Wednesday, 2 February 2011
Emaar Properties PJSC, the builder with investments in the North African country, gained the most since June. Dubai Islamic Bank PJSC advanced 3.7 percent after Fitch Ratings assigned the lender a long-term foreign currency issuer rating of A. The DFM General Index surged 3.3 percent, the most since April 11, to 1,594.87 at the 2 p.m. close in Dubai. The measure extended gains after Yemen’s president said he won’t seek another term. The Bloomberg GCC 200 Index climbed 1.5 percent, the most since Dec. 5, at 1:20 p.m. in Riyadh.
Mubarak’s speech offered a “clearer picture in terms of the political reading regionally; the markets had overreacted before,” said Haissam Arabi, chief executive officer of Gulfmena Alternative Investments in Dubai. “We expect minimal impact on the micro level. It’s a matter of days before the dust settles.”
Saudi Arabia’s Tadawul All Share Index fell 5.2 percent from Jan. 24 through yesterday and fetches 1.9 times net assets, the cheapest level relative to the MSCI Emerging Markets Index since Bloomberg began compiling the monthly data in April 2006. Qatar’s QE Index trades at 2 times book value, a 29 percent discount to the average level since June 2005, the data show.
“Any contagion into the Gulf Cooperation Council markets is completely unjustifiable, putting aside company specifics with exposure to Egypt,” said Rami Sidani, the Dubai-based head of Middle East and North Africa investment at Schroder, which oversees about $230 billion of investments worldwide. The crisis “is a good entry point in stocks we like,” he said.
The stocks, which included lender İşbank, were also selected based on their dividend potential, growing exposure to emerging markets and relative value compared with the Istanbul Stock Exchange’s main ISE-100 index, HSBC said in an e-mailed report Wednesday.
“Within the next three years, the investment grade case could be one of the major factors to shape equity expectations and stock picks,” HSBC said.
Egyptian equities and bonds traded offshore were largely unchanged on Wednesday as investors tried to make sense of president Hosni Mubarak’s pledge to step down, and moves by the army to persuade protestors to clear the streets.
Investors in the Gulf had fewer doubts, with equities rising sharply in Dubai and elsewhere.
In London, GDRs in Orascom Construction, Egypt’s largest company by market capitalisation, slipped slightly from $39.84 on Tuesday’s close to $39.12. Orascom Telecom was fractionally higher art $3.40 ($3.37). Egypt’s 10 year bond was a touch lower at 95.90 (96.00). The country’s credit default spread, a risk measure, narrowed a bit by 1o points to 355, following an 85-point gain on Tuesday.
The flow of protestors in Cairo’s Tahrir Square have unsettled markets across the region. In Turkey, investors already had doubts over the central bank’s unorthodox policy initiatives. Egypt’s intensifying political crisis swung sentiment against emerging markets, hitting the lira and prompting a sharp sell-off in Turkish equities and bonds.
“There’s a general feeling that the CBT [Turkish central bank] could not have picked a worse time to experiment,” said Nicholas Spiro, at the consultancy Spiro Sovereign Strategy, while analysts at the brokerage EFG Istanbul Securities said the “safe-haven credentials” of Turkish assets had “no doubt taken a bit hit”.
Yet asset prices are already rebounding, and analysts speculate that a period of prolonged instability in the Middle East could boost Turkey’s weight in regional affairs – and its attractions for international investors.
"Talks for the merger are on, but this is subject to negotiations and terms and conditions put forth by both companies," one of the people said.
The person said the Saudi firms would look at offloading a 51 percent stake if a joint business with 15,000 towers was created.
Gulf Bank had net profit of 8.66 million dinars in the fourth quarter, according to Reuters calculations, reversing a net loss of 21.05 million dinars in the prior-year period.
The bank earned 2010 net profit of 19.06 million dinars against a net loss of 28.07 million dinars in 2009, according to a statement to the bourse on Wednesday.
"I agree that banks have increased their fees and commission rates and not interest rates," Sultan Nasser al-Suweidi was quoted as saying on www.emirates247.com website.
"There is a new set of regulations that are coming, and the central bank will intervene because matters are getting out of control," he said.
Expectations of a smooth transfer of power in Egypt rose after President Hosni Mubarak said he would stand down later this year.
Egyptian five-year credit default swaps fell 69 basis points from Tuesday's closing levels to 364 bps, according to Markit, and are down nearly 100 bps from April 2009 peaks hit in recent days.
The rating agency is “relatively confident” that Egypt will pay its debt obligations, Kai Stukenbrock, director for sovereign and international public finance ratings, said in an interview in Dubai today.
There is a 50 percent chance that S&P will cut Egypt’s credit rating further, he said.
Lenders are also to provide the central bank with details of the natures of the liabilities, and risks that each bank may face, according to the newspaper.
