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Thursday, 27 January 2011

Dubai World shies away from media limelight | beyondbrics –

Nakheel has been forced to call a press conference to persuade the world that the troubled developer’s World Development, an artificial archipelago of 300 islands off Dubai’s coast, was not sinking.

But Wednesday’s technical press conference and boat tour – no cameras allowed! – did little to take attention away from a flurry of media coverage over the Dubai World Tribunal, where Nakheel’s parent is working out its $25bn debt restructuring.

The common-law tribunal – which was set up by the Dubai International Financial Centre (DIFC) – is beginning to shine a light on Nakheel and its finances. The government-owned company has accumulated an alarming amount of debt since the shuddering property crash in Dubai.

Egypt: bye-bye to the carry trade? | beyondbrics –

Egypt has been a locus of that enduring emerging market passion, the carry trade, and that’s why the unfolding political crisis matters to so many foreign investors.
They have used dollars borrowed at ultra-low interest rates to buy higher yielding debt in emerging markets. In Egypt’s case, the central bank’s benchmark interest rate is an alluring 9.75 per cent. But street protests against the rule of Hosni Mubarak are putting the carry trade in jeopardy.
A lot of money is at stake. Foreign investors own about 20 per cent of Egypt’s short-term Treasury bills and the chart below (from BNP Paribas) shows how holdings have soared in the past two years, from around E£5bn to over E£60bn ($10bn).

UPDATE 2-Emaar launches $500 mln sukuk at 8.5 pct -sources | Reuters

Emaar Properties EMAR.DU, which built the world's tallest building, priced a $500 million Islamic bond at a profit rate of 8.5 percent, three sources said, as the first UAE sukuk of the year was oversubscribed.

The five-and-a-half year sukuk, issued as part a $2 billion bond programme, attracted $1.7 billion in bids, one source close to the deal said on Thursday.

"This is a great price given real estate element. They did well to keep it at single digits and not hit 10 percent," one banker who did not want to be identified said.

Egypt protests fuel Dana Gas share fall - The National

The Abu Dhabi Securities Exchange General Index declined 0.1 per cent to 2664.64.

The Dubai Financial Market General Index lost 0.2 per cent to 1624.55

Elsewhere in the region, Kuwait's measure was flat at 6971.00, Bahrain's measure was also unchanged at 1460.67. Oman's bourse was also unchanged at 6947.14. Qatar's bourse gained 0.3 per cent to 9046.26. The Saudi Tadawul All-Share Index was closed for the day.

FT Alphaville » The Mubarak effect on equities

Things are moving fast in Egypt — especially in equity markets.
The EGX 30 was down 10 per cent on Thursday morning after protesters defied the Mubarak government’s ban on demonstrations. Trading on the North African nation’s stock exchange was even temporarily suspended.
So, time for investors to worry?
Citi is telling Egypt-investors to sit tight:
Our overall conclusion is that while massive economic disruption as a result of political unrest looks rather unlikely, the risk premium that investors require to hold Egyptian assets is likely to remain higher than it was. Therefore, even if the current sell-off does prove to be a buying opportunity, this is unlikely to be realized for some time. The problem for the equity market is that even assuming earnings are unaffected by recent events, Egypt does not look sufficiently cheap within CEEMEA to make for a compelling overweight case at this juncture. However given recent declines, it is probably late to sell aggressively: we would prefer to be neutral in Egypt within CEEMEA.
The longer-term picture here is pretty interesting, however. Citi reckon it’s a truism that stock markets prefer stability to instability, but equities’ actual performance around times of political crises isn’t straightforward at all. Here’s a chart:
Tricky, tricky political crises.

First Investment’s Lenders Accept Restructuring Plan, Qabas Says - Bloomberg

First Investment Co.’s creditors agreed to join a plan to restructure the company’s debts of about 90 million dinars ($321.8 million), Al-Qabas reported, citing unidentified people familiar with the matter.

The Kuwaiti Islamic finance company, known as Al-Ola, is to repay its liabilities over 5 years, the newspaper said.

Al-Ola said in October that it had agreed with lenders on most of the terms to restructure a 90 million-dinar sukuk, according to a filing to the bourse. The company is seeking to turn its debt into a medium-term sukuk, it said in the filing.

