Thursday, 3 March 2011
Dubai Aerospace Enterprise's leasing unit DAE Capital cancelled orders for 18 A320 single-aisle jets and 12 A350-900 wide-body aircraft, helping to push the European plane manufacturer into a negative net order position for 2011.
Libyan airline Afriqiyah Airways also cancelled three A320 aircraft but appeared to have converted these into new orders for the slightly larger A321 plane, according to monthly statistics issued by Airbus on Thursday.
The shares rose 4.7 percent, the most since Sept. 29, to 1,340 fils at the 12:30 p.m. close in Kuwait City.
Etisalat, the Abu Dhabi-based phone company seeking control of Zain, missed a second deadline in its attempt to acquire a 46 percent stake for $12 billion, Zain’s second-biggest shareholder said March 1.
Emaar Properties PJSC (EMAAR), builder of the world’s tallest skyscraper, retreated 5.6 percent and Dubai Financial Market (DFM) PJSC tumbled to the lowest in two years. The DFM General Index (DFMGI) declined 2.5 percent to 1,339.81, the lowest level since June 2004, at 12:56 p.m. in Dubai. The gauge has lost 18 percent since Tunisia’s Zine El Abidine Ben Ali was ousted in January.
Investors are shunning assets in the Middle East and North Africa as the political turmoil, which started in Tunisia more than two months ago, expanded to Oman, Bahrain, Yemen, Libya and Iran. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, Human Rights Watch said in a statement on its website on Feb. 28.
The Central Bank of Oman (CBO) decided to revise the dividend payout from 45 percent to 40 percent, Bank Muscat said in a statement.
The lender said 25 percent of the dividend will be paid in cash while the remaining 15 percent will be in the form of bonus shares. It had earlier proposed a 30 percent cash dividend.
Emirates Integrated Telecommunications Co. (DU), as Du is formally known, had 2010 profit of 1.31 billion dirhams ($357 million), compared with 264 million dirhams a year earlier, it said today in a statement. Du paid 15 percent of its earnings in royalties, down from 50 percent in 2009. Revenue rose 33 percent to 7.1 billion dirhams.
“The most widely acknowledged success is the continued growth of our market share,” Chairman Ahmed Bin Byat said in the statement. The telephone company “will be advised on the royalty rate for future years in due course,” he said.
From Eurasia Group's global oil analyst, Greg Priddy:
"While officials at Arabian Gulf Oil Company (Agoco), the Libyan NOC subsidiary in eastern Libya, have spoken of setting up an alternate arrangement to market their oil, this should be taken very skeptically given the absence of an internationally recognized alternative payment mechanism which will be acceptable to buyers. While there may be a trickle of Libyan exports, the majority of Libyan crude oil export volumes will probably be offline for months, not weeks.
In this context, and given the continuing unrest across the Middle East and North Africa, the focus of the market is on the potential for further outages, causing a hypersensitivity to headline risks. While Saudi and other GCC spare capacity is able to cover Libyan volumes, any further disruption would bring spare capacity down to a level which would be cause for genuine alarm -- reintroducing some (but not all) of the market dynamics that drove prices to $147/barrel in 2008."
A Facebook group calling for a Saudi "Day of Rage" on Friday has attracted about 20,000 members; on Wednesday, the Kingdom arrested an opposition religious leader in the country's Eastern Province - home both to an unhappy Shia minority and the world's largest oil field - and, according to one unconfirmed report, has shot dead an administrator of the Facebook group.
With Libyan oil supply expected to go offline for, as Eurasia estimates, "months, not weeks", much focus will be on Saudi Arabia's ability to step in and replace that lost supply. There are doubts if the Kindgom can even physically manage it; more importantly, if political unrest takes hold in Saudi, any signal from the West that it supports the aspirations of Saudi protesters will make the country's rulers far less inclined to do the world a favour and keep oil prices down.
“27. [The Council] Affirms that it shall keep the Libyan authorities’ actions under continuous review and that it shall be prepared to review the appropriateness of the measures contained in this resolution, including the strengthening, modification, suspension or lifting of the measures, as may be needed at any time in light of the Libyan authorities’ compliance with relevant provisions of this resolution;“28. Decides to remain actively seized of the matter.”
|TASI (Saudi Stock Market)||5323.27||-3.89%|
|DFM (Dubai Financial Market)||1352.24||-1.61%|
|ADX (Abudhabi Securities Exchange)||2529.82||0.10%|
|KSE (Kuwait Stock Exchange)||6147.7||-0.16%|
|BSE (Bahrain Stock Exchange)||1377.36||-2.30%|
|MSM (Muscat Securities Market)||6352.23||0.77%|
|QE (Qatar Exchange)||7489.25||-2.20%|
|LSE (Beirut Stock Exchange)||1419.28||0.31%|
|EGX 30 (Egypt Exchange)||5646.5||-10.52%|
|ASE (Amman Stock Exchange)||2214.46||-0.87%|
|TUNINDEX (Tunisia Stock Exchange)|
|CB (Casablanca Stock Exchange)||12754.3||-0.48%|
|PSE (Palestine Securities Exchange)||482.29||-0.10%|
GHC Chief Financial Officer Mukhtar Safi also said the firm is planning to tap debt markets through a bond issue in 2012 or 2013 to finance its petrochemical investments. He gave no further details.
