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Wednesday, 26 February 2014

UPDATE 3-Russia's largest banks halt new loans in Ukraine eyeing political risk | Reuters #EuroMaidan

UPDATE 3-Russia's largest banks halt new loans in Ukraine eyeing political risk | Reuters:

"Russia's second-largest bank VTB has joined Sberbank in saying it would halt new lending in Ukraine, underlining concerns over financial risks due to political turmoil in Kiev.

Ukrainian President Viktor Yanukovich was driven from power over the weekend after months of upheaval sparked by his decision to spurn deals with the European Union and improve ties with Russia. While the country has an interim leader, a new government is yet to be formed.

"It is hard to evaluate the risk at the moment," VTB Chief Executive Andrei Kostin said at a press conference on Wednesday.

While other foreign lenders have cut their Ukraine exposure in the five years since the 2008 collapse of Lehman Brothers - to 20 percent of Ukraine banking sector assets in 2012 from 40 percent in 2008, according to a Raiffeisen Research survey - Russian banks stayed. They now account for 12 percent of the sector..

Russia's President Vladimir Putin said that Russian banks have an estimated $28 billion of exposure to its neighbour, with Gazprombank, Vnesheconombank (VEB), Sberbank and VTB among the main creditors."

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News.Az - Turkmenistan seeks gas exports to Europe via Turkey, Azerbaijan

News.Az - Turkmenistan seeks gas exports to Europe via Turkey, Azerbaijan:

"TANAP will start construction work on pipelines across the Caspian to Azerbaijan in early 2015. It is hoped that Turkmen gas will reach Turkey by 2018 and then Europe in 2019.

Turkmenistan has expressed its interest in exporting natural gas to Europe, and Turkey's state owned TANAP may prove to be the solution for this.

Speaking at the Petrol-Gas Summit in Istanbul, the head of the Turkish Energy Ministry's Transit Petrol Pipelines Office, Reha Muratoglu, said that he believes the pumping of Turkmen gas to Europe via TANAP pipelines across the Caspian Sea has now become likely.

Last year Turkey's Energu and Natural Resources Minister Taner Yildiz visited Turkmenistan, where he submitted a request for for an annual supply of 5-6 cubic meters of natural gas to TANAP.

TANAP will start construction work on pipelines across the Caspian to Azerbaijan in early 2015. It is hoped that Turkmen gas will reach Turkey by 2018 and then Europe in 2019."

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Qatar has long-term commitment to UK’s energy security: al-M..

Qatar has long-term commitment to UK’s energy security: al-M..:


A view of the South Hook LNG Terminal. Inset: Al-Marri
Energy is a hugely politicised subject in the UK with the main industry players under mounting pressure to keep a lid on prices not just from consumers but regulators. Now a big question is looming over who should control the North Sea oil and gas supplies. With Scotland debating whether it should become an independent country, the stakes over management of the remaining reserves are rising. To the extent that Monday saw the UK cabinet convening in Aberdeen, the heartland of the oil and gas industry, in only the second such gathering in Scotland since 1921. Just a few miles away Ministers from the Scottish government held their own talks on this sensitive subject. It was a case of High Noon at the gas field."

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UAE aims to ensure its billions are spent wisely in post-Morsi Egypt -

UAE aims to ensure its billions are spent wisely in post-Morsi Egypt -

"Gulf governments have been generous in their support of Egypt’s military-backed interim government, spending billions to signal their approval of the overthrow of the Islamist president, Mohamed Morsi, last summer.

Now, having underwritten almost $7bn in aid – and helped prevent the collapse of Egypt’s beleaguered economy – the United Arab Emirates is trying to ensure that its latest tranche of $2.9bn is judiciously deployed, advocating reforms and helping to craft measures for stimulus measures that will help put the economy on track."

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MIDEAST STOCKS-Qatar's Mesaieed soars on debut, Egypt retreats on political uncertainty | Reuters

MIDEAST STOCKS-Qatar's Mesaieed soars on debut, Egypt retreats on political uncertainty | Reuters:

"* Mesaieed priced at almost 3 times fair-value estimates

* Qatar retail investors dominate, institutions stay away

* In Egypt, Sisi presidential bid may not be declared soon

* Cairo index's uptrend may pause around 8,000 points

* Ma'aden surges after Saudi gold deposits found

By Nadia Saleem

DUBAI, Feb 26 (Reuters) - Qatar's Mesaieed Petrochemical Holding soared on its first day of trading on Wednesday, while Egypt's bourse retreated because of uncertainty over the timing of a hoped-for presidential bid by Field Marshal Abdel Fattah al-Sisi.

