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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