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Tuesday, 11 January 2011

GCC Market Breadth Performance Review — GCC Index Analysis , Market Breadth — GCC Market Analytics

This is the second in a series of posts evaluating the performance of the studies presented in the weekly market analysis report (see first post here).

This post will look at the performance of the market breadth analysis. Market breadth is measured using the 20-day advance/decline indicator. When the advance/decline indicator is greater than zero this tells us that more stocks have risen in price than fallen. When the indicator is less than zero more stocks have declined in value. (See the following post for more details on this indicator and how it is calculated: Part I, Part II andPart III)

On the charts below I've highlighted the market breadth for each GCC Index from August to December 2010. The green shaded areas denote periods when market breadth was positive and red shaded areas are the negative breadth periods.

Dubai Stock Market Breadth

Abu Dhabi Stock Market Breadth

Saudi Stock Market Breadth

Kuwait Stock Market Breadth

Qatar Stock Market Breadth

Bahrain Stock Market Breadth

Muscat Stock Market Breadth
I think it's fair to say that the charts above show that the market breadth analysis has done a pretty good job of identifying bullish and bearish periods.
Here are the actual performance figures:
Stock Market Breadth Performance
Under positive market breadth (first column) GCC markets have tended to perform strongly, much more so than when breadth was negative (second column).

For example, under positive market breadth the DFM General Index returned +21.79% whilst the Index lost -9.40% during negative breadth periods.

The performance during positive market breadth periods beat total index returns (third column) for 5 out of the 7 GCC markets.

In conclusion, as with the trend analysis I reviewed in the last post, market breadth has performed very well over the past 5 months. For all GCC markets positive breadth has been associated with rising index levels whilst negative breadth has been associated with falling for flat index levels.

UPDATE 1-Vodafone Qatar swings to positive Q3 EBITDA | Reuters

Vodafone Qatar VFQS.QA said its earnings before interest, tax, depreciation and amortisation (EBITDA) was positive for the first time in the third quarter, as the mobile operator reported a narrowed nine-month net loss.

Vodafone Qatar said its EBITDA for the third quarter was 1 million riyals, on revenue of 266.5 million riyals ($73.25 million), boosted by an 18 percent rise in new customers over the quarter.

The Qatari affiliate of British mobile operator Vodafone (VOD.L) said in a statement on Tuesday its nine-month net loss narrowed to 456.8 million riyals, compared with 495.6 million riyals in the same period a year ago, a decrease of 8.3 percent.

What Is Your Prediction for Oil’s Price In 2011? | Arabianomics

Perhaps one of the most important factors in the Saudi economy – still, but not forever – is the price of oil. It directly affects the Saudi budget and spending, and, let’s face it, has helped to usher the Saudi economy into the age of modernity and globalization.

While important and impactful for the Saudi economy, it likewise has a major affect on the US economy, though in a different way because we are on the demand side. Higher oil price means higher gas prices, which means a change in the way Americans travel and commute and in costs of shipping and other materials. If you’re reading this website, you’re likely to already know this.

So, what is your prediction for oil’s price in 2011?"

Egypt's NUCA to sell up to $862 mln in 5-yr bonds | Reuters

The Egyptian government's New Urban Communities Authority (NUCA) said on Tuesday it will sell up to 5 billion Egyptian pounds in 5-year bonds next month to finance infrastructure and other development.

NUCA, which is responsible for developing satellite cities, mainly around Cairo, said it had approached banks to manage the sale, which should begin toward the end of February.

'It will range between 3 and 5 billion pounds. We're hoping for 5 billion, but it depends on the market,' NUCA Vice Chairman Safwat Ghanem said by telephone.

MIDEAST STOCKS-UAE stocks tumble as Arabtec, Aldar spook traders | Reuters

Stocks in the United Arab Emirates slid on Tuesday after two property companies unveiled financing plans likely to be dilutive to minority shareholders, with Dubai's index .DFMGI making its largest drop in two months.

Abu Dhabi's Aldar Properties (ALDR.AD) slid 4.6 percent after the indebted developer said it wants to issue a convertible bond and sell assets.

