Sunday, 16 January 2011
These are part of a restructuring plan for the state-linked firm, which has made losses for four straight quarters and faces an estimated $3 billion funding gap in 2011. Abu Dhabi's government will pay Aldar $4.5 billion for various assets. [ID:nLDE70F01C]
'Equity holders suffer immediate equity impairment and future dilution, but solvency is now assured,' Nomura wrote in a research note. 'The stock now looks expensive relative to its peers and that will likely take some time to correct.'
Entities 50% or more owned by Dubai’s government and ruler Sheikh Mohammed Bin Rashid Al-Maktoum amount to $129.3 billion, the Swiss bank said in a report dated January 13. It said the debt burden could, in fact, be “much higher than our final numbers owing to the lack of full disclosure.”
The debt of what is popularly known as Dubai Inc, a collection of government and quasi-government businesses and agencies, is usually put at about $110 billion. A restructuring of the debt of Dubai World, the biggest of the Dubai Inc. borrowers, last September brought some improvement in investor sentiment and a handful of bond offerings at the end of last year. But Credit Suisse said it sees new problems ahead in 2011.
The bank accepted bills worth 1 billion Egyptian pounds, the same amount it was seeking.
The rates of the accepted bills ranged from 9.09 percent to 9.308 percent versus a range of 9.451-9.539 percent at the previous auction.
The bills, for issue on January 18, mature on April 19, 2011.
The Heritage Foundation’s economic freedom report for 2010 has come out and Jordan has actually improved.
Jordan’s economic freedom score is 68.9, making its economy the 38th freest in the 2011 Index. Its score is 2.8 points better than last year, with significant gains in fiscal, monetary, and investment freedom and improved control of government spending. Jordan is ranked 4th out of 17 countries in the Middle East/North Africa region and registered the sixth highest score improvement in the 2011 Index. Progress toward upgrading Jordan’s economic infrastructure has aided economic growth despite the challenging global economic environment. Levels of trade, fiscal, and investment freedom are relatively competitive. The financial sector has taken steps to meet international standards.
Public finance management and privatization have been key parts of the reform agenda. Social security and pension reforms are being followed by efforts that include public wage bill containment and capital spending reduction. Future planned adjustments include better-targeted capital spending, water and energy market liberalization, and private-sector development. Overall economic freedom is limited by corruption and the judicial system’s vulnerability to political influence. [source]
National Investments Co (NINV.KW) (NIC), working on behalf of its parent firm, is gathering Zain shares to tender to the Etisalat offer.
'National Investments Co states that its client Al Khair National told the company that the parties involved in the deal are continuing their talks until a clear and firm deal is completed,' NIC said in a statement on the Kuwaiti bourse website on Sunday.
“The parties have not made sufficient progress toward completion of the proposed transaction in order to meet that deadline due to unforeseeable delays in Zain providing access to all relevant information,” Etisalat said in an e-mailed statement today. “The parties do continue to work toward the announcement of a definitive transaction.”
Emirates Telecom, the United Arab Emirates’s biggest phone carrier and also known as Etisalat, is aiming to expand its presence in the Middle East, where Zain operates in countries from Kuwait and Iraq to Bahrain after selling most of its African assets last year to Indian billionaire Sunil Mittal’s Bharti Airtel Ltd. for $9 billion. For Zain, it is the second attempt by majority shareholders to sell control.
Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, headed for its lowest close in more than a month. EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank, declined 3.3 percent. The EGX30 Index lost 1.2 percent, the largest intraday decline since Nov. 30, to 7,073.86 at 12:59 p.m. in Cairo. Tunisia’s benchmark Tunindex tumbled 13 percent last week as increasing violence lead to the toppling of the country’s leader on Jan. 14.
The Tunisian protests may embolden demonstrators who have recently taken to the streets in other North African and Middle Eastern countries, including Egypt, Morocco and Jordan, all of which have experienced demonstrations about economic conditions, said Marina Ottaway, director of the Middle East program at the Carnegie Endowment for International Peace in Washington.
Across the region, lenders including Samba Financial Group, Al Rajhi Bank, Doha Bank and National Bank of Bahrain are expected to report earnings for the final three months of last year before the end of the week. UAE banks will soon follow, with the Abu Dhabi Commercial Bank (ADCB) and First Gulf Bank due to report full-year earnings on January 26, and National Bank of Abu Dhabi is expected to follow by February 1. Emirates NBD is due to report on February 10, although some banks could start to provide early earnings estimates from this week.
Sofia el Boury, a banking analyst at Shuaa Capital, said the results for the quarter would be likely to result in a great deal of adjustment for banks, as the true extent of their exposure to bad debts became apparent.
Nakheel revealed last year that it would issue as much as US$3.2 billion (Dh11.75bn) of five-year bonds with a 10 per cent annual return to contractors who were owed money. The contractors would receive 40 per cent of their agreed-upon debts in cash.
Most of Nakheel's contractors will be eager to sell the sukuk on receipt to get much-needed cash into their businesses, analysts said.
A funding framework was revealed on Thursday comprising the sale of Dh10.9 billion (US$2.96bn) of infrastructure assets on Yas Island, Dh5.5bn of residential units and land, and a Dh2.8bn convertible bond.
Ahmed Ali al Sayegh, the chairman of Aldar, said the financial framework would "strengthen our capital structure and provide us with a stable and sustainable platform from which we can continue to capture commercial opportunities to deliver value to shareholders".
The lender believes, however, that after a year of restructuring at the emirate's two biggest debtors, Dubai World and Dubai Holding, fears over potential defaults are receding, and it says the UAE's well-capitalised banks will be able to absorb any major hit from provisioning requirements.
But "there is a chance of further restructuring of debt", it adds.
In reality, the Heritage Foundation and the Wall Street Journal are noted for their conservative ideologies and embracing of private sector initiatives. Amongst others, the report sees governmental involvement in the economy as something negative.
Yet, the global financial crisis of 2008 revealed the need for governmental leadership in restoring confidence in local economies through rescue packages on the one hand and steady spending on the other. This was true of the US, which under a Republican-controlled White House opted to use tax-payer funds for bailing out financial institutions.
"I am expecting a correction in the Qatar market and possibly in Saudi Arabia as well. These markets have performed strongly in recent days," said Chahir Hosni, sales manager with EFG-Hermes.
"Overall, in the medium-term, the regional markets, which have been lagging most of the emerging markets are likely to gain momentum from higher global oil prices which are close to $100 (Dh367) a barrel," he added.
According to Abu Dhabi's Urban Planning Council some $200 billion (Dh734 billion) will have been pumped by 2013 into various infrastructure projects.
"The idea behind Abu Dhabi's economic diversification is that if oil prices go down, there will be other sources of income to compensate [for the loss in oil revenue]," Mohammad Amerah, an Abu Dhabi-based economist, told Gulf News.
The reaction was noticeably more bearish in Dubai than Abu Dhabi. This makes sense given the relative strength of the Abu Dhabi Securities Exchange General Index (ADI) compared to the Dubai Financial Market General Index (DFMG), which can be seen on the charts and is discussed below.
Investors will be watching closely to see how shareholders are handled in Arabtec and Aldar in regards to fairness, transparency and disclosure. This will impact the perception of current and future risk in UAE markets for investors. Regardless of this news, on a technical basis, both UAE stock markets continue to evolve normally, with the possibility of a recovery from the recent downtrend still in place, at least so far.