Wednesday, 13 April 2011
Mubadala launched the 5-year bond at 180 basis points over U.S. Treasuries, and the 10-year at 210 basis points over U.S. Treasuries, according to IFR Markets, a Thomson Reuters unit.
This compares to price guidance of +185bp and +210bp, respectively.
Instead, tear gas in Tahrir Square and the fall of Hosni Mubarak, the former president, has sent the operation, with $8.6bn of investments under management, back into defensive mode.
“This is a delicate period,” says Hisham El-Khazindar, Citadel’s managing director and co-founder.
The government last month completed a $25bn restructuring deal with financial creditors of Dubai World, Nakheel’s holding company, ending a damaging period of uncertainty for the emirate.
The restructuring of Dubai World and its entities comes amid broader efforts to extend maturities at other state-backed companies, including Dubai Group – a unit of Dubai Holding, a conglomerate owned by the ruler – which is close to reaching a deal on $6.2bn worth of debt.
More Homogenous Board:
With talks of Etisalat buying 46% of Zain and the sale of Zain Saudi, opposition voices grew. These voices were coming from the Salem Al Ali and Ali Al Khalifa blocks. With their representatives out of the board, being replaced by individuals loyal to the Al Kharafi block, such deals can go through with less hassle, as the board members now are all on the same page.
The Quarrel of the Economic Elite:
Three of Kuwait’s economic elite quarreled over Zain: Al Kharafi family, Ali Al Salem, and Ali Al Khalifa. Al Kharafi emerged victorious, which may prompt certain repercussions. It has created “bad blood” between the economic blocks, which may lead to further quarrels in different areas.
Overall Implication of Kuwait’s Economy:
As Zain is the biggest company listed on the Kuwait Stock Exchange, it has become a bellwether of the overall economy. As we have seen in the past, the company’s stock can lift the stock market, and vice-versa. If Zain decides on selling more of its assets and distributing the proceeds (which is now an easier task after the departure of the opposition), the extra liquidity will be positive on the overall market.
Zain’s board will serve for three years. These three years are crucial, as now Al Kharafi have no barriers to fulfill their strategy and goals. They can either grow the company and create value to investors or sell off the company’s assets, distribute the proceeds, and shrink the company.
“We are entering a period in the region where we are more cautious,” Ali al Shihabi, chairman of Rasmala Investment Bank Ltd., said in a phone interview on Wednesday. “We are expecting 2011 to be a difficult year. Volumes could be low, foreign capital flow might be less, and we are approaching that with caution.”
Uprisings in the Middle East and North Africa that ousted leaders in Tunisia and Egypt have hurt financial markets in the Persian Gulf, with the DFM General Index retreating 4.6 percent in the first quarter. Rasmala reduced the number of its employees in November to lower costs by as much as 25 percent and reorganize, Shihabi said that month.
|TASI (Saudi Stock Market)||6604.16||0.20%|
|DFM (Dubai Financial Market)||1600.46||0.63%|
|ADX (Abudhabi Securities Exchange)||2659.32||1.02%|
|KSE (Kuwait Stock Exchange)||6369||0.07%|
|BSE (Bahrain Stock Exchange)||1401.95||-0.53%|
|MSM (Muscat Securities Market)||6375.04||0.03%|
|QE (Qatar Exchange)||8815.44||0.50%|
|LSE (Beirut Stock Exchange)||1410.68||0.16%|
|EGX 30 (Egypt Exchange)||5301.47||1.90%|
|ASE (Amman Stock Exchange)||2209.49||-0.72%|
|TUNINDEX (Tunisia Stock Exchange)||4246.29||-0.93%|
|CB (Casablanca Stock Exchange)||11857||-0.74%|
|PSE (Palestine Securities Exchange)||490.2||0.71%|
State-owned Mubadala, which plans to invest $16.3 billion in 2011, is issuing a dual-tranche five-year and 10-year dollar-denominated bond, which the market expects could raise between $1.5 billion and $3 billion.
Price guidance issued on Tuesday indicated the five-year tranche will be priced in the area of 185 basis points over U.S. Treasuries.
"We expect growth in Saudi Arabia to reach 6.6% in 2011 on the back of higher hydrocarbon prices and more government spending. Saudi Arabia has enough spare capacity to compensate for oil production shortfalls elsewhere, and higher oil production will boost the economy," says a note from Standard Chartered analyst Shady Shaher.
