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Thursday, 16 September 2010

U.A.E. Stocks Advance as FTSE Group Gives Country Emerging Market Status - Bloomberg

Dubai’s benchmark index rose to the highest level in almost four months after FTSE Group categorized the United Arab Emirates as an emerging market, boosting confidence that foreign investment will increase.

Emaar Properties PJSC, developer of the world’s tallest skyscraper, climbed 1.6 percent and Dubai Investments PJSC jumped to the highest since May. The DFM General Index advanced 1.2 percent to 1,647.03 at the 2 p.m. close in Dubai, bringing its gain for the week to 3.4 percent. Abu Dhabi’s benchmark stock index increased 0.2 percent.

“The entry of the U.A.E. to the FTSE Emerging Markets Index is positive in terms of exposure and liquidity,” said Paul Cooper, managing director at Sarasin-Alpen & Partners Ltd. in Dubai, which oversees more than $500 million in the Middle East. “Volumes have improved.”

Kuwait's International Investment Group Denies Report on Debt Repayment - Bloomberg

International Investment Group KSCC denied a newspaper report that the company made repayments of$15 million to an Emirati lender and $3 million to sukukholders.

IIG will inform the Kuwait Stock Exchange of any developments to its financial plans, the company said in a statement to the bourse today.

Al-Watan reported the payment citing people familiar with the matter.

Abu Dhabi Paymasters Fund Fujairah Oil Hub to Bypass Hormuz - Bloomberg

The emirate of Abu Dhabi, having spent billions last year bailing out glitzy neighbor Dubai, is turning to more distant Fujairah to ensure safe, quick passage for its oil exports and improve the nation’s food security.

The capital of the United Arab Emirates, the fourth-largest crude producer in the Organization of Petroleum Exporting Countries, is bankrolling infrastructure projects in the easternmost emirate, Fujairah, to gain direct access to the Indian Ocean. Abu Dhabi is investing in an oil-storage terminal and a $3.3 billion pipeline and is building the country’s biggest power and water treatment plants as well as a facility to store imported grain.

The U.A.E.’s richest emirate is taking advantage of Fujairah’s location to bypass the Strait of Hormuz, a chokepoint at the mouth of the Persian Gulf for a fifth of the world’s oil supplies. Iran has threatened to block the waterway if attacked because of its nuclear program. In July, a Japanese tanker was bombed in the Strait, heightening concern that energy supplies from the Gulf are insecure.

Dubai World Debt Fair Value Raised at JPMorgan After $24.9 Billion Accord - Bloomberg

The fair value estimate of Dubai World’s loans was raised to 53-55 cents to the dollar from 44-46 cents at JPMorgan Chase & Co. after the state-owned holding company reached an agreement with creditors on restructuring $24.9 billion of debt last week.

The estimate was raised because of tighter spreads, higher estimated loan recoveries and shorter estimated maturity of the restructured debt, analyst Zafar Nazim wrote in a report e- mailed today.

U.A.E. Gets First Emerging Market Status at FTSE Group as Stocks Rebound - Bloomberg

FTSE Group will be the first to categorize the United Arab Emirates as an emerging market, helping attract part of the $3 trillion of funds that track the London-based index compiler’s benchmarks.

The classification will “have a significant impact, not only on the U.A.E.’s investment flows but to investment portfolio’s holding emerging markets stocks globally,” Jonathan Cooper, FTSE’s managing director for Middle East and Africa, said in an interview. The Gulf Arab country will be classified as a secondary emerging market, and the shares of 21 companies, including Emaar Properties PJSC, will be added to the FTSE’s Global Equity Index after the close on Sept. 17.

Stock brokers in the U.A.E. are struggling to make ends meet as trading volumes tumbled to the lowest in four years, forcing some to close. At least 12 brokerages in the U.A.E. have submitted requests to the Securities and Commodities Authority to suspend operations this year. The U.A.E., which has a frontier market status at MSCI Inc., will remain under review for a potential reclassification to emerging markets, the index provider said in June.

