Global's GCC Weekly Market Report - May 28, 2009

Qtel Establishes $5 Billion Bond Program on London Bourse

Qatar Telecom QSC said it established a $5 billion global medium-term note program on the London Stock Exchange to fund the company’s general corporate operations, including refinancing existing debt.

“The company is holding meetings with global fixed income investors to ascertain investor interest,” the telecom operator said in a statement to the Doha bourse today.

Fitch Ratings last week assigned an “A+” rating to the bond program, while Standard & Poor’s Ratings Services assigned it an “A-” rating.END

UAE cenbank says nothing can replace the dollar

The central bank chief for the United Arab Emirates said he saw weakness in the dollar as a "temporary situation" and expressed support for the greenback, saying nothing could replace it as a reserve currency.

"There is no other currency to replace the dollar, not the euro," Central Bank Governor Sultan Nasser al-Suweidi told reporters on Sunday. "It is the currency for investment."

The comments echo those made several days earlier when Suweidi said the UAE was not diversifying its reserves away from the dollar after the country's decision to drop plans to join a Gulf Arab currency union fanned speculation it could alter its dollar peg.

Saudi Billionaire With HSBC Stake Has Accounts Frozen

Saudi Arabia’s central bank ordered the country’s banks to freeze the accounts of Maan al-Sanea, the Saudi billionaire who owns a stake in HSBC Holdings Plc, people familiar with the instructions said.

The Saudi Arabian Monetary Agency sent circulars to the legal departments of Saudi-based banks on May 28 and May 30 telling the lenders to freeze the accounts, including credit cards, of al-Sanea, his wife and four family members, according to one person who read the documents. SAMA didn’t say why it took the action, according to the person, who declined to be identified because the information is confidential.

Al-Sanea, who is chairman of the Khobar-based Saad Group, also manages The International Banking Corp. B.S.C., a unit of Ahmad Hamad Algosaibi & Brothers Co., according to an Algosaibi official who spoke on condition of anonymity. Algosaibi said last week that TIBC’s creditors weren’t paid “pending a debt restructuring exercise.” The bank has $2.2 billion of short-and medium-term debt, according to a May 16 report by Capital Intelligence, a credit analysis and ratings company.

Global's Egypt Weekly Market Report - May 28, 2009 (PDF)

PIF eyes stake in mortgage lenders

The Public Investment Fund (PIF), the Saudi finance ministry's investment vehicle, plans to take stakes of up to 40 per cent in new mortgage lenders, industry sources said on Saturday.

PIF, which is already one of the biggest investors in the Saudi stock market, said in March that it plans to venture into mortgage financing in anticipation of a mortgage law expected to come into effect this year.

The new law could open up home ownership to more of the 25 million population in the most populous Gulf Arab country, less than a third of whom currently own property.

Global financial crisis speeding up process of structural shift in Dubai

The composition of Dubai's economy will undergo a structural shift over the next few years toward sustainable long-term sectors such as transportation, healthcare, education, tourism and financial services.

The global financial crisis has speeded up this process, Dr Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC), told members of the Dubai Chamber of Commerce and Industry on Thursday.

"This shift in the relative importance of various sectors of the economy is, in fact, a central component of the Dubai Strategic Plan 2015, but it's happening more quickly than envisioned by the plan, largely due to the impact of the global crisis," said Bin Sulaiman during the Dubai Chamber's quarterly Business Breakfast, its second of 2009.

Saudi funds way ahead of Gulf peers

Saudi-focused funds dominate Zawya's top 10 best performing funds year to date. Nine out of the top ten funds are focused on the Saudi market as the Tadawul has galloped ahead of other Gulf markets, rising 23 per cent this year.

With oil rising 50 per cent this year, stocks such as Sabic (up 31 per cent), Sipchem (up 39 per cent) and Saudi Kayan (up $44 per cent) have led the way. No wonder Saudi Petrochemical Funds, managed by HSBC Saudi Arabia, has risen 46 per cent this year, making it the best performing fund in the region, tracked by Zawya.

"The performance of the HSBC Saudi Petrochemical Equity Opportunities Fund has improved over the past month due to improved performance in the Saudi petrochemical sector on the back of rising oil prices," says the fund's manager Khalid Al Judaie.

Demand for financial professionals increasing

Head hunters are reporting the first signs of hiring among banks and private equity firms in the GCC since the economic crisis hit the Gulf last autumn, although financial professionals are reportedly having to accept salaries up to 30 per cent lower than they may have commanded six months ago.

The Dubai-based recruitment firm IQ Selection, part of the global Premier Group, says inquiries from potential employers have increased by about 60 per cent in the past month.

“We’re seeing hiring happening mainly in the front office for private equity and investment banking capital markets,” said Jonathan Gould, a financial services consultant at the recruitment firm. “Before, the hiring market was a shut shop, with redundancies and rate cuts. Now, firms are coming to us with live vacancies and wanting us to supply them with talent.”

Competition to build UAE’s first nuclear reactors

“It’s going to be a very long summer,” says an executive of one of the companies short-listed for a contract to build the UAE’s first nuclear reactors.

The massive contract, due to be awarded on Sept 16, is described as one of the biggest opportunities in the global nuclear market, as it is likely to be the first in a series to build a fleet of reactors worth tens of billions of dollars over the next two decades.

