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Wednesday, 1 June 2011

FT.com / Comment - Politics may rule on GCC growth

Leaders of the Gulf Co-operation Council nations announced last month that they were considering extending membership to Morocco and Jordan.

The expansion of any such union is often based less on economic logic than on politics. The accession of many eastern European states to the European Union since 2004, even if economically premature, was essentially a political project.

It is unclear whether the GCC is considering full membership for one or both of Morocco and Jordan, or whether the six existing members want to create a new tier of membership focused on mutual political and military interests.

Emirates launches $1 bln 5-year bond | Reuters

Fast-growing Dubai-based airline Emirates [EMIRA.UL] launched a five-year $1 billion bond in an upsized offering at the lower end of its initial price guidance.

The company said the bond launched at 330 basis points over midswaps, as reported earlier by Reuters, with a coupon of 5.125 percent.

Final price guidance for the bond had been in the range of 330 basis points to 337.5 bp over midswaps and carried a reoffer price of 99.904.

MENA stock markets close - June 1, 2011

ExchangeStatus IndexChange
TASI (Saudi Stock Market)
6741.830.09%
DFM (Dubai Financial Market)
1574.40.93%
ADX (Abudhabi Securities Exchange)
2666.011.02%
KSE (Kuwait Stock Exchange)
6390.10.19%
BSE (Bahrain Stock Exchange)
1349.070.18%
MSM (Muscat Securities Market)
6075.071.12%
QE (Qatar Exchange)
8326.9-0.58%
LSE (Beirut Stock Exchange)
1363.230.43%
EGX 30 (Egypt Exchange)
5507.67-0.28%
ASE (Amman Stock Exchange)
2159.28-0.03%
TUNINDEX (Tunisia Stock Exchange)
4142.890.53%
CB (Casablanca Stock Exchange)
12202.20.05%
PSE (Palestine Securities Exchange)
496.87-0.39%

Qatar spending not reliant on World Cup as GDP soars | Reuters

Losing rights to host the 2022 soccer World Cup would do little to dent Qatar's economy -- although it would be a major blow to prestige -- as energy revenue continues to fuel the Gulf Arab nation's growth.

The head of Germany's soccer federation on Wednesday called for FIFA to re-examine the award of the tournament to Qatar amid allegations it had bought the event. The Gulf state has strenuously denied any wrong-doing. [ID:nLDE7500JC]

But even if the gas exporter ultimately loses the tournament, the impact on infrastructure expansion and on the economy would be limited, analysts said.

OPEC seen ignoring West's call to act | Reuters

OPEC is unlikely to bow to western pressure to officially raise oil output at its meeting next week, with members instead expected to act independently of the group, a Reuters poll showed on Wednesday.

All 13 oil analysts and traders surveyed by Reuters predicted the Organization of the Petroleum Exporting Countries (OPEC) would roll over its current output agreement, untouched since the group's record cut in December 2008.

"They will simply sit on the fence with oil back near $100 barrel," said Harry Tchilinguirian, head of commodity markets strategy for BNP Paribas.

Moody's downgrades long-term and short-term issuer ratings of Bahrain Islamic Bank by two notches to Ba1/Non-Prime | AMEinfo.com

Moody's has downgraded the long-term and short-term issuer ratings of Bahrain Islamic Bank (BIsB) by two notches to Ba1/Non-Prime from Baa2/Prime-3. Concurrently, the institution's stand-alone bank financial strength rating (BFSR) was lowered to E+, which maps to a baseline credit assessment (BCA) of B1.

Both the Ba1 issuer ratings and BFSR of E+ remain under review for possible further downgrade.

Ratings Rationale

The downgrade of BIsB's ratings reflects a material weakening in the institution's stand-alone financial profile, as shown in the significant losses it posted in the last two years and the erosion of its capital base in the absence of new capital injections. The sharp deterioration of the bank's asset quality since 2008 is at the core of BIsB's financial problem. Results in 2010 show a very high level of non-performing loans, driven for the most part by some high corporate and real estate sector concentrations in the institution's loan book.

Sluggish loan growth slows GCC banks' recovery: S&P - Zawya

Most banks in the Gulf are set for slow recovery because of "sluggish loan growth and difficult funding conditions," Standard & Poor's said on Tuesday.

The ratings agency said the financial profiles of most of the Gulf banks are expected to remain relatively stable or keep improving, but slowly because of listless loan growth and difficult funding conditions.

S&P noted in its report that most sovereigns and by extension banks in the GCC will continue to remain isolated from the political turmoil in other parts of the Middle East and North Africa.

Egypt's Citadel Capital stock jumps 4.5 pct | Reuters

Shares of Egypt's Citadel Capital were trading 4.5 percent higher early in the session after the firm released its 2010 results.