FT.com - BA chief warns of threat from Mideast airlines

Europe has failed to recognise the “significant threat” of ambitious Middle Eastern airlines, the head of British Airways has warned.

Willie Walsh told industry leaders: “We have been very slow in the UK and in Europe to recognise the new competitive threat.

“We should as Europe be concerned about what’s happening here.”

Tamweel Bonds Show Investor Skepticism Over Dubai Accord: Islamic Finance - Bloomberg

Islamic bonds of Tamweel PJSC, the United Arab Emirates’ biggest mortgage company, show investors are skeptical that Dubai World’s debt restructuring will resolve the emirate’s financial woes.

Tamweel’s 4.31 percent sukuk due in 2013 are the worst- performing Islamic bonds in the U.A.E. in the past five months after their yield surged 867 basis points, or 8.67 percentage points, since an April 13 low. Yields on the debt climbed six basis points to 19.64 percent since Sept. 9, the day before Dubai World unveiled an accord with 99 percent of creditors. Yields on notes from Dubai World’s DP World Ltd. fell 22 basis points in that time.

While the state-owned holding company reached an agreement with creditors to alter the terms on $24.9 billion of debt, government-controlled businesses are still struggling to meet obligations. A government plan to merge Tamweel, which has a $235 million loan due in January, with Amlak Finance PJSC has been in the works for 22 months. Both shares have been suspended since 2008.

GCC Market Analytics: Price Projections Using Pattern Matching

When analysing markets and trying to predict future price action there are certain techniques and studies that I pay a lot of attention to (here and here for example). There are other studies, however, that I don't assign any great weight to but still look at regularly because they're, you know, fun and interesting. The pattern matching and price projection study I'll describe in this post falls into this category.
Here's how it works. Let's take the cumulative percentage return of the DFM General Index over the previous 25 trading days:

This 25 day price action can compared with all other historical 25 day periods for the DFM General Index. In doing so we can identify which past 25 day price periods most closely match the current 25 day price action(note: the matching algorithm I used has been adapted from the gummy-stuff.org website. It uses a Pearson correlation to determine the level of similarity between the current 25 day cumulative returns and the historical 25 day cumulative returns).

As an example, the chart below shows the current 25 day price return (dark blue line) versus the best historical 25 day match (light blue line):


As you can see, the cumulative 25 day return of the best historical match closely tracks the the current 25 day price returns. The smaller chart shows at what point the best historical match occurred on the DFM General Index. In this example the the 25 day period that most closely matched the current 25 day price movement was in September 2007.

Next, we can use the price action that followed the best historical match to make a price projection for the current market. The chart below shows three such price projections:


Rather than rely on the price projection of the single best historical match I've also included the second and third best matches. Each projection extends for 20 trading days into the future and is determined by the price action that followed the corresponding best match period.

For example, the dotted red line shows the 20 day projected price action, from the current market level, based on the price action that followed the best historical match back in October 2007. The dotted green line is another 20 day projection but based on the second best historical match (Jan 2005) and the orange line is the projection based on the third best historical match (Aug 2004).

The red, green and orange markers on the smaller chart highlight the three best historical match periods on the DFM General Index.

In the example above we can see that the price action that followed both the best historical match (dotted red line) and second best historical match (dotted green line) was bullish, extremely so for the best match. However, the price action that followed the third best match (dotted orange line) was bearish.


The rationale underlying this analysis is that periods of similar price action will also share similar future price action. Of course, the future is unlikely to unfold exactly as it did in the past. Nonetheless, it's informative to know how similar price movements to the one forming currently played out in the past.


In the next post I'll provide the price projections for other GCC indices based on this pattern matching analysis.

Abu Dhabi Commercial Bank ratings lowered to 'A-/A-2' on continued asset quality erosion - Business Intelligence Middle East - bi-me.com - News, analysis, reports

Standard & Poor's Ratings Services today said it lowered its long- and short-term counterparty credit ratings on Abu Dhabi Commercial Bank (ADCB) to 'A-/A-2' from 'A/A-1'. The outlook is stable.

