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Monday, 17 March 2014

Crimea: risks and opportunities - YouTube #EuroMaidan

Crimea: risks and opportunities - YouTube:



"The outlook for Russia and eastern European frontier markets
Crimea's vote to leave Ukraine for Russia has been followed by a rebound for local stocks. Marcus Svedberg, chief economist at East Capital, and John Authers analyse the outlook for Europe's frontier markets and what will rehabilitate Russia's markets.



"



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The odd couple? - YouTube

The odd couple? - YouTube:



"Lex's Rob Armstrong and Oliver Ralph discuss the rationale behind Russian energy group Rosneft's decision to buy a stake in Italian tyremaker Pirelli - and explore the Italian company's increasingly complex list of shareholders.



"



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Abu Dhabi GDP for 2013 estimated at Dh953.2b | GulfNews.com

Abu Dhabi GDP for 2013 estimated at Dh953.2b | GulfNews.com:



"

Preliminary estimates for 2013 show that Abu Dhabi’s Gross Domestic Product (GDP) is expected to reach Dh953.2 billion, with a growth rate of 4.8 per cent, according to data released on Monday by the Statistics Centre Abu Dhabi (SCAD).



SCAD’s data showed that GDP at current prices amounted to Dh909 billion in 2012 compared to Dh846.7 billion in 2011.



Abu Dhabi’s GDP would hence register a five-fold increase since the beginning of last decade, as it would have moved up from Dh185.7 billion in 2001 to an estimated Dh953.2 billion in 2013.



In a press conference held by SCAD, Director of Economic Statistics Department, Nasser Dayan, said that all economic activities and sector experienced growth during 2012.



Statistical surveys showed that non-oil GDP in 2013 at current prices is estimated to reach Dh429.3 billion with a 10 per cent growth rate. In 2012, non-oil GDP amounted to Dh390.9 billion — an increase from the 2011 figure of Dh361.9 billion"



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MIDEAST STOCKS-Property, banks lift UAE bourses after Dubai debt rollover | Reuters

MIDEAST STOCKS-Property, banks lift UAE bourses after Dubai debt rollover | Reuters:



"* Rollover was expected but is positive signal on UAE policy



* Dubai's Emaar retests chart resistance



* Qatar boosted by Gulf International Services



* Mesaieed Petrochemical falls after publishing first results



* Kuwait's Noor Financial drops as Pakistan deal blocked



By Olzhas Auyezov

DUBAI, March 17 (Reuters) - Property and banking shares lifted stock markets in the United Arab Emirates on Monday after Dubai obtained a roll-over of $20 billion of debt. Other markets in the region were mixed as uncertainty over the Ukraine crisis continued to prompt profit-taking by some retail investors.



Abu Dhabi and the central bank of the United Arab Emirates said on Sunday that they had agreed to extend for five years $20 billion of loans which were provided to the Dubai government as emergency aid during its financial crisis, and were due to mature this year in two tranches.



The roll-over had been widely expected, but it was still good news for Dubai, and Abu Dhabi's decision to deal with both tranches at once - rather than waiting until each one matured - appeared to suggest a determination to clear obstacles to growth in the UAE."



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Ukraine Bonds Decline as Investors Weigh Aid Outlook After Vote - Businessweek

Ukraine Bonds Decline as Investors Weigh Aid Outlook After Vote - Businessweek:



"Ukraine’s Eurobonds maturing in June fell for the first time in three days as investors sought clarity on the progress of International Monetary Fund aid after a referendum moved the Crimea region closer to secession.



The government’s dollar notes declined to 91.86 cents on the dollar from 92.16 on March 14, sending the yield up 2.24 percentage points to 50.5 percent by 3:30 p.m. in Kiev. The hryvnia slid 0.5 percent to 9.75 per dollar, set for the weakest close this month, according to data compiled by Bloomberg.



Crimean lawmakers set in motion measures for the Black Sea peninsula to join Russia after the referendum provided the expected overwhelming majority in favor of the move. Investors were looking for signs of increased tension in eastern Ukraine and further Russian incursions, which would hamper bailout talks with the IMF, said Viktor Szabo, who helps oversee $10 billion in emerging-market debt at Aberdeen Asset Management in London."



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ADX to kick off New York roadshow - bi-me.com

ADX to kick off New York roadshow - Business Intelligence Middle East - bi-me.com - News, analysis, reports:



"Abu Dhabi Securities Exchange (ADX) will lead its first roadshow of the year from 18-20 March with a delegation to New York City comprising senior representatives of a number of listed companies.  



The aim of the visit will be to engage with potential new investors, fund managers, asset management and investment management companies, as well as high end investors to demonstrate the range of opportunities, as well as to provide an insight into the operations and future development of ADX. 



