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Monday, 31 January 2011

FT Alphaville » Oil spikes, shocks and stocks

With oil on the rise, what next for equity markets?

That’s the question KBW try to answer in a note out on Monday. The analysts look for correlations over the last 50 years between big (ten and 20 per cent quarter on quarter) WTI rises and changes in the S&P500 and the Keefe Bank Index.

The headline result is, um, choppy: the S&P500 was equally split between higher and lower quarter-over-quarter closes when the WTI rises 20 per cent (click to expand):

FT Alphaville » Suez isn’t Brent’s $100 problem

Brent’s finally done it:
(Reuters) Brent crude oil futures surged above $100 a barrel for the first time in 28 months on Monday on concerns that anti-government protests in Egypt could create instability across the Middle East, possibly disrupting oil shipments through the Suez canal.
In London, ICE Brent crude for March delivery shot up to $100.05 a barrel, rising 63 cents on the day…
And had hit $101 at pixel time, the highest since September 2008.

Fundamentals | Dubai plans to bring in DvP settlement this year

The Dubai Financial Market says it is ready to introduce the ‘delivery versus payment’ system before the end of this first quarter
Part of plans to implement international best practices
Dubai set to be at forefront of DvP implementation in UAE
“Significant development” for UAE to adopt ‘emerging market’ status

The Dubai Financial Market (DFM) said today that it is keen to introduce the ‘delivery versus payment’ (DvP) settlement system before the end of the first quarter of 2011 in plans to drive forward the implementation of international best practices.

If the DFM’s plans go ahead, Dubai will be the first market in the United Arab Emirates (UAE) to introduce DvP. - Saudi move to buy telecoms stake

Kingdom Holdings, an investment vehicle controlled by Prince Al-Waleed Bin Talal, the prominent Saudi investor, has made an offer to buy Zain of Kuwait’s 24 per cent stake in Mobile Telecommunications Company, its Saudi Arabian subsidiary.

Kingdom did not disclose how much it had offered for the position in MTC Saudi Arabia, also known as Zain Saudi Arabia, but in a statement to the Saudi stock exchange said that its offer was open until February 6.

Shares in MTC were trading at SR7.45 on Monday, which would imply a total consideration of at least SR2.6bn ($691m).

Oil hits $100/bbl | ft energy source blog –

It was bound to happen at some point. Today, four weeks into the new year, Brent crude did what it hasn’t done since 2008: topped $100 a barrel.
This is from Reuters:
Brent crude oil futures surged above $100 a barrel for the first time in 28 months on Monday on concerns that anti-government protests in Egypt could create instability across the Middle East, possibly disrupting oil shipments through the Suez Canal.
The question now is how long it stays up here and what damage it could do to the global economic recovery.

Dubai’s Damas agrees deal with lenders to restructure debt - Retail -

Damas International, the largest gold jewellery retailer in the Middle East, said on Sunday it reached an agreement with a committee of bank lenders on a debt restructuring involving $817m of loans.

The firm has extended a standstill agreement with its lenders to 31 March 2011, it said in a statement to Nasdaq Dubai, to allow time for the debt deal to be approved by other banks.

“Damas International Limited announces today that the steering committee of its bank lenders has agreed to extend the standstill period for such banking facilities… to 31 March 2011,” in said in the statement. "[Damas] has reached agreement with their steering committee of bank lenders, with respect to the form of the facility agreement ." - Contagion fears rattle Arab markets

Arab financial markets are being rocked by Egypt’s political turmoil, with several stock markets continuing to drop and the cost of insuring against default spiking across the region.

While Egypt’s stock market remains closed after shedding over a fifth of its value in January, credit default swaps – a kind of default insurance – on Egyptian debt rose 17 basis points to 445 basis points on Monday, according to Markit, a data provider.

Moody’s on Monday downgraded Egypt’s debt rating one notch to Ba2, with a negative outlook, citing worries that “escalating political tensions” will worsen the government’s already stretched financial position


Gulf markets defy Egypt protests | beyondbrics –

With Egypt’s stock exchange closed, investors are looking to other bourses in the Middle East to gauge the impact of Cairo’s protests on regional business. The news on Monday was encouraging: Persian Gulf markets rebounded sharply from last week’s falls, with Abu Dhabi stocks gaining the most in three months.

“Markets in the Gulf Cooperation Council are seeing a strong rebound as smart money is picking up names that are unaffected by the geopolitics of North Africa,”said Omair Ansari, equity strategist at Gulfmena Alternative Investments. “Earnings for the majority of the companies in the GCC are insulated to within the region, thus yesterday’s selloff was unjustified.”

The United Arab Emirates’ ADX General Index rose 1.3 per cent to 2,594.29, its biggest increase since mid-October. It suffered its largest fall since November 2009 in Sunday’s session.

Abu Dhabi Stocks Rebound on Speculation Drop on Egypt Overdone - Bloomberg

Abu Dhabi shares gained the most in three months on investor speculation declines yesterday triggered by the unrest in Egypt were overdone given prospects for earnings growth. Saudi Arabian stock retreated.

Emirates Telecommunications Corp. rose the most since October after its Egyptian unit resumed services and as an offer for Zain Saudi Arabia may help it buy a controlling stake in Kuwait’s Zain. National Bank of Ras Al-Khaimah PSC surged to the highest since 2005 as full-year profit rose 38 percent. The ADX General Index increased 1 percent, the most since Oct. 19, to 2,586.75 at the 2 p.m. close in Abu Dhabi. The measure slumped the most since November 2009 yesterday. Saudi Arabia’s Tadawul All Share Index dropped 1.1 percent at 2:19 p.m. in Riyadh.