A tight three-way race has emerged among consortiums of firms from four countries.

Iraq ex-trade minister arrested

Police on Saturday detained Iraq’s former trade minister in connection with graft allegations involving food rations, ordering a plane in which he was flying to Dubai to turn back, witnesses and officials said.

An Iraqi judge issued an arrest warrant for former Trade Minister Abdul Falah al-Sudany on Saturday, but he had already boarded a plane to Dubai, parliament’s anti-graft watchdog said.

A passenger travelling on the same plane as Mr Sudany said it was turned around about half an hour into the flight.

Developers changing contractors to finish projects on schedule

Image by Reza Vaziri via Flickr

Zawya reported that the construction industry is witnessing a rise in developers and consultants changing contractors or sub-contractors on projects or renegotiating contracts due to dropping prices of construction materials in Dubai.

Investors on the U-Bora Towers project in Business Bay recently said that the anticipated completion date for the project has now changed to March 31st 2010.

The Korean firm was transparent about the period of construction affected and explained in the letter to the investors that having completed the termination procedures, the company could now state that the sub contractor, Simplex Infrastructures Limited had defaulted on its contractual obligations. The situation had lead to a temporary suspension of construction activities in the course of work.

The appeal of ETF investing

Exchange-traded funds (ETF) have been the most successful financial product of the new century, and ETFs focused on the Middle East have mushroomed in just the last year to nearly a dozen that trade in New York, London and elsewhere in Europe.

ETFs are gaining adherents because they are cheap, tax efficient and transparent in their holdings and operations. They trade throughout the day, rather than only at market close, and are free of red tape such as redemption fees and rules against frequent trading. They target more asset classes than do mutual funds, including gold bullion, agricultural commodities and currencies. Hundreds of them target specific industries and sectors, allowing individuals to fine-tune their holdings.

While the US market for ETFs is the oldest, largest and most liquid, substantial trading has grown up in global bourses, particularly those of the English-speaking world. With many financial advisers counselling their expatriate clients to invest strictly in their home marketplaces, that is particularly easy to do with ETFs.

Shuaa lights the touch paper for market lift-off

It was quite a week for UAE stock markets, with all the indices heading in the right direction for once. Optimism over the two core fundamentals – property and oil prices – combined to produce a wave of positive sentiment for the first time since last autumn, and I believe this will be more than the proverbial “dead cat bounce”.

Barring major global upsets, the consensus is that energy prices will continue to strengthen for the rest of the year. Property is more uncertain, but with falls of up to 50 per cent already this year, some are beginning to see the bottom. At least one major banking institution is about to publicly “call” the property market, I hear. Brave indeed.

At the heart of last week’s surge was the UAE’s very own Shuaa Capital, which has become something of a barometer for the health of the Dubai financial community. Shuaa contributed to the optimism on DFM on three fronts: first, it produced research showing that investor confidence in the region was on the up for the first time in many months. A healthy 43 per cent of respondents thought things would improve in the next half year.

SWFs should invest locally to start projects, says banker

Sovereign wealth funds and family offices should take equity stakes in local companies to help kickstart planned projects worth US$750 billion across the Gulf, according to a senior Calyon banker.

“The use of excess liquidity by SWFs in the region ... needs to be encouraged more, that will drive more inward investment,” said Albert Momdjian, who heads Calyon’s investment banking in the Middle East and Africa.

Calyon, the investment banking arm of Crédit Agricole, considered “petrodollar recycling” one of its main pillars of growth.

Opec warns oil too high

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Opec warned oil consumers of another speculative attack on energy prices yesterday as crude oil hit a six-month high above $66, and one banker predicted a return to the $100 barrel.

Crude oil futures are poised for their largest monthly gain in a decade, having already risen 38 per cent this month, despite a bleak outlook for demand.

Abdalla el Badri, the secretary-general of Opec, said latest supply and demand trends did not support the current price.

Abu Dhabi's IPIC launches $3.5 bln loan

Abu Dhabi government-owned International Petroleum Investment Company (IPIC) has launched a $3.5 billion syndicated loan to support recent acquisitions, two banking sources close to the deal said.

It is the first major new money loan in the Gulf this year, and is expected to act as a barometer for international banks' appetite for syndicated loans in the region, the sources said.

"I think this will get the market moving... I would expect it to be successful," a senior loans banker at a European institution said. The loan is split between a one-year bridge loan A that will be refinanced by bond issues, and a two-year facility B that is extendable for a further year at lenders' discretion, the sources said.

Kefi's Saudi gold venture follows recent regulations to attract foreign mining investment

Kefi Minerals, the gold and copper explorer, announced the formation of its new minerals exploration joint venture, Gemco Limited with leading Saudi construction and investment group Abdul Rahman Saad Al-Rashid & Sons Company, (ARTAR).

Kefi is the operating partner with a 40% shareholding of GEMCO with ARTAR holding the other 60%.

ARTAR is a conglomerate investing in different sectors in Saudi Arabia such as construction, real-estate, agriculture and health care in the Kingdom of Saudi Arabia and abroad.

Why was the Industrial Revolution British?

An excellent article for those interested in Economic History.

When I first read subject line my reaction was "What?", but amazing to read how availability of cheap energy enabled British trade supremacy, centuries ago.

Could this model be replicated for OPEC members?

