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Wednesday, 19 January 2011

FT Alphaville » Oil shock 2.0, or, the benchmark wars

Concerns are mounting that $100 oil prices, if hit, could be enough to dislodge the precarious global recovery — thrusting the world economy back into recession, or even worse, into another global financial crisis.

But while that is certainly a legitimate worry, there may actually be another equally pressing one rearing its ugly head too.

We’re talking about what happens if volatility in the WTI-Brent spread doesn’t settle.

Nakheel’s World alive but not kicking | beyondbrics –

The World isn’t dead; it’s “in a coma.”
This misleadingly apocalyptic statement came from a lawyer representing troubled Nakheel, developer of Dubai’s “The World”, an archipelago of artificial islands reclaimed a few kilometres off the emirate’s coastline.
Nakheel, which is being restructured alongside the $25bn restructuring of debts at its parent Dubai World, argues that the project could be revived from its dormant state in a few years’ time.

Qatar National Bank Says Rights Offer to Boost Core Capital - Bloomberg

Qatar National Bank SAQ, the Persian Gulf country’s biggest bank by assets, said its planned $3.5 billion rights offer will boost core capital as the firm aims to become the top Gulf Arab lender in the next five years.

“We are currently ranked No. 2 in profitability within the region, No. 3 in terms of assets, top five in terms of loans and deposits, but if you look at equity we are around No. 8 or 9 and if you look at capital adequacy ratios we are more than 20,” Chief Financial Officer Ramzi Mari said in a conference call with investors today.

This will “hinder” Qatar National’s ability to meet its target of becoming the top financial institution in the Gulf Arab region in the next three to five years and achieve annual growth of 25 percent to 30 percent, he said.

Does the Amiri Grant Really Cause Inflation? « Alpha Dinar- talking Gulf finance

We have recently discussed the KD 1,000 Amiri Grant that Kuwaiti citizens are receiving (click hereand here) in celebration of the 50th anniversary of Independence. One of the points that many talk about is that the grant is going to create inflation. Personally, I don’t feel that this is the case, as the grant is just going to be paid once and is not recurring. To further illustrate my point of view, I will take a detailed look at the issue at hand.

First, lets step back a bit and define inflation. Inflation, according to is:

“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.”

So, people arguing that the grant causes inflation are claiming that the cost of goods and serivces is going to rise further as a result of people having an extra KD 1,000 in their bank accounts.

Now, let us look at what the CPI basket (how inflation is measured) includes to determine whether these goods and services are going to rise subsequent to the Amiri grant.

The first two constituants, Food and Beverages & Tobacco, will highly likely see no increase in prices as the major sales outlet for these products are the Co-ops, who control prices. Private markets (Sultan Center, City Center, etc.) will not raise prices as well to compete. Clothing and Footwear might see an increase depending on the retailer, but will need permission from the Ministry of Commerce. Housing will likely not be affected as the grant is to small relative to the price of land, a house, or an apartment’s rent. Some of the Household Goods & Services constituants (Furniture and Home Appliances) might be affected, but again it will depend of the retailer. Transport & Communication and Education & Healthcare will not be affected as prices are regulated by the government. Some constituants of the Other Goods and Services basket (Recreational Goods, Personal Care, and Misc. Goods and Services) might be affected but it will depend on the retailer.

So of the CPI basket, on 24% of the products might see an increase in price by retailers wanting to profit from the Amiri Grant. And even if all the products within the 24% see an increase in pricem how big will that increase be? An iPhone selling for KD 290 instead of KD 280? 5% increase? Meaning that inflation will rise by 1%. However, the scenario of everyone raising their prices is highly unlikely, making the Inflation affect of the Amiri Grant weak.

Egypt's EFG seeks more acquisitions, eyes bonds | Reuters

Cash-rich EFG-Hermes, Egypt's biggest investment bank, said it was seeking more acquisitions after buying a 65 percent stake in Lebanon's Credit Libanais late last year.

The Cairo-based bank, which has up to $6.2 billion in assets under management, said it also was working to improve Egypt's bonds market and hoped to take advantage of private-public partnerships being promoted by the government.

"We are looking at Africa. Africa is going to be our next move in the investment banking field. In commercial banking, Syria is a market that we are really interested in," Chief Executive Officer Yasser El Mallawany said in an interview.

Qatar Airways set for “imminent” A380 order - Business Traveller

Local media reports quote Qatar’s CEO Akbar Al Baker as saying that the carrier will soon place a “large” order for A380 aircraft. Al Baker was speaking at the launch of Qatar’s new route to Bucharest and Budapest.

Website quotes Al Baker as saying that “We have five A380s on order and imminently we will order another large number of the same aircraft”. There has been no official confirmation from Qatar’s head office, possibly as any such announcement may be held back for this year’s Paris Air Show in June.