Shares in Mesaieed, a unit of state-owned Qatar Petroleum, rocketed 450 percent from their initial public offer price to close at 55.0 riyals, after touching an intra-day high of 73.90 riyals. It was Qatar's first new listing since 2010.

Because the IPO was only open to Qatari investors and a limited amount of information was released by the company, the stock has only been thinly covered by analysts. But most estimates for fair value were around 20 riyals."

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Hryvna Decline Dragging Ruble Down With It | Business | The Moscow Times

Hryvna Decline Dragging Ruble Down With It | Business | The Moscow Times:

"LONDON — Ukraine's hryvna tumbled 4 percent on Wednesday to 10 per dollar as political uncertainty mounted, its weakness spilling over to the ruble, taking that currency to a fresh five-year dollar low.

Broader emerging assets however traded broadly in positive territory on the back of a smaller fall in the Chinese yuan than previous sessions.

Ukraine remains without a settled government several days after the ouster of President Viktor Yanukovych, raising concerns that the country will fail to tap outside financial support in time to repay debts as its own hard currency reserves dwindle.

The hryvna's latest fall takes year-to-date losses on the once tightly controlled unit to almost 20 percent against the dollar, more than any other major emerging currency in 2014. Bonds are also falling, with the 2017 dollar issue now having erased over half its Monday gains.

"The whole political picture in Ukraine has become even more blurred than before," said Simon Quijano-Evans, head of emerging markets research at Commerzbank in London."

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EU axes Turkish growth forecasts citing political, financial risks - ECONOMICS

EU axes Turkish growth forecasts citing political, financial risks - ECONOMICS:

"The European Commission has slashed its expectations for Turkey’s economic growth in 2014 and 2015, on the grounds of “the domestic political uncertainty and the possibility of a further sell-off in Turkish assets.”

“Growth was somewhat faster than expected in 2013, but the outlook for economic activity over the next two years has deteriorated against the background of recent developments,” the Commission’s “Winter Forecast 2014” report stated.

The report projected that the country would grow 2.5 percent this year, 0.5 points below its previous forecast and 3.0 percent in 2015, trimming previous prediction by 0.8 points."

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Banks Warned to Watch Out for Possible Yanukovych Transactions - #EuroMaidan

Banks Warned to Watch Out for Possible Yanukovych Transactions -

"WASHINGTON--The U.S. Treasury warned banks Tuesday to watch out for the possibility former Ukraine president Viktor Yanukovych may try to move stolen state assets after he bolted from Kiev over the weekend in the face of escalating opposition protests.

Treasury's Financial Crimes Enforcement Network said banks need to apply "enhanced scrutiny" to transactions by either Mr. Yanukovych or his senior former government officials, to protect against "misappropriated or diverted state assets, the proceeds of bribery or other illegal payments, or other public corruption proceeds." 

The U.S. warning didn't constitute a direct allegation. But Western economists have accused Mr. Yanukovych and his government of quietly pilfering state coffers, building secret stashes of taxpayer cash over his time in power, and taking them out of the country."

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Money for Ukraine? | MacroScope

Money for Ukraine? | MacroScope:
Russia’s next move remains the great unanswered question for Ukraine but there are glimmers that things might be starting to move elsewhere.
IMF chief Christine Lagarde said last night she would send a technical support team to Ukraine soon if Kiev makes a request. It can’t do so until an interim government is formed, probably tomorrow. That would be step one, but only step one, down the road to an international aid package.
The European Union’s foreign policy chief promised Ukraine’s new leaders strong international support but offered up no specifics and there will be no meaningful bailout until after elections slated for late May although EU budget commissioner Janusz Lewandowski said bridging aid of 1 billion euros might be available.
The situation is clearly urgent though the assertion from Kiev that money must come within two weeks looks overblown.
There is jockeying for position in Kiev with allies of newly freed former premier Yulia Tymoshenko trying to take key positions and opposition leader and ex-world boxing champ Vitaly Klitschko declaring he would run for president. The formation of an interim administration will be the main internal focus for now.
The initial relief rally in Ukrainian assets has fizzled out. The hryvnia never got a lift, partly because the country’s limited reserves are probably going to have to be devoted to meeting international debt payments to avoid default leaving little to defend the currency. And Monday’s Ukrainian bond rally ended abruptly yesterday and went into reverse.
The hryvnia fell more than 6 percent on the day and if it can’t be propped up by the central bank, that raises currency risk for investors. There is also the possibility of debt restructuring as with the euro zone and what conditions the IMF will apply to any help, should it be forthcoming. So the initial market view that Yanukovich’s ouster had made default much less likely has now been clouded by a range of concerns.
There are others besides. Acting president Oleksander Turchinov expressed concern about threats to the country’s unity in mainly Russian-speaking Crimea, following protests there against the leaders who have taken charge in Kiev.
Both Russia and the West, while competing for influence, have said publicly that they do not want a split. But Russian foreign minister Lavrov, who has been talking tough, is out again calling for international condemnation of “nationalist and neo-fascist” sentiment in western Ukraine and attempts by nationalists to ban the Russian language.

