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Thursday, 3 February 2011

Fitch downgrades Egypt's debt rating - Maktoob News

Fitch Ratings on Thursday downgraded Egypt's debt grade by one notch, the third major agency to do so in as many days, citing the violent protests' consequences for the economy and public finances.

Fitch, whose downgrade follows similar moves this week by Moody's Investors Service and Standard & Poor's, warned that a continuation in the violence between pro- and anti-government protesters could lead to another ratings cut.

"The downgrade reflects the significant intensification of unrest, at the start of what is likely to be a volatile transition to a new government, and the increasingly negative consequences for the economy, public and external finances of the continuing disruption," said Richard Fox, head of Middle East and Africa Sovereign Ratings at Fitch.

Gulf regional banks challenge global competitors for bond fees -

Gulf Arab banks, long trailing international lenders in managing bond sales in the region, are hiring from their global competitors and looking to partner with them in an effort to build fee income.

With their experience, history in the region, greater ability to lend and access to global investors, international banks such as HSBC Holdings and Standard Chartered ]regularly top the Gulf’s bond league tables, a list that ranks banks by the amount of money they helped clients raise. Still, regional lenders are showing gains: Samba Financial Group climbed to Number 8 last year from 13th in 2009 and National Bank of Abu Dhabi moved up two places to Number 9, according to data compiled by Bloomberg.

Even as the value of bond sales fell 24 percent last year in the region, Gulf bankers say they have progressed by building trading in the secondary market necessary to support prices after the securities are sold. An announcement last month by the United Arab Emirates to borrow money may also be a step toward creating a domestic bond market, where local banks would likely be favored by Gulf governments over foreign competitors.

Foreign investors in Egypt await market reopening | Reuters

Gulf Arab fund managers who only weeks ago were predicting Egypt would be the top regional performer in 2011 are now caught in the country's political upheaval as the local financial markets remain shut.

The main Egyptian share market index has dropped more than 21 percent since the start of the year and financial markets have now been shut for the last five working days as protesters demanding an end to President Hosni Mubarak's rule camp in Cairo's streets,

Fund managers are now hoping they can cut losses once the market reopens. Egypt's stock exchange is due to reopen on Monday provided banks are operating smoothly, its chairman was quoted as saying

Dubai’s Shares Snap Two-Day Advance as Egypt Protests Worsen - Bloomberg

Dubai’s shares dropped, snapping two days of gains, as opposing groups clashed in Egypt, fueling concern the political crisis in the North African country will spread.

Aramex PJSC, the Middle East’s biggest courier company and provider of services in Egypt, declined to the lowest since November. Dubai Islamic Bank PJSC, the United Arab Emirates’ biggest Shariah-compliant lender, retreated the most since Jan. 30. The DFM General Index dropped 0.9 percent, the most since Jan. 30, to 1,581.01 at the 2 p.m. close in the emirate, bringing its weekly decline to 2 percent. The gauge surged 3.3 percent yesterday.

“The latest developments in Egypt have made investors cautious after yesterday’s rally,” said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi.

AFP: Iraq readies to protect overseas funds

Iraq has told its central bank to open accounts to transfer hundreds of millions of dollars out of a post-Gulf war US fund to protect the money from foreign claims, a government spokesman said on Wednesday.

The cabinet also asked MPs to approve a $400-million compensation package for US victims of toppled dictator Saddam Hussein, and set up a mechanism for UN-mandated war reparations to Kuwait, Ali al-Dabbagh said in a statement.

"The government asked the central bank to immediately open accounts before May 1 to transfer funds," from the Development Fund for Iraq (DFI), he said.

Tunisia- A Demonstration Effect « Alpha Dinar- talking Gulf finance

Tunisia came as a surprise not only to the Arab world, but to everyone; it changed the rule of game. As I watched Mubarak’s speech on Tuesday I thought that not calling for early elections and an easy transition of power as his pledge to step down was dismissed as too slow. Clearly there is no return to status quo in Egypt, but is it a positive change? Certainly could be, but that remains to be seen. Yet the important question was will contagion effect be contained or will it spread similar to the Euro periphery sovereign debt story.
Looking at credit markets one can notice that credit markets price in limited contagion risk, at least so far. Credit spreads on sovereign entities in the Middle East started to widen sharply last November due to the political unrest that started in Tunisia. As the situation started to worsen, spreads widened as investors started to assign a higher probability to a severe political scenario in the Middle East and perceived greater market risk in the area. Interestingly, Egypt’s sovereign five-year CDS spread is now 433 bps, which roughly equals that of Portugal. Also, both countries have a B2 CDS-implied rating.
Two important gauges to consider monitoring in assessing the broader impact of events in the Middle East are the price of oil and the CDS spread of Israeli government debt. Thus far, the Suez Canal doesn’t seem to be under serious threat and there seems to be no interruptions to the flow of oil through the Canal. While oil prices have risen, investors still haven’t assigned a higher probability to a scenario of interruptions. As for the CDS spread of the Israeli government, the five- year spread has widened from 116 bps on January 26th to 145 bps on February 1st but not as much as the other countries in the region.
All in all, the market seems to price in a scenario of limited contagion risk as indicated by oil prices and CDS spreads.

