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Tuesday, 1 February 2011

UAE's NBAD Q4 profit up 71 pct; has Egypt exposure- Maktoob News

National Bank of Abu Dhabi (NBAD), the UAE's largest lender by market value, reported a 71-percent jump in quarterly profit on Tuesday, above forecasts, as deposits grew and asset quality improved.

NBAD also said it has about $400 million exposure to Egyptian entities. The North African state has been racked by political unrest as protestors demand the end of President Hosni Mubarak's 30-year rule.

NBAD had profit of 732 million dirhams ($199.3 million) in the three months to Dec 31, up from 429 million dirhams in the prior-year period, it said in a statement.

Egypt: volatility beats optimism | beyondbrics – FT.com

Volatility is the word of the moment – not only on Egypt’s streets, but in investor perceptions of events as well. After rising sharply for five sessions up until Monday, the cost of Egyptian bond insurance dropped suddenly on Tuesday.

The spread on five-year credit default swaps fell from its intra-day peak of around 450 basis points in the previous session to around 390 basis points. It could be that investors have found reason to relax in the army’s vow not to use force against protestors.

But outstanding uncertainties – especially over what kind of government would emerge if President Hosni Mubarak stood down – probably still outweigh the signs of stability.

Turkey’s first Islamic fund to track Gulf finance - Hurriyet Daily News and Economic Review

Turkey’s first Islamic fund, run by Istanbul-based brokerage Bizim Securities, is seeking to attract more investment from the Persian Gulf with its Shariah-compliant stock index.

The Istanbul Stock Exchange started an Islamic gauge of 30 shares on Jan. 6. Bizim, whose parent company Boydak Holding owns shares in companies including an Islamic bank, is planning to raise 100 million Turkish Liras and through investments set to begin in the second half of 2011, Deputy Chief Executive Av┼čar Sungurlu said in an interview last week.

“Turkey is an increasingly attractive investment destination, particularly with investors in the Middle East and North Africa,” Akber Khan, a director at Al Rayan Investment in Doha, Qatar, said in a telephone interview Jan. 27. “The overall investment case for Turkey for medium to long-term investors is compelling. Strong medium-term growth dynamics are driven by positive demographic trends and rising gross domestic product per capita.”

Gulf sukuk sink as Egypt turmoil cuts demand - ArabianBusiness.com

Islamic bonds are tumbling, sending Arabian Gulf yields to a six-week high, as concern political unrest in Egypt will spread pushes up the cost of crude and threatens the global economic recovery.

Average yields on Sharia-compliant sukuk from the six-nation Gulf Cooperation Council jumped 28 basis points since January 27 to 5.59 percent yesterday, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index. The extra yield investors demand to hold emerging-market debt over US Treasuries widened 24 basis points over the past two days to 270, the highest level since November 30, JPMorgan Chase & Co’s EMBI+ Index showed.

“Investors are jittery and are waiting to see how quickly the crisis in Egypt is resolved,” Muhammad Asad, who oversees $210m of Sharia-compliant funds as chief investment officer at Al Meezan Investment Management Ltd, Pakistan’s biggest Islamic fund, said in an interview yesterday. “It cannot be allowed to linger on or it may have long-term effects on the Islamic market in the Middle East.”

Abu Dhabi Stocks Advance on Speculation Drop on Egypt Risk May Be Overdone - Bloomberg

Abu Dhabi shares advanced for a second day on investor speculation declines triggered by the unrest in Egypt were overdone given earnings prospects. Kuwait shares retreated.[bn:WBTKR=ADIB:UH]

Abu Dhabi Islamic Bank [], the United Arab Emirates’ second- biggest bank complying with Shariah banking rules, extended yesterday’s gain and United Arab Bank surged 7 percent. The ADX General Index rose 0.5 percent to 2,599.34, the highest since Jan. 27, at the 2 p.m. close in the emirate. The measure lost 3.7 percent on Jan. 30. Protests demanding Egyptian President Hosni Mubarak step down started on Jan. 25 and escalated on Jan. 28. The DFM General Index climbed 0.6 percent.

The shares gained today as “bank results are excellent and cash dividends are up,” said Nabil Farhat, partner at Abu Dhabi-based Al Fajer Securities. “Investors are watching for any new developments in Egypt, particularly what could happen when Egyptian banks and the stock market open.”

Kuwait’s NBK Foresees 10% to 15% Growth This Year, CEO Says - Bloomberg

National Bank of Kuwait SAK expects profit growth of as much as 15 percent this year and plans to expand into the Syrian market, Chief Executive Officer Ibrahim Dabdoub said today.

