Monday, 18 April 2011
A derivatives trade gone horribly awry had straddled Gulf Bank with a massive loss, sparking a bank run – the first in living memory in the region – and forcing a swift bail-out from Kuwait’s sovereign wealth fund.
Gulf Bank’s derivatives mishap may have been the nadir for the country’s large and varied financial sector, but most of the industry has suffered from the aftershocks of the global and regional economic downturn.
Emaar MGF, which has been unsuccessfully trying to tap the capital markets since January 2008, is also in talks with private equity players to raise nearly Rs 400 crore for two of its Gurgaon projects. Sources say the realty firm is talking to Tishman Speyer, Sun Apollo and Morgan Stanley for this project level financing.
When contacted, Emaar MGF said it is regularly in talks with quite a few potential investors and lenders, that these talks are generally confidential in nature and thus it cannot comment further at this stage. CNBC-TV18 also learns that Emaar MGF is in talks with Starwood Capital to raise USD 200 million at the entity level, which will require dilution of both partners-Emaar and MGF.
Average residential rents have fallen 40 per cent in Abu Dhabi since the market’s peak in 2008, say analysts with Jones Lang LaSalle, the consultancy.
The estimated 16,000 new homes scheduled to come on to the market this year – double the number of 2010 – will drive rents down further, although not enough to meet local demand for middle-income housing.
The only thing more surprising than the comment from Ali Naimi, the Saudi oil minister, that the oil market is oversupplied, is how seriously the market appears to have taken it. The oil price has dipped sharply today, according to some at least, because of Naimi’s comments.
The evidence Naimi cites is that the Saudis cut output last month by some 800,000 barrels per day. Some of this may have come from reduced Japanese output, afterthe earthquake put many of its refineries out of action. But this demand is likely to return relatively soon – it certainly shouldn’t be viewed as gone from the market in the long term.
Another, possibly more important reason for the Saudis to cut output is to manage their medium-term spare capacity. Although the market is comfortable with the 3.5m barrels the Saudis say they have, traders are particularly concerned about whether that number is rising or falling. To support prices, the Saudis have to show that capacity is not being eroded.
|TASI (Saudi Stock Market)||6533.34||0.02%|
|DFM (Dubai Financial Market)||1652.76||0.26%|
|ADX (Abudhabi Securities Exchange)||2709.33||0.41%|
|KSE (Kuwait Stock Exchange)||6375.1||0.51%|
|BSE (Bahrain Stock Exchange)||1403.22||-0.06%|
|MSM (Muscat Securities Market)||6396.6||-0.14%|
|QE (Qatar Exchange)||8645.17||-0.96%|
|LSE (Beirut Stock Exchange)||1392.93||-0.54%|
|EGX 30 (Egypt Exchange)||4956||-3.17%|
|ASE (Amman Stock Exchange)||2210.88||0.05%|
|TUNINDEX (Tunisia Stock Exchange)||4162.17||0.51%|
|CB (Casablanca Stock Exchange)||11928.6||-0.07%|
|PSE (Palestine Securities Exchange)||489.41||0.23%|
The $10 billion includes $6 billion of bank debt and $4 billion owed to other investors, according to the people, who declined to be identified because the information is private. Discussions are at an early stage and an agreement is several months away, one of the people said.
A spokesman for Dubai Group declined to comment.
Since the ousting of former Egyptian president Hosni Mubarak sparked civil unrest across the Mideast and north Africa, more parochial investors may have been tempted to lump the whole region into a pot marked “too risky”.
The more discerning spotted opportunity.
The Dubai Financial Market index is back to pre-Tahrir Square levels, having bounced 22 per cent since early March, a time when investors were indiscriminate in their fear of the civil unrest in the Gulf and beyond.
In a statement accompanying its financial results, JAFZA's chairman said the company was considering refinancing options for its 7.5 billion dirham ($2.04 billion) Islamic bond, or sukuk, its only outstanding debt.