Middle East debt insurance costs rise -Markit | Reuters

The cost of insuring Egyptian and other Middle Eastern debt against default rose on Thursday after supporters of President Hosni Mubarak killed at least five anti-government protestors in Cairo.

Egypt's five-year credit default swaps rose 12 basis points from Wednesday's close to 400 bps, according to Markit, but remain below nearly-two-year highs of 450 bps hit earlier this week.

Lebanon's five-year CDS rose 24 bps, also to 400 bps, and Bahrain's 5-year CDS rose 14 bps to 238 bps. Bahrain's CDS hit their highest level since Sept 2009.

Saudi Arabia: riddle of the regime | beyondbrics –

The protests rocking ruling regimes in the Middle East have raised concerns – especially in the energy sector – about whether they will spread to Saudi Arabia, the world’s largest oil exporter.

The kingdom, the Arab world’s biggest economy, is grappling with similar issues to Egypt, albeit on a much smaller scale: a growing young population, nearly one third of whom are between the age of 15 and 30; an official unemployment rate of 10 per cent; rising inflation; and a shrinking middle class. But will the kingdom be the next to be shaken? Unlikely.

Western and Saudi analysts do not expect Egypt’s experience to be repeated in a country that has only been experimenting with freedom of expression since 2005 when King Abdullah came to power.

Qatar joins Canary Wharf in bid for £300m Shell HQ - Real Estate -

Qatar has entered a joint £300m ($485.7) bid with London’s Canary Wharf Group to buy up the site of Shell’s headquarters in the UK capital.

The Gulf state will compete with bidders including Land Securities, the UK’s largest real estate trust, which has paired with Berkeley Homes, and Helical Bar with Aviva and Native Land, the UK’s Financial Times reported.

Private sector bids include one from Chelsfield, led by Sir Stuart Lipton, with London & Regional, the property company of Ian and Richard Livingstone, the wealthy property entrepreneurs, the report said.

Oil: Egypt fears boost Brent | beyondbrics –

Oil prices jumped above $103 a barrel for Brent crude on Thursday amid the latest violent clashes in Egypt between pro-democracy protestors and supporters of embattled president Hosni Mubarak.

The price is now over 8 per cent higher than before the turmoil started last week – a clear sign of concern but not of panic. Yes, the Suez canal is a vital supply line. And yes, there are some risks of contagion to the big oil exporters. But investors seem to be holding their nerve.

Stock markets in the Middle East told a similar story. After dropping sharply in their initial response to the crisis and then recovering they were little moved on Thursday by the latest escalation of violence – with Dubai down 1 per cent but Saudi Arabia up 2 per cent during trading.

Qatar Market Retreats From Overbought Levels — Qatar Analysis — GCC Market Analytics

In a previous post I looked at how the Qatar market was in overbought territory based upon the 20-day Relative Strength Index (RSI).

Well, since that post the Qatar market has fallen by about 5%, causing the RSI to retreat from those overbought levels.

In the previous post the RSI level for the QE Index was at 80. The updated chart below shows that the RSI has now fallen to 40. That's the biggest RSI decline since the start of the market rally back in the summer of 2010.

In the previous post I also looked at the Qatar stocks with the highest RSI levels. Below are the updated charts for those stocks. Like the QE Index, they have all retreated from their overbought levels - but some more than others.

Unicorn says won't buy Dubai stake in Bank Islam - Maktoob News

Bahrain's Unicorn Investment Bank, which said it repaid a $125 million Islamic credit facility on Thursday, has dropped plans to buy Dubai Group's 40 percent stake in Malaysia's Bank Islam, a top executive said.

Dubai Group, an investment vehicle owned by the ruler of Dubai, said in October 2009 it was reviewing options for the stake in Malaysia's second-largest Islamic bank as it shifts its focus closer to home.

Unicorn had been mulling the purchase of that stake.

Russell Investments company plans Gulf index - The National

A top US money manager is planning to create a region-wide index to rival New York's MSCI in the Gulf.

Russell Investments, a Washington company with about US$155 billion (Dh569.33bn) of assets under management, intends to build a pan-GCC index that could include the six Gulf countries on its emerging market benchmark.