“Markets in the Gulf Cooperation Council are seeing a strong rebound as smart money is picking up names that are unaffected by the geo-politics of North Africa,” said Omair Ansari, equity strategist at Dubai-based Gulfmena Alternative Investments. “Earnings for the majority of the companies in the GCC are insulated to within the region, thus yesterday’s selloff was unjustified.”

Egypt: economic paralysis | beyondbrics –

Shops, offices and banks across Cairo remained shut on Monday and thousands of people chose not to go to work as evidence mounted that parts of Africa’s second largest economy have been paralysed by ongoing anti-government protests.
A backlog of containers is stacking up in Alexandria, Egypt’s largest port, the New York Times reported. Barclays said it had closed its 65 bank branches in the country on the advice of the central bank, and Bloomberg reported that several international oil companies were preparing to evacuate staff or their dependents from the country.
Royal Dutch Shell said it had decided to temporarily relocate the families of expatriates and some non-essential staff from Egypt. Lukoil of Russia said it was evacuating most of its staff and Italy’s Eni said it was repatriating 250 employees.

Foreign investor bans in Saudi to end ‘very soon’, says gov’t advisor - Banking & Finance -

As Saudi Arabia bids to grow its private sector, the kingdom is likely to remove the bans on international investment in some of its business sectors, an advisor to the government has said.

Saudi currently bans foreign investment in oil and gas exploration, health, education, media and retail – as well as all military and security-related sectors.

The government reviews the list on an annual basis.

Kuwait's Gulfinvest cut out from list of investment firms | Reuters

Kuwait's central bank has cut Gulfinvest International (GVES.KW) from the list of investment firms operating in the country, the firm said on Monday.

"Clients' portfolios will not be affected by this decision ... and the firm will coordinate with all creditors and the restructuring officer for the best ways to resume the restructuring process," Gulfinvest said in a statement on the Kuwaiti bourse website.

Last year, Gulfinvest defaulted on a 200 million loan ($54.47 million) to Abu Dhabi Commercial Bank (ADCB.AD) for which investment bank Shuaa Capital was a guarantor.

BGCC200: Bloomberg GCC 200 Index Summary - Bloomberg

VALUE: 59.150 USD

Bloomberg GCC 200 Index (BGCC200:IND)

FT Alphaville »Moody’s downgrades Egypt to Ba2

Moody’s is the first to move on the Mubarak uprising:
DIFC – Dubai, January 31, 2011 — Moody’s Investors Service has today downgraded Egypt’s government bond ratings to Ba2 from Ba1 and has changed the outlook to negative from stable.
Today’s rating action was prompted by the recent significant rise in political event risk and concern that the policy response could undermine
Egypt’s already weak public finances. We had previously signaled that such developments may result in a ratings downgrade (see Moody’s latest Credit Opinion on Egypt published 24th November 2010).
Moody’s has today also downgraded the country ceiling for foreign currency bonds to Baa3 from Baa2 and the country ceiling for foreign currency bank deposits to Ba3 from Ba2. The outlook on these ratings was changed to negative from stable. The short-term country ceiling for foreign currency bonds was downgraded to P-3 from P-2. The local currency ceilings were downgraded to Baa1 from A3.

Egypt has limited war chest to avert finance crisis - Maktoob News

Egypt has substantial reserves to avoid an external payments crisis but these could be seriously depleted within weeks if political protests continue, while its banks may struggle to cope with a rush of withdrawals.

In the two working days after the protests erupted last Tuesday, which was a bank holiday, Egyptians and foreign investors transferred hundreds of millions of dollars out of Egypt, currency traders estimated.

The government had $36 billion in foreign reserves at end-December, central bank figures showed. According to a Jan. 27 note by Citigroup, it also had $21 billion of additional assets with commercial banks at end-October -- its so-called "unofficial reserves".

UAE Dana Gas swings to Q4 profit, beats analysts view - Maktoob News

UAE-based Dana Gas , the Gulf's only listed natural gas company, reported a higher-than-expected quarterly profit, helped by higher production.

Dana Gas, which owns assets in Egypt, made a fourth-quarter net profit of 59 million dirhams ($16.07 million), Reuters calculated from previous financial statements.

It posted a loss of 193 million dirhams a year ago after being hit by exploration write-offs and impairment provisions.

Kingdom Holding offers to buy Zain Saudi stake - Maktoob News

Saudi investment firm Kingdom Holding has offered to buy Kuwaiti telecom company Zain's entire stake in its Saudi Arabian unit, Kingdom said in a statement on Monday.

Zain has to sell its 25 percent stake, valued at 2.75 billion riyals ($733 million), in Zain Saudi for regulatory reasons so that it can sell 46 percent of its own stock for $12 billion to UAE telecom firm Etisalat.

The Etisalat deal is championed by Kuwaiti family conglomerate Kharafi group, a major Zain shareholder.

Return to lending lifts RAKBank - The National

RAKBank led gains among banks reporting earnings yesterday, helped by a return in lending that analysts expect will continue throughout the year.

Commercial Bank of Dubai (CBD) and National Bank of Umm al Qaiwain (NBQ) also reported a rise in profits.