Rivals Emirates increased its A380 orders by a further 32 aircraft last year, taking its total orders of the superjumbo to 90, and while it’s unlikely Qatar would announce an order of this magnitude, it is logical that the carrier would look to increase its future A380 fleet for use on routes such as London, Paris, New York and possibly destinations in Asia and Australia.

Saudi Shares Fall Most in 2 Months as Sabic Profit Disappoints - Bloomberg

Saudi Arabian shares retreated the most in two months after fourth-quarter earnings at Saudi Basic Industries Corp. missed analysts’ expectations. Qatar’s stock index fell the most since November.

Saudi Basic, the world’s biggest petrochemicals maker, dropped the most in six months. Saudi Arabian Mining Co. decreased for a fourth day after it posted a fourth-quarter loss. The Tadawul All Share Index declined 0.9 percent, the most since Nov. 23, to 6,657.73 at the 3:30 p.m. close in Riyadh. The measure has slipped 0.9 percent this week, snapping a seven-week rally. Qatar’s QE Index retreated 1.3 percent, also the most since Nov. 23.

“There’s a little disappointment that Sabic’s numbers missed estimates,” said Haissam Arabi, chief executive officer of Gulfmena Alternative Investments in Dubai.

Tabreed Bonds Show Investors See Support From Abu Dhabi: Islamic Finance - Bloomberg

Islamic bonds of National Central Cooling Co., known as Tabreed, rose on speculation the provider of air conditioning services to the Dubai Metro may follow Aldar Properties PJSC in getting financial support from Abu Dhabi.

Tabreed’s floating-rate $200 million sukuk maturing in July rose 13 cents on the dollar in the past month to 88 cents yesterday, according to Exotix Ltd., an investment bank specializing in illiquid bonds. Shares of Tabreed, part-owned by Mubadala Development Co., fell to an eight-year low on Jan. 17 on concern government aid may dilute the stock.

“If Tabreed is not able to restructure, the support will be in another wave of convertibles,” Mahdi Mattar, head of research at Abu Dhabi-based CAPM Investment PJSC, an investment banking company, said in a response to e-mailed questions Jan. 18. “Investors learned from the Aldar case, that government support won’t be free.”

Egypt to offer 19 areas for gas exploration: paper | Reuters

Egypt's state-owned Egyptian Natural Gas Holding Company (EGAS) will offer up 19 areas for exploration this year in international tenders, a newspaper reported on Wednesday.

"It is planned to offer 17 areas to search for gas in the Mediterranean Sea and two land areas in the Nile Delta," al-Masry al-Youm paper cited the head of the company, Mahmoud Latif, as saying during a company meeting on Tuesday.

The company expects a 7 percent increase in domestic consumption of gas to 35.5 million tonnes in the 2010/2011 fiscal year, the paper cited an EGAS report as saying.

Occidental wins Abu Dhabi Shah gas project -sources, UAE Industries - Maktoob News

Occidental Petroleum has been awarded a contract to develop Abu Dhabi National Oil Company's (ADNOC) Shah gas project, in a deal expected to be worth $10 billion, sources said.

"ADNOC has awarded the Shah gas field to Oxy," said an ADNOC source in Abu Dhabi on Wednesday, adding that this was the company's first ever project with the state firm.

The source, plus an Abu Dhabi energy official, said there were no other partners for the project.

ADCB forms strategic alliance with BofA Merrill Lynch - Banking Business Review

Abu Dhabi Commercial Bank (ADCB) and Bank of America Merrill Lynch (BofA Merrill Lynch) have formed a new strategic relationship in the United Arab Emirates (UAE).

Under the partnership, the clients of BofA Merrill Lynch requiring services in the region can access to the capabilities provided by ADCB, while ADCB clients will have access to BofA Merrill Lynch's global network of corporate banking and cash management capabilities.

In addition, both the banks will establish a committee, comprising senior bankers from both organizations, with a goal of developing global working relationships and sharing opportunities.

Dubai’s Emaar sets up $2bn Islamic bond programme - Real Estate -

In November, it was reported that Emaar, developer of Burj Khalifa, the world’s tallest building, was tackling a debt of AEDS3.8bn ($1.3bn) maturing in 2011.

The company considering selling its own headquarters in order to finance the repayment.

Emaar Properties reported a net profit of AED2.17bn for the first nine months of 2010, compared to a loss of AED392.8m for the same period in 2009.

Moody’s Investors Service yesterday rated the bond programme at ‘B1’ with a negative outlook.

MIDEAST DAYBOOK: Tabreed, Emaar Bonds; Sabic Quarterly Earnings - Bloomberg

Islamic bonds of National Central Cooling Co., known as Tabreed, rose on speculation the provider of air-conditioning services to the Dubai Metro may follow Aldar Properties PJSC in getting financial support from Abu Dhabi.