At the same time, higher oil prices make it easier for Saudi Arabian authorities to increase government spending more or less at will.
National Investment Co., or SNI, made a consolidated net profit of 8.28 billion dirhams in 2010, up from 2.38 billion in 2009, according to financial statements published over the weekend in Le Matin, one of Morocco's most pro-establishment newspapers.
Siger, the firm that groups the main business interests of the Moroccan royal family, holds a stake of around 60 percent in SNI, market sources said. Officials at SNI could not immediately be reached to confirm the figure.
Does Saudi Aramco intend to stay on the sidelines watching Brent crude prices - already $120 per barrel - climb as high as $200 (U.S.) per barrel, while blaming speculators for distorting market fundamentals?
Or is the emperor simply wearing no clothes? Is Saudi Arabia, and by extension, OPEC, already tapped out, barely struggling to make up for the loss of 1.3 million barrels of oil exports from a now non-producing, war-torn, Libya.
Shares of Commercial Bank, Qatar’s second-biggest bank by assets, dropped 1.9 percent to 73.1 riyals, the lowest intraday level since March 10 at 12:04 a.m. in Doha. Doha Bank, Qatar’s third-largest bank by assets, retreated 4 percent to 53.2 riyals, the lowest since March 20.
Commercial Bank was assigned a share price estimate of 83 riyals and Doha Bank a share price estimate of 62 riyals.
The market shrugged off concerns raised by the IEA and IMF earlier this week that high oil prices are beginning to dent oil demand, as well as a Goldman Sachs forecast that Brent prices would decline sharply.
ICE Brent crude for May rose $1.22 to $122.14 a barrel by 0642 GMT after hitting a high of $122.19. U.S. crude for May delivery reversed earlier losses, and climbed 66 cents to $106.91 a barrel.
Global Arab Network | Moody's places Kuwait Projects Company Holding ratings on review for downgrade | Economics
Moody's decision to place the ratings on review follows a more detailed assessment of KIPCO's year-end 2010 financial data. The trend line of some key metrics -- cash coverage and market-value leverage (MVL) -- indicates a weakening against prior years. Whilst MVL at 22% (19% at FYE
2009) remained within Moody's expectations for the Baa2 rating category, i.e. below 25%, cash coverage weakened from the 2009 year-end level of
According to Zephyr data, deal value weakened 22 percent from $4.6 billion in Q4 2010 and was 60 percent lower than the $9 billion recorded in Q1 2010.
However, the Q1 2011 result was flattered by low valuations in Q3 2010 and frail deal activity in Q3 2009.
KIPCO’s EMTN programme was launched on 12th April, 2006. The issue — listed on the London Stock Exchange — was the first by a private sector corporate from the Middle East. The programme offered international investors their first opportunity to diversify from the US dollar Floating Rate Notes usually offered by banks in the Gulf region at that time.
Since the debut issue under the EMTN programme in April 2006, KIPCO has been a frequent and successful bond issuer, gradually extending the term of its issues.
--This could be the dip you’ve been looking for. Goldman Sachs released a note overnight warning of “nascent signs of oil demand destruction”. This is another way of saying that when oil costs over $100/barrel, people find a way to use less of it. The Goldman note coincided with a tactical retreat by commodity investors.
--NYMEX crude was down another three per cent yesterday and is now down six per cent in the last two days. It joins oil, gold, and copper in the commodities complex in the correction phase. Some of the wire services report that because high oil prices damage global growth rates, you don’t need to hedge against inflation anymore with precious metals.
--This is wrong.
The region suffers from the highest youth unemployment in the world at more than 25 per cent, while labour force participation rates are only 35 per cent compared with 52 per cent internationally, according to a report by McKinsey, the consultants, commissioned by the IFC.
Such is the demographic profile that just to maintain current average unemployment rates, the region needs to create an additional 35m-40m extra jobs, the report said.
The International Institute of Finance (IIF) believes that the recently announced social benefits in Saudi Arabia totalling $130 billion (Dh477 billion) will increase the target oil price it needs to balance its budget to $88 from $68 last year.