"We have invested Dh10 billion since 2004 and we are looking at investing another Dh10 [billion] to Dh15 billion in the coming five years," Safi told a conference.
Initial crude exports from Fujairah, located outside the Arabian Gulf on the Gulf of Oman, are due to start in the second half and will reach full capacity in early 2012 once the pipeline is fully operational, the person told Zawya Dow Jones this week.
The $3.29 billion, 400-kilometre pipeline will enable Abu Dhabi to export as much as 70 per cent of its crude from Fujairah, where tankers will be able to pick up the oil instead of sailing an extra day into the Arabian Gulf via the Strait of Hormuz, the narrow waterway watched over by Iran.
The UAE operator has collected all the information related to the due diligence and is in the process of analysing the data before making a final decision, said Ahmed bin Ali, the senior vice president of corporate communications at Etisalat.
"Consequently the results will be discussed with the sellers in a later stage, and the final results will be presented to Etisalat's board of directors to make a decision in this regard," said Mr bin Ali. Etisalat and Zain are "still in talks", he said.
Industries Qatar (IQ) reported a net profit of 1.5 billion rials for the final quarter of last year, an improvement on the 1.07bn rials for the same period in 2009 but well below the 1.65bn rials analysts forecast.
Profit for the year was 5.6bn rials, the company said.
London-based FM Capital Partners Ltd., founded in 2009 with financing from a Libyan sovereign wealth fund, was preparing to raise money from other outside investors this year for the first time, according to two people briefed on the plans who declined to be identified because the firm is private. Those plans may have to be postponed after governments froze Qaddafi’s assets and global leaders rebuked his violent crackdown on dissidents, hedge-fund industry consultants said.
Libyan money is “a huge hindrance” to soliciting new investors, said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based consulting firm that advises hedge funds and investors. “Once there is a transition to a more stable government, their asset base should be a positive in helping them build the business.”
First, there were uprisings in Tunisia, Egypt, and Bahrain. Then violence in Libya. And now there have been calls for a March 11 "Day of Rage" in Saudi Arabia. In response to all of this, King Abdullah has returned to Saudi from his post-surgery recuperation – and he has quickly released a +$35 billion package of reforms. All eyes are turning to Saudi Arabia and it has been a fairly tense week in the world's other magic Kingdom.
Regarding the announced reforms. These are mainly economic, not political, in nature. And you can expect them to be very successful in the short-term. They increase the salaries of government workers, move more of the population into government jobs, subsidize education, subsidize housing, and so on. The King is bringing a $35 billion sledge hammer down on the Kingdom's most immediate economic problem – the increasing unaffordability of life for significant portions of the population. And it will work. In a country of 23M, $35 billion is a big hammer.
"Despite its limited representation in a market of thousands of stocks, the Dow Jones Industrial Average nonetheless is an important barometer. Given the sheer dollar value of its 30 component issues, any cracks in its armor should not be ignored.
So when fully one fifth of Dow stocks sport technical failure we should take notice. Failure, in the lexicon of charting, is often used to describe a stock falling as it hits a key level such as resistance or the top of a pattern.
When a stock breaks out to the upside from resistance or a chart pattern it is usually a bullish sign. Demand overcomes supply and prices move higher – most of the time. However, failure to hold on to that breakout is the unusual case and that makes it a true newsworthy event for investors."
Note in this context the following information about the current oil policy of Saudi Arabia from Marketwatch. While the article references anonymous sources, which stands in the way of fact-checking, there is one paragraph that caught our eye:
"The main threat is ... Saudi instability when the current king dies. We know he is very ill but obviously there is no indication of how critical that condition is. But it is acknowledged that the next transition will present a much bigger threat to internal stability ... Vested interest groups have been waiting for this transition to push their agenda. Saudi experienced considerable regional instability up to 10 years ago but bought it off with higher oil-based spending. Today the problem is as bad, if not worse. There have been only a few of the promised reforms ... Resentment towards the wealth gap with the royals is very high ... Even if/when the instability in other countries, such as Libya, settles, the Saudi succession threat is now firmly on the table. What happens in Bahrain could be very key. That alone will keep the oil market nervous for this year."