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Mesaieed Petchem Shares Soar In Qatar Debut, Far Exceed Estimates » Gulf Business

Mesaieed Petchem Shares Soar In Qatar Debut, Far Exceed Estimates » Gulf Business:

"Shares in Qatar’s Mesaieed Petrochemical Holding Co soared 590 per cent on Wednesday in the country’s first stock market listing since 2010, far exceeding analysts’ estimates of fair value.

The shares opened at 50.0 riyals, up from their initial public offer price of 10.0 riyals, and after half an hour of trade had climbed further to 69.00 riyals.

Analysts’ valuations for the stock ranged between 18 and 21 riyals, Ahmed Shehada, head of trading at QNB Financial Services, said before the listing.

Mesaieed, a unit of state-owned Qatar Petroleum (QP), raised 3.2 billion riyals ($880 million) in an IPO of about 26 per cent of its shares. The offer, which authorities said was heavily oversubscribed, was open only to Qatari investors; foreigners can buy up to 15 per cent of the firm from the market."

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GCC proves a credit to itself | The National

GCC proves a credit to itself | The National:

"In a sign of a further possible downgrade, Turkey this month had the outlook on its rating cut from stable to negative by Standard & Poor’s as concern surrounds the health of its economy. In contrast, the ratings of the GCC – excluding Bahrain – have remained relatively robust, underlining their deep reserves and stable political outlook.

Here, S&P’s John Chambers and Moritz Kraemer explain their lingering worries about the US and the euro zone, why Turkey is in trouble and how the GCC is managing to weather global rockiness."

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Lagarde: IMF probably will provide additional support to Ukraine - Ukraine Business Online #EuroMaidan

Lagarde: IMF probably will provide additional support to Ukraine - Ukraine Business Online:

KYIV/LONDON, Feb 26, 2014 (UBO) – Responding to an announcement by IMF head Christine Lagarde that additional assistance for Ukraine is possible, Standard Bank chief emerging market economist Timothy Ash said:

Al Jazeera is reporting US officials as suggesting that the IMF may be willing to lend up to USD15bn in a new programme. I assume that this will be augmented with some modest additional bilateral contributions, perhaps to take the total package to perhaps USD20-25bn.

This is short of the USD35bn being called for by Ukraine's acting finance minister, but for me it is not just about the money. What is important is:

First having a solid reform coalition in place ASAP. The longer the delay in having a functioning administration and accessing international financing, the likely the larger the hole in the government, bank and external balance sheets which will need filling.

Second, having a credible reform programme in place, and assurance that a future administration will hold to this - Ukraine has a very poor track record in this respect, and the international community needs to think through how it can anchor reforms. Ukraine can help itself by carrying out fiscal adjustment, energy sector reform, FX adjustment, fighting graft (including going after assets stolen by the former regime - and the West needs to help here), which should help close fiscal and external financing gaps.

Third, somehow working to normalise the relationship with Moscow - albeit likely to be very difficult in practice. Ukraine needs to offer something in exchange for its drive for European integration - actually I have long argued for the privatisation of the gas transit system, and let the Russians pay top dollar for it! The GTS is after all worthless if Russia just opts to build pipelines around Ukraine, and even if Russian owns the pipeline - IT IS STILL IN UKRAINE, the latter fact will always ensure Ukraine has geopolitical leverage. This is Ukraine's hour of need and it needs to think creatively to get out of the vice.

Fourth, Ukraine needs an extended period of political stability, with an administration in place for an extended period and able to implement reforms.

Finally note the IMF issued a report earlier today which underlines the challenges. They warn of the risk of further downside in the UAH, but also of a double digit drop in real GDP this year - I thought that that warning was particularly stark.

The above commentary represents a personal view, is not investment advice or Standard Bank research, but may contain extracts from published research.
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