Egypt market reopens, shares fall again | beyondbrics –

Would everybody please calm down? That was what the Egyptian authorities seemed to be saying when they suspended share trading to let the spooked market compose itself. But the answer has come back: No.

Shares plunged further as soon as the Cairo stock exchange reopened late on Thursday morning local time, bringing losses on the day to 10. 6 per cent. They were down 6.2 per cent before the suspension and had fallen by 6 per cent on Wednesday too, reacting to audacious street protests against president Hosni Mubarak.

It seems Egypt’s political future is becoming more uncertain by the day. Talk of an incipient revolution in Africa’s second largest economy still seems overblown, but less so than it did two days ago.

Life in Dubai: Getting back to normal (I call this the "real economy" what can be seen, not massaged!)

One of the largest development projects in town is the Al Sufouh tram system. When it began, several kilometres of the once-completed Al Sufouh Road from Knowledge Village into Dubai Marina were dug up and diversions were put in place.

Then the global financial crisis hit.

When it did, the reaction in Dubai was the same as it was in much of the rest of the world. Hit the PANIC! button.

Saudi Arabia – the Consultant’s Goldmine « 59steps's Blog

Saudi Arabia spends a fortune on Western know-how to try to transform the way it does business, both in the public and in the private sector. The country has long been a prime market for consultancies. And this is especially the case today, with all the current soul-searching about the pressing issues of the day: Saudization, unemployment, energy, social issues like drug abuse, security, and above all the challenge of moving towards a knowledge-based economy. Most of the major international consultancies have a presence in the Kingdom – McKinsey, KPMG, Booz and Co, Ernst and Young and PWC to name a few.

Many of these companies are highly reputable and do good work. But some Saudis I talk to comment that the big consultants bring in their senior people to pitch for the business, and then deploy the junior, less experienced people to do the work. Whether or not this is fair comment, I do sometimes wonder whether the Kingdom gets long-term value for money from the consultancy delivered both the public and private sector.

My experience in Saudi Arabia tells me that consultancies often deploy out-of-the-box methodologies developed in New York and London, and try to make them fit in an environment for which they may not be suited.

The world economy: Has the optimism returned? | gideon rachman's blog –

I have, as usual, succeeded in spending a day in Davos without attending a single public session. But I have managed to speak to several interesting people about the world economy.

My sense is that optimism has returned. Even Dr Doom – Nouriel Roubini – has become notably less pessimistic. China and India are here in force and radiating the good will of those whose time has come. There seems to be little doubt that they will continue to grow very rapidly. The mood about the US has also markedly improved. Some informed observers are even talking about 3.5 per cent growth this year. Few seem to believe that the federal government will have any serious difficulty selling its debt. Even the panic over the eurozone seems to have abated. People seem to believe that a default will be avoided this year.

At the same time, it is not hard to find alternative perspectives. One emphasises the sheer uncertainty. Another stresses the potential for an unexpected eurozone default, perhaps by Ireland, after its election. That could lead to a panic in the wholesale markets, on which European banks depend. Yet another worry is inflation and the rising public debt in high-income countries.

gulfnews : Police chief calls for return of public money

Dubai Police Chief Lieutenant General Dahi Khalfan Tamim has called on anyone who has embezzled government funds to return the money at the earliest.

He warned that Dubai authorities would not spare anyone who illegally benefited from the government's money.

The statement follows the State Audit Institution (SAI), the UAE's top federal auditor, which oversees the spending of billions of dollars of public funds, launching a set of guidelines on Tuesday to ensure transparency, accountability and better use of public money.

Gas discovery backfires on Heritage - The National

Heritage Oil, a Canadian exploration firm, has made the biggest Iraqi gas discovery in more than 30 years. But investors hoping for an oil discovery punished the company for its surprise announcement yesterday, sending its share price down 17 per cent in London.

"Previously anticipated prospective oil resources … have proven to be wet gas/condensate," Fox Davies Capital in London said in a research note. "We would expect the announcement to have a negative impact on the share price."

