advance/decline indicator.

As you can see, the 20-day advance/decline indicator oscillates around the zero level (right axis). When the advance/decline indicator is above zero (green shaded area) this signifies that a greater number stocks are rising in value than falling. The more the indicator rises above the zero level the greater the proportion of stocks that are rising versus falling.

When the advance/decline indicator is below zero (red shaded area) this signifies that a majority of stocks are falling in value. The further the indicator is below zero the greater the proportion of stocks that are falling versus rising.

As you might expect, when the DFM General Index has been rallying it has been accompanied by a positive 20-day advance/decline percentage. In bear markets the 20-day advance/decline percentage tends to be negative with a majority of stocks falling in value.

There are two main ways to interpret and use the advance/decline indicator. The first is to use extreme advance/decline levels as an indicator of potential market turning points. The logic here is that when a very high percentage of stocks are participating in a market move this is unsustainable and will be followed by a market reversal.

The other main use is to look for divergences between the advance/decline indicator and market prices. For example, if market prices are making new lows but the advance/decline indicator is not then this might signify a bottom for the market and higher future prices. The logic behind this use of the advance/decline indicator is that where fewer stocks are participating in a market decline this shows a lack of support for that move and a likely turning point. The opposite is true for rising markets.

In future posts I will examine the validity of both uses of the advance/decline indicator on GCC equity markets. To begin with, however, I've tested a simpler use of the indicator which has yielded positive results across all GCC markets.

The chart below shows the performance of the DFM General Index under different advance/decline conditions:
(Note: Results are uncompounded and do not include fees or dividends)
The blue line in the chart above is the price of the DFM General Index since 2004. The green shows the performance of the Index when the advance/decline indicator was positive and higher than it was two weeks ago. The green shows the performance of the Index when the advance/decline indicator was negative and lower than it was two weeks ago.

I arbitrarily chose these rules but they seemed quite intuitive (to me at least). My reasoning was that if a majority of stocks were participating in a market rally and the number of stocks participating was increasing this would be bullish for the future price direction. On the other hand, if a majority of stocks were participating in a market decline and the number of stocks participating is that decline was increasing this would be bearish for future price direction.

The results above show that these simple rules were reasonably effective in identifying periods of increasing and decreasing market prices. The future performance of the DFM General Index when the advance/decline indicator was positive and higher than two weeks ago was bullish (green line). However, the future performance of the DFM General Index tended to be bearish when the advance/decline indicator was negative and lower than it was two weeks ago (red line).

These results were fairly consistent across all GCC markets and I'll present them in Part II. In Part III of the market breadth series I'll introduce a study which I'll use ongoing basis to monitor the advance/decline indicator and it's implications for future market price action.

Dubai International Financial Centre Plans to Cut Cost of Doing Business - Bloomberg

Dubai International Financial Centre plans to reduce the cost of doing business in the tax- free business park to encourage investments, the company said in statement to Nasdaq Dubai bourse today.

“During the first six months of 2010, the number of companies registered in the DIFC remained constant despite the economic downturn,” according to the statement. “While a small number of firms have withdrawn over the period from the center, a significant number of firms from across the world continued to join including first time entrants into the region.”

DIFC has 745 registered companies of which 297 are regulated and 374 are non-regulated, it said. The center also has 74 retailers.