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Wednesday, 9 March 2011

What Will Saudi Arabia Do?

10 Safe Plays for Higher Oil if Saudi Arabia Is Next - Seeking Alpha

With each week seemingly yielding another Middle East monarchy or dictatorship in jeopardy, the price of oil and the US Oil Fund (USO) have moved steadily higher. The dollar has continued its descent lately, supporting a higher price for West Texas Intermediate and Brent Sweet.

[Click all to enlarge]

The Brent Sweet Oil Fund (BNO) looks a bit toppy here.

West Texas crude has been late to the party, but the shutdown of Libyan production and the jeopardization of the Suez transportation route and other production shutdowns have added interest in western oil markets.

Billionaire Prince Alwaleed talks up Saudi stocks | Reuters

Saudi billionaire Prince Alwaleed bin Talal threw his weight behind Saudi stocks on Wednesday, saying he would invest 1 billion riyals ($267 million) in a market pummelled by unrest in the Arab world.

Prince Alwaleed, a nephew of Saudi Arabia's King Abdullah and a prominent investor in Citigroup (C.N), said at a press conference that he had invested more than 500 million riyals in banks, petrochemicals, telecoms, industrial and consumer stocks, and was ready to spend a similar amount in the future.

"The stock market fall is not justified," he told reporters, adding that the economy of the world's top oil exporter was healthy.

Funding woes push Palazzo Versace Dubai behind schedule -

Recently we heard that Palazzo Versace Dubai would open in October, after two years of delays. It sounded for a moment like the Dubai dream was back.

Not so fast.

A local realtor warns that "the Palazzo Versace is heavily behind schedule… What we hear is that project funding is blocked [and] completion dates have been postponed," according to Arabian Business.

MENA stock markets close - March 9, 2011

ExchangeStatus IndexChange
TASI (Saudi Stock Market)
DFM (Dubai Financial Market)
ADX (Abudhabi Securities Exchange)
KSE (Kuwait Stock Exchange)
BSE (Bahrain Stock Exchange)
MSM (Muscat Securities Market)
QE (Qatar Exchange)
LSE (Beirut Stock Exchange)
EGX 30 (Egypt Exchange)
ASE (Amman Stock Exchange)
TUNINDEX (Tunisia Stock Exchange)
CB (Casablanca Stock Exchange)
PSE (Palestine Securities Exchange)

France’s Lagarde Says Saudis Won’t Let Oil Market Deteriorate - Bloomberg

Saudi Arabia has the capacity and willingness to prevent a surge in oil prices amid unrest in Libya, according to French Finance Minister Christine Lagarde.

“The big producers have said they won’t let the market deteriorate,” Lagarde said today on a visit to a gas station in Paris. “Saudi Arabia has said very clearly they have spare production capacity that would make up for even a total halt in output from Libya.”

Gasoline prices are setting records across Europe as the rise in crude prices caused by the conflict in Libya punishes companies and consumers. Brent oil for April delivery rose as much as 1.2 percent today to $114.39 a barrel on London’s ICE Futures Europe exchange.

UAE's Arabtec swings to profit; delays rights issue | Reuters

Dubai contractor Arabtec (ARTC.DU) swung to profit in the fourth quarter and shelved plans for a rights issue and $150 million convertible bond while market conditions are unfavourable.

Shares in Arabtec, the largest builder in the United Arab Emirates by market value, had surged 7.9 percent to 1.36 dirhams by 0840 GMT, while Dubai's benchmark index was up 1.9 percent.

Arabtec had planned a rights issue of 398.67 million shares.

Dubai Stocks Advance Most in World on OPEC Supply Speculation; Emaar Gains - Bloomberg

Dubai shares gained the most in the world on increased speculation OPEC will consider boosting output to compensate for disruptions in Libya and the Persian Gulf weighs an aid plan for Bahrain and Oman.

Arabtec Holding PJSC, the biggest publicly traded construction company in the United Arab Emirates, surged 7.9 percent after it delayed the sale of convertible bonds and a rights offering. Emaar Properties PJSC (EMAAR), builder of the world’s tallest tower, increased a second day. The DFM General Index (DFMGI) climbed 2.1 percent to 1,441.96, the highest intraday level since March 1, at 12:39 p.m. in Dubai. The gauge has lost 11 percent since Tunisia’s President Zine El Abidine Ben Ali was ousted in January. The Bloomberg GCC 200 Index (BGCC200) rose 1.2 percent.