Dubai builder Arabtec (ARTC.DU) fell 3 percent to a two-week low. It is planning a $108.5 million rights issue and $150 million convertible bond. [ID:nLDE70A068]

BP exceeds cost recovery level at Iraq's Rumaila, Iraq Industries - Maktoob News

Production at Iraq's supergiant Rumaila oilfield has exceeded the 10 percent increase required for developers BP and China's CNPC to start recovering investment costs, oil and company officials said on Tuesday.

Britain's BP said in a statement production had increased by more than 10 percent above the 1.066 million barrels per day (bpd) baseline production rate agreed on in December 2009.

A South Oil Company document, obtained by Reuters, showed production at the oilfield -- one of the world's largest -- actually reached 1.27 million bpd on Dec. 26, 2010, and an industry source said that level was still being pumped.

UPDATE 1-Qatar fund's stake buy to boost lenders -analysts | Reuters

Qatar's sovereign fund plans to purchase a remaining 10 percent stake of a promised 20 percent stake in the Gulf state's banks to provide support to its local lenders.

The planned purchase by the Qatar Investment Authority (QIA) -- decided during the financial crisis and to take place in the first quarter -- will boost confidence in the sector and lift investor sentiment in the gas-rich Gulf state, analysts said.

"It demonstrates the significant level of support that the Qatar government said it would provide and has provided," said Richard Sykes, head of global markets at Standard Chartered in Qatar. "Clearly, for local banks that are listed, it will bring a boost in market capitalization on the exchange."

Abu Dhabi May Raise Aldar Stake After Mubadala Bond Conversion, Asset Sale - Bloomberg

Abu Dhabi may increase its stake in Aldar Properties PJSC, the emirate’s largest developer, as part of a possible conversion of bonds into equity. The shares fell the most in two months.

The company may convert 3.56 billion dirhams ($970 million) in bonds due to Abu Dhabi investment arm Mubadala Development Co. in November into shares, Aldar said today in a statement to the bourse. Aldar also said it may sell unspecified assets.

“This will be received negatively because the market was hoping for a long-term loan from the government,” said Chet Riley, a Nomura Holdings Inc analyst based in Dubai. “The asset sale will be to the government, which is similar to what they did before with the Yas Island assets.”

FT Tilt - First UAE sovereign bond within a year (Registration required)

Here comes another ultra safe piece of sovereign paper backed by vast oil wealth. While both Dubai and Abu Dhabi have issued sovereign bonds in the past, this will be the first bond issued by the UAE federal government - although given that federal debt, like emirate-level debt, is implicitly backstopped by Abu Dhabi oil reserves, the distinction is mainly academic:

ABU DHABI, Jan 11 (Reuters) - The United Arab Emirates finance ministry expects to issue the oil producer's first ever sovereign bonds toward the end of the year or in early 2012, a minister said on Tuesday. Asked when he expected to issue bonds at the federal level, Minister of State for Financial Affairs Obaid Humaid al-Tayer told reporters: "Either the end of this year or the first part of next year."

Real Estate Market Commentary - Markaz

UPDATE 1-No emergency OPEC meeting if oil at $100 - Kuwait | Energy & Oil | Reuters

OPEC will not call for an emergency meeting before its scheduled gathering in June 2011 if the price of crude oil hits $100 a barrel, Kuwait's oil minister told reporters on Tuesday.

Asked whether the oil producing group would hold an emergency meeting if oil prices, near $90 a barrel currently, hit $100 a barrel, Sheikh Ahmad al-Abdullah al-Sabah said: 'No.'

Oil was steady above $89 on Tuesday, with U.S. crude for February CLc1 gaining 12 cents to $89.37 a barrel by 1005 GMT after trading as high as $89.67 at the start of the trading session.

Alaska Pipe Closure May Draw Oman, Russia Oil to U.S. - BusinessWeek

Alaska’s pipeline closure may force U.S. West Coast refiners to purchase crude supplies from Oman and Russia to make up a shortfall in supplies, pushing Middle East benchmark prices higher, Societe Generale SA said.

The main grades to replace the lost Alaska North Slope crude oil will probably come from the two areas, Michael Wittner, a London-based analyst with Societe Generale, said in a report yesterday.

“If refiners, after waiting a couple more days, feel that they need to obtain alternative crude supplies because the restart appears to be slipping, they would have to increase imports,” Wittner said. “For this to happen, the main market impact would not be on WTI or even Brent. Instead, Dubai would strengthen relative to both Brent and WTI, in order to make the arbitrage economically feasible.”