But all three banks have lowered their loan-to-deposit ratios to less than 100 per cent, within limits mandated by the Central Bank to ensure the financial health of the UAE's lenders. The banks did not provide detailed financial reports or earnings for the fourth quarter.

Mena's troubles cloud World Economic Forum - The National

The economic malaise at the root of the political upheaval in parts of the Mena region hijacked the World Economic Forum agenda this year.

It produced a sombre mood among delegates who had been buzzing with optimism about the state of the global economy.

The unrest has highlighted the need for economic reform and jobs in the region - home to 200 million people and on the doorstep of Europe.

New Medical Centre refinances most of Dh475m in debt - The National

New Medical Centre (NMC), one of Abu Dhabi's oldest healthcare companies, has managed to refinance most of its debt of about Dh475 million (US$129.3m) after having a "crisis" last year, its top executive says.

The company announced at the weekend a surprise $1.2 billion sale of a 40 per cent stake to Centurion Investment that NMC will use to go on an acquisition spree of hospitals in the region and build new facilities across the Emirates. The deal values the company at $3bn.

Dr BR Shetty, the chief executive of NMC, said the new deal - struck in just 10 days - was a "big moment" that came after a tough period in the company's history.

Dubai prepares for the next step - The National

The reverberations of the global financial crisis continue to echo around Dubai.

Dubai World is restructured, although the final deals for it and its subsidiary Nakheel have still not been signed, and a phased reorganisation of Dubai Holding's financial obligations is under way.

Now attention is turning to Investment Corporation of Dubai (ICD), the third pillar of the corporate infrastructure known informally as Dubai Inc.

Hedge Fund Bears Blindsided by Oil Surge on Egypt Protest - Bloomberg

Hedge funds cut bullish bets on oil last week by the most in two months before political protests erupted in Egypt, igniting a rally that sent prices up by the most since 2009.

The funds and other large speculators reduced net-long positions, or wagers on rising oil prices, by 18 percent in the seven days ended Jan. 25, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. That turned into a losing bet as prices surged at the end of the week.

Oil jumped 4.3 percent Jan. 28, erasing the week’s losses, as protesters called for the end of the 30-year rule of President Hosni Mubarak, sparking speculation of more turmoil in the region. The volume of oil futures soared to a record in electronic trading on the New York Mercantile Exchange. Shares in the $1.8 billion U.S. Oil Fund, the largest exchange-traded fund in the fuel, hit an eight-month high.

Qatar has huge investments in Egypt: Businessmen

Qatar has huge investments in Egypt which is currently undergoing a political turmoil.

Although exact estimates are hard to have the investments could run into a few billions of dollars, knowledgeable circles say.

State-backed companies like Qatari Diar and Barwa Real Estate Development companies apart, a lot of Qatari individuals have invested hugely in apartments, farms and small and medium agro-based as well as industrial projects as well.

gulfnews : Region expects flurry of fundraising in 2011

The Gulf region is expected to witness a flurry of activity in fundraising this year by both government related entities and corporates and refinancing debt will not be a big problem for many of these entities, David Karsbol, chief economist at Saxo Bank, told Gulf News in an interview.

"Markets are now open for Gulf companies to raise funds. I don't see any big problem for most companies to raise funds through bond market and banking channels. Financial services and real estate sectors are likely to face some difficulties in the short to medium term," said Karsbol.

Gulf based companies have more than $60 billion (Dh220.34 billion) refinancing requirements in the next 12 to 18 months, according to a recent estimate by Royal Bank of Scotland. HSBC has projected fund raising by regional entities to hit more than $30 billion this year.

Egypt’s Borrowing Plans Disrupted by Unrest

Egypt’s plan to raise 4 billion ($683 million) Egyptian pounds this week at debt auctions was disrupted after protests rocked the North African country, forcing the government to close banks and the stock market.

The government sold 2.5 billion pounds of 182-day bills in an auction on Jan. 27 as yields jumped 40 basis points, or 0.4 percentage point, from the previous sale to a one-year high of 10.6 percent, according to data compiled by Bloomberg. The Arab world’s third-largest economy delayed two debt sales scheduled for yesterday.

Reduced demand for Egyptian debt may harm the government’s ability to meet its target of cutting the budget deficit to 3 percent of gross domestic product by 2015. The gap widened to 8.1 percent in the fiscal year that ended in June from 6.9 percent in the previous 12 months. The yield on the government’s $1 billion of bonds due in April 2020 rose 27 basis points Jan. 28 to a record 6.6 percent, data compiled by Bloomberg show.

gulfnews : Dubai to export Islamic finance to Europe

Dubai's financial services industry is fast emerging as a leading catalyst in the development of Islamic finance products and services to Europe, according to officials from Dubai Exports, an agency within Dubai Department of Economic Development.

"The expertise of Dubai in the area of Islamic financial services is something that we hope to capitalise through our export facilitation services" said Engineer Saeed Al Awadi, the CEO of Dubai Exports.

"We have carried out two very successful trade missions in Islamic financial services which have linked our firms with opportunities in foreign markets."

Heard on the Street -

Two years after finding itself in the teeth of the credit crisis, Dubai is back. At least on one measure.

For Jumeirah Group, one of the Gulf state's leading hotel operators, revenue per available room over the holiday period was back above the highs reached in 2007.