Brokerage Company Goes into Liquidation

The Golden Gate Securities and Brokerage Company be dissolved and liquidated, according to a decision by a judicial committee setup by official authorities in Dubai.

The company has been found guilty of committing a series of irregularities, a press release issued by Securities and Commodities Authority or SCA said. The committee was set up early this year to settle the issue legally.

Ghassan Al Saheb Public Accountants have assigned the job to carry out liquidation process under the supervision of the Securities and Commodities Authority, or SCA has asked the creditors of the firm to submit their claims to the liquidator within 45 days .

Darvesh shelves plans to invest $6bn in 40 branded projects

Darvesh Group, a Dubai-based diversified company, has shelved its plans to invest $6 billion (Dh22bn) to construct 40 branded projects across different cities in the next five years.

"We have put on hold our plans to enter the real estate market as the sector has seen a worldwide decline. Besides, banks are also not interested in funding projects. So we are investing in technologies and stable cash flow industries," Ahsan Hassan Darvesh, Managing Director, Darvesh Group, told Emirates Business.

In February 2008, the company announced the launch of Le Diamond, a property concept that it said will span the Middle East and India, in partnership with Ivana Trump.

EU Solvency II rules to alter insurance policies in UAE

Insurance companies in the UAE are gearing up to implement Solvency II capital adequacy rules approved by the European Parliament.

The rules will limit the amount of risk that insurance and reinsurance companies can undertake in relation to their capital bases. The rules are due to be implemented by 2012 and will set a new regulatory standard for insurance companies across the world. Industry sources said the rules could lead to major changes in the UAE.

Many insurance companies in the Middle East are monitored by credit rating agencies such as Moody's and Standard & Poor's. As Dubai is trying to become a global financial centre, insurance companies here are watching the Solvency II developments closely.

Dubai Duty Free sales decline by 4%

Sales at Dubai Duty Free have fallen by 4 per cent in the first five months of this year as travellers change their spending habits, an executive says.

Colm McLoughlin, the managing director of Dubai Duty Free at Dubai International Airport, said although passenger traffic had risen by 3 per cent so far this year, people were spending less.

“They are not spending as much money on luxury products as they did before and they’re spending more money on normal, run-of-the-mill items,” Mr McLoughlin said.

Russia plans LNG sales to US

Gazprom, the Russian state-controlled gas monopoly, is eyeing the US market as it seeks to build a substantial position in the global liquefied natural gas business after opening its first LNG plant in February.

The company, already the world’s biggest exporter of pipeline gas, is now aiming for “participation in the LNG world on a scale commensurate with its resource base”, Frederic Barnaud, the president and managing director of the company’s LNG trading unit, Gazprom Global LNG, told the Gastech conference in Abu Dhabi.

Gazprom sees its nascent LNG business as a strategic opportunity to diversify its export potential by accessing international markets it cannot reach by pipeline. The US is a key target because it is the biggest gas market in the world, Mr Barnaud said on the sidelines of the conference.

Kurds open oil pipelines for testing

Iraq has started exporting oil from its semi-autonomous Kurdistan region, after years of deadlock over disputed Kurdish oil contracts.

But it is still unclear how DNO International, the Norwegian firm pumping the oil, will be paid.

Asim Jihad, the Iraqi oil ministry spokesman, said Iraq had started shipping crude from Kurdistan’s Tawke field to a Turkish port on the Mediterranean.

Rera freezes accounts of several developers

The trust accounts of several major property developers have been frozen until they can prove that construction is progressing and the land has been properly registered, officials said yesterday.

The Dubai Real Estate Regulatory Authority (Rera) has frozen the escrow accounts in an effort to protect investors’ interests as the property market grapples with falling prices and a shortage of lending. By law, all money made from the sale of off-plan property must go into an escrow account, to be used solely for the construction of the property.

Marwan bin Ghalita, the chief executive of Rera, said the developers in question needed to provide technical reports detailing the progress of construction before they could withdraw money from the accounts. “There can be no withdrawal until they have completed the technical report,” he said.

Landmark penalty is corruption warning

A landmark penalty was imposed on a former sales manager yesterday, the first ruling in Dubai’s drive against corruption.

The ruling against the 32-year-old Emirati, who worked in Dubai Industrial City (DIC), includes three years’ imprisonment for taking Dh17m (US$4.63m) in illegal commissions on sales, repayment of the illegal commissions, and a Dh17m fine.

But the ruling’s toughest feature may send the loudest message: for every Dh100 he fails to pay on his fine upon his scheduled release, he faces another day in prison. AZ could face 465 years in jail if he pays none of the fine, in effect a life sentence.

Landmark penalty is corruption warning

A landmark penalty was imposed on a former sales manager yesterday, the first ruling in Dubai’s drive against corruption.

The ruling against the 32-year-old Emirati, who worked in Dubai Industrial City (DIC), includes three years’ imprisonment for taking Dh17m (US$4.63m) in illegal commissions on sales, repayment of the illegal commissions, and a Dh17m fine.

But the ruling’s toughest feature may send the loudest message: for every Dh100 he fails to pay on his fine upon his scheduled release, he faces another day in prison. AZ could face 465 years in jail if he pays none of the fine, in effect a life sentence.