The IIF notes that many components of these benefits, such as new public sector jobs and unemployment benefits, are effectively irreversible and forecasts that Saudi Arabia will need oil to be somewhere between $100-$110 by 2015.
Ahmed Ali al Sayegh, who has served as chairman since the company's launch in 2005, did not file papers for a new term. Four other current board members are also absent from the list of nominees, according to a company filing on the Abu Dhabi Securities Exchange.
An Aldar spokesman declined comment.
As Zain shareholders yesterday approved a US$3.1bn dividend payout, two new board members were appointed, prompting speculation among analysts the Etisalat deal could be back on track.
Sheikh Khalifa Ali Al Sabah, a key shareholder in the company who was opposed to the Etisalat deal, was voted off the Zain board, a spokesman for the company confirmed. Sheikha Aida Salem Al Ali Al Sabah has also left the board, the spokesman said.
All 831 respondents to Banque Saudi Fransi's (BSF’s) second-quarter (Q2) business confidence survey expect oil prices to remain above $100 a barrel for the coming two quarters, including 76 percent supposing prices will stay above $110 a barrel. Higher oil prices and greater production have enhanced the overall expectation about the business community's growth prospects, with a majority of company executives surveyed charting out plans to increase production and hire new staff in the next six months as the vast majority count on a revival in bank lending.
Still, there has also been a shift in investment attitude coinciding with recent weakness in regional equity markets and political uncertainty afflicting several countries in the region. The survey indicated a move is taking place toward regarding low-risk investments in cash and bonds as more favorable than equity investments. A majority of respondents also expect inflation to rise in the coming period after the government handed out one-time bonuses to employees as part of a sweeping SR485 billion citizen support package unveiled in the first quarter.
The Middle East and North Africa (Mena) was likely to see one of the highest growth rates globally in upstream capital expenditure programmes, from which Renaissance stood to benefit, Deutsche Bank said. So-called capex programmes, or money spent on acquisitions and upgrades of equipment, property or industrial buildings, had been one of the more resilient in the Middle East, the bank said.
Shares in Renaissance, which provides services to the oil and gas sector, rose the most in more than three weeks as Deutsche Bank initiated coverage of the stock with a "buy" recommendation.
Credit Suisse’s Mohamad Hawa in London affirmed neutral ratings on Arab National Bank, Riyad Bank and Saudi Hollandi Bank.
He cut his target price on ANB to 35 riyals ($9.33) from 46 after the bank paid out a bonus issue of four shares for every 13 held.
Under the agreement both parties have agreed to identify companies based in Jafza that may benefit from carrying out an initial public offering (IPO) on the Dubai exchange. Jafza will work closely with NASDAQ Dubai to provide companies with information and support and jointly host workshops and training to support listing plans by suitable companies.
The collaboration is expected to boost Jafza's existing investment framework that provides clients with world-class facilities as well as innovative products and services, and now, a variety of options that provide them with access to funds. In addition to raising capital to finance growth, a company in Jafza can enhance and sustain its business standing by meeting the exchange's international listing standards. As part of efforts to create a holistic framework, Jafza also plans to explore new debt financing options and instruments for its clients.
Though it may be tempting to introduce wholesale changes in policies and personnel, these new governments should use stability in business to underpin political change. Sudden moves in economic policy introduce uncertainty and disrupt long-term commercial relationships, discouraging investment and hampering exports. Shifting policies gradually and with forewarning – especially when these policies affect consumers directly, as in the case of subsidies for food or energy – minimises dislocations.
For example, when Luiz Inácio Lula da Silva, a trade unionist, became president of Brazil, he quieted market fears by signalling continuity in economic policy. In much the same way a country like Tunisia, which by some measures has better economic policies than several European Union nations, can ensure investment continues to flow by showing that these policies will be largely preserved.
Saad Group, which is owned by Saudi billionaire Maan al-Sanea, and the Algosaibi family, one of the most prominent in the Gulf, have waged a legal battle across several continents since mid-2009, when it emerged that both were struggling to repay debts of more than $20bn.
Ahmad Hamad Algosaibi and Brothers has accused Mr Sanea of “massive fraud” that it claims could amount to much as $10bn, and has launched legal actions in the Cayman Islands, New York and London against the Saudi billionaire and Saad Group.