Gerald Lawless, executive chairman of the group, which has 2,600 rooms at hotels in Dubai, including the famous Burj Al Arab, told The Wall Street Journal in Davos that vacationers from the U.K., Germany and Russia helped underpin the rebound. Revenues per room remain somewhat volatile, but they dropped by about a quarter during the credit crisis, which had caused financial distress in highly leveraged Dubai.

The other nationality of travelers that Mr. Lawless is looking to for a boost: Chinese celebrating the coming New Year.

$150 oil will shock markets warns Jim Rogers as Egypt boils « ArabianMoney

The commodities bull market has many years to go and oil is heading past $150-a-barrel warns legendary investor Jim Rogers who caught the commodities bull a few months early in 1999. Own real assets, not stocks and bonds, he says.

Stocks were not a good place to be in the 1970s. President Obama does not understand what is going on. Only another financial crisis will resolve the debt crisis.

Posted on 31 January 2011

Sunday, 30 January 2011


Friday’s surge in oil prices due to the turmoil in Egypt and other parts of the Middle East was a wake-up call to the market that the economic ramifications could be wide reaching. The protests in Egypt represent the people’s cries for a more democratic nation. This is obviously a long-term positive and could have a wide ranging impact on the future of Middle Eastern politics and government, however, in the near-term this has the potential to disrupt a very fragile global economy.
The primary risk comes thru the potential for higher oil prices. There is no telling how long the turmoil in Egypt will last and whether or not it will spread to other regions. The risk here is that the uprisings will disrupt oil production and shipment in the Middle East. The WSJ elaborates:
“In the short term, the biggest global economic worry remains oil prices. Egypt itself isn’t a big energy producer. But significant shipments of oil and petroleum products pass through Egypt each day on their way from the Mideast to European and U.S. markets.

Egypt: Mid East markets plunge | beyondbrics –

The Egyptian crisis continues to reverberate around the financial markets. With global financial centres mostly closed, the action was concentrated on Sunday in the Middle East, where shares suffered their biggest one-day falls in weeks.
Dubai’s index plunged 4.3 percent, in the steepest fall in the region. Egypt’s market was closed after sliding 16 percent last weekend will be shut on Monday.
Paul Herber, co-portfolio manager of the Forward Frontier MarketStrat fund, told Anora Mahmudova of beyondbrics: “The risk of contagion…is quite high.”
Herber said:
The real question is – is the investment flight a short term phenomenon, based upon immediate events or will it continue and expand and turn into a wave of capital pulling out of these assets for longer period. Nobody knows the answer to that.

A month in global macro – emerging markets underperform | gavyn davies –

In this regular series of weekend blogs on the major events in the world of global macro, the last blog of the month will reflect on the main themes of the whole month, not just the latest week. In January, rising inflation risks in the emerging markets dominated market behaviour and worries about unrest in the Middle East,and the wider impact of higher agricultural prices, replaced the European sovereign debt crisis as the main concern for global markets. Global equities and bonds were little changed during the month, but developed markets out-performed the emerging world. Global and US activity indicators remained encouraging, but the Fed showed no signs of an imminent change in its policy stance. Next week will see the publication of the US ISM and employment data, and the markets will doubtless stay focused on events in Egypt.
This month, I learned that:
1. The emerging markets can go down as well as up. Political risk stemming from events in Egypt is the dominant concern as the month ends, but deeper economic forces are also causing concern in emerging markets. In the past two years, if not for much longer than that, it has been taken for granted that the growth rate in the emerging economies would remain robust, while the performance of the US , Europe and Japan was subject to much greater risk. All of this is still true, over the long term. But, in January, the markets decided that they had become over-confident about the immediate future in the emerging world, mainly because rising agricultural prices led to concerns not only about about political stability but also about the prospects for monetary policy in many emerging countries. This is likely to remain an important issue for markets throughout 2011. If monetary policy in the BRICs and other emerging economies is tightened too much, then emerging equities may have a disappointing year, relative to their developed market counterparts. If, on the other hand, there is insufficient monetary tightening in the EMs, then bubbles could develop in their equity and property markets. In January, the markets leaned towards the former view, so many of the most important equity markets in the emerging bloc, including India and China, fell sharply, even before Egypt took centre stage.

The Wrath of Egypt’s “Friday of Anger” « Alpha Dinar- talking Gulf finance

Egyptians are rioting demanding a change in the country’s political system and the departure of President Hussni Mubarak. The Egyptian stock market reacted negatively to the riots, with the index plummiting more than 16% during Wendesday and Thursday. The markets were closed today, Sunday, from the fears of further losses in the markets.

Egypt is a country with a large weight in the region and the continent, so any disturbance in Egypt will cause shockwaves throughout the world. This is evident in the financial world as stock markets around the world plummeted during Friday to Sunday.

It is worth to note that the Saudi Index fell 6.5% yesterday (saturday) and has recovered aome of its loss today, with the index going up 2.5%. Also, European markets’ decline was helped by bad data in the region.

Egypt Reserves Enough If Investors Want to Transfer Money Out, Okdah Says - Bloomberg

Egyptian Central Bank Governor Farouk El-Okdah said the country has enough foreign currency reserves to accomodate investors should they wish to withdraw funds.

The Cairo-based central bank has $36 billion in reserves, the governor said in a telephone interview today.