Another Blow To The GCC Monetary Union: the UAE Pulls Out (Registration required. Story date 20 May, 2009)

Less than 24 hours after Dubai’s finance chief was demoted, the UAE announced its decision to withdraw from the GCC Monetary Union, putting the broader union at risk. This decision comes two weeks after a major milestone; selection of the location of the GCC Central Bank. UAE officials did not conceal their reservations about the choice of Saudi Arabia to host the institution. UAE newspapers heavily criticized the Saudis in what may have developed into a political rift.

For starters, the GCC Secretariat is already located in Saudi Arabia and other institutions in other GCC countries, and with plans to diversify the government institutions, they believed that the GCC Central Bank should be located in the UAE, given its development as one of the region’s financial hub, possibly with a presiding Saudi National.

Despite the political headlines,the GCC monetary union was already facing many hurdles and the 2010 deadline had already been abandoned, particularly as economic policies have diverged in the wake of the global and local economic crisis. Changes in the GCC policy agenda- now focusing on policy responses that would shield the GCC countries and boost growth and liquidity – took precedence over convergence and made delay more likely. Furthermore other aspects of the customs union may face delays. This decision should not come as a big surprise. Oman announced its decision not to participate several years ago. Kuwait de-pegged from the dollar in 2007 (and pegged to a dollar-dominated basket) although it vowed to join the union. The UAE’s decision to pull out, despite the fact that it was the first country to apply to host the union in 2004, versus Saudi Arabia who applied in 2008, might be a fatal blow. With only four out of six members willing to join, any potential union seems ripe for significant delays.

Temasek Considers Abu Dhabi Bid For Chartered-Sources

Chartered Semiconductor Manufacturing Ltd. (CHRTD: News ) has received a S$2.45 billion or $1.7 billion bid from Abu Dhabi's Advanced Technology Investment Co, to acquire Temasek Holdings Pte,'s near 60% stake in the chipmaker, reports said.

Advanced Technology, a technology investment company, which is wholly owned by the government of Abu Dhabi, offered to buy Chartered shares from Temasek at S$2.40 to S$2.60 apiece, reports noted.

Chartered Semiconductor in announcement said that it has not received such a bid from Advanced Technology. Reportedly, Temasek declined to comment on what they called "rumors."

Chartered reported a net loss of $98.8 million for the three-month period ended March 31 and expects to post a deficit in the current period. Chartered chips are used in Microsoft Corp.'s Xbox 360 game consoles. The company raised $300 million in April by selling shares to existing investors. Chartered slashed staff strength and cut overtime work to curtail costs.

Mohammed Bin Rashid orders not to increase government fees in Dubai

Vice President and Prime Minister of UAE and Ruler of Dubai HH Sheikh Mohammed bin Rashid Al Maktoum has ordered government departments in the emirate of Dubai not to increase any government fee. He also ordered to cut down a number of fees levied by the emirate's government by 20 to 30percentage.

The decision mirrors the Ruler's keenness for bolstering the economic competitiveness of Dubai and enhancing the governments support to the investment environment for the benefit of the community as a whole.

Based on the approval of the executive council of Dubai emirate, Sheikh Mohammed had ratified a mechanism for taxes levied for various government services as proposed by the department of finance in a just and reasonable framework. On the basis of this, Sheikh Mohammed ordered the finance department to revise various fees and tariffs levied for government services. He also ordered the finance department of the emirate to decrease certain fees which are above the required limits and not to increase any fees which are below the limits as per the mechanism.

UAE mortgage firm posts Q1 loss of $11 million

The United Arab Emirates' (UAE) mortgage firm Tamweel, the country's leading Islamic mortgage provider, said Thursday it made a net loss of 41 million dirhams ($11 million) for the first quarter of 2009 on provisions, higher funding costs and lower income from property sales.

"The negative impact of the global economic situation, which affected financial institutions and the real-estate sector in the country, continued in the first quarter of 2009," said Sheikh Khaled Bin Zayed al-Nahyan, the company's chairman.

The company made a "prudential provision of 52 million dirhams to cover any future impairment in its real-estate investment portfolio," the company said in a statement.

Credit card defaulters of the day, Dubai edition

The flipside of all those abandoned cars at Dubai airport — assets left behind by foreigners leaving the country for good — is the abandoned liabilities they’ve left behind on their credit cards:

Some UAE banks are seeing up to 2,500 customers leave the country every month without paying off their credit card bills, a number that could rise in June, a senior RAK Bank official said on Sunday…

RAK Bank recovers around a quarter of the debt that goes unpaid as a result of one of the customers leaving the country, Martin said.

I’m surprised the recovery rate in these cases is as high as 25%, frankly: chasing down debtors who live abroad is non-trivial and always expensive. But then again, I’m sure that many of the credit card balances in question are pretty enormous: as Julie Sherrier notes, Dubai is known as something of a shoppers’ paradise. If the credit card debt rises into six figures, which I’m sure it does on occasion, it’s be worth fighting for.END

Qatar to buy $4.1bn in real estate from banks

Qatar has offered to buy real estate investments worth up to $4.1bn from local banks, as the government steps up efforts to support the domestic financial sector against the fallout from the credit crunch.

Though Qatar's property sector is healthier than in many other Gulf countries, the market has weakened this year, and analysts expect non-performing loans to rise, weighing on banks' earnings.