"We have much to offer new investors from the US." said Mr. Rashed Al Balooshi, CEO of ADX. "As one of the leading global performers in 2013, ADX is very attractive to international investors, particularly in light of the upgrade by MSCI of ADX to emerging market status, which takes effect this year, as well as the encouraging performance of the UAE economy."



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Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion - Bloomberg

Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion - Bloomberg:



"L1 Energy, the investment vehicle of Russia’s fourth-richest man Mikhail Fridman, agreed to buy RWE AG (RWE)’s Dea oil and gas unit, gaining assets in the U.K., Germany and the North Sea.



The sale values Dea at about 5.1 billion euros ($7.1 billion), including debt, Germany’s largest power generator said in a statement yesterday. The deal is the first for LetterOne, the group set up by Fridman, 49, and co-investor German Khan last year to invest part of $14 billion they gained from selling a stake in the Moscow-based TNK-BP oil venture.



The agreement helps Fridman and Khan move their energy investment abroad as RWE, which reported its first full-year loss since the foundation of the Federal Republic of Germany in 1949, looks to raise cash from asset sales.



LetterOne has earmarked as much as $10 billion for investment in the global oil and gas business over the next five years and attracted a number of high-profile energy executives to its advisory board, including former BP Plc (BP/) Chief Executive Officer John Browne and Anadarko Petroleum Corp.’s Jim Hackett."



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BBC News - Russia 'planned Wall Street bear raid'

BBC News - Russia 'planned Wall Street bear raid':



"There is a cynicism in the relationship between Russia and the US, being played out in the Crimean crisis, which is deep, rooted in history and shows that the triumph of capitalism over communism wasn't the end of the power game between these two nations.



The depth of mistrust between the two was highlighted in the interview given by Hank Paulson, the former US treasury secretary, for my recent BBC Two documentary, How China Fooled The World.



The excerpts I am about to quote never made it into the film, because they weren't relevant to it. But they give a fascinating understanding of the complex relationship between Washington and Moscow."



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In Putin’s Russia, risk prices you | FT Alphaville #EuroMaidan

In Putin’s Russia, risk prices you | FT Alphaville:

Or, why investors might be less than sanguine about sanctions against Russia.
We could start with the OFZs.
(Morgan Stanley’s chart — click to enlarge)
Just how is it that foreigners have come to own over a fifth ($20bn) of Russia’s domestic government bond market, after all?
Well, because of painstaking efforts to connect Russia back to the basic plumbing of international finance over the years, actually. At least in part.
The impressive quadrupling of non-resident share in a year which you can see from the middle of 2012, for example — that’s the boost after Euroclear and Clearstream said they would start clearing OFZs within their systems. It’s kind of the bond-market equivalent of visa-free travel: a big deal. Elsewhere Russian bonds have also risen to 10 per cent of the GBI, the main artery of emerging-market bond indices.
In other words, it’s important to note at the start of a post like this that there was a genuine rehabilitation of Russia as a place to get money in, and as importantly, out, in recent years. It makes it all very ironic now.
After all, between the prospect of “phase three” financial sanctions by the US and EU if events escalate in the annexation of Crimea, and the potential for capital controls from the Russian side — the plumbing is being placed in danger all over again. In part, tellingly, this is through markets anticipating the authorities’ worst-case options.
The risk repricing
It’s interesting this isn’t being noticed more. Repricing of this risk will do very real damage, even if far from crippling, to the Russian economy (which is already poorly).
Of course, this concept cuts across some of the blather of recent weeks — that the Putinist Kremlin is filled with geopolitical geniuses, and/or that western politicians arevalets of the oligarchs. (That argument must have appealed to many because, if the City looked too big to risk a Russian exodus, then it supported the view that the City is too big anyway. It was still wrong.)
The risk can already be seen quite granularly in the FX market. One-year non-deliverable forwards for the rouble/dollar rate last week began trading at a rare premium to their onshore deliverable counterparts. The clue’s in the name. Foreign holders of the latter are starting to wonder if they’ll be able to take delivery of spot roubles a year out.
But it also speaks to a much broader issue with investing in Russia. Since Mr Putin became president in 2000, around $350bn of private-sector capital has flowed out of the country, according to Morgan Stanley — into Belgravia property, Cypriot brass-plates, what have you. The sloshing around of this wealth has been seen as a weakness of the west (see: oligarchs, valets).
Even so, it also means foreign investors should have been aware they were putting money into relatively hollowed-out Russian bond and equity markets. The locals’ assets weren’t sticking around much.
This somewhat belies the idea of Russia overall having an autarkic, oil-exporting balance sheet — although that’s perfectly real. Half a trillion dollars in FX reserves (less than half of that in US-dollar securities, which could in theory become difficult to access). A balanced budget (well, the Kremlin will need it, if it’s going to dispense imperial largesse to Crimea now). Government external debt to GDP is in single digits. The entire economy is a giant oil-price proxy. Sanctions can’t cripple Russia at all then, that’s true. Especially energy sanctions.
Then again, what would financial sanctions — of long duration and unprecedented complexity — mean to investors only just through that recent rehabilitation of Russia?
Sanctions complexity
It is true that complexity would be a challenge for the sanctions-setters themselves.
If Russian officials planning the invasion of another country have been anywhere near as careful about executing offshore financial escape-hatches as their compatriots can be in divorce cases before English courts… it will be complicated for the west’s asset-freezing agencies to track, even at the level of targeted sanctions against individuals.
At the next level of sanctions — directions to avoid business with named institutions — it is legally more complicated still. Partly this is because of the international co-ordination necessary (which might not even help that much).
Partly it is because these institutions could sue right back. Bank Mellat is a name we’ve been surprised to have not heard much. Only recently, Iran’s largest private bank quashed both UK sanctions under the Counter-Terrorism Act, and an overlapping EU asset freeze. In the former, the UK Supreme Court found late last year that the UK order was “irrational in its incidence and disproportionate to any contribution which it could rationally be expected to make to its objective.”
On the other hand, an institution like the US Office of Foreign Assets Control arguably thrives on the complexity and ambiguity of sanctions regimes, as it has with Iran. Its remit is wide-ranging and extra-territorial: financial institutions have to self-report their compliance with OFAC strictures. (The story of Argentina’s pari passu saga is — no joke — partly the story of US courts establishing their own highly effective sanctions regime against a recalcitrant actor.)
And that, probably is where investors with their OFZ holdings and index weightings may start to feel like sitting ducks. (Another, more US-focused Morgan Stanley chart – click to enlarge)
Russia vs Iran
Sanctions are wasting assets. They probably become less effective over time, which is why governments take their sweet time threatening them instead first, and also establish gradations of severity in order to signal the willingness to lop off bits of their own financial systems to compel a transgressor.
But the economic backdrop to sanctions, if they do go all the way on Russia, would be very different even to that facing Iran over its nuclear programme, for example. Sanctions here had a deleterious impact on oil exports (they may also have worked, in compelling Tehran to talk). But ultimately they’re fingers in the dyke.
Money would probably love to flow in to Iran, in the long run. Imagine Turkey with a current account surplus and a tenth of world oil reserves, plus a stock market with $170bn in capitalisation already, as Renaissance Capital put it in an excellent note last week. The Iranian economy arguably shouldn’t still even be a frontier market, on its fundamentals, though politically it remains far off frontier.
Perhaps Russia, however, never stopped being a frontier market: investors just pretended otherwise. The Moscow stock market has a $500bn capitalisation, sure, and London creaks under the listings and GDRs of Russian corporate names. Frontier appellation seems absurd.
But the whiff of sanctions grapeshot will just remind investors of deep-seated anxieties about the safety of keeping money in Russia, or investing in companies which do. Their reaction will get reflected in turn in the rates that are charged Russian corporate borrowers, and even the stance of the central bank, in defending the rouble. That’s a pity, because there are plenty of decent Russian companies (many of which would be helped by a weakening rouble). Sadly, Putin risk is wrecking them.
Same for some western companies. It will certainly suck to be BP if this environment persists, for example, with its over-dependence on Russia for production growth. But if anyone is still wondering why there are Russian companies which can trade just four or five times their forward earnings (Gazprom itself is not far off two times)… stop. The answer was always there. The sanctions stuff may just show it was the right one.
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The 3Rs of EM investment - YouTube

The 3Rs of EM investment - YouTube:



"The Bric and Mint strategies for EM investment are based on baskets of countries. Mark Haefele of UBS Wealth Management tells John Authers why the 3Rs strategy - resilience, reform and reasonable price - may be a better framework for making investment decisions.



"



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fastFT: Dubai's $20bn debt deal lifts stock market - FT.com

fastFT: Market-moving news and views, 24 hours a day - FT.com:



"Dubai's reworked $20bn bailout deal with big brother emirate Abu Dhabi has rekindled its stock market rally, as the benchmark index heads close to the six-year high it touched last month.



The Arab world's leading commercial entrepĂ´t over the weekend reached an agreement with the central bank of the United Arab Emirates and its capital Abu Dhabi to refinance at preferential rates a $20bn bailout it received after its property market imploded in 2009.



The bond maturities were extended by five years at an interest rate of just 1 per cent, below the 4 per cent agreed in 2009 when Abu Dhabi rode to its neighbouring emirate's rescue. The deal removes about a quarter of the $80bn of debt coming due by 2017, according to IMF estimates."