“There is a perfect constellation of short-term positive factors at play in the markets, which given how badly shares were beaten down, investors have taken to with gusto,” said Shehzad Janab, the head of asset management at Dubai-based Daman Investments PSC, which oversees more than 5.5 billion dirhams ($1.5 billion). Speculation that the Organization of Petroleum Exporting Countries will increase output and the Gulf Cooperation Council discussing aid to help Bahrain and Oman quell unrest have helped improve sentiment, Janab said. - Naimi sheds light on Saudi oil reserves

When a supply oil crisis hits, policymakers in rich countries always look at their strategic petroleum reserves. The stockpiles, set up after the Arab oil embargo of 1973-74, are the last line of defence against a shortfall in oil supply.

From now on, they should look somewhere else too.

Almost unnoticed on Tuesday, Saudi Arabia said it was boosting its own strategic storage to guard the world against a supply shock. In an interview with the official Saudi Press Agency, Ali Naimi, the kingdom’s oil minister, said Riyadh was now “storing additional quantities of crude oil at various storage facilities”.

Saudi Market Rebounds « Alpha Dinar- talking Gulf finance

2011 witnessed a huge wave of political turmoil in the MENA region, which has reflected on the performance of all the stock markets. Today we’re going to focus on the Saudi Tadawul stock market. Tadawul has lost 11% since the tension first began in Tunisia- the beginning of the political unrest. The market has rebounded this week after shedding 20% in the two weeks following the mid-February riots in Bahrain.
On March 5th , Al-Arabiya news reported that Mr. Ibrahim Al-Assaf, Saudi Finance Minister, said that prices in Tadawul are attractive and that the Saudi Public Pension Agency bought shares last week.
Saudi is embarking on solid reform steps with its $36 billion spending plan. The plan will be setting minimum wages for Saudi nationals, providing housing and benefits for the unemployed, and approving a legal framework to govern property ownership by GCC nationals.
Tadawul surged to a two week high as no signs of internal Saudi protests emerged and the government became an aggressive buyer in the stock market. Tadawul increased by 3.3%, reaching 5,950 yesterday.

FT Tilt - Oil wealth handouts in the Middle East(Registration) ht @robinenergy

Common wisdom had it that oil-rich states such as Saudi Arabia would avoid the turmoil sweeping their less fortunate neighbours. They would always be able to buy off opposition with oil revenues. But is this a sustainable and optimal use of record petroleum receipts?

On February 12, Kuwait got its retaliation in first, offering every citizen $3500 and free food. A day later, King Hamad of Bahrain paid $2650 to every Bahraini family. Jordan, Yemen, Syria and Algeria announced fuel and food subsidies and price caps.

Libyan dictator Muammar Gaddafi followed the script, offering pay rises for state employees of 150 per cent and a gift of $400 for each family. Such promises, echoing his earlier, unfulfilled call of February 2009 to dismantle all ministries and give oil revenues directly to the people, did nothing to quell the determined struggle against his rule.

Speculators, Energy Traders Betting Big on Regional Crisis | Arabianomics

Colin Barr at Fortune discusses the reckless speculation that continues to drive the price of oil up, and may push gas prices to a point where they have a negative impact on the US economic recovery.


“The surge of speculative money into the oil futures pits shows that big financial players are expecting the price of WTI crude to surge well above the recent $105 or so seen last week. If they are right, it will bring $4 gasoline a step closer.

That will not be good news for most consumers, though it could help some big energy traders score big paydays, thank goodness. You would hate to see the talent fail to get its due.”

Orascom rides out the chaos as profits soar - The National

Orascom Construction, Egypt's largest listed company, has posted a 76.1 per cent rise in profit for the fourth quarter of last year.

The result belies the fact that its core market is now ensnared in strikes and protests nearly a month after the turmoil that toppled the country's president.

The company announced profits of US$186 million (Dh683.1m) for the final three months of the year, after a bumper quarter for its fertiliser division. Chet Riley, an analyst at Nomura Securities, said the company "had very comprehensive quarterly results, with revenue and earnings growth from both business strands". Its business was "supported by very high underlying fertiliser pricing and increasing margins".

Egypt awaits the bargain hunters - The National

The steep decline in share prices of Egyptian companies traded on foreign exchanges and the drops that are expected when the Egyptian Exchange, reopens will make the country's top companies acquisition targets, says the head of Egypt's largest bank.

Hisham Ezz al Arab, the chairman and managing director of Commercial International Bank,said investment bankers would soon begin circling Egypt's companies.