The operation aims to "support the real estate sector . . . and allow banks to continue to play their vital role" in the country's development, Sheikh Hamad bin Jassem al-Thani, Qatari prime minister said yesterday. Qatar's abundant wealth - it is the world's largest supplier of liquefied natural gas - has allowed it to actively support its banks and wider economy during the financial crisis

Dubai former minister is acquitted of fraud

Dubai's appeal court yesterday overturned the fraud conviction of a former minister for allegedly embezzling assets from his business partner.

Khalifa Bakheet al-Falasi, whose sentence to two years in prison in February was seen as a signal that officials would be held accountable, was welcomed by his supporters within the United Arab Emirates who had always maintained his innocence.

The UAE president removed Mr Falasi last year from his cabinet post when Dubai authorities decided to try the minister in a criminal court.

Dubai Cutting Taxes And Fees To Lure Investment Amid Slump

Dubai's ruler has frozen taxes on some services and ordered others be slashed by 20%-30% in a bid to encourage investment in the Gulf emirate, which has been seriously hit by the global financial crisis.

Under the measure, announced by the official Wam news agency, Sheikh Mohammad bin Rashed al-Maktoum ordered that no fees be increased.

Taxes to be cut include fees for the issuance and renewal of trade and professional licences, licences for business promotions, property ownership certificates, and for converting buildings into hotels or serviced apartments and remodeling commercial buildings.

Bank Muscat (BM) - Result Update - May 2009 (PDF)

Malaysia's MMC says Dubai World reviews oil project

Malaysia's MMC Corp (MMCB.KL) said on Thursday its partner Dubai World was reassessing a plan to jointly build a multi-billion ringgit petroleum hub in the Southeast Asian nation.

"Dubai World is currently assessing options with respect to their interest in the maritime centre masterplan ....given the current economic situation in Dubai," said MMC in a filing with the stock exchange.

MMC in 2007 said the cost of the maritime centre project, which will include a petroleum and industrial zone, was estimated at 16 billion ringgit ($4.56 billion).

Dubai World is the investment arm of the Dubai government.

($1=3.512 Malaysian Ringgit)END

UAE court clears ex-minister of fraud

A former United Arab Emirates cabinet minister was acquitted on Thursday of fraud after he appealed a jail sentence handed earlier this year, his lawyer said.

Former state minister Khalifa Bakhit al-Falasi was sentenced to two years in prison in February for taking control of a software company after his Lebanese partner died.

A Dubai appeals court also acquitted two co-defendants -- a US citizen and an Indian citizen -- lawyer Hussein al-Jaziri told AFP.

Falasi had been stripped of his post in July on the orders of UAE President Sheikh Khalifa bin Zayed al-Nahayan, amid a crackdown on corruption in the business hub of Dubai.END

Q+A-Why is Malaysia Port Klang scandal important?

Malaysia's government is to unveil later on Thursday an independent auditors report into the construction of a free trade zone in Port Klang, a project aimed at boosting capacity in the port.

What started off as a 1.8 billion Malaysian ringgit ($516.2 million) project has ballooned into one which could cost more than 10 billion ringgit following an acrimonious pullout by the project's Dubai-based international partner.

The issue raises the question of risk foreign investors face when doing business in Malaysia. It has been used to attack the integrity of the government by the opposition at a time when Malaysia's new prime minister is still reeling from losses in the 2008 general election.

North Africa currency baskets (PDF)

Standard Chartered Bank introduces its baskets for the North African currencies

Egypt basket is targeted within a +/- 2.5% trading band

Morocco and Tunisia shifted to different baskets in September/October 2008

Algeria appears to be targeting its currency versus oil

The SCB India Chartbook - Q2-2009 (PDF)

1. GDP
2. Inflation
3. Money and liquidity
4. Fiscal health
5. GoISec market
6. Balance of payments
7. INR
8. Politics

Former Deyaar CEO's lawyer seeks transfer of case to criminal court

The lawyer of Deyaar's former CEO has requested that his client's case be transferred from the Dubai Misdemeanours Court to the Dubai Criminal Court of First Instance.

"My 43-year-old American client, Z.S., Deyaar's former CEO, is being prosecuted along [with] eight other suspects before the Dubai Misdemeanours Court and concurrently he is being prosecuted over the same matter in the Dubai Court of First Instance.

"I ask the court to detach him individually and refer him to the criminal court where he is currently being prosecuted in another case of alleged financial irregularities but the same subject," lawyer Ali Abdullah Al Shamsi argued when he addressed Presiding Judge Rifaat Mahmoud Tulba at the Dubai Misdemeanours Court.

UAE to revise plans for gas expansion

The UAE is facing a severe gas supply shortage and an expected deterioration in the crisis could force it to revise plans to expand its LNG production, an Abu Dhabi gas official warned yesterday.

Despite a steady rise in domestic gas output, the shortage has widened over the past few years because of a surge in domestic consumption, prompting some power plants to use costlier diesel fuel, said Hamed Al Marzouqi, acting head of the market research at Abu Dhabi Gas Liquefaction Company (Adgas).

"The UAE faces a severe shortage of gas and the effects of the coming crisis are already being felt," Marzouqi told the Gastech conference in Abu Dhabi.

Salama in tie-up to offer three Islamic funds

Salama, the world's largest takaful and re-takaful group, has tied up with Crédit Agricolé Asset Management (Caam) Group to offer a bouquet of Shariah-compliant funds to investors.