Gulf Stocks: Air Arabia, Aldar Properties, DP World, Etisalat - Bloomberg

The DFM General Index dropped 4.3 percent, the most since May 25, to 1,543.96 at 1:15 p.m. in Dubai on concern political unrest in Egypt could spread as protests persisted and the North African country’s president refused to resign. Abu Dhabi’s ADX General Index dropped 3.7 percent. Saudi Arabia’s benchmark stock index gained 2.3 percent after losing 6.4 percent yesterday.

Sawiris Says Suleiman Appointment May `Not Be Enough' to End Egypt Protest - Bloomberg

Egyptian billionaire Naguib Sawiris, the chairman of Orascom Telecom Holding SAE, said the appointment of Omar Suleiman as the nation’s vice president by President Hosni Mubarak may not be enough to satisfy protesters.

“I think it is not enough,” Sawiris said in a telephone interview today from Egypt. “It’s a good step because the gentleman, Mr. Suleiman, has a very good international reputation. He is from the system so he can at least ensure that the current transition to a more democratic regime can happen.”

Suleiman’s appointment yesterday makes him the first vice president since Mubarak’s ascension to power in 1981. The move came as thousands of protesters congregated in central Cairo, defying a military-imposed curfew, and looting erupted in several cities. Mubarak also named Aviation Minister and former air force commander Ahmed Shafik as prime minister to replace Ahmed Nazif, who resigned yesterday at Mubarak’s request.

North Africa now under close scrutiny from investors - The National

Investors from the Gulf and elsewhere are re-examining their strategies as they gauge the economic consequences of the political change sweeping the area.

North Africa's populous countries in recent years positioned themselves as receptive to foreign investment and tourism, even as their political systems stagnated. Outside investors, in turn, put billions of dollars into Egypt, Tunisia, Algeria, Morocco and other parts of a region that has experienced robust economic growth for years. Tourists, too, came by the millions.

But with the ousting of Tunisia's government, along with violent clashes in Egypt, Algeria, Yemen and Lebanon, new questions are being asked about the demographics and economic growth that made those countries ripe for investment. Analysts now say foreign investors are taking a stance more cautious than ever before over the region, which has suffered a sudden flight of capital in bond, equity and currency markets.

UPDATE 1-Dubai Investments Q4 net profit drops 36 percent | Reuters

UAE conglomerate Dubai Investments DINV.DU reported a 36 percent drop in its fourth-quarter profit, as revenues for 2010 fell as the local economy remained weak after the burst of the asset bubble two years ago.

Dubai Investments, which is involved in sectors from real estate to manufacturing, said its profit for 2010 was 804.9 million dirhams ($219.2 million).

Its net profit for the fourth quarter is 89.7 million UAE dirhams ($24.43 million), according to Reuters calculations. The company made a profit of 141 million dirhams during the same period last year.

UPDATE 1-Gulf markets tumble on Egypt turmoil, contagion fears | Reuters

Gulf stock markets tumbled on Sunday as investors, rattled by turmoil in Egypt and concerns the unrest may spread, shed their positions to push indices to multi-week lows.

Egyptian protesters were on the streets again in central Cairo on Sunday, demanding President Hosni Mubarak step down while security forces struggled to contain looters. [ID:nLDE70S0LV]

Egypt's bourse .EGX30 was shut on Sunday after falling 16 percent in two days last week. The Egyptian pound EGP= has fallen to six-year lows.

Qatar Holding snaps up stake in farmland venture Adecoagro -

Qatar Holding, the investment arm of Gulf state’s sovereign wealth fund, has taken a stake in South American farmland venture Adecoagro following the firm’s US initial public offering.

The Gulf fund agreed to buy stock equal to about 25 percent of proceeds in the IPO, which raised $314m for Adecoagro.

The initial offering comes as commodity prices rally and food prices reach record highs.

Big reason for hope in Iraq: Oil, and lots of it -

On a bleak stretch of desert near the Iraq-Kuwait border - half a world away from the Gulf of Mexico and last year's nightmarish blowout - BP is riding high, rapidly developing one of the world's richest oil fields.

The British energy giant plans to drill 3,000 new wells here over the next 10 years and build a town from scratch to house 4,000 employees. BP and Iraqi officials hope the Rumaila field soon will become the second most productive in the world - after Saudi Arabia's Ghawar - propelling the country into competition with Saudi Arabia and its other powerful oil-producing neighbor, Iran.

Iraq sits on the world's third-largest oil reserves, after Saudi Arabia and Venezuela, with the biggest known fields lying under the windswept sands outside Basra. Despite aging pipelines, spotty electricity, chronic insecurity and a maze of inefficient bureaucracy, the oil sector is pressing an ambitious expansion plan that will determine Iraq's economic future long after the last American soldiers withdraw at the end of the year.

Egyptian Bourse, Banks Will Stay Closed Today After Anti-Mubarak Protests - Bloomberg

The Egyptian bourse will be closed today following clashes yesterday between thousands of protestors and police in central Cairo, the fifth day of unrest. Banks also will be shut, State TV said.

The North African country’s benchmark stock index had tumbled 16 percent in the prior two trading days, and Egypt’s dollar-bonds fell, pushing yields to record highs on Jan. 28. Fitch Ratings said it may cut the nation’s credit rating. The exchange is North Africa’s second-largest market by capitalization after Morocco.