Emaar Properties PJSC hired HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Standard Chartered Plc to arrange meetings with fixed-income investors for a planned bond sale. The meetings will start Jan. 21.

Saudi Basic Industries Corp., the world’s biggest petrochemicals maker, said fourth-quarter profit rose 27 percent, below analysts’ estimates.

Moody's cuts Tunisia credit rating, could lower it further | Reuters

Moody's Investors Service lowered its credit rating of Tunisia to Baa3 from Baa2 on Wednesday and said it may cut it further because of instability and unrest following the ousting of strongman Zine al-Abidine Ben Ali.

"The current uncertainties about the economic and political consequences of the collapse of Tunisia's previous political regime are the main drivers for the decision to downgrade the government's bond ratings by one notch and assign a negative outlook," said Aurelien Mali, Moody's lead sovereign analyst for Tunisia.

"Moody's will closely monitor Tunisia's political risk and stability over the next few months, as a further outburst of violence and disorder could exert added negative pressure on the economy," he said.

Doha Bank Full Year Net Rises to 1.1 Billion Riyals - Bloomberg

Doha Bank QSC, Qatar’s third-biggest bank by assets, said 2010 full-year profit rose 8.3 percent and the bank’s board recommended raising share capital by up to 15 percent through the sale of global depositary receipts.

Net income advanced to 1.05 billion riyals ($288 million), or 5.56 riyals a share, from 973.6 million riyals or 5.38 riyals in the previous year, the bank said in an e-mail today. Net income was expected to rise to 1.08 billion riyals, according to the average estimate of nine analysts compiled by Bloomberg. The bank recommended a dividend of 5 riyals a share.

Doha Bank plans to sell $500 million of senior bonds in the first quarter, it said on Dec. 26.

UPDATE 1-Aldar clarifies capital raise plans, not to delist | Reuters

Aldar Properties (ALDR.AD) has no plans to delist its stock after investors asked for clarification of its capital raising plans announced last week when the Abu Dhabi government threw it a $5.2 billion lifeline.

Abu Dhabi stepped in to support the struggling developer last Thursday, agreeing to buy some of its key assets and subscribing to a bond sale. [ID:nLDE70C22R]

Aldar will issue 2.8 billion dirhams in convertible bonds to Mubadala, the Abu Dhabi investment fund, after shareholders approve the plan, The bonds will mature on or about December 15 with a coupon rate of 4 percent.

Prince Alwaleed’s 2010 Rebound | Arabianomics

Saudi Prince Alwaleed Bin Talal is one of the more well-known Saudis, mostly because of his presence and notoriety in the world of international business. Alwaleed, through his investment company Kingdom Holding Co., owns a large stake in Citigroup and other well known corporations, and also owns Rotana, a media company. His vast personal wealth allows him to be consistently considered among the world’s richest.

Alwaleed’s Kingdom holding had a great fourth quarter in 2010, according to a Reuters report. The company “posted a 50.8 percent rise in its fourth-quarter net profit to 234.6 million riyals” and “made a net profit of 605.2 million riyals in 2010, up 50.3 percent from the previous year.”

Those are very encouraging figures for Alwaleed, the nephew of King Abdullah. Perhaps the most well-known of his dealings this year was the purchase of $500 million of GM’s new stock offering, which totals a 1% ownership of the company, according to Dow Jones. The move increased the size and diversity of Alwaleed’s US holdings.

Benefits of Kuwait’s KD 1000 Amiri Grant « Alpha Dinar- talking GCC finance

Yesterday, “Sal” talked about how the Amiri grant will lead to inflation. He further pointed out that he personally would’ve preferred to see the money spent on infrastructure projects. Here in Alphadinar we encourage diverse points of view, thus, I will take a supportive view and talk about the benefits of this grant. The political aspect is evident in that the grant came at a time of popular objection to the government. Thus, it has helped loosen the valve on the explosive political scene in Kuwait. People are simply happier!
The economic aspects are where I will try to elaborate more. Although there are inflationary fears, I believe that this grant is the better of two evils when compared with calls for debt forgiveness. We were about to debt forgiveness all over again, however, this grant shut the door on such morally hazardous acts. Other Kuwaitis were wishing for the doubling of salaries. This would have been a terrible drain on a budget that currently devotes more than two-third to the salaries section! In finance, everything is relative. Further, I believe that the relative drawbacks of the amiri grants are much lower than forgiving debt or doubling salaries. People may argue that we should not be discussing any of these alternatives. I tend to agree with that perspective, however, one has to be realistic and acknowledge that Kuwait is a welfare state with a small population and an abundance of oil.
Other benefits will be the stimulative effect on the Kuwaiti economy. Part of a fiscal policy is tax cuts, which lead to an increase in aggregate demand. Well, think about this one-time grant as an injection to an ill-economy. People will spend their money and companies will benefit. On the other hand, they may save it or pay down credit card or bank debt. Such acts will also have a positive impact on banks as they will have more liquidity and will become more willing to lend, thus, stimulating the economy.
What other points do you guys have?