"The downgrade reflects our view that ADCB's credit measures have continued to deteriorate beyond our earlier expectations and relative to those of similarly rated peers," said Standard & Poor's credit analyst Goeksenin Karagoez.

The bank's large proportion of construction and real estate (CRE) loans, its exposure to Dubai World (DW), and its high single-party concentration increases the challenges it faces, and in our view, is hindering management's ability to tackle problems. Moreover, at 5.4% after adjustments, our estimate of ADCB's risk-adjusted capital (RAC) ratio suggests a much weaker capitalization and capacity for unexpected losses than similarly rated peers. In addition, internal capital generation remains weak.

Dubai International Capital Said to Propose Selling Assets Over 5 Years - Bloomberg

Dubai International Capital LLC, an investment company owned by Dubai’s ruler, presented a plan to creditors to sell assets over five years to repay $2.6 billion of debt, two people with knowledge of the plan said.

DIC has also sought a second extension until November at commercial terms on the repayment of a $1.25 billion loan as it draws up a restructuring plan, the people said, declining to be identified because the information is private. The loan, originally to mature in June, was first extended to Sept. 30.

Preliminary estimates of the value of the company’s assets suggest that sales proceeds would be enough to repay principal, a banker with knowledge of the plan said. Negotiations are under way on the interest rate of the extended loans, he said. A spokesman for Dubai International Capital declined to comment.

DIC's Alliance Medical extends restructuring talks | Reuters

Alliance Medical, a UK medical services business owned by a top Dubai private equity firm, has secured a two month extension to restructuring talks as it continues to seek a buyer, people close to the discussions said.

Senior lenders of Alliance Medical, which is owned by Dubai International Capital [DUBAHP.UL], have agreed to extend a standstill agreement that was due to expire on Sept. 16 to mid-November, after the firm received expressions of interest from potential bidders on Monday, the sources said.

The extension gives Alliance Medical time to either clinch a deal with a buyer, after it was put up for sale at the end of August at the behest of senior lenders, or put together a new one with incumbent owner DIC, the private equity vehicle of Dubai's royal family."

DIC's Alliance Medical extends restructuring talks | Reuters

Alliance Medical, a UK medical services business owned by a top Dubai private equity firm, has secured a two month extension to restructuring talks as it continues to seek a buyer, people close to the discussions said.

Senior lenders of Alliance Medical, which is owned by Dubai International Capital [DUBAHP.UL], have agreed to extend a standstill agreement that was due to expire on Sept. 16 to mid-November, after the firm received expressions of interest from potential bidders on Monday, the sources said.

The extension gives Alliance Medical time to either clinch a deal with a buyer, after it was put up for sale at the end of August at the behest of senior lenders, or put together a new one with incumbent owner DIC, the private equity vehicle of Dubai's royal family."

gulfnews : Qatar may ease investment limits for bourse link-up

Manama: Qatar may ease the foreign investment limit for listed companies as the country's bourse is set to be linked to global stock markets.

"Eventually, it will have to happen. The government is aware of the issue and I believe discussions are going in the right direction," an industry source told the Qatari daily Gulf Times.

Currently, the foreign investment limit is 25 per cent, but the corporate sector has been asking the government to ease this to help them attract much needed capital and to enhance liquidity.

gulfnews : Qatar may ease investment limits for bourse link-up

Manama: Qatar may ease the foreign investment limit for listed companies as the country's bourse is set to be linked to global stock markets.

"Eventually, it will have to happen. The government is aware of the issue and I believe discussions are going in the right direction," an industry source told the Qatari daily Gulf Times.

Currently, the foreign investment limit is 25 per cent, but the corporate sector has been asking the government to ease this to help them attract much needed capital and to enhance liquidity.