The three Islamic funds are Bric (Brazil, Russia, India and China) quantitative fund, an active Asian equities ex-Japan and a Global Equity fund of Islamic funds.

The funds give investors the opportunity to diversify their equity asset allocation through different investment processes (quantitative, active and multi-management) or country exposure (Bric, Asia ex-Japan, Global Equities).

'Economy has not hit bottom'

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The world economy has not bottomed out yet, China's central bank said in a report yesterday.

It said China's government, which has allocated four trillion yuan (Dh2.1trn) in fiscal stimulus to restore economic growth, will emphasise domestic consumption as a long-term strategy.

The People's Bank of China will ensure there's ample financial liquidity to fund investments in the country, the People's Bank of China said yesterday in its 2008 report on regional economies.

Sukuk price sees 29% increase

The average price of GCC corporate Islamic bonds, or sukuk, has jumped by a dramatic 29 per cent since the market reached its trough in February, a reflection that confidence in the Gulf is recovering fast, international law firm Trowers & Hamlins said yesterday.

In comparison, the average price of US corporate bonds remained virtually unchanged (falling two per cent) over the same period.

"Since the market's darkest day on February 11, the average yield on corporate GCC sukuk has fallen from 17.2 to 10.1 per cent and the average credit spread over the London interbank offer rate has narrowed from 1,414 to 751 basis points," the firm said.

Dewa seals significant $1b credit facility deal

Dubai Electricity & Water Authority (Dewa) has successfully closed a $1 billion Export Credit Agency (ECA) backed financing deal in support of its ongoing and future capital expansion.

The financing - arranged by Calyon, Citi, Deutsche Bank & HSBC - has a maturity of 13 years and is supported by comprehensive guarantees from European ECAs Coface, Hermes and SACE for contracts awarded to the French, German and Italian suppliers.

This is the first major ECA financing for a sovereign in the UAE and as such carries a high profile.

Investment Dar files complaint

Investment Dar, the Kuwait-based investment firm that owns half of Aston Martin, says it has filed a criminal complaint against the Commercial Bank of Kuwait after a dispute over the ownership of a stake in Boubyan Bank.

In December, Investment Dar sold its 19.2 per cent stake in Boubyan Bank to the Commercial Bank of Kuwait, the second-largest lender in the country, for 94.1 million Kuwaiti dinars (Dh1.19 billion).

The sale agreement, which was approved by the Central Bank of Kuwait, gave Investment Dar the option to buy back the shares later.

Capital’s hotels feel strain

Abu Dhabi’s hotels are starting to feel the strain of the global financial crisis and weaker tourism demand, with last month’s room revenues falling for the first time in more than a year, according to data.

Figures from STR Global show revenue per available room (RevPAR) in the capital declined by 6.9 per cent to $249.43 last month, down from $267.90 in April last year. Occupancy levels also fell to 80.3 per cent, down from 88 per cent in April last year. But average room rates in Abu Dhabi were up 2 per cent to $310.56.

“The feeder markets really have absolutely slowed right down,” said Rob O’Hanlon, a partner at Deloitte Tourism, Hospitality and Leisure. “The majority of markets are actually feeling that and Abu Dhabi is getting its share.”

French footprints, Xtreme chicken and corporate dead wood

So much to rant about, so little space. The first order of business is to point out with a mixture of elation and anxiety the implications of France’s new, enlarged military and artistic footprint in Abu Dhabi. On one hand, it will be a true joy to expand the French connection in the UAE’s increasingly cosmopolitan urban landscape: it may finally be possible, for example, to get a halfway decent pain au chocolat along with one’s daily naan. And while one may be justifiably sceptical about the deterrent factor of a Ligne Maginot in the Gulf, it will doubtless help alleviate one of the long-standing concerns of investors to know that an attack on the UAE is an attack on France. On the other hand, this does virtually guarantee a mini-invasion of Francophones vying with the SUVs for sidewalks on which to park their Peugeots and Citroens. They’ll doubtless complain that the malls should be open air, rather than air conditioned. It seems only a matter of time, moreover, before this column is published entirely in French.

Oh well, c’est la crise. If the Anglo-American economic model wasn’t so tattered, it might well have been Barack Obama, the US president, or Gordon Brown, the UK prime minister, standing in Mina Zayed port this week. Speaking of which, this week’s column was originally intended to be written live at the Dubai-based Institute for Corporate Governance (Hawkamah) symposium on insolvency laws and creditor rights systems in the MENA region, held yesterday at the Hilton in Abu Dhabi.

Unfortunately, composing a column on-site for a modern newspaper requires wireless internet access, a convenience that the Hilton’s business centre deems to be worth more than Dh200 (US$54.45) in value. While this may be true under the circumstances, this columnist refuses to pay high fees for something that in decent hotels has become as commonplace as lights and running water. Charging hotel visitors for Wi-Fi these days is like charging them to use the toilets. The Hilton’s management, for the record, apologised, explaining that the fees were imposed by a third-party company that runs the hotel’s business centre.

Trump Tower delayed indefinitely

Work on the Trump International Hotel and Tower project has been suspended indefinitely.

Nakheel, which was developing the project, first called a halt at the end of last year.
The Al Habtoor Leighton Group has spent the past few months making the site safe and preparing it for a possible resumption of work, according to David Savage, the managing director, but it is not known when the project will resume.