"Generally companies will be too cheap," he said in an interview in his Cairo office. "The business environment in Egypt has changed and will change … That makes it very much a good, healthy business environment. If I'm sitting at one of the international corporates, I would definitely and seriously look for targets."

gulfnews : IPIC plans dual-tranche issue of euro bonds

Abu Dhabi's International Petroleum Investment Co (Ipic) plans a dual-tranche five-year and 10-year benchmark bond issue denominated in euros, two market sources said yesterday.

Benchmark size is usually understood to be at least $500 million (Dh1.74 billion) meaning Ipic will raise at least $1 billion if the deal goes ahead, under its unlimited Global medium term notes programme (GMTN).

Ipic concluded investor roadshows in London last last night 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.

Algosaibi applauds Bahrain's criminal charges against Maan Al Sanea -

Saudi Arabia-based Ahmad Hamad Algosaibi & Brothers (AHAB) today applauded, Nawaf Hamza, the Bahraini Public Prosecutor for announcing criminal hearings into Maan Al Sanea's illegal activities involving The International Banking Corporation (TIBC) and Awal Bank.

"We greatly respect the government of Bahrain in their efforts to criminally charge those who orchestrated this massive fraud against our family and the hundreds of financial institutions that are involved," said the Algosaibi family. "This fraud took place around the world and we continue to work with the many government authorities seeking answers as to how much money moved through so many financial systems without detection."

AHAB has accused Maan Al Sanea of fraud, forgery, theft, and masterminding a massive Ponzi scheme that spanned the globe and left over a hundred banks with an estimated US$22 billion of exposure. AHAB's alleged exposure to the fraud is US$9.2 billion.

Gulf Times – Qatar GDP forecast togrow 11.2% in 2011; CPI seen scaling up to 2.5%

Qatar’s GDP is forecast to grow 11.2% this year and 7.5% in 2012, a report says.

Inflation determined by the consumer price index (CPI) may scale up to 2.5% this year from -2.9% in 2010, Bank of America Merrill Lynch has said in its latest global economic forecast.

The CPI inflation will increase further and reach 3.5% in 2012, the report said without elaborating.

Kuwait Energy chief calls sweeping change ‘positive’ | Energy Source –

Sara Akbar, chief executive of Kuwait Energy, an independent oil and gas company focused on the region, brought to the IHS Cambridge Energy Research Associates’ annual energy conference in Houston what she called a “view from the street” on the North Africa/Middle East tensions.
Akbar said that although the region was made up of disparate countries, they had enough similarities that one spark had set off change throughout. Even in Kuwait – which she noted had a very stable political system – there were calls for change.And the calls across the region, she said, were welcome:
This is a big, positive step to the future. Everyone is very happy with what is happening. We see the end to dictatorship…. It will enhance the economies of the region…. It will be a bumpy road for all… It will take a long time to get there, to have stable democracies. That is what we want to be. We want to be real countries.

IMF sounds alarm on overheating - The National

The UAE Government must be ready to cut back spending when the economy shows signs of overheating, the IMF says.

Its warning comes as oil prices hit post-downturn peaks and inflationary pressures edge higher.

More co-ordinated fiscal policy between each emirate was important, said an IMF adviser to the country.

Dubai Stocks Tumble to World’s Cheapest as ING Says Time to Buy - Businessweek

Growing unrest in the Middle East sent Dubai stocks to the cheapest level in the world relative to company assets, a signal to ING Groep NV and Charlemagne Capital Ltd. that shares in the region’s financial hub are worth buying.

The Dubai Financial Market General Index’s 13 percent drop this year left it valued at 0.6 times net assets, or book value, a 67 percent discount to the global average and the least since Bloomberg began compiling the data four years ago. Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, fetches 3.15 dirhams ($0.86) even after the company said last month its book value was about 6.06 dirhams a share on Dec. 31.

Stocks sank as protests that unseated governments in Egypt and Tunisia spread across the Middle East, threatening to slow growth in Dubai, the regional headquarters for global firms from Goldman Sachs Group Inc. to Morgan Stanley. The emirate’s 0.4 percent inflation rate and 0.8 percent unemployment set Dubai apart, reducing the likelihood of turmoil and presenting opportunities for investors, ING and Charlemagne Capital say.

Aiming to Bolster a Lagging Real Estate Market, Dubai Introduces Islamic REITs - Arabic Knowledge@Wharton

Since the global economic downturn in 2008, Dubai has sought to display signs of financial improvement. And the glitzy sheikhdom of the United Arab Emirates (UAE) has begun to demonstrate growth -- officials expect foreign direct investment to increase 30% this year -- except in real estate. What was once the world's fastest-growing property market has seen values fall 62% from their 2008 peak, according to a February report from Deutsche Bank. Largely prolonging the pain has been oversupply, as thousands of additional residential and commercial units are expected to enter the market, when roughly 40% of homes and offices remain vacant, according to Bloomberg.