In early afternoon trading in London, Heritage shares were priced at 360.9 pence, down from the previous day's close of 406.6 pence. The steep one-day drop wiped out most of the stock's gain of about 20 per cent during the past month.

Saudi Arabia’s Oil Production May Rise 3.4% This Year, BSF Says - Bloomberg

Saudi Arabia, the world’s largest oil exporter, will increase production by 3.4 percent in 2011, according to Banque Saudi Fransi.

Saudi Arabia will pump 8.48 million barrels a day, from 8.2 million in 2010, the Riyadh-based bank known as BSF said in an e-mailed report dated yesterday. That compares with an average of 9.1 million produced from 2004 to 2008, the bank said.

The country’s oil-sector growth is forecast at 3.5 percent in 2011 as crude prices average above $80 per barrel, BSF said.

MIDEAST MARKETS -Property woes hinder UAE markets | Reuters

Tumbling property prices will stymie gains on markets in the United Arab Emirates, but for medium- to long-term investors downside risks are limited and local stocks are among the cheapest in the region.

"UAE markets will remain under pressure because of real estate. Most listed companies are exposed directly or indirectly, whether they are developers, contractors or banks," said Shahid Hameed, Global Investment House head of asset management for the Gulf region.

"Real estate tends to have a long cycle - the UAE is now three years into a correction and there are probably another couple of years to come. That will keep the economy under pressure, especially in Dubai, and perpetuate negative sentiment on UAE markets." / Emerging Markets - Bourses urged to prioritise reforms

The status of the long-awaited merger of Abu Dhabi and Dubai’s stock markets remains murky, much to the consternation of local brokers who hope a unified bourse will reignite investor interest in the United Arab Emirates.

Talks appear to have hit an impasse, and some observers fear momentum behind the merger has been lost.

However, while it makes sense to merge the three bourses, lawyers and bankers say that reforming the UAE’s regulatory architecture should be a more pressing priority.

UPDATE 1-Batelco Q4 profit falls 18.6 pct, eyes acquisitions | Reuters

Bahrain Telecommunications' BTEL.BH fourth quarter net profits fell 18.6 percent but were in line with expectations as a loss in market share and start-up costs for its Indian operations hurt full-year results.

Net profit fell to 20.81 million dinars ($55.21 million) in the quarter ended Dec. 31, according to Reuters calculations, compared to 25.56 million dinars in the year-earlier quarter.

Analysts forecast average quarterly profit of 20.51 million dinars in a Reuters poll.

Goldman: skirting around Iran | beyondbrics –

Having suggested last week that the Bric acronym may be losing its purpose, Goldman Sachs is busy promoting a successor, N-11.

Goldman’s N-11 Equity Portfolio is aimed at investing in the 11 countries identified as the next markets worth following after the Brics. But it comes with a twist – it will actually invest only in 10. Number 11 is Iran.

Mindful of US sanctions on investing in Iran, the fund will not be putting any money directly into Iran. Goldman said that for investors Iran was “a restricted country”. But the fund can invest in companies in other countries, for example the UK, with exposure to Iran.

Video: Risk in the Arab world | beyondbrics –

As the Arab world finds itself in flux following protests in Tunisia and now Egypt, Alia Moubayed, senior Middle East economist for Barclays Capital, says investors face not only growing political risk, but fiscal threats too, as governments consider increasing wages and subsidies.

Guest post: will Tunisia’s politics spill over into Egypt’s economy? | beyondbrics -

While the impact of the political unrest in Tunisia on its economic performance in 2011 is likely to be relatively significant, the potential economic impact of Tunisian political contagion on the Egyptian economy is not – despite the fact that on a basic level a link is undeniable. Planeloads of returning tourists provided eyewitness accounts of the violence in Tunisia on most European news channels in early January.

When followed up with a day of protest in Cairo and other Egyptian cities on January 26, complete with the riot police firing canisters of tear gas on protestors, the idea that political unrest could potentially ruin a much longed-for summer vacation is clear.

Clearly, fewer tourists arriving in Egypt would affect growth and the current account in 2011. But the fall-off in arrivals is likely to be limited. Egyptian tourism marketing highlights the ‘Red Sea Riviera’ and the call of history, both of which seem a long way from the unrest in Tunis.