“Initially they thought it would be six to 12 months, but the honest answer’s going to depend on what happens in the market,” Mr Savage said Wednesday. “It’s a high-end product, so it’s got quite an unusual market.”

OPEC gears for global recovery

Image via Wikipedia

OPEC is relying on a recovery in the world economy to wipe out an overhang of oil supply, allowing ministers at a policy meeting today to hold back from any more output cuts.

Oil prices have almost doubled since hitting a low of US$32.40 in December, reaching a six-month high of $63.45 a barrel on the New York Mercantile Exchange today.

The Saudi Arabian oil minister, Ali al Naimi, said the higher prices reflected expectations of a recovery.

Faith in property market a tough sell

Four multimillion-dirham properties in Dubai that went under the hammer this week failed to sell, providing further evidence that the UAE’s appetite for new homes is still subdued.

Only nine people registered to take part in Tuesday night’s auction for three villas in Arabian Ranches and a penthouse in Jumeirah Beach Residences. Of those, only three actually entered bids, all of which failed to meet the properties’ reserve prices.

The public auction at Al Murooj Rotana Hotel was a first for Madania Real Estate and attracted a crowd of more than 100 people.

EU warns UAE over fraudulent exports

The EU has threatened to withdraw special trade privileges from the UAE unless the country reduces the number of goods sent to Europe with fraudulent paperwork.

As an emerging market, the UAE is a beneficiary of tariff-free imports under the EU’s General System of Preferences (GSP). That offers Emirati businesses an easier path into the European markets, as exported goods can be exempt from tariffs for up to 60 per cent of the items’ value.

But EU officials say the UAE and Malaysia have been identified as significant sources of improperly exported goods, raising concerns about organised crime networks, revenue losses and the country’s reputation as a reliable trading partner.

The State of Real Estate Around the World: No Signs of Stabilization? (Registration required)

Today we take a look at the health of residential and commercial property markets around the world. Slowing economic activity and a credit crunch contributed to a decline in housing activity, prices and construction in most major economies. Eastern Europe and the Baltics, as well as the U.S. and UK, have endured some of the sharpest declines. In many countries, not only in the U.S., the bottom of the property markets still seems far off, with sales, prices and starts forecast to continue declining, albeit at a slower pace, through much of 2009.

In fact, many European economies (and Canada) tend to have housing cycles that lag behind the U.S. by about 2-3 years, suggesting that their declines could also persist beyond a U.S. housing stabilization. Sounder lending standards and lower incentives to invest in residential property in some countries may allow them to avoid the depths of the U.S. property correction but others may suffer more severely. The liquidity resulting from quantitative easing has contributed to a slower deterioration of the housing markets. Yet with high inventories in many markets, it may take some time to absorb the excess. This will continue to erode the value of asset-backed securities and banks' balance sheets and defer the revival of construction activity, a major driver of growth.

The decline in retail trade and contraction of the financial sector has worsened the commercial property outlook. Commercial vacancy rates are on the rise in almost all major centers in Europe and North America and net effective rates have declined by 25-30% in major cities in Asia, suggesting that new investment is unlikely as these cities try to absorb overcapacity in retail and hotel trade. Meanwhile, still tight corporate debt markets pose obstacles for corporate finance. Despite the weak fundamentals, REITs and other property investments have benefited from the renewed risk appetite and have been climbing off late. These property investments might well be vulnerable to any reversal of risk appetite.

UAE hosts 89% of inter-Gulf investments

The UAE ranks first among Gulf countries in attracting inter-Gulf investments, according to an economist.

The United Arab Emirates is receiving 89% of the total inter-Gulf investments of which Saudi Arabia exports 90%, said Assistant Secretary General of Saudi Council of Chambers of Trade and Industry Ibrahim Al Qernas at the "Economic Integration among Gulf countries" meeting in Riyadh.

"Financial openness of member countries of the Gulf Cooperation Council vary", he said noting that banks are not playing an active role in the process of economic integration among members of the bloc.

On his part, dean of the King Abdullah Center for Studies and Research Dr Hamad Al-Al Sheikh said foreign assets in Gulf countries are estimated at US$ 1 trillion the majority of which are low-return US government bonds.

UAE businessman set to buy Portsmouth

A United Arab Emirates businessman is to buy Portsmouth -- the Premier League club said on Wednesday.

Dr Sulaiman Al Fahim, the man behind the Abu Dhabi United Group takeover of Manchester City, was revealed as the purchaser on the club's official Web site.

"Portsmouth FC can confirm that it has accepted an offer from Dr Sulaiman Al Fahim to buy the club," said a statement.

Palestinian bourse takes to the road

The Palestinian Securities Exchange has launched a drive to attract more capital from foreign investors and raise the international profile of what remains one of the smallest stock markets in the Arab world.

The campaign is aimed primarily at Palestinian diaspora communities around the world and Gulf investors.

Both groups enjoy close economic ties with the Palestinian territories, and PSE executives hope they can be persuaded to deepen their commitment by investing in companies listed on the West Bank-based exchange.

Opinion: UAE ‘Dutch disease’ offers lesson

“Dutch disease”, rather than a blight afflicting trees or a human illness, refers to the problems the Netherlands faced in the 1960s when its economy slumped after the discovery of natural gas.