"The establishment commenced work on the liability management and is currently exploring various refinancing options," Chairman Hisham Abdullah Al Shirawi said in a statement, referring to the sukuk.
The strong increase came after Nasdaq Dubai started routing all its equities trades through the trading platform of Dubai Financial Market (DFM) in July 2010, in order to improve access by individual investors.
The value of trades by individuals rose to $14.8 million in the first quarter of 2011, up 52 per cent from the fourth quarter of 2010. Total traded value – by institutions and individuals – fell 44 per cent in the same period, to reach $202 million in the first quarter of 2011.
Futures slipped as much as 1.1 percent after Saudi Arabia’s Oil Minister Ali al-Naimi said yesterday the “market is oversupplied.” Crude fell 2.8 percent last week on speculation price gains spurred by conflicts in the Middle East will curb economic expansion. The world economy is being hurt by “very high” oil prices, said Nobuo Tanaka, the International Energy Agency’s executive director.
“The price recovery may have been delayed by al-Naimi’s comments, but I think the general trend is for the market to move higher,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “Investors are cautiously returning as it becomes apparent that Libyan crude may be unavailable for some time, and as unrest continues in other countries.”
Abu Dhabi’s budget balance will also be strengthened by revenue from its state oil company ADNOC and return from its massive overseas assets, controlled mainly by the Abu Dhabi Investment Authority (ADIA), National Commercial Bank (NCB) said in a study sent to Emirates 24/7.
Citing official data, NCB said Abu Dhabi projected a budget a deficit of Dh84.9 billion in 2010 based on an oil price of about $60 a barrel.
DP World will sell the stake to Qube Logistics (QUB.AX: Quote), the two companies said in separate statements on Monday.
The deal, which consists of the purchase of DP World's shares and related loans, is expected to be completed by the end of April and will provide Qube with a 94.5 percent stake in POTA with management owning the remaining 5.5 percent, Qube said.
"Overseas companies may leave - maybe what was working in 2007 to 2008 doesn't provide the basis for the number of firms that will be here in the future," said Al Habtoor Leighton managing director and CEO Laurie Voyer, who was speaking during the Cityscape Abu Dhabi event.
"There are far too many competitors for opportunities and somewhere along the line that will need to be sorted out."
The oil shock is a windfall for Abu Dhabi, owner of one tenth of the world’s oil and gas reserves, whose government infrastructure spending is the growth catalyst for the Federation. The protracted political riots in Bahrain reinforce Dubai’s bid to be the preeminent financial, tourism, trade services and aviation/shipping hub of the Middle East. Global oil companies and banks have relocated the families of their staff from Tripoli, Damascus, Sanaa, Bahrain and even Cairo to Dubai in a tradition that goes back to the fall of the Shah, the Lebanese unrest and the Iran-Iraq was in the past generation. Regional capital flows will also be attracted to the UAE because political risk premia have spiked in almost every banking market in the Arab world.
Hotel occupancy rates, airport passenger traffic, school/school enrollments, traffic, Jebel Ali export volumes, bank deposit growth rates in Dubai and Abu Dhabi reflect the post-Arab spring realities. Bahrain’s future as an international financial centre could well be undermined by the current unrest. This happened to Beirut, which lost its status as the money souk of the Levant after the PLO, Druze and Phalangist militias gutted its financial district in the opening round of unrest that culminated in Syrian intervention and two horrific Israeli invasions of Lebanon. Financial centres cannot coexist with political risk. Hence the role of the UAE as a banking safe haven.
The bank made a quarterly net profit of 7.7 million rials ($20 million), compared with 6.6 million rials in the same period last year, it said in a statement to bourse on Monday.
Analysts polled by Reuters had estimated an average first quarter profit of 6.86 million rials.
The world's first Halal Food Index was unveiled at the opening of WHF 2011 by Tun Abdullah Ahmad Badawi, former Malaysian prime minister.