Aldar Properties CreditWatch implications revised to developing on announced financial framework-

Standard & Poor's Ratings Services said today that it has revised the CreditWatch implications on its 'B' long-term and 'B' short-term issuer credit ratings on Abu Dhabi-based property company Aldar Properties PJSC (Aldar) to developing from negative.

"We initially placed the ratings on CreditWatch with negative implications on November 15, 2010, in response to challenging real estate market conditions, delays in property handovers, and collection problems," S&P said.

"We revised the CreditWatch implications following the announcement of a financial framework for Aldar, including the 19.2 billion United Arab Emirates dirham (AED) of cash inflow from asset sales to and reimbursements from the government and the placement of an AED2.8 billion mandatorily convertible bond with Mubadala Development Co. PJSC (Mubadala; AA/Stable/A-1+), 100% owned by the Abu Dhabi government," said Standard & Poor's credit analyst Tommy Trask.

The issuance and subsequent conversion of the convertible bond, which is subject to shareholder approval, may raise Mubadala's stake in the company to about 49%, strengthening the link between Aldar and the government of Abu Dhabi.

Thomson Reuters launches Middle East equity indices -

Thomson Reuters today announced the introduction of 500 new equity indices aimed at the Middle East markets.

Indices from the equity markets of Bahrain, Kuwait, Oman, Qatar and the UAE are among the new additions which are available on Thomson Reuters Eikon, the company’s recently launched next-generation desktop for financial market professionals.

New regional indices have also been created consisting of Middle East and North Africa (MENA) which includes Bahrain, Kuwait, Oman, Qatar, UAE, Morocco and Egypt; Gulf Cooperation Council (GCC) which includes Bahrain, Kuwait, Oman, Qatar and UAE; and Organization of the Islamic Conference (OIC) which includes the MENA countries and other Islamic countries such as Pakistan, Indonesia, Malaysia, Turkey.

Saudi Basic Industries Fourth-Quarter Profit Advances 27%; Below Estimates - Bloomberg

Saudi Basic Industries Corp., the world’s biggest petrochemicals maker, said fourth-quarter profit rose 27 percent, in line with analysts’ estimates, as demand recovered.

Net income advanced 5.81 billion riyals ($1.55 billion) from 4.58 billion riyals a year earlier, the Riyadh-based company known as Sabic said in a statement today. The mean of five analyst estimates was for a profit of 5.88 billion riyals, according to data compiled by Bloomberg.

Sales of fertilizers and plastics increased as the petrochemical industry began to recover from the global financial crisis on increased demand for automotive, construction and consumer goods. Sabic Chief Executive Officer Mohamed al-Mady said the company benefited in the last three quarters from a stable oil price and moderate demand growth.

Saudi Arabia, Qatar and Egypt Favored at EFG Among MENA Markets - Bloomberg

EFG-Hermes Holding SAE recommended equities in Saudi Arabia, citing a decline in provisioning and a possible easing of foreign investment restrictions in the Arabian Peninsula’s biggest stock exchange.

The bank also favors Qatar and Egypt among markets in the Middle East and North Africa region.

A possible upgrade of markets in Qatar and the United Arab Emirates to emerging markets status at MSCI Inc. would also help boost shares, the investment bank said in a note posted on its website today.

Sukuk market set to rebound says report

The sukuk market may well be set to bounce back after suffering badly in the global financial downturn.

The value of sukuk has jumped 61 per cent in the past year, according to a research by Trowers & Hamlins, the international law firm.

A total of $7 billion of sukuk were issued in the year to June 2010 compared to $4.3 billion the previous year.

Where’s the next ‘Jasmine revolution’? | beyondbrics | News and views on emerging markets from the Financial Times –

Whether or not it heralds a new era for the country, last week’s ousting of Tunisia’s president Zein al-Abidine Ben Ali has made investors in the Arab world decidedly skittish.

Is there a real risk of unrest breaking out elsewhere in the region? Renaissance Capital thinks so. The Russian investment bank argues that, largely for demographic reasons, countries in North Africa and the Middle East are more susceptible to wars and revolutions than others.

Sociologists have long argued that countries facing a “youth bulge” – countries in which men aged 15-34 make up more than 15 per cent of the total population, by Renaissance Capital’s definition – face a particularly high risk of unrest.