“Same thing, between 10 and 15 percent,” Dabdoub said in a phone interview from Kuwait City, after the bank reported a 14 percent rise in full-year profit.

Credit growth this year will depend on economic activity in the country and Kuwaiti banks will have overall domestic credit growth of 10 percent “if not more” this year, Dabdoub said.

Bahrain's Investcorp first half profit dips- Maktoob News

Investcorp, the Bahrain-based alternative investment manager, on Tuesday reported a small drop in first-half profit as its hedge fund returns slowed after a strong performance in the previous year.

The company, which once floated luxury brands Gucci and Tiffany & Co, suffered its first ever full-year loss in the fiscal year ended June 2009 as the financial crisis hit.

But its hedge fund business had helped it return to a profit in the financial year to June 2010.

Dubai's DP World suspends Egypt operations | My Sinchew

Dubai ports operator DP World has suspended its operations at the Ain Sukhna port in Egypt, a spokeswoman said on Tuesday, as a revolt calling for the ouster of Egypt's president raged into an eighth day.

"DP World Sokhna is closely monitoring the situation in Egypt" and "as a precautionary measure has temporarily suspended operations" at the Red Sea port of Ain Sukhna, which it operates, the spokeswoman said.

"The security of our people remains paramount and we are doing whatever necessary to ensure the safety of all our people," she said, adding that "we have no other operations in Egypt."

Kuwaiti Investment Firms Need Support After Crisis, KUNA Reports - Bloomberg

Kuwaiti investment companies are “suffering” and need support after the global economic crisis, the state news agency KUNA reported, citing Asaad al-Banwan, chairman of the union of investment companies.

The union wants more government intervention ‘because what happened was more than what was expected and predicted, as a result of the drop of capital and the weakness of funding sources,’’ al-Banwan said, according to KUNA.

Abu Dhabi Sovereign Fund Uses Indexed Strategies, Magazine Says - Bloomberg

Abu Dhabi Investment Authority uses index tracking strategies for a majority of its investments in emerging market shares, according to Saeed Al Hajeri, executive director of the Authority’s emerging markets department told Chartered Financial Analyst Magazine in an interview.

The emirate’s sovereign wealth fund is also interested in investing in diverse infrastructure assets including airports, highways, hospitals, power stations and gas pipelines, the magazine cited Al Hajeri as saying. ADIA’s focus is on long-term assets with stable yield and its infrastructure investments are divided between North America, Europe and the Far East, Al Hajeri said, according to the magazine.

FT Alphaville » Another Egypt downgrade – S&P cuts to BB


Just when things were beginning to look up for Egypt…
… Standard & Poor’s has followed Moody’s and downgraded the country’s ratings.
The statement, with our highlights, below:
Rating Action On Feb. 1, 2011, Standard & Poor’s Ratings Services lowered its long-term foreign currency sovereign ratings on the Arab Republic of Egypt to ‘BB’ from ‘BB+’, and its long- and short-term local currency ratings to ‘BB+/B’ from ‘BBB-/A-3′. The short-term foreign currency rating of ‘B’ was affirmed. We have also placed the long-term local and foreign currency ratings on Egypt on CreditWatch with negative implications.
The recovery rating on Egypt’s senior unsecured debt is unchanged at ‘3′, indicating our expectations of meaningful (50%-70%) recovery of principal, on a net present value basis, in the event of a default or restructuring of Egypt’s commercial debt.
At the same time, we lowered to ‘BB+’ from ‘BBB-’ Egypt’s transfer and convertibility assessment, our opinion on the likelihood of the sovereign restricting access to foreign exchange needed for debt service by borrowers other than the government.
Rationale
The rating actions reflect our expectation that the violent demonstrations of the past week will persist, despite the appointment of a vice-president and the dismissal of the government by President Hosni Mubarak on Jan. 29, 2011. At present, a state of political impasse appears to exist in the country: President Hosni Mubarak refuses to cede power, security forces are struggling to contain ongoing demonstrations, the imposed curfew is being ignored, while the protestors continue to rally against the Mubarak administration because of their dissatisfaction with the political system and poor living standards.
We think it likely that the army will play a key role in resolving this current impasse. We believe the presence of the military, which is respected by the public, has so far helped to defuse some of the violence. The military has so far not intervened in the protests and has allowed violations of the curfew to continue.
We expect the current political instability and violent conflict to affect Egypt’s economic growth in 2011 and beyond, not least through the adverse impact on the important tourism sector. This follows real GDP growth of close to 5% over the past two years. We think the conflict and the ensuing uncertainty may also weigh on Egypt’s balance of payments if inward foreign direct investment (FDI) or remittances were to decrease.
We are of the view that the government will eventually take measures to alleviate poverty by increasing fuel and food subsidies. We believe this will have negative implications for the public sector deficit, and it will likely be difficult to tackle the deterioration of public finances given Egypt’s limited fiscal flexibility. The general government has an official deficit target of about 8% of GDP this year, which in turn reflects heavy capital-spending commitments. Given that subsidies for food and fuel already account for just over one-fifth of government expenditure, we think that the government may offset an increase in these subsidies by cuts in capital spending. On the other hand, we consider that revenues could also decline the longer the political crisis continues. As a result, in the absence of emergency spending cuts in other areas, the budget deficit in 2011 could reach double digits, in our view. This will be difficult to finance while political uncertainty prevails. We estimate that Egypt’s gross general government debt stood at almost 74% of GDP last year, well above the ‘BB’ median of 42% of GDP.
Egypt’s external position appears quite strong. The current account position has been at near balance in recent years. This mainly reflects movements in the trade deficit, as well as improved Suez Canal revenues and higher tourist receipts. However, the trade deficit is currently being pressured by higher oil and food import costs. Moreover, receipts from the tourism industry are likely to decline at least during 2011 given the ongoing violent protests in the country and foreign government travel warnings deterring visitors. In addition, the inflow of private remittances, which amount to about 4% of GDP, may weaken.
FDI is an important factor supporting the overall balance of payments, with net FDI inflow equating to about 5% of GDP in 2010. In our view, the uncertainties surrounding political stability, if prolonged, may undermine investor confidence in long-term project financing. Egypt is also dependent upon volatile capital flows, such as portfolio investments, which are also vulnerable to reversal. International reserves are currently about $36 billion, equal to between five and six months’ coverage of current account receipts (CARs).