“No one expected this to take place and at such a fast sequence of events,” said Mohamed Radwan, head of international sales at Cairo-based Pharos Holding for Financial Investment. “The critical time frame for the market is from now until the implementation of economic and democratic reforms demanded by the people.”

gulfnews : Kuwait's exceptional budget for 2011-12

Kuwait's budget for fiscal year 2011-12 is exceptional in many respects. On the one hand, projected revenues and expenditures are up by nearly 38 per cent and 10 per cent, respectively, undoubtedly sizable figures in a span of a single year.

On the other hand, the figures confirm ever-growing significance of the state in the local economy. The projected spending of $64 billion amounts to 54 per cent and 44 per cent of the country's gross domestic product (GDP) in nominal and purchasing parity terms, respectively, undoubtedly exceptional.

The figures clearly suggest that Kuwait's economic well-being is too dependent on public sector spending, and in turn on oil income.

Investors shaken by protests in Egypt - The National

Saudi Arabia's main stock index fell 6.4 per cent yesterday following unprecedented protests on the streets of Cairo that have shaken investors around the world.

The Tadawul All-Share Index suffered its biggest daily fall since May, mirroring volatility on Friday in most of the world's major stock markets. Oil rose by 4.3 per cent to US$89.34 per barrel late on Friday on fears that the protests in Egypt could disrupt crude shipments through the region.

Gold, a traditional safe haven for investors, was up 1.7 per cent to $1,341.70 an ounce, its biggest increase since late last year. Prices for US government debt - another safe-haven investment - have also been on the rise.

Arab Leaders in Davos Predict Regime Change in Egypt -

The unrest engulfing Egypt caught business and political leaders at the World Economic Forum off guard, but it became the hottest topic among the Arab elite here. Most of those leaders tuned in to the dramatic events from iPads and BlackBerrys and huddled to debate how the uprising would affect the rest of the Arab world.

“It’s all anyone’s talking about,” said Sheik Mohammed bin Essa al-Khalifa of Bahrain, who leads the nation’s economic development board and participated in many of the discussions.

For the most part, the consensus was that President Hosni Mubarak of Egypt would not easily relinquish his authoritarian grip, an outcome that became more evident as he named Omar Suleiman, the country’s intelligence chief and a close ally, as his vice president on Saturday.

Saturday, 29 January 2011

WAM | Etisalat updates investors on its proposal to acquire shares in Zain

Etisalat said it is making good progress on its proposal to acquire 51 per cent of the total issued share capital and voting rights (excluding shares held in treasury but including all shares which may be issued pursuant to the exercise of any options) in Mobile Telecommunications Company LLC ("Zain") ("Proposed Transaction").

It added in a statement that Etisalat's due diligence effort has recently accelerated, and Etisalat values the continuous and positive cooperation of Zain. In addition, Etisalat's discussions with eighteen international and regional banks regarding the financing required to complete the Proposed Transaction continue, and it remains highly confident that it will be able to secure the necessary financing.

"Etisalat is delighted with the recent progress in the due diligence process and wishes to reach a final agreement as soon as practically possible" Etisalat Chairman Mohammed Omran said.

The final progress and the results on the Proposed Transaction are to be presented after the due diligence completion review to Etisalat Board of Directors by the end of February 2011. Etisalat will keep its stakeholders posted about the progress.

Unrest in Egypt Spooks Saudi Market — Saudi Analysis — GCC Market Analytics

Clearly, the situation in Egypt has made investors in Saudi very nervous. The Tadawul Index dropped 6.43% today with volume spiking to levels not seen in well over six months.

Saudi Tadawul Index Falls 6.43%

With such a decisive fall you'd expect the other GCC markets to follow Saudi's lead when they open tomorrow.

Unsurprisingly, the countries in the eye of the storm have seen their stock prices sell-off considerably. The Egypt 30 Index fell by more than 10% on Thursday alone.

Also, oil futures rose by nearly 5% on Friday. That's the biggest one day rise since September 2009.

In short, the financial markets are nervous about the situation in Middle East and the possibility of further contagion in the region. Things are moving quickly and no one is sure what will happen next. And as everyone is fond of saying, markets hate uncertainty.

Saudi Arabian Stocks Tumble Most in Eight Months as Egyptians Defy Curfew - Bloomberg

Saudi Arabian shares retreated the most since May on concern political unrest could spread in the Middle East after Egyptian protesters clashed with police and the North African country’s president refused to resign.

The Tadawul All Share Index tumbled 5.1 percent, the most since May 25, to 6,354.10 at 2:37 p.m. in Riyadh. All but one of the 146 shares fell. Saudi Basic Industries Corp., the world’s largest petrochemical maker, slumped as much as 5.9 percent. Al Rajhi Bank, Saudi Arabia’s largest publicly traded lender, dropped as much as 4 percent. The cost of protecting Saudi Arabian debt against default for five years soared the most in more than two years yesterday.

“There is a lot of worry looming among investors that we’re going to see a domino effect across the region,” said Amro Halwani, a trader at Shuaa Capital PSC in Riyadh. “That is pushing investors away from equities and straight into cash. It is panic selling across the board.”

Etisalat sees Zain due diligence done by end Feb | Reuters

Etisalat, which is bidding to buy a 46-percent stake in Kuwaiti telco Zain, expects to present the results of its due diligence to its board by the end of February, the UAE telecoms firm said in a statement on Saturday.

Etisalat also said talks with 18 regional and international banks on financing continued and it was "highly confident" it will secure the necessary financing.

