Tuesday, 8 March 2011
Al-Sanea is on a list of 15 executives referred to the country's lower criminal court by Bahrain public prosecutors, according to a document issued by the prosecutor's office and seen by Reuters.
The state-run Bahrain News Agency (BNA) said the complaints involved "money laundering and fraud" and added: "The state prosecution office has transferred the case concerning some of the accused to the lower criminal court for committing the violations listed in the two complaints."
How to hedge the Saudi monarchy?
We’ve asked it before on FT Alphaville, given how unrest would throw the oil market into extreme volatility. We’re sceptical you could even try, but we’re sure there’s more to it than the ‘all bets are off’ line we often hear about the prospect of Saudi protests.
Credit Suisse might have been onto something this week (extending the analysis to Qatar as well as Saudi Arabia):
We advise an overweight stance on the Middle Eastern petrochemicals sector and highlight that any potentially warranted political risk premium is hedged by rise in crude prices impacting earnings positively…
Petrochemical sector earnings are positively correlated to higher crude prices and by corollary to localized regional geopolitical turmoil.
Although ‘localised’ is the kicker here.
Credit Suisse do make some interesting arguments nevertheless. Such as, there’s little expropriation risk in a crisis, because the Saudi and Qatari governments own most of the companies anyway (click chart to enlarge):
While the crude correlation comes from the way petrochemical product prices benefit from the price of naphtha, which reflects crude pricing in turn. It creates a fundamental case for stocks recently panic-sold by local investors. (Gulf bourses rebounded strongly on Tuesday, ironically.)
While Credit Suisse also advise buying a call option on US crude ($120 a barrel by June, anyone?) because of global panic over a Gulf crisis, we don’t really know how a Saudi revolution would be received or how petrochemical infrastructure would be affected.
For example, take Sabic, one of the world’s biggest petrochemicals companies (chairman: His Highness Prince Saud bin Abdullah bin Thenayan Al-Saud).
Like Saudi Aramco, Sabic has facilities in the eastern province, where a large Shia population struggles for official recognition. That’s been seen as one flashpoint for unrest and even violence towards production, especially with a view to events over the border in Bahrain.
But we wonder if that’s the issue so much as the ‘risk’ that the Saudi government will face demands to liberalise control over national oil wealth. There’s a very detailedrecent declaration of reform by the liberal opposition which is worth a read if you’re wondering what protests would be calling for (HT Saudi Jeans). Naturally, we have little idea of the extent to which the Saudi security forces would be prepared to use violence against any protests, which could change everything very quickly.
In short — the stakes of trying to change the most absolute monarchy in the Middle East do seem to go beyond hedging. Extricating royal control from companies could overturn the country’s stock market even despite upside exposure to what crude prices would likely be doing in the background.
Egypt’s current experience of dealing with dictatorial ties to companies underlines the problem. Even there, family fiefdoms were nothing like the ones Saudi princes have right now.
And as for that background of crude developments – even Credit Suisse’s call option is probably unlikely to capture fully how crazy the post-Saudi oil price would go.
Talk about a black swan, or what?
Oil-rich Abu Dhabi, capital of the UAE, may sell $1.5bn in debt in 2011 to create a long-dated benchmark, while Dubai also may issue $1.5bn to fund its budget, Standard Chartered said in an e-mailed report dated Monday.
Outside of the UAE, Qatar and Bahrain may sell $1bn of securities each, the bank said.
Mohammed Al-Omar said the Islamic lender will issue the benchmark sukuk following the success of Turkey's first Islamic bond offering, from lender Kuveyt Turk in August.
The Kuveyt Turk sukuk fetched a yield of 5.25 percent and was oversubscribed by investors from the Middle East, Asia and Europe.
“Kuwait will change investment policies in these countries, yes, but will not liquidate” investments, al-Shimali told reporters in parliament today. The minister declined to provide details of planned policy changes.