Aldar to seek approval for asset sales, bond issue, UAE Industries - Maktoob News

UAE's Aldar Properties' board plans to call a shareholders meeting to seek approval for sale of "certain" assets and issue a convertible bond, the struggling property developer said in a statement on Tuesday.

Aldar said its board of directors, which is meeting on Jan. 13, will also consider converting debt it issued to Abu Dhabi's investment fund, Mubadala in 2008 into shares of Aldar, the statement added.

The Abu-Dhabi developer has been in the spotlight in recent months amid speculation that it would receive government support to meet its cash needs.

Kuwait SE’s 2011 Reforms Start with the Index « Alpha Dinar

The Kuwait SE suffers from major problems. Yet, it is encouraging to see signs that these issues are being addressed. We have repeatedly talked about how the Kuwait SE’s main index is misleading and that the exchange is crowded with paper-companies. Well, there is some good news. The new Head of the exchange, Mr. Al-Saif, seems set to embark on a new era of change. This year, the Kuwait SE will launch a new electronic trading platform in collaboration with NASDAQ. This is an imperative step as we had witnessed several trading outages in the past year. It will also help the exchange better monitor trading patterns for compliance purposes and facilitate trades faster and more accurately.
Going back to the point concerning indices, the Kuwait SE is set to launch a new index that consists of 15 blue-chip companies, in collaboration with NASDAQ. It is expected to be tested in the first half and will be fully operational by November. The 15 companies will be “carefully” chosen from across all sectors of the exchange. Moreover, they will be placed on a bi-annual review to aid in updating the constituents of the index. This is something we have been relentlessly calling for here at AlphaDinar: A credible index! On the next post, I will try to guess which companies will be the lucky 15, what are some other implications of these changes, and how you can make money. Stay tuned!
Below are links to previous articles related to the issues with the current price index:

Kuwait’s Gulf Bank Plans to Book ‘Aggressive’ Provisions in 2011 - Bloomberg

Gulf Bank KSC plans to maintain “aggressive” provisions for bad loans this year as Kuwait’s second-biggest lender by market value recovers from $1.3 billion in losses on derivatives trading, Chief Executive Officer Michel Accad said.

“We need to continue to be aggressive because I really don’t think it’s the end of the crisis in the region,” Accad said in an interview today at the bank’s headquarters in Kuwait City.

Specific provisions are forecast to be reduced over time and provisions next year will be less than in 2011, he said. “The provisions of this year will not be very much different from last year” and are predicted to be the same order of magnitude, Accad said.

Dubai World's Las Vegas project aims to raise $1bn - The National

The owners of the CityCenter project in Las Vegas, in which Dubai World has a 50 per cent stake, plan to raise more than US$1 billion (Dh3.67bn) from the sale of bonds in an effort to restructure its extensive debt pile.

CityCenter Holdings, the owner of the giant hotel and entertainment complex, wants to sell $1.1bn of debt in a private placement.

Half of CityCenter Holdings is owned by a subsidiary of MGM Resorts, with the remainder owned by Infinity World, a wholly-owned subsidiary of Dubai World.

Etihad targets profit as revenue soars to $2.95bn - The National

Etihad Airways boosted revenues and trimmed its costs last year with the aim of reaching its first profits after seven years of rapid growth.

The Abu Dhabi airline managed to beat its own targets in reducing expenses by US$320 million (Dh1.17bn), despite launching seven new destinations and adding 800 staff, said James Hogan, the chief executive.

Revenues climbed 29 per cent to $2.95bn, and passenger volumes rose 13 per cent to 7.1 million.

Kuwait's IIG may sell, break up or seek investor - The National

International Investment Group (IIG), a troubled Kuwaiti financial concern, announced it was considering selling assets, finding a new investor or breaking up the company after defaulting last year on a US$200 million (Dh734.6m) Islamic bond.

IIG is the third major investment company in Kuwait to default on debt - the others being The Investment Dar in 2009 and Global Investment House (GIH) in 2008. Kuwait's finance companies were some of the hardest-hit in the region by the global financial crisis as share prices plummeted and banks became reluctant to refinance borrowings.