Experts say the index will be a bridge-builder for Islamic funds, exchange-traded funds and sukuks as well as for global non-Islamic investors interested in the emerging food sector. Here are some basic facts about the index and its role in the future of Islamic investing.
Many companies suspended dividends after the global financial crisis first jolted Gulf bourses at the end of 2008, but this year cash dividends - money distributed to shareholders out of a company's earnings - are again being paid.
In fact the dividend yield, which is the ratio of payouts in dividends each year relative to share price, continues to be higher in this region than in some of the world's major markets.
In repeated statements to the press in recent days, the company said it bought Helwan Portland Cement from private owners, not the government, contradicting reports that a claim was filed with the country's public prosecutor on those grounds.
But the statements did little to keep the army of sellers at bay as the company's shares headed to their lowest close on record. The stock slumped almost 10 per cent to end at 4.69 Egyptian pounds.
Under the new rules, financial services can be promoted in or from the Dubai International Financial Centre (DIFC) only by companies regulated by the DFSA or another UAE federal authority.
While previously the DFSA policed the offering of all financial services in the DIFC, a loophole meant the communications used to market products were unregulated.
The Saudis follow Theodore Roosevelt's advice to "speak softly and carry a big stick"; their stick being the world's largest oil reserves.
Conversely, the "price hawks", led by Iran and Venezuela, consistently trumpet the virtues of higher prices. In their view, the "fair price" is US$10 higher than whatever it is today. As in the old Texan expression "all hat and no cattle", they are content to talk big.
The announcement of the spending boost comes after two months of sporadic protests by demonstrators asking for more jobs and greater representation in government.
On Saturday, the country’s ruler, Sultan Qaboos bin Said, promised pay raises and benefits for 120,000 civil servants and pensioners, according to a report in Times of Oman.
In March, the Sultan had ceded to demands of protestors asking for a raise in salary by increasing the living allowance of government employees by 100 Omani rials ($260). He also increased the pension of civil servants by 50 percent.
“My pension is now 154 rials more than it was before, a rise of 40 percent,” Ahmed Al Jahdhami, a retiree based in Muscat, told the newspaper. “I used to get 512 rials and now I get 666 rials, thanks to the royal grant.”
Nasser Al-Khorafi may be best remembered amongst his many pioneering roles as the founder and chairman of the Khorafi Group, one of the largest and most diversified conglomerates in the Arab world, with the group's lucrative food division, Americana, holding the exclusive franchise rights in the Middle East for fast food brands including KFC, Wimpy, TGI Friday's, Cadbury's, Pizza Hut and Saint Cinnamon. He is also the largest individual stakeholder in the popular doughnut company, Krispy Kreme holding 13.8
This year Al-Khorafi also featured heavily in the British press after his name was linked to a rumored buyout of Newcastle United football team. Reports claimed the billionaire was in discussions to buy the club for $440m, but the rumors were later denied.
"It all depends on who succeeds Kharafi, but Zain is likely to still be up for sale," said Irfan Ellam, Al Mal Capital vice president in Dubai. "It depends on the financial situation of the Kharafi group. Assets could be sold to pay down debts."
The group's interests span real estate, retail and financial services, but these were hit hard by the financial crisis and it has direct and indirect liabilities likely to total at least $5 billion, said Naser al-Nafisi, general manager for Al Joman Center for Economic Consultancy in Kuwait.
"My outlook is very positive because I see these political changes result in more open societies, more dialogue and therefore better environment for markets including stocks and bonds," Mobius told reporters in Dubai.
"I am not saying the ride is going to be smooth and in many places we could see some bumps but the overall trend is positive."
"We have reported to our three shareholders the sensitivities of cash and cash collection. (If) we don't get paid or something gets delayed then we need standby facilities," Al Habtoor chief executive said Laurie Voyer said.
"At the end of the day, the shareholders need to come to terms with how to take the business forward."