The private equity firm said it made a consolidated net loss of $241.7 million. It did not give a comparative figure, but last year it reported net profit of $38.6 million.

Earlier in the session the shares rose as high as 7.7 percent.

GOLDMAN COMMENT: Gold, myrrh and incense

Jim O'Neill - Goldman Sachs Asset Management

By Jim O'Neill, Goldman Sachs Asset Management.

I returned from a brief 3-day trip to the Gulf this morning, after visiting Abu Dhabi and Dubai. I spent much of the time highly stressed about the path of the Icelandic ash cloud, in view of a rather important event that I needed to get back to London for Saturday evening. As is often so typical of life these days, it looks as though it was all blown out of proportion, and my own personal black swan event didn’t happen. Mind you, if the bookmaker’s odds are to be believed, then United are merely there to make up the numbers in tomorrow¡¯s Champions League Final. We shall see.

Beyond the ash-induced stress, the trip was very interesting. We hosted a client conference in Dubai and I also met with a number of important clients. In addition to discussing the world and global markets, I had fascinating exchanges with people about the so-called Arab Spring.

THE ARAB UPRISING.

Most people locally were as concerned as many people around the world seem to be about the possible future paths. That said, it was fascinating to hear this as well as comments about all the specific nuances. There were some I chatted with that shared my view that this could be the Middle East and North Africa (MENA) Berlin Wall ‘moment’ but not many. Most see the possible paths as highly uncertain and worrisome. One local fund manager put it to me differently. He said that there is always uncertainty about the future in this part of the world. But these uprisings have eliminated this future uncertainty. Instead, the uncertainty is here now. Linked to what I wrote about recently following my Singapore trip and fund managers’ experience, if you combine uncertainty with lower valuations, this spells opportunity.

Much discussion focused on each of Egypt and Syria, both being seen as key countries for the region. But the more the discussions advanced through a dinner where it became the featured topic, the more uncertain it became. On Egypt, views ranged from the most negative outcomes post the September elections to some thinking that, while Mubarak has gone, not much has really changed, as the Army will remain in charge. Regarding Syria, many see it as even more interesting, since a change in regime could have big consequences for Iran and support for the more extreme terrorist organizations.

DUBAI AND N11 CAPITAL?

This was the first time I had spent a few days there since the bursting of the property bubble. The damage could be seen everywhere, with many half-finished projects. That being said, the main artillery roads seem to function better based on my trip over to Abu Dhabi and back. I can’t help wondering whether it is all really sustainable in Dubai, but as I have found on past trips, the more I found my mind wondering, maybe there is more substance than meets the eye. With the troubles of Bahrain, and the never ending volatility of Beirut, and the clever way its leaders have allowed the local atmosphere to develop, Dubai seems to really benefit from some of the large nations not so far away. Moreover, it seems to benefit from those that are doing well, and possibly also from those that are less stable. Two of the BRIC countries, Russia and India, especially have positive relevance for Dubai, and a number of the Next 11 Group; Egypt, Iran, Pakistan and Turkey, all have differing degrees of relevance.

I would encourage anyone to take a visit to this part of the world. It is quite mind opening.

ABU DHABI AND GOLD BARS.

I had been planning to add a picture to this week’s Viewpoint. Abu Dhabi is the more sober of the major UAE conurbations and has always a more straightforward raison d’etre owing to its oil reserves and revenue. However, not to be completely outdone, as I am sure many of you know, it has a 7-star hotel, yes 7 stars. We managed to slip into the Emirates Palace for a quick (and not so cheap) cup of tea in between meetings, particularly to visit the Gold Bar ATM that is present in the lobby. Yes, there is a Gold Bar machine, and I have a picture on my blackberry to prove it. A shame that my technology skills are sufficiently limited that I can’t upload it for all you Gold bulls to see.

WORLD MARKETS AND THE MAY FACTOR.

Not because of this particular anecdote, but the Middle East being what it is, my meetings involved more discussion about Gold prices than is usually the case in other parts of the world. While the gold bar machine anecdote adds to all the other colourful stories I pick up, the recent remarkable resilience of gold, despite what has happened to silver and other commodities, is rather impressive. This gold price strength may perhaps be just a simple function of both the extremely low level of G7 real interest rates and the prospect that they might not rise anytime soon. I got the impression that there a quite a few bulls of Gold in the Middle East.

DP World Shares Trade at Premium to Dubai on Debut in London - Businessweek

DP World Ltd. shares in London were trading at a premium of 1.7 percent to yesterday’s closing price on Nasdaq Dubai as the Dubai World-controlled company’s stock debuted on the London Stock Exchange.