UAE's NMC group sells 40 percent stake to Centurion for S$1.3 bil

United Arab Emirates' private healthcare firm New Medical Centre (NMC) has sold a 40 percent stake to Centurion Investment to expand in overseas markets as demand for medical care surges, its CEO said on Saturday.

NMC, a 36-year-old company with hospitals across the UAE and a pharmaceutical manufacturing facility in Abu Dhabi, has sold the stake for 4 billion dirhams (S$1.39 billion). Centurion is a new UAE healthcare entity with plans to go into other businesses in the future.

"The deal has been signed. It will help us expand and grow further in the UAE and internationally," Bavaguthu Raghuram Shetty told Reuters.

‘Turkey as important as BRIC countries for UK’

Right Honorable Lord Mayor of London Michael Bear has said Turkey is equally important as Brazil, Russia, India and China -- also known as the BRIC countries – for the UK.

In the last of his three-day visit to Turkey, Bear -- who heads the British capital’s local authority City of London Corporation -- made the opening speech at the panel “İstanbul International Finance Center: What does the London experience say about İstanbul?” held at the İstanbul Stock Exchange (İMKB) on Friday.

During his speech, he lauded Turkey’s economic performance and said, “The scale of opportunities in İstanbul is immense.” Speaking about Turkish-British relations, Bear reminded those present that the trade volume between the two countries was at $9 billion in 2009 and that they aim to double that figure by 2015. He also noted that 2,000 British companies are operating in Turkey.

Marshall Auerback Speaks on BNN About Implications of Unrest in the Middle East « naked capitalism

Portfolio strategist, hedge fund manager, and sometime Naked Capitalism guest blogger Marshall Auerback spoke on BNN about the implications of unrest in the Middle East for the economy and investors. Enjoy!

Screen shot 2011-01-28 at 10.55.19 PM

You can view the clip here.

An economic crisis is not force majeure - The National

Donald Trump made news after defaulting on payments to the financiers of a 92-storey building in Chicago as the global financial crisis hit in 2008. Claiming Deutsche Bank had undermined the project, Mr Trump defended his failure to pay by invoking the loan's "force majeure" clause, alleging that "the world financial crisis is an extraordinary event". It was a valiant but desperate effort that ultimately failed. That hasn't stopped others from trying it, including some developers here in the UAE.

As The National reported this week, the builder of a delayed luxury development in Dubai has invoked the so-called "act of God" clause to refuse refunds to buyers. Shaikh Holdings last week informed owners in Sanctuary Falls, a collection of 96 villas under construction in Jumeirah Golf Estates, that the company was not liable for penalties for delays due to "force majeure", or unforeseen circumstances.

"Events have occurred that are outside our control and therefore we are not liable for any penalties in these circumstances," the developer said in a letter to owners. Shaikh Holdings is not alone. Michael Lunjevich, a partner with law firm Hadef & Partners, says the clause has become "the mechanism of choice for developers to justify a project on hold".

Gulf frontier markets robust despite Egypt: Qatar | Reuters

Investors should not lump Egypt and other Middle Eastern markets together in one group as strong fundamentals especially in the Gulf argue for a favorable investment climate, a top Qatar regulator said.

Emerging stocks fell and debt insurance costs across the Middle East and North Africa -- both categorized as a frontier market -- surged on Friday as jitters over political unrest in Egypt spilled into the broader region.

Even in Saudi Arabia, dollar/Saudi one-year forwards hit their highest in two years, reflecting expectations of a fall in the Saudi riyal currency in 12 months' time."

Vacancies rise in Dubai's shopping centres - The National

Shoppers in Dubai this week will find an abundance of empty space and closed stores in addition to the Dubai Shopping Festival.

Vacancy rates in Dubai's shopping centres are at their highest levels in recent years, up to 30 per cent, according to new data from Jones Lang LaSalle, the property consultants.

Malls in Dubai typically average closer to 5 per cent to 10 per cent of vacancy, said Craig Plumb, Jones Lang LaSalle's head of research. / Emerging Markets - Getting back into Egypt is all a matter of timing

Investors’ flight from financial markets in Egypt and the wider region could yet lead to opportunities for re-entry, assuming stability eventually returns. The challenge, though, will be in the timing.

The Egyptian government’s strong grip on the military makes its hold on power appear more secure than that of the recently-deposed Tunisian president, Zein al-Abidine Ben Ali.

Yet the speed of events in Tunisia surprised many, and the investment climate in the region will be affected not only by seismic political shifts but by growing deficits and inflation as worried governments increase subsidies for basic goods. - Oil near $100 level as Mideast tensions grow

Oil prices closed the week nearing the $100-a-barrel mark amid tension in the Middle East and stronger economic growth in the US.

But Abdalla El-Badri, secretary-general of the Opec oil cartel, said the market was well supplied and dismissed calls for a boost in the group’s output in spite of rising prices and mounting worries about the impact on global economic growth and inflation.

ICE March Brent, the global benchmark, rose on Friday to a peak of $99.63 a barrel, up 2.1 per cent on the week and the highest level since late-2008.

Egyptian Protests Sink Frontier ETFs. |

Frontier market ETFs, some of the hottest instruments in ETF Land, have taken a big hit on the violence in Tunisia and Egypt. Frontier markets are the markets too small to be considered emerging markets. They’re still tiny economies with markets that are highly risky and not very transparent. One of the biggest risks is political risk. Of course, most of these are in Africa.