Despite the pessimism pervading the market, Dubai launched a Shariah-compliant real estate investment trust (REIT) in November. Emirates REIT, jointly developed by Dubai Islamic Bank and Eiffel Management, a French REIT specialist, joins a number of Shariah-compliant REITs that have been set up Asia and the Middle East over recent months. Governments and Islamic financiers alike hope the new products will spur investment from Muslims and non-Muslims into these regional real estate sectors.

Officials have been quick to tout some encouraging signs. While European buyers have not returned, Dubai has remained afloat on purchases by real estate investors from India and China; according to the Abu Dhabi-owned newspaper The National, Indians were the biggest bloc of expatriate investors, buying US$2.4 billion worth of properties last year, while Chinese investors bought properties worth US$157 million last year, a 700% increase from 2008. On the heels of the Emirates REIT, the National Bank of Abu Dhabi plans to launch a trust this year.

Black swans flying all over the region warns top Abu Dhabi royal family advisor « ArabianMoney

There is a whole flock of black swans flying over the region at the moment, top Abu Dhabi royal family advisor and veteran regional analyst Matein Khalid told delegates to the Hedge Funds World Middle East conference in Dubai yesterday.

He is betting on the VIX uncertainty index as his alpha play, and also investing in the Russian oil companies Lukoil, Rosneft and Gazprom. His forecast is for a volatile few months ahead in financial markets.

Mr Khalid is worried about the five to six million barrels per day that Saudi Arabia is supposed to have in spare capacity, and noted that assessments provided by Wikileaks suggested that it would take 10 years for the kingdom to produce 12 million barrels per day. He saw two million barrels per day as a more realistic assessment of global spare capacity. - How to read the second Arab awakening

It is nearly 75 years since George Antonius wrote of the first “Arab awakening”, one reflecting an outbreak of nationalist sentiment against European masters. What we are currently witnessing could prove to be a second such awakening; one neither generated by, nor aimed at Israel and the US, but a home-grown phenomenon that targets unresponsive, repressive leaders.

We cannot be sure, however, whether what we are seeing is a genuine democratic revolution. In some countries, protests will fizzle out. In others they could become chaotic, especially if oppositions splinter having achieved the one objective on which they agree: the ousting of the existing regime; Egypt and Tunisia both come to mind here.

Or repression could rule the day, if governments show resolve and are willing (and able) to crack down with impunity. This might prove to be the case in Libya, but even then the cycle of challenge to authority could begin anew. In all cases generalisations should be resisted. Each country is different, while references to a wave of change are simplistic. A range of political outcomes are likely to be reached, taking divergent paths. - Spotlight turns on stakes in Arab banks

The Libyan regime’s diversification of business interests in the Middle East, particularly in banking, broadens the financial options of Muammer Gaddafi as he battles rebels on the ground and financial sanctions in the US and Europe.

Only two months before Libyans revolted against their repressive ruler, the regime further diversified its asset portfolio into friendlier Arab jurisdictions.

The Libyan Investment Authority, the $65bn sovereign wealth fund, for many years has had vast holdings in the Middle East. Its Lafico subsidiary owns hotels in Morocco and Jordan, and large shares in companies ranging from agriculture to pharmaceuticals. But as attempts to block financing to the regime gain momentum in western capitals, the spotlight is turning to the regime’s stakes in banks in the region.

According to Zawya, the information provider, the government has stakes in a dozen banks in the Arab world, including 99.5 per cent of the Lebanon-based north Africa Commercial Bank and 50 per cent of Tunisia’s Banque Arabe Tuniso-Libyenne de Développement et de Commerce Extérieur. Smaller stakes are held in banks in Algeria, the United Arab Emirates and Egypt.

Sovereign wealth funds swell globally, shrink in Russia

Assets managed by sovereign wealth funds total almost $4tn worldwide, making 2010 the second year running in which they showed an 11% increase.

However, some countries were making withdrawals from their SWFs in 2010. Russia’s Reserve Fund, for instance, contracted to $25.4bn from $60.5bn over the year as a result of being used to balance the national budget, according to Preqin, an alternative assets research firm.

The global proportion of SWFs making alternative investments swelled over 2010, Preqin says, forecasting it will keep growing throughout 2011.