IIG hired the consultancy KPMG to come up with restructuring options after the default last April. In a disclosure posted on the NASDAQ Dubai website yesterday, KPMG said it recommended a range of options for IIG's restructuring that included doing nothing, selling assets, finding new investors or breaking up the company.

Qatar National Bank Full-Year Profit Rises 36%, Beats Analysts' Estimates - Bloomberg

Qatar National Bank SAQ, the Persian Gulf country’s biggest lender, said full-year profit rose 36 percent, beating analysts’ estimates, amid rising loans and deposits.

Net income rose to 5.7 billion riyals ($1.57 billion), the Doha-based bank said in an e-mailed statement today. The median estimate of 11 analysts was for a profit of 5.57 billion riyals, according to data compiled by Bloomberg.

Qatari banks benefited from a pickup in economic activity last year after a slowdown because of the global credit crisis. The government expects gross domestic product to expand 21 percent this year after increasing 16 percent in 2010. Moody’s Investors Service estimates the country will spend $57 billion over the next decade on infrastructure projects after Qatar won the rights to host the soccer World Cup 2022.

The Investment Dar issues restructuring plan update -

The Investment Dar Co. (TID) issued Monday an update on its restructuring process.

"Following the recent appointment of the reconstituted Coordinating Committee, the Company held its first face to face meeting with the Committee last Thursday in Dubai," TID said.

"At the meeting, the documentation relating to the official engagement of the Committee was finalised. The Coordinating Committee membership now includes Jordan International Bank, ABC Islamic Bank, Lloyds TSB, Al Rajhi Bank, the Islamic Development Bank and Bank of Bahrain & Kuwait, Kuwait branch," the statement added.

Mixed outlook for Islamic finance industry, says Ernst & Young -

Islamic financial institutions are at cross roads entering 2011, said Ernst & Young. The industry is expected to continue to show resilience in the face of a challenging economic scenario.

This is despite the fact that growth levels of the Islamic finance industry, at more than 20% per annum for the past several years, came under tremendous pressure in 2010.

Ashar Nazim, Executive Director and MENA Head of Islamic Financial Services Group at Ernst & Young says: “Having achieved the critical volume estimated at US$1 trillion in Islamic assets, the question reverberating across board rooms, and among users of Islamic financial services, is about differentiation, or the lack thereof, that Islamic financial institutions have on offer. Effectiveness of the existing Shari’a governance framework, as well as synthetic product structures commonly in use are especially under discussion.”

Qatar court braced for spike in World Cup contract rows - Construction -

Qatar is likely to see a spike in legal disputes as contractors pitch for a slice of its $100bn infrastructure plan ahead of the 2022 World Cup, the CEO of the newly-opened Qatar Civil and Commercial Court said.

The surge in construction deals will go hand-in-hand with an increase in commercial disputes due to the volume of work on offer, said CEO Robert Musgrove.

“Do not underestimate the importance of the success of the 2022 bid for the World Cup,” he said. “When there’s such incredible growth and commercial activity, there’s going to be disputes, and I very much see the court offering a service, if the companies write us into the contract.”

Multi-asset exchange to launch operations

The Middle East and North Africa's (Mena) first multi-asset exchange will begin live operations on February 7 at its facility at Bahrain Financial Harbour. The Bahrain Financial Exchange (BFX) will adopt a phased approach to its trading whereby its Islamic division, Bait Al Bursa, will start its e-Tayseer platform for general use and then its conventional segment on March 7.

This two-phased approach is designed to give participants sufficient time to market and develop business in the BFX's Islamic sector in advance of launching the conventional market.

After two years of hard work, the BFX is set to revolutionise trading in the Mena region. The BFX will be a unique global exchange where multi-asset class instruments will commence trading on a single exchange environment offering its users Islamic products, currencies, commodities and equity indices in its first phase of live operations. / Middle East - Shuaa Capital seeks to rebuild reputation

For good or for ill, Shuaa Capital is a lodestone of the domestic financial services scene in Dubai.

From a boutique specialising in research in the 1990s, the bank expanded a decade later into a fully fledged investment bank.

In doing so, it embodied the emirate’s growth from trading port to financial centre, producing high quality research and establishing a virtual monopoly on initial public offerings.