More than two months of protests have rocked the Middle East and North Africa as citizens demand civil rights, higher living standards and the ouster of entrenched autocratic regimes. Governments from Jordan to Yemen have offered concessions to quell public discontent.
|TASI (Saudi Stock Market)||6073.79||2.07%|
|DFM (Dubai Financial Market)||1412.51||2.72%|
|ADX (Abudhabi Securities Exchange)||2573.05||0.95%|
|KSE (Kuwait Stock Exchange)||6138||0.06%|
|BSE (Bahrain Stock Exchange)||1393.15||-0.28%|
|MSM (Muscat Securities Market)||6292.25||0.07%|
|QE (Qatar Exchange)||8011.77||4.30%|
|LSE (Beirut Stock Exchange)||1409.26||0.17%|
|EGX 30 (Egypt Exchange)||5646.5||-10.52%|
|ASE (Amman Stock Exchange)||2234.29||0.15%|
|TUNINDEX (Tunisia Stock Exchange)||4380.31||3.58%|
|CB (Casablanca Stock Exchange)||12646.2||0.18%|
|PSE (Palestine Securities Exchange)||483.17||0.10%|
If we learned anything during the most recent financial crisis it is that markets can get it wrong. During the recent Egyptian crisis, oil prices spiked over concerns about the transshipment of oil via the Suez Canal. Markets today are beginning to price contagion effects spreading from North Africa to, principally, Bahrain. Although it is hard to predict the political outcome in the Gulf island, markets are pricing a premium on the risk of contagion to neighboring Saudi Arabia. Aside from making any definite calls on the future outcome of Bahrain, we remain reassuring about Saudi Arabia. The chances of disruption to oil production remain distant as is the likelihood of major unrest. Markets have a tendency to differentiate less during crises and, as we saw during the Dubai debt crisis in 2009, risk premiums spiked for all. Differentiation took time, however.
Saudi Arabia’s ability to carry out distributive policies is obvious, particularly in areas that have important social significance. The government announced an estimated USD36bn spending programme (as much as 8.3% of last year’s GDP) on housing, education and social welfare on top of a 2011 budget which is the largest in its history. Saudi King Abdullah recently unveiled a string of financial support measures geared towards citizens through new unemployment benefits that stand to help youths facing double-digit joblessness rates; expansion of social security safety nets set to target lower-income Saudis; and substantial funds allocated to writing off the debts of deceased borrowers and prisoners. The royal order, which includes 19 components, strives to promote job creation, expedite the supply of housing, and improve funding for education, charity associations, cultural and sporting clubs, and professional associations.
Could Saudi Arabia be telling porkies when it comes to its spare capacity capabilities?
It’s something Goldman Sachs analysts are wondering on Tuesday.
For example, they’ve deduced — from reverse-engineering the kingdom’s production levels — that Saudi may have raised output before the crisis in Libya ever broke out.
Or, as they put it:
… we believe that Saudi Arabia was already producing significantly more than indicated in official reports. Recent news reports suggest that Saudi Arabia is currently producing more than 9 million b/d of crude, roughly 700 thousand b/d above the official supply number for January. While this sharp increase seems to be a reaction to the recent collapse in Libyan output, some reports suggest that Saudi Arabia had already significantly increased production prior to the turmoil in Libya, which is more in line with our view.
Now, this is potentially problematic because of the implications it has for Opec spare capacity all round, as reflected in the chart below:
Benchmark size is usually understood to be at least $500 million meaning IPIC will raise at least $1 billion if the deal goes ahead, under its unlimited Global medium term notes programme (GMTN).
IPIC will conclude investor roadshows in London on Tuesday against a backdrop of political upheaval in the Middle East and North Africa which has raised risk premiums. Protests have spread to the Gulf region, taking place in Bahrain, Kuwait, Oman and Saudi Arabia.
On Monday, North Sea Brent crude futures were trading about 60 cents higher at around US$117 a barrel by 1404 GMT. U.S. crude was around US$105.70.
Brent fell more than US$2 on Tuesday to below US$113 after Kuwait's oil minister said OPEC is in talks to boost production for the first time in more than two years, soothing markets rattled by the Middle East unrest.
Qatar National Bank, the country’s biggest lender, gained 6.1 percent. Emaar Properties PJSC (EMAAR), builder of the world’s tallest skyscraper in Dubai, advanced 4.1 percent. Qatar’s QE Index (DSM) rallied 3.4 percent, the biggest gain since Dec. 5, to 7,944.97 at 10:40 a.m. in Doha. The DFM General Index (DFMGI) climbed 2.1 percent, the most since March 6, to 1,403.43 in the emirate. The gauge has lost 14 percent since Tunisia’s Zine El Abidine Ben Ali was ousted in January. The Bloomberg GCC 200 Index (BGCC200) rose 0.8 percent.