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FlyDubai Putting the Squeeze on Air Arabia, Says NBK Capital - Middle East Real Time - WSJ

FlyDubai Putting the Squeeze on Air Arabia, Says NBK Capital - Middle East Real Time - WSJ:



"Competition is hotting up among low-cost carriers in the Persian Gulf desert. That’s according to analysts at NBK Capital, who say government-owned FlyDubai’s aggressive expansion is having a negative impact on publically-listed Air Arabia at its Sharjah hub.



FlyDubai and Air Arabia already overlap on 40 destinations from their respective airports, which are just a short drive away from each other. In total, Air Arabia offers 70 destinations from Sharjah International, while FlyDubai launched 17 new routes last year from Dubai International to now serve a total 66 destinations.



Air Arabia also recently added a new hub about 100 kilometers away in Ras Al Khaimah, filling a void left by RAK Airways which suspended operations in January. Low-cost carriers have grown to make up 7% of total traffic in the region, from nothing ten years ago, Boeing Co. says, illustrating the growth in the sector."



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Trader profile: Bassel Khatoun’s investment outlook on Middle East stocks | The National

Trader profile: Bassel Khatoun’s investment outlook on Middle East stocks | The National:



"Bassel Khatoun is co-head of Mena equity local asset management at Franklin Templeton Investments Middle East. Lebanese-born but raised in Britain, he joined the company in 2007 when it was Algebra Capital. He previously worked in the investment banking division of Citigroup in London.



What is the asset class and geography are you focused on?



I am focused on Mena equities which, after a year of strong returns, are an area of renewed interest among international investors. Despite the importance of the Mena region in the world economy continuing to rise, Mena equities remain a hugely under-represented asset class in global portfolios. We expect this material disconnect to change over time. In our opinion, the long-term growth potential of the region and the gradual development of its capital markets present investors with an attractive opportunity today."



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First half of Omantel share sale 1.99 times subscribed | GulfNews.com

First half of Omantel share sale 1.99 times subscribed | GulfNews.com:



"The first part of Oman’s sale of a 19 per cent stake in telecommunications operator Omantel has finished and the private placement was 1.99 times subscribed, the company said in a statement to the Muscat bourse on Sunday.



In February, state news agency ONA reported that the government would sell 142.5 million Omantel shares, reducing its holding to 51 per cent from 70 per cent.



The sale was divided into two, equal-sized parts, with the first — a private placement — aimed at wealthy individual inevstors and institutions; it required investors to place minimum orders of 2 million shares each."



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Commodities Cushioned From Crimea Crisis by Ample Supply - Bloomberg

Commodities Cushioned From Crimea Crisis by Ample Supply - Bloomberg:



"Unprecedented natural gas reserves in Europe, record global grain output and the threat of mutual economic calamity from oil sanctions are cushioning commodity prices even as the Ukraine-Russia conflict spurs a gold rally.



While U.K. gas prices, a European benchmark, rose 5.1 percent since the crisis began at the end of February, they are still the lowest for this time of year since 2010. Brent crude fell 0.7 percent. After wheat advanced 15 percent and corn 4.7 percent, both remain about a quarter below the peaks in 2010, the last time Russia and Ukraine curbed shipments. Gold reached a six-month high on March 14 as demand for a haven grew.



Abundant supply is limiting some price swings caused by Russia’s incursion into Crimea, where a majority in a disputed vote yesterday chose to join Russia, preliminary results show. Europe gets about a third of its gas from Russia, half of it through Ukraine, and about the same proportion of crude. Russia’s economy has slowed for three years, increasing its reliance on the export revenue. Sanction talks in Europe have focused on asset freezes and visa bans rather than energy."



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Emerging Currencies Drop as Crimea Vote Boosts Micex - Bloomberg

Emerging Currencies Drop as Crimea Vote Boosts Micex - Bloomberg:



"Emerging European currencies declined versus the dollar, Russian shares rose from their lowest since 2010 and wheat gained after Crimea’s disputed vote to leave Ukraine. Chinese equities climbed as the yuan dropped after the government widened the currency’s trading band.



Russia’s ruble slipped 0.2 percent as of 7:07 a.m. in London, while Hungary’s Forint retreated 0.4 percent. Futures on the Euro Stoxx 50 Index rose 0.2 percent and Standard & Poor’s 500 Index contracts were little changed. Moscow’s Micex Index climbed 1.2 percent. The yuan retreated to this month’s low of 6.1708 versus the dollar, while a measure of Chinese shares in Hong Kong added 0.2 percent. Tencent Holdings Ltd. (700), China’s biggest internet company, tumbled 2.6 percent in Hong Kong as e-commerce site Alibaba Group Holding Ltd. began work on a U.S. listing."



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