IMF vows to help Egypt reform | beyondbrics – FT.com

With Cairo braced for what organisers hope will be a million strong march against the country’s president on Tuesday, the International Monetary Fund said that it isready to help Egypt reform its economy.

But Dominique Strauss-Kahn, the IMF’s managing director, also said he does not expect turmoil in Egypt and Tunisia to have a global impact beyond the oil markets, where prices dipped slightly on Tuesday morning but stayed above $100 a barrel.

On the domestic economy, AFP reported him saying: “The IMF is ready to help in defining the kind of economic policy that could be put in place.”

Dubai official to visit Kerala to salvage Smart City Project – MSN India

Dubai International Financial Centre (DIFC) Governor Ahmad Humaid Al Tayer is visiting Kerala in a last ditch attempt to salvage the Smart City Kochi project, a news report has said.

In a meeting held with UAE-based Indian businessman M A Yusuf Ali -- who was recently appointed by Kerala as its mediator on the project -- on Sunday evening, Al Tayer is said to have discussed the agenda for the crucial meeting that the government of Kerala is scheduled to hold on Wednesday (February 2), the Emirates 24/7 report said.

The Smart City Project, which was initially agreed to in 2003, has been delayed ever since due to various disagreements. The latest stumbling block is the dispute over freehold rights over 12 per cent of the land under the project.

Gaming Today : Kerkorian selling its stock in MGM Resorts?

It may seem unimaginable but it is now being reported that Kirk Kerkorian’s Tracinda Corp. may sell its interest in MGM Resorts International (MGM).

In an announcement last week, Tracinda said it "occasionally receives inquiries regarding the shares" it owns in the largest employer in Nevada.

Kerkorian, 93, is the founder of the company and once held more than 50 percent of the outstanding stock. In fact, prior to the building of CityCenter, the Strip property that is 50 percent owned by MGM and a subsidiary of Dubai World, Kerkorian’s holdings were said to be valued at nearly $15 billion.

Since the country’s economic slump, Kerkorian’s MGM holdings have been valued at less than $2 billion.

GCC Index Performance: January — Monthly Index Review — GCC Market Analytics

Everything went a bit wrong in the final few days of January, brought about by the Egypt situation, of course.

The Dubai and Abu Dhabi markets are once again the worst performers with the DFM General Index losing 5.90% in January and the ADX losing 4.89%. Muscat, Bahrain, and Qatar all managed to stay positive for the month, despite suffering late Egypt related falls.





MIDEAST DAYBOOK: Egypt Unrest; Qatar Trading Hours; NBAD Results - Bloomberg

Newly appointed Vice President Omar Suleiman reached out to opposition groups in a bid to end the unrest in Egypt as demonstrators urged a million people to take to the streets today and force President Hosni Mubarak from office. See {EXTRA } for more news on unrest in Egypt.