The gains were prompted by “positive economic news including the GCC’s possible plan to extend aid to Bahrain and Oman,” said Mahdi Mattar, head of research at Abu Dhabi-based CAPM Investment PJSC, an investment banking company. “It may be the beginning of a relief period. We will have to wait till next week as some are watching for possible events in Saudi Arabia.”
Ahmed Humaid al-Tayer, part of the Supreme Fiscal Committee which was tasked with steering Dubai through a crippling debt crisis, also said the emirate's economic outlook was "looking good" in 2011.
Dubai has about $30 billion of debt maturing over the next two years, with $12 billion of that due this year. The largest is the $4 billion loan to Investment Corporation of Dubai which falls due in November.
“We are in consultations but not yet decided which direction” to go, Sheikh Ahmad al-Abdullah al-Sabah told reporters in Kuwait City today. Kuwait is still producing at “our quotas,'' he said. ``We did not increase.”
Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to Bloomberg estimates. The Organization of Petroleum Exporting Countries supplies about 40 percent of the world’s oil.
Saudi Arabia increased output to around 9 million barrels a day, almost 1 million bpd above its agreed OPEC quota, as violent unrest slashed exports from Libya but analysts said production had been significantly increased before fighting broke out.
The uprising in Libya has cut its 1.6 million bpd output by half, the International Energy Agency said late in February, while Libya's top oil offical has estimated output has fallen by 700,000-750,000 bpd. Libya was the world No.12 exporter before the unrest.
In Bahrain the court, not the prosecutor, has the power to bring criminal charges.
The prosecutor did not name the defendants but last year Bahrain detained four British financiers for over a year in relation to the collapse of the banks.
Global depository receipts (GDRs) for Cairo's companies listed in London, including Orascom Telecom and Orascom Construction Industries, have fallen in the past few days after staging an initial rally.
GDRs are like shares that provide international companies with access to another exchange.
Global appetite for bonds and other debt issued by regional governments has waned in recent weeks.
"The sovereigns with the highest debt levels will face the most challenges," Kai Stukenbrock , the director of Europe, Middle East and Africa sovereigns ratingsfor Standard & Poor's, said yesterday.
The request is part of a worldwide asset-seizure campaign that began shortly after Mr Ben Ali's fall on January 14. Similar efforts are under way in Egypt, where government bodies and private sector groups are trying to find and recover the assets of the former president Hosni Mubarak.
"Tracing and freezing [Mr] Ben Ali's assets in the UAE, in strict adherence to the UAE's international obligations under the UN Convention Against Corruption, is the only appropriate measure to meet with the expectations of the Tunisian population," said William Bourdon, the president of Sherpa, a group of French lawyers.
I, it turned out, was partly employed by Muammer Gaddafi. The Libyan Investment Authority had accumulated a 3.27 per cent stake in Pearson, which owns the Financial Times. Following the recent UN sanctions resolution and the UK government order against Libya, Pearson froze the shares and announced it would not pay dividends to the fund.
Dame Marjorie Scardino, Pearson’s chief executive, said it was “pretty abhorrent” that the Libyan authority had been able to buy the stake but added: “We don’t choose our shareholders, they choose us, so there is a very limited amount of things we can do.”
Last night the sultan fired a total of 12 ministers including Ahmed Makki, the economy minister who was a focus for the anger of demonstrators gathered in Sohar, an industrial port north of Muscat, the capital.
The reshuffle came shortly after Standard & Poor’s, the rating agency, said that it was putting the sultanate’s sovereign debt on review for downgrade.
The oil-rich Gulf federation also needs to shore up its powerful government-backed firms that were at the center of its boom and bust through writeoffs of bad assets and greater transparency in their financial situations, the IMF said.
After being hit hard, especially in Dubai, by the 2008-2009 financial shock, the UAE economy should grow by 3.25 percent in 2011, with a good pickup in the non-oil sector, the Washington-based institution said in a mission report.