One might think such a bonanza would be entirely beneficial but economists have observed that a boom in the resource sector usually leads to a real appreciation in the currency, either through higher inflation or a stronger currency (or both). This typically damages the competitiveness of other sectors and deprives non-resource sectors of necessary investment.

In addition, when countries become overly reliant on the resource sector, which is capital intensive, they often neglect human capital – investing in fields such as education. As a result, resource-rich countries often find themselves underperforming countries such as Singapore and Hong Kong that have no natural resources.

Women chip away at barriers to advancement

Image by AFP/Getty Images via Daylife

Khulood al-Atiyat, a 21-year-old student born and raised in Dubai, does not see any barriers in front of her career goals: to set up her own tour agency.

She believes the drive by Dubai’s leadership over the years to open opportunities to women in the emirate has led to a sea change among Emiratis in their late 40s and below. Gone are the days when families in the United Arab Emirates would universally call on their daughters to find a husband and make a home once they had finished their schooling.

Ms Atiyat says the shift has come as Emiratis become more outward looking, thanks to travel and living among a population in which the majority are expatriates – especially in Dubai, where foreigners form more than 80 per cent of the population.

Kurdish exports resume despite Iraq impasse

For the past two years, foreign oil companies working in Kurdistan have had their hands tied. They have not been able to export their oil and have limited their development in the region. That could be set to change this weekend.

Kurdish oil is expected to start flowing through a pipeline that runs from Iraq through Kurdistan to Turkey and on to wider export markets.

Iraq’s oil ministry said yesterday it would start exports from fields in the country’s largely autonomous Kurdistan region on Sunday at an initial rate of 10,000 barrels per day.

Saudi family groups feel the pain

Image by ▌ÇP▐ via Flickr

It wasn't supposed to be this way. Ahmad Hamad Algosaibi & Brothers Company is one of the oldest and most respected family-owned conglomerates in Saudi Arabia. It was a group that could borrow on reputation alone, with a son of its founder on Forbes' world rich list.

But since one of its wholly owned subsidiaries, The International Banking Corporation (TIBC), defaulted on financial obligations to other banks this month it has sent jitters across the market.

The Algosaibi group has not responded to several requests for comment. But the fact that one of its subsidiaries defaulted has raised broader questions about the state of the oil-rich Gulf's secretive family-run businesses as they grapple with the downturn. The concern is that some may have overextended during the boom years, which saw Gulf states accumulate huge petrodollar reserves and fuelled rapid expansion, and are beginning to pay the price.

Dubai Fountain (You Tube)

Dream jobs dwindle for Australians in Dubai

DUBAI'S dream jobs have evaporated and hopes of making quick riches have been replaced by an air of fear and loathing following the arrest of several Australians this year.

Five months after taking on a job in a large Dubai property group, a Sydney property specialist has returned to Sydney as promises made during the interview disappeared the day he arrived in Dubai.

"The project for which I was hired to develop was cancelled due to the credit crunch," said the executive, who declined to be named.

Nakheel Gets Funds From Govt Of Dubai, Plans Bill Payments

Dubai-based real estate giant Nakheel PJSC said Wednesday it has received funds from the government of Dubai, without specifying the amount.

"Some of the funds will be used for payments to contractors," Dubai's Palm Island builder said in a statement on Nasdaq Dubai's Web site, adding that the "amount, terms and use of all the funds remain under discussion".

The company is at the center of growing concerns over Dubai's ability to repay billions of dollars in debt and is entangled in a growing number of disputes over unpaid bills to foreign contractors.END

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• Mandelson called in to help recoup £400m Dubai debt (telegraph.co.uk)

Saudi Stock Market Weekly Report - 27-May-2009

Developers offer part ownership as distressed property sales rise in UAE

A failed property auction this week in Dubai shows that the market is not yet on red alert, although developers are keen to look at new ways of improving their cash flow.

The funding shortfall in the market may require an increasing number of private and single-tower developers to offer part ownership options to investors in their projects, according to some experts.

A few developers in Dubai such as Cirrus Developments are offering unit purchasers the option of becoming a shareholder in the project. In March, Cirrus presented a restructuring proposal to the purchasers of Aquarius Gate project, which will convert their status from "unit purchasers" to "shareholders" in new project company.

Senior leaders from Gulf region and institutional investors meet at SHUAA GCC Investor Conference in London

SHUAA Capital, the GCC's leading financial services institution, today announced the start of its first two-day GCC Investor Conference in London.

The SHUAA GCC Investor Conference brings together senior business leaders from 17 leading GCC companies with over 200 international investors to talk about each company’s investment case and equity story and discuss the theme of the fundamental strengths of the GCC economies and equity markets.

The event will start with keynote speeches and panel sessions with participants including: HH Sheikh Khaled bin Zayed Al Nahyan, Chairman, Bin Zayed Group, UAE; HH Sheikha Hanadi Al Thani, Chairperson, Amwal Investment Co, Qatar; Abdulrahman Alsufiyani, Vice President SAGIA Funds Initiative, Regional Development, Saudi Arabia; Husam Hourani, Managing Partner, Tamimi & Co; Tom Healy, CEO, Abu Dhabi Stock Exchange; Abdullah Bin Saleh Al Suweilmi, CEO, Saudi Stock Exchange (Tadawul); and; Kito de Boer, Director, Middle East North Africa, McKinsey & Company.