Sunday, 6 February 2011
“The current trend of a lot of the loans being refinanced in the bond market will continue,” Deepak Kohli said in an interview in Dubai on Feb. 3. “If the bond markets continue to be conducive, I would think the bond and loan volumes will be around 50-50, if not favoring the bond market a little bit.”
Governments and companies in the six-nation Gulf Cooperation Council, which includes oil-rich Saudi Arabia, the United Arab Emirates and Kuwait, raised $32.6 billion from 58 bond sales in 2010, according to data compiled by Bloomberg. That was 40 percent of the $80 billion raised in debt capital last year, data provided by Standard Chartered show.
Merrill Lynch Kingdom of Saudi Arabia has become “a licensed, approved and authorized member firm with the right to conduct brokerage services and deal as principle and agent from Feb. 6,” according to a statement on the Saudi bourse website today.
A wide range of countries is invited, including Turkey. “We invited both government and private companies from Turkey. Turkey has good potential for real estate, tourism, construction and agriculture,” Dawood Al Shezawi, one of the organizers of the meeting, told the Hürriyet Daily News & Economic Review in a recent interview.
The event’s theme, which will be held in Dubai, is “Investing in emerging markets and high-growth countries, identifying opportunities in fast-growing economic sectors and fostering sustainable development.”
The central bank issued a circular over the weekend, saying it "has been decided to terminate the activities of the Islamic finance services" offered by conventional banks.
The order is effective immediately but gave lenders a grace period until Dec. 31 to shutter operations, sources said.
“Creditors will keep the guarantees they have and transfer the (debt) not covered by guarantees into a contribution in the company’s capital,” the company said in a statement on the Kuwait bourse website. This would mean the company has settled all its debts, it added.
Under the plan, current shareholders will have the priority to own a stake in the new capital, the company said, adding that a new strategic partner will be allowed in after consultation with the firm’s restructuring adviser.
Emaar Properties PJSC, the United Arab Emirates’ developer with investments in Egypt’s real-estate industry, advanced 1.5 percent. Air Arabia PJSC rose for the third time in four days. The DFM General Index rallied 1.6 percent to 1,605.89, the highest since Jan. 27, at the 2 p.m. close in Dubai. Qatar’s QE Index gained 1.5 percent, led by banks, after the central bank ordered conventional lenders to stop offering Islamic banking services.
“The Gulf Cooperation Council markets took a breather as the tension in Egypt seems to ease,” said Mahdi Mattar, head of research at Abu Dhabi-based CAPM Investment PJSC, an investment banking company.
The number of firms licensed to operate in the business park reached 792 in the same period, a rise on 6.3 percent on the first half, and 14.2 percent on 2009.
More than half of new firms were from North America and Europe, DIFC said. Around 45 percent were from the Middle East and wider Asia region.
By now we have heard enough street interviews with articulate Egyptian rebels to know they are driven to desperation by economic and social stagnation. The last straws were, apparently, the recent rise in food prices, and the example of their Tunisian neighbours.
The risk of a social explosion would have been obvious to educated observers with inside knowledge of the local economy, right?
The Egyptian Exchange will remain closed on Sunday and Monday, and authorities have said they will give two days' notice before reopening the bourse, suggesting that if no announcements are made, it will be closed on Tuesday also. The market has been closed since January 27.
While traders expect the market to be hit hard on reopening, many stress that the sell-off will likely be a selective one, particularly by local and international institutions that buy and sell on a stock-by-stock basis. Companies with substantial business outside of Egypt, especially exporters who have not had production disrupted, should fare better than most, and are already looking cheap after the massive sell-off at the beginning of the crisis.
Top among them is Orascom Construction Industries (OCI), a long-time favourite of FT Tilt. Kuwait's Global Investment House, which rates the stock a "buy", sat in on a conference call with OCI management, and summed up the situation thus:
According to the Company officials, its fertilizer business has not been affected at all. There was no loss time recorded and production of Egyptian Fertilizer Company and Egyptian Basic Industries Company continued at full throttle. There was no disruption in the fertilizer exports as well. Regarding OCI's construction business some of its projects which were in Cairo's core district witnessed a 5-6 days closedown along with looting of furniture and office equipments estimated between USD200k-300k which is quite a paltry number considering Company's cash balances and net income estimates of USD1,228mn and USD663mn for 2011. So far it is not known if the loot is covered under insurance. Nevertheless, Global Research estimates that the loot amount is quite insignificant and it would not materially affect the Company's financials and valuations. With the recent steep decline in the Company's share price post Egyptian political chaos, OCI share price has a potential upside of 41.5% to EGP321.3/share.
Bankers had braced for foreign investors and local business executives to flee the pound but the currency closed at 5.93 to the dollar, having weakened by about 1.3 percent since it was last traded on January 27.
Egypt's AlexBank, a former big state bank that has been privatised, said after trading it had ended its first open day with a net cash surplus of 4 million pounds.
While growing bank profitability is good news for the economy, banks' failure to pass on the benefits of lower interest to their customers is an obstacle to growth for companies.
Lending growth was sluggish between September and December. First Gulf Bank's net loans were almost unchanged from the previous quarter at Dh96.5 billion (US$26.27bn), while National Bank of Abu Dhabi (NBAD) cut lending by 1.5 per cent to Dh136.8bn.
Most of the money leaving the two countries forms part of the capital flight that bankers say is to be expected during a crisis, but the asset freezes mean close monitoring was needed.
"There's been a substantial inflow of funds from countries including those [two] in the past week," said the chief executive of a UAE bank, who asked to remain anonymous.
Sales of loans made to Dubai World began last summer, several months before the company reached an agreement with creditors in September to restructure $24.9 billion of debt. The first trade was a $25m slice of a $5.5bn loan sold at 55 cents on the dollar last May.
The loans covered in last week's sale agreement would go for between 60 and 65 cents on the dollar, according to two sources familiar with the transaction.