The company, which advises on $2 trillion of assets, intends to create a benchmark that includes Saudi Arabia, whose market accounts for half of the entire market capitalisation and almost three quarters of the entire equity value traded on all GCC stock exchanges.

Moody’s Downgrades 5 Egyptian Banks; UAE Regulations on Bank Fees | Advisor One

As demonstrations continued in Egypt and the nation’s banks remained closed, Moody’s downgraded five of the nation’s banks Wednesday morning and said they were on review for additional downgrades. Also Wednesday, the United Arab Emirates’ central bank announced that it planned to issue new regulations regarding its country’s bank fees.

The banks hit by Moody’s ratings changes were National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria. Local currency deposit ratings for some of the banks were also cut by two notches.

Not only Egypt’s banks, but its stock exchange, are still closed; banks will not reopen till Sunday, according to a central bank official quoted by Egypt’s official news agency MENA. However, Hisham Ramirez, deputy governor for the central bank, said Wednesday that when they opened they would have sufficient funds to carry on business as usual. “The whole banking system will reopen,” he was quoted as saying. “They will be ready and liquid and everything.”

Egypt Not Iran 1979 as Mideast Financial Stability Buoys Markets - Bloomberg

Egypt’s turmoil is having limited impact on global financial markets, where investors see few parallels with Iran’s 1979 revolution or the contagion that followed Thailand’s meltdown 13 years ago.

World equity-market capitalization climbed to $53.6 trillion this week, the highest level since June 2008, even as protests against Egyptian President Hosni Mubarak’s 30-year rule intensified and forced the nation’s bourse and banks to close for a fourth day. Dubai’s equity index rose the most in nine months yesterday and emerging-market bonds rallied, according to data compiled by Bloomberg.

While the uprising in Iran three decades ago sparked a 140 percent surge in oil and Thailand’s devaluation led to a global equity selloff, Egypt has about 0.3 percent of the world’s crude reserves and its foreign-currency holdings exceed overseas debt by $29 billion. Traxis Partners LP’s Barton Biggs says it’s a mistake to sell shares because of Egypt’s crisis, while Pacific Investment Management Co.’s Mohamed El-Erian sees signs of a “reconciliation” in the most-populous Arab country.

Violence in Egypt suggests Gulf bourse recovery premature « ArabianMoney

Gulf stock markets rallied yesterday on news that Egypt’s President Mubarak will not be standing at the election in September. But later violence erupted on the streets of Cairo as pro-government demonstrators attacked anti-regime demonstrators in what seemed a well organized counter revolution.

Does somebody in the background want to remind Egyptians of the dangers of civil war? Perhaps the same mastermind that sent the police home while looters took advantage of the protests to ransack property?

February Seasonality — GCC Index Analysis , Seasonality — GCC Market Analytics

How have GCC stock markets performed during previous February's?

The chart below shows the average daily percentage change for each GCC market during each calendar month.

As you can see, February has tended to be a good month for GCC stocks with all markets showing a positive average daily return. In fact, from a historical perspective, February through April has been the strongest part of the year for GCC markets.

Here's hoping this February confirms to historical tendencies.

Month Seasonality for GCC Stock Markets: Dubai, Abu Dhabi, Saudi, Kuwait, Qatar, Bahrain & Muscat
P.S. It should be noted that we're dealing with a very small data set for this analysis. My data only goes back as far as 2004 for GCC equity markets so there have only been seven prior instances of each calendar month. It's hard to draw any concrete conclusions from such a small data set.

January Large Cap Monitor — Large Cap Monitor — GCC Market Analytics

Banks were amongst the big large cap winners in January. Qatar National Bank rose 8.65%, Al Ahli United Bank +7.04% and Emirates NBD +5.43%.

The biggest fallers were Emaar Properties (-14.08%), First Gulf Bank (-10.68%) and Saudi Telecom (-8.69%).

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Sorry for interrupted service, I have been suffering internet connectivity issues.

UPDATE 2-Bahrain mulls $1 bln sov bond by end-March - IFR | Reuters

A $1 billion bond being mulled by Bahrain is likely to receive a positive response despite political turmoil in Egypt, analysts said, and could become the first sovereign sale from the Gulf Arab region this year.

The Gulf kingdom, a non-OPEC oil producer, has invited banks to bid on arranging the longer-term issue tentatively scheduled for March, IFR Markets, a unit of Thomson Reuters, said on Wednesday.

The ongoing unrest in Egypt showed little signs of easing as pro- and anti-government protesters clashed in Cairo on Wednesday, with investors increasingly concerned about contagion to other Arab states.