Kharafi owns 12.4 per cent of Zain and is being targeted by Etisalat as it pursues of a 46 per cent stake in the operator in a deal worth Dh44.1bn or 1.70 dinars a share.
Nasser al Kharafi, the billionaire chairman of Kharafi Group, confirmed that the National Investments Company, a brokerage in Kuwait, would receive 50 fils per share in the deal for its "role in collecting the 46 per cent ownership needed".
The S&P-Hawkamah Pan Arab ESG Index ranks the Middle East's top 50 companies using a set of environmental, social and corporate governance standards. It is a joint venture between the ratings agency and Hawkamah, an institute for enhancing corporate governance in the region.
"We're raising the bar as far as [financial and governance] reporting is concerned and putting these issues on the corporate agenda," said Dr Nasser Saidi, the executive director of Hawkamah.
The surplus reached 19.4 billion riyals ($5.3 billion) in the second quarter of Qatar's 2010/11 fiscal year as revenue was partly boosted by higher gas output, the central bank's preliminary estimates showed.
Qatar, one of the world's top investors through its sovereign wealth fund, ran a deficit of 23.2 percent of gross domestic product in April-June, which analysts said was due to common budgetary adjustments.
The government also granted a licence to Isbank (ISCTR.IS), Turkey's largest bank, to open a representative office, the statement said.
The state relinquished its monopoly on the banking sector eight years ago, and 14 privately owned banks -- all subsidiaries of Arab banks -- now operate in the country of 20 million people.
The bank, which has exposure of about $400 million to Egyptian entities, said provisions would weigh on earnings growth.
NBAD booked net impairment charges of 1.20 billion dirhams ($326.7 million) last year while non-performing loans stood at 3.2 billion dirhams, or 2.3 percent of NBAD's loan book.
Saudi Arabia’s Tadawul All Share Index has fallen 5.2 percent since Jan. 24 and now fetches 1.9 times net assets, the cheapest level relative to the MSCI Emerging Markets Index since Bloomberg began compiling the monthly data in April 2006. Qatar’s QE Index trades at 2 times book value, a 29 percent discount to the average level, according to Bloomberg data that begins in June 2005.
“Any contagion into the Gulf Cooperation Council markets is completely unjustifiable, putting aside company specifics with exposure to Egypt,” said Rami Sidani, the Dubai-based head of Middle East and North Africa investment at Schroders, which oversees about $230 billion of investments worldwide. The crisis “is a good entry point in stocks we like,” he said.
"Having weathered the worst of the storm with the Dubai debt [restructuring] in the last quarter of 2009, which was followed by a quick resurgence in optimism, UAE consumers are now holding their breath for a significant positive indicator," said Sevil Ermin, managing director of Nielsen in the UAE.
However, according to Christo Daniels, managing director of IQ Selection, a recruitment agency, their company has seen a rise in vacancies and hiring.
As Egypt's political revolt unfolds and threatens to upend the Arab world's political status quo, it seems to be business as usual from Kuwait to Saudi Arabia: People commute to work on dusty roads, shop and eat at posh malls. But at home, they are glued to television images of chaos on the streets of Cairo.
Now, after eight days of relentless protests threatening to break the 30-year rule of Egyptian President Hosni Mubarak, Gulf states cannot help but wonder how far unrest will spread and how that might impact their own rule.
“I don’t expect we’ll change our monetary policy in the near term.
“It’s very early to judge what’s going to happen and the impact on the cost of borrowing. Everyone is concerned because there’s a lot of uncertainty but let’s not jump to conclusions at this stage.
The closure of the domestic stock market and banking sector last week has temporarily halted the outflow of capital, but not before the bourse plunged 20 per cent and an estimated $1.5bn of foreign money placed in Treasury bills left the country, according to one senior analyst in Cairo.
This caused the exchange rate to the dollar to drop by almost 1 per cent over the past week to a fresh six-year low of E£5.85, with the fall moderated by discreet central bank intervention, some analysts said.
An old adage, reputedly coined by Nathan Rothschild during the Napoleonic Wars, urges investors to be contrary, and “buy at the sound of cannons, and sell at the sound of trumpets”.
Some intrepid fund managers seem to be heeding the advice, and bought Egyptian shares today.
Cairo’s stock exchange, the oldest and largest in North Africa, remains shuttered, after shedding a fifth of its value last month. Yet four large Egyptian companies have listed global depositary receipts in London, which have continued to trade throughout the country’s political upheaval.
But that is what Standard & Poor’s did with a couple of partners on Tuesday, unveiling a new index of 50 equities designed help investors identify companies that do well in terms of environmental and social policy as well as governance. And that last word, governance, does give the index a certain resonance.
The S&P/Hawkamah Pan Arab ESG Index ranks companies with the best records of disclosure on environmental, social and governance (ESG) issues, as well as their record in policy implementation, as measured by independent reports.