Qatar Exchange extends trading hours and changes the tick size for share movements from today. Trading will start 9:30 a.m. Doha time and close at 1 p.m.

Dubai Financial Market PJSC and the Qatar Exchange plan to move to a so-called delivery-versus-payment system this quarter as the bourses seek to boost their chances for inclusion in the MSCI Emerging Markets Index. Dubai plans to introduce short- selling as well as securities borrowing and lending this year.

Red flags are raised over money deals - The National

Financial companies informed the Central Bank of 55 per cent more suspicious money transfers last year compared with 2009, the head of the regulator's anti-money laundering unit says.

The Central Bank received 2,711 tip-offs from insurers, banks, investment companies and other financial services companies last year, said Abdulrahim Mohamed al Awadi, an executive director of the Central Bank and the head of the anti-money laundering and suspicious cases unit. That compared with 1,750 reports in 2009.

The rise "shows the effectiveness" of efforts to educate financial companies about their responsibilities to report suspicious financial activity, Mr al Awadi said.

Damas extends standstill on Dh3bn in debt - The National

Damas International has been forced to extend its payment standstill on more than Dh3 billion (US$817 million) of debt for a sixth time, as not all of its lenders have signed the agreement.

The largest gold and jewellery retailer in the Middle East announced yesterday that it had reached an agreement with some of its more than 20 lenders but was giving the remainder until the end of March to reach a decision.

"In order to allow the company and the steering committee sufficient time to obtain the final approval and signature of the bank lenders … the company considered that it was prudent to extend the standstill period," Damas said in a filing with Nasdaq Dubai.

Mid-East contagion fears for Saudi oil fields - Telegraph

"Yemen, Sudan, Jordan and Syria all look vulnerable. However, the greatest risk in terms of both probability and severity is in Saudi Arabia," said a report by risk consultants Exclusive Analysis.

While markets have focused on possible disruption to the Suez Canal, conduit for 8pc of global shipping, it is unlikely that Egyptian leaders of any stripe would cut off an income stream worth $5bn (£3.1bn) a year to the Egyptian state.

"I don't think the Egyptians will ever dare to touch it," said Opec chief Abdalla El-Badri, adding that the separate Suez oil pipeline is "very well protected". The canal was blockaded after the Six Days War in 1967.

Business : UAE financial system is safe: Central Bank

The Central Bank of UAE on Monday asked all financial institutions in the country to immediately report any suspicious money transactions or cases they come across to its Anti-money Laundering and Suspicious Cases Unit (AMLSCU).

After inaugurating a workshop for insurance companies and brokers on Monday, ALMSCU executive director Abdulrahim Mohammed Al Awadi said it was the responsibility of all entities to report such transactions and cases to help the country keep its financial system sound.

“The Anti-money Laundering Law (AML) has obligated the reporting requirements in relation to any suspicious transactions to banks, other financial, commercial and economic entities that include insurance companies and brokers,” Awadi said

FT.com / Gideon Rachman - Democracy is back – how awkward

Ingram Pinn illustration

It has taken just six weeks for the arrest of a fruit-and-vegetable seller in Tunisia to spark a chain of events that now threatens to topple the government of Egypt. Watching the revolt against autocracy spread across the Arab world is exciting, uplifting – and also deeply alarming for the world’s major powers, all of which are, in different ways, fond of the status quo.

The discomfort of the US is obvious and much remarked upon. As the world’s only superpower and President Hosni Mubarak’s main outside sponsor, it is the US that everybody is looking to. But the turmoil in Egypt will also be a source of anxiety for European and even Chinese leaders.

Europeans have long been acutely aware that theirs is an ageing continent, separated by a narrow sea from a much poorer, much younger north African and Arab world. They have wrung their hands about the economic and political stagnation in countries such as Tunisia and Egypt – while co-operating closely with those countries’ leaderships, in an effort to combat everything from terrorism to illegal immigration. Now, Europeans are left cringing at the old photos of their leaders embracing the likes of President Zein al-Abidine Ben Ali of Tunisia.



FT Alphaville » Remittances to Egypt

Another Tilt of the hat to our blogging brethren for the heads up about a primer on Egypt out Monday from Capital Economics.

We were struck by this chart showing the components of Egypt’s current account (im)balance. Click to expand:

The World Bank’s People Move blog puts Egypt in the top ten of remittance receivers worldwide. After oil and tourism they are Egypt’s third largest source of income, says its foreign ministry, via Bikyamasr.