The latest sell-off was triggered by the arrest of a Shi’ite cleric in the Kingdom’s Eastern Province after he called for democratic reforms and a constitutional monarchy. The province is home to Saudi Arabia’s aggrieved Shi’ite minority and also holds the country’s vast Ghawar oilfield, placing it at the epicentre of global crude supply.
“Unrest in this region can have fatal consequences for the world,” said JBC Energy. “The plunge on the Saudi stock exchange can be interpreted as a sign of waning trust.”
The investment comes after Sheikh Mohammed bin Zayed, crown prince of oil-rich Abu Dhabi, last month toured the northern emirates, which are smaller and less wealthy than the capital Abu Dhabi and commercial hub of Dubai.
The move is the latest in a string of public sector investments, subsidies and other handouts in the Middle East as governments respond to the wave of youth unrest sweeping the region.
Saudi Arabian stocks fell 3.9 per cent, the country’s 13th consecutive session of losses, taking the benchmark index to its lowest level in almost two years. Dubai’s benchmark index shed 3.5 per cent, to a seven-year low.
“Until recently, the Gulf markets hadn’t reacted that much to events in north Africa but we’ve suddenly had a wave of selling across the region, emanating from Saudi Arabia,” said Oliver Bell, an emerging markets fund manager at Pictet.
Energy rich Gulf states plan to launch a massive Marshall-style plan to assist Bahrain and Oman which have been hit by unrest, Kuwait's Al-Qabas newspaper reported.Citing unnamed senior sources, the daily said the six-nation Gulf Cooperation Council states were holding discussions that may culminate in a summit to launch the aid package. Besides Oman and Bahrain, the GCC groups Kuwait, Qatar, Saudi Arabia and United Arab Emirates, which together are estimated to have $1.35 trillion in surplus assets amassed in the past few years from oil revenues.The aid programme was aimed at boosting economic and social conditions, and living standards in Bahrain and Oman, as well as provide housing to the needy, create jobs and upgrade public services, Al-Qabas said.
In responding to the direct action of protestors, investors (indirectly) may never before have attached so much weight to democratic credentials, and we suspect there have been few such moments in history when a small number of institutional characteristics can explain so much variation in bond prices.
That’s in a new paper by frontier market investment shop Exotix (full paper in the usual place; hat tip Sid Verma at FT Tilt), which has applied “a model-based approach that focuses only on variables directly related to the underpinnings of unrest” and found that “democratic credentials have been a key determinant of relative frontier bond performance so far in 2011.”
There were other variables that have also punished frontier sovereigns, of course — poor labour market participation (especially amongst the young) and higher inflation chief among them.
And there were some flaws in the model:
Of course, [democratic credentials] cannot explain everything; numerous country-specific factors (and plain old volatility) are not captured: for example the model could not be expected to explain the recent rallies in Ecuador or Serbia. But as chart 1 shows, the model correctly predicts the >3% declines in bond prices in each of Egypt, Jordan, Tunisia, Morocco, Iraq and Saudi Arabia.
Some further conclusions from Exotix, beginning with a hopeful message for Egypt …
(1) We think some MENA sovereigns will bounce back once reforms are under way: Our model suggests Egypt has upside potential, and, with prices currently 11% below year-end and significant reform appearing inevitable, we retain our HOLD, but think it is a good buy for those willing to carry short-term risks. Recall that as recently as October the finance ministry was sufficiently confident to consider issuing a 100-year bond! Our model also points to Tunisia, a sovereign with broadly similar potential and short-term risk, as undervalued.
(2) What if thirst for increased democracy spreads outside the region? (There were even demonstrations in North Korea on 24 February!) Some sovereigns with relatively strong democracies have underperformed in 2011 according to the model: These include Argentina, Costa Rica and Panama (on which we have BUYs; and Ghana and Gabon (on which we have HOLDs). Conversely, our model identifies others (with relatively weak democracies) as having overperformed so far in 2011: within MENA, these include Kuwait and Dubai. Outside the region, this includes Kazakhstan, Venezuela, Vietnam, Georgia and Ecuador.
And ending with the obligatory mention of oil prices …
(3) We recognise factors beyond the scope of the model. There is no automatic link between the model results and Exotix recommendations. A prolonged spike in oil prices would mean all frontier sovereigns are affected by a global economic slowdown; and global wealth and risk will be redistributed between oil consumers and producers. In that regard, we reiterate our BUY on Iraq Paris Club loans. But elsewhere in the region, extra oil reveues and spending have been less obviously successful in placating activists (Bahrain and Saudi Arabia). We also recognise risks throughout the region that political transformation will not be smooth.