Gulf countries need to step on the gas over corporate reforms - The National Newspaper

Efforts to drive corporate reform across the Middle East need to be accelerated, says the executive director of Hawkamah Institute for Corporate Governance based in Dubai.

“The speed at which we have had reform of corporate governance regimes and guidelines has been very timid and we should move much faster,” Dr Nasser Saidi said yesterday.

“Oman and Saudi Arabia already have compliance departments within their market regulators to ensure compliance with corporate governance, this signals that authorities are serious about implementing good corporate governance and we would like to see more of that,” said Dr Saidi, who is also the chief economist of the Dubai International Financial Centre Authority."

Afghan central bank calls on UAE for help in freezing assets - The National Newspaper

The Afghanistan central bank is looking for help from the UAE in freezing assets related to properties former Kabul Bank officials bought in Dubai, the bank’s governor says.

The central bank took control of Kabul Bank on Tuesday to secure deposits held by Afghanistan’s largest private financial institution.

Customers have been nervous since Kabul Bank’s top two directors resigned late last month amid rumours of corruption.

Kuwait posts $22bn budget surplus

Kuwait has posted a budget surplus of KD6.4 billion ($22.2 billion) for the financial year 2009/10, up from KD 2.7 billion the previous year. This is its 11th consecutive budget surplus, said a report by National bank of Kuwait (NBK).

The country's revenues fell 16 per cent because of lower oil prices and production cuts last year, but they were still 219 per cent of budgeted numbers, said the NBK report citing FY2009/10 closing accounts.

The expenditures too fell 38 per cent and were 93 per cent of the budgeted amount, it added."

FT.com - Egypt’s building progress

A cheerful young couple play with their dog on a bright green lawn, a child jumps into a swimming pool and an athletic young man swings a golf club and drives a ball into a pond on a verdant golf course. These are some of the images advertising Allegria, a high-end housing development under construction by Sodic, one of Egypt’s leading real estate companies.

Compounds such as Allegria have mushroomed on the eastern and western outskirts of Cairo, offering high-earners luxurious lifestyles that cannot be found in the cramped apartment blocks of the city centre.

Egypt has seen a prolonged property boom over the past five years as developers have tapped into pent-up demand from the affluent higher reaches in society.

FT.com - States’ dominant role in equities

Though all the Gulf countries are trying to foster and nurture more vibrant private sectors, governments remain the dominant economic drivers and their role in regional stock markets is undimmed, according to recent research.

According to a report by Markaz, a Kuwaiti investment company, published earlier this month, 179 listed companies in the Gulf are at least partially owned by 51 government entities.

Overall, governments own about 29 per cent, or $182bn, of the region’s total market capitalisation.

FT.com - Iraq: The awakening of an economic giant

President Barack Obama officially declared the end of US combat operations in Iraq on August 31, but the news from the country continues to be dominated by the ongoing political turmoil and violence. Iraq clearly remains a volatile country and is likely to be so for years to come. What is less obvious, however, is that beneath the unsettled surface, Iraq is an economic giant, slowly but surely awakening after a 30-year slumber.

The first stirring of economic life began last year, when 12 new contracts were awarded to international oil companies to increase production in 10 of Iraq’s grossly under-exploited oil fields.

Iraq’s oil reserves are the fourth largest in the world, after Saudi Arabia, Venezuela and Iran, but production today is barely 2.5m barrels a day, making Iraq at best a middle-weight on the international stage. The new contracts should bring a substantial stream of investment in the country’s neglected oil infrastructure, allowing production to rise to more than 10 mb/d by 2020 (the government’s own target is 12 mb/d by 2016).

FT Alphaville � The self-denying sovereign wealth fund

This is – in a way - yet another of those posts commemorating the fall of Lehman Brothers, two years ago to the day.

Then again — the post-Lehman sovereign wealth fund really has become something to behold, given the past two years of change.

Especially because those changes show that not even sovereign wealth funds have escaped 2008’s release of the volatility genie. And yet they themselves seem unable to acknowledge it.