On the heels of the overthrow of the Tunisian government last week, Egypt is now in turmoil. The Egyptian military have been ordered into the streets to help the police after a day of violent protest against President, and accused dictator, Hosni Mubarak. Fighting continues on the streets of Cairo, despite a nationwide curfew. The New York Times reports “the ruling party’s building was in flames at nightfall.” The tensions moved around the Arab world as protestors took to the streets of Yemen.

Egypt’s stock market fell 10% on Thursday and was closed Friday for the sabbath day, according to Jon Ogg at 24/7 Wall Street. The pure play Market Vectors Egypt Index ETF (EGPT) tumbled 14% this week. Of course, it’s a tiny fund, with just $8.5 million in assets under management. Liquidity might be a problem in this fund as Friday’s volume was 938,000 shares trading hands vs. average daily volume of 28,211. Meanwhile, with 21% of its portfolio in Egypt as of September 30, the Market Vectors Africa Index ETF (AFK), is down 8.5% this week to $32.27.

Friday, 28 January 2011

2010 DS100 Summary: Companies Absorb Financial Crisis Shock

DS100 Top 100 Companies of the OIC
The 7th Annual DS100 continues to benchmark the corporate environment of the 57 OIC (Organization of Islamic Conference) member countries.
The 2010 DS100 ranking, which is based on end-of-year (EOY) 2009 revenue data of the top 100 Companies of the OIC member countries, fully shows the impact of the 2008/09 financial crisis. As expected, EOY 2009 revenues were down for all sectors represented on the DS100 compared to EOY 2008. The silver lining has been that sectors such as finance, consumer goods, and utilities absorbed the shocks, still showing single digit growth, although down from double digits growth experienced in the previous year.
With USD 1.12 trillion in total revenues, the 2010 DS100 list of companies recorded a 26.47% overall decline in annual revenue over the previous reporting period. Conversely, 44 companies on the list grew in revenue, with 19 showing double digit growth.

Top 100 Companies of the Muslim World [Infographic] Analysis next post.

UAE cbank: banks must book quarterly provisions from 2011 - Maktoob News

Banks in the United Arab Emirates, hurt by exposure to debt-laden Dubai World, must book provisions on a quarterly basis starting this year, according to a circular from the Central Bank, which is pushing for transparency in the country's banking system.

The UAE Central Bank issued a clarification and guidance manual to banks dated Jan 27 advising them to follow guidelines issued last November. The new rules are in line with the Basel Committee on Banking Supervision standards.

"Banks had issues in interpreting the November circular. The latest one is a detailed clarification," a senior banker said.

Aldar on the Edge (Not Any More) — Abu Dhabi Stock Analysis — GCC Market Analytics

At the beginning of the week I noted how the stock price of Aldar Properties was teetering on the edge, at the 2 dihram level.

Well, it's not any more. The 2 dihram level offered no support and stock fell to a new lifetime low of 1.81 by Thursday's close. Aldar finished down 11% for the week and is now down 20% since the start of the year (and an eye watering 86% from its 2008 all time high).

Revolt in Tunisia adds to economic risks and fiscal pressures for MENA sovereigns, says S&P -

Some Middle Eastern and North African (MENA) sovereigns could be more susceptible than others to contagion from the current revolt in the Republic of Tunisia (foreign currency ratings BBB/Watch Neg/A-3, local currency BBB+/Watch Neg/A-2 ), says Standard & Poor's Ratings Services today in a report.

Many of the economic and political factors that contributed to the protests leading to the resignation of Tunisia's president Zine El Abidine Ben Ali in mid-January 2011 can be found to different degrees and varying combinations in
other sovereigns in the region, says the report "Tunisia's Jasmine Revolution Is Adding To Political And Fiscal Risks In The MENA Region".

"Although we don't expect a wave of regional political instability, we see Egypt, Algeria, and Jordan, and to a lesser degree Morocco as most vulnerable in this respect," said Standard & Poor's credit analyst Kai Stukenbrock.

Weekly Market Analysis (Week 5) — Weekly Index Review — GCC Market Analytics

The weekly market analysis pages have been updated for trading week 5 (January 29th - February 3rd). Use the links below to view the individual market analysis pages:

The table below shows the market outlook based on each study.
Visit the links above to view the full analysis reports for all GCC markets.

gulfnews : National Bank of Fujairah net profit surges 64%

National Bank of Fujairah (NBF)reported a 63.85 per cent jump net profits to Dh170.9 million last year, compared to Dh 104.3 million in 2009, the company said in a statement.

The bank's operating income grew by 12.2 per cent and operating costs were reduced by 7.9 per cent while cost to income ratio improved from 44.5 per cent to 36.6 per cent.

The provision for loan losses was Dh205.0 million for the year compared to Dh214.3 million for 2009. The Bank continues to be prudent and proactive in providing for potential loan losses in view of ongoing uncertain market conditions.

Emivest asks for more time - The National

A Dubai aerospace company with facilities in the US is seeking to dispose of its assets and has asked American courts to extend its bankruptcy protection until the middle of summer.

Emivest Aerospace, which makes the SJ30 light jet, filed for bankruptcy protection in October with the US district court in Delaware and has been looking to sell its assets before a deadline set by the courts for next month.

But last week lawyers for the company asked for an extension until mid-May to file a formal bankruptcy reorganisation plan, and until mid-July for creditors to accept the plan.