The shares were at 830 pence at 8:58 a.m. in the British capital after gaining to as much as 880 pence. The stock rose 1.3 percent to $13.63 on Nasdaq Dubai, reversing a decline of as much as 1.9 percent. They closed at $13.45 yesterday.

DP World, which operates ports from Europe to Asia, cross- listed 830 million ordinary shares to attract investors after low trading volumes in its home market. "The aim is to provide an additional platform to invest in DP World shares to help attract a broader range of investors," it said today.

Emirates eyes $750 mln from bond -sources - Maktoob News

Emirates airline, which is expected to price a dollar-denominated bond on Wednesday, is aiming to raise about $750 million from the sale, two banking sources said on Tuesday.

Lead managers on the issue had said that the Dubai airline was planning a benchmark-sized bond, which is typically at least $500 million.

"They're looking at a minimum of $500 million and a maximum of $750 million," said one of the sources. A second source confirmed the company was eyeing $750 million from the issue.

UAE needs to up efforts on debt mkt -c.bank gov - Maktoob News

The United Arab Emirates needs to double efforts to create a local market for government and corporate bonds, Central Bank Governor Sultan Nasser al-Suweidi said on Wednesday.

"When it comes to adequacy and quality of capital, we don't have any difficulty in securing capital adequacy in the short run," he told a financial workshop in the UAE capital.

"As for liquidity, the difficulty lies in the fact that there are no sufficient government debt instruments. It will be important to double efforts locally to create an active market for government bonds as well as high quality corporate bonds," he said.

Alwaleed Google eye possible tech tie-up | A1SaudiArabia.com

Prince Alwaleed Bin Talal has held talks with Google chairman Eric Schmidt over “”potential business cooperation”" between Kingdom Holding and the US Internet giant.

Any collaboration would focus on the technology sector, Kingdom said in an emailed statement Monday, following a Paris meeting between the pair.

Alwaleed holds significant investments in the US market, through his stakes in Citigroup, News Corp and Time Warner.

gulfnews : Improved liquidity must help business

It is wrong that the Central Bank can talk of the liquidity in the UAE as being "abundant" and bankers can say that the "liquidity situation is much better", but at the same time many large development companies have not paid their suppliers. All this spare money sitting in the banks should be used to pay off the contractors and suppliers who had the misfortune to be working for the large developers at the end of the boom in 2008.

It is obviously very good news that liquidity has returned to the UAE's banking system in such abundance that the Central Bank governor "expects the emirates interbank rate to go down further because the liquidity situation has improved". And Sultan Al Suwaidi is right to ask the banks to drop their interest rates, and so reduce the cost of borrowing.

But all this banking liquidity has to trickle through to the business world, which is still coping with the terrible effects of the property slump in which the real estate market's huge 60 per cent share of the country's GDP fell by more than 50 per cent. The government rescues have saved the large developers, but it is now the suppliers and contractors who need the money.

gulfnews : DME Oman gains traction as benchmark

Completing four years in operation today, the Dubai Mercantile Exchange (DME) is confident of evolving its flagship marker, DME Oman as a legitimate delivery-backed oil benchmark for the largest oil producing region in the world, Thomas Leaver, Chief Executive of the DME, told Gulf News in an interview.

Average daily volumes (ADV) for the DME Oman crude oil futures contract (DME Oman) through the first quarter stood at 3,000 contracts (equivalent to 3 million barrels of oil per day). Sustained liquidity and continued growth enabled the DME to set a new trading record in January, with an ADV of 3,570 contracts, the highest monthly figure since trading began on the DME in 2007.

Although the exchange experienced high volatility and reduced volumes in April, Leaver said DME volumes picked up momentum in May.

DP World's voyage to a listing on the LSE - The National

Mohammed Sharaf has been chief executive of DP World since the company was formed in 2005, but has a pedigree in the business going back to his first job in the port of New York in the 1980s. He spoke to The Nationalas he became the first Emirati chief executive of a company listed in London.

DP World shares are about to be traded on the London Stock Exchange. How important an event is this in the company's history?

Listing in London is a very significant milestone for us. We have grown over the past 40 or so years from a local to a regional to a global company with operations in 31 countries around the world. Today we are the third-largest container terminal operator with around 10 per cent of the world market. We've come a long way in quite a short time, and this is yet another step in that journey.

In terms of being a publicly listed company, we have laid a solid foundation over the last three years with our listing on Nasdaq Dubai, but investors' feedback, particularly international fund managers', has been that while they like us and they'd like to invest, their internal rules prevent them doing so. They told us that a listing elsewhere would give them access. We looked at various different exchanges and we decided that London was the right place for a dual listing - the regulatory framework is very similar to Nasdaq Dubai's, a large number of emerging market funds are based in London and, last but not least, the time zones give us an extra day and an additional 12 hours trading over a week.

DP World will now be positioned alongside regional companies on Nasdaq Dubai and some of the world's leading companies on the London Stock Exchange - a great outcome for all our shareholders.

Emirates lands fleet financing - The National

Emirates Airline has lined up financing for the delivery of billions of dollars' worth of new aircraft and is set to tap the bond market for more cash in the near future.

The cash injection comes as the airline prepares to accelerate its fleet expansion as it receives more Airbus A380 superjumbos and Boeing 777-300ERs, putting new demands on its financing abilities.

The Dubai airline completed lending terms with three foreign banks for the financing of 10 of the wide-bodied, long-haul jets from Airbus and Boeing, worth US$3 billion (Dh11.01bn) at list prices before standard industry discounts.

RBS woos Gulf as it aims to go private - The National

On the first leg of a tour of Gulf states, Stephen Hester told The National the bank had cleaned up its balance sheet and resolved the problems that brought it to the brink of collapse in 2009.

"I'd be happy if the government started selling shares today," Mr Hester said yesterday in Abu Dhabi. "We're ready to stand on our own two feet."

The process of privatising the bank would be unlikely to start until regulatory changes to the British banking system were complete, and the timing of any share sale would ultimately be decided by the UK government, he added. But he said he hoped it could get under way next year.

IMF Sees Saudi Arabia Economic Growth of 6.5% in 2011 on Oil Production - Bloomberg

The International Monetary Fund said it sees economic growth of 6.5 percent in Saudi Arabia this year, with increased oil output boosting the fiscal surplus.

“The strong near-term economic outlook provides an opportunity to address longer-term priorities,’’ Masood Ahmed, the Director of the Middle East and Central Asia Department, said in an e-mailed statement today. “Key steps will be to continue progress in diversifying the economy, building on the positive business environment, and continuing to improve access to finance” for small businesses.

Qatar's bid for emerging market status looks like being delayed - The National

It is not just the controversy surrounding Qatar's Fifa World Cup winning bid that is weighing on the Gulf nation's market.

Qatar looks like it has knocked on the head any chance of an upgrading by the index compiler MSCI to "emerging market" status.

The chairman of the country's exchange said ownership limits, a key element in the nation's potential for an upgrading from "frontier market" status, would continue to stand at 25 per cent. There had been talk of lifting the limit to 49 per cent, potentially prompting an influx of foreign direct investment.

Russia, Qatar Face Pressure to Scrap Gas Link to Oil Prices as Crude Jumps - Bloomberg

Russia and Qatar are under growing pressure from Europe’s biggest utilities to scrap a 40-year-old system that links natural-gas prices to oil after Brent crude’s 23 percent surge this year.

As delegates from countries that hold two-thirds of the world’s reserves gather in Cairo tomorrow for a one-day meeting of the Gas Exporting Countries Forum, customers from France’s GDF Suez SA to EON AG of Germany are urging producers to link prices to spot markets instead of insisting on long-term contracts that shadow the fluctuations of oil. Contract prices will rise about 15 percent in the next quarter alone, according to Wood Mackenzie Ltd., an Edinburgh-based energy consultant.

“The European contract price of gas is going up,” said Thierry Bros, a senior analyst at Societe Generale SA in Paris. “Utilities won’t sign new oil-linked contracts.”

UAE to tighten banks' liquidity control guidelines - ArabianBusiness.com

The UAE's central bank will tighten regulations on how banks in the Gulf Arab state manage liquidity so they can better cope with future crises, a central bank circular seen by Reuters showed on Tuesday.

Lenders in the world's No.3 crude exporter will be required to comply with qualitative, quantitative and reporting requirements on liquidity risk management, effective from September, according to the circular sent to banks.

"The aim of this liquidity regulation is to reduce the frequency and severity of banks' liquidity problems," the circular said.

Liquefied Natural Gas Goes Boom!

Even before the Tohoku earthquake and tsunami reminded the world that nuclear power is not risk-free, the liquefied natural gas (LNG) market was booming in Japan. In fact, the LNG market has been booming throughout Asia for the last several years. That's good news for Australia...and for a variety of companies that serve the LNG industry.

Currently, Japan is the largest buyer of LNG. Japan and South Korea together make up 53% of current global regasification capacity. (That is, the ability to import LNG and turn it back into a gas for consumer and industrial use.)

Pressed against this new demand is an aging supply base in places. For instance, there are old LNG fields in Malaysia and Indonesia coming to the end of their useful lives.