The United Arab Emirates central bank said on Wednesday it would form a committee with bank officials, its latest move to deal with the challenges posed by global financial turmoil.
Most Gulf Arab countries have sought to ease tight liquidity and prop up sagging investor confidence with an array of policy steps since the global credit crisis deepened in late September.
Last month, the UAE central bank bought $10 billion in Dubai government bonds to give state-linked firms in the former Gulf Arab boomtown access to cash to settle debts as they face a real estate slump.
Wednesday 4 March 2009
UAE federal govt says to move to 3-year budgets
ABU DHABI, March 4 (Reuters) - The United Arab Emirates said on Wednesday it was revamping the way it develops its federal budget, including releasing budgets every three years and adopting a "zero-based budgeting" format.
The first three-year budget would run from 2011 to 2013, and the draft would be ready by November this year, the oil exporter's Ministry of Finance said. Analysts deemed the move as more appropriate to help the country prioritise spending.
The UAE, a federation of seven emirates including Abu Dhabi and Dubai, currently releases budgets every year and uses an incremental budgeting process. Each emirate, meanwhile, devises its own budget.
The first three-year budget would run from 2011 to 2013, and the draft would be ready by November this year, the oil exporter's Ministry of Finance said. Analysts deemed the move as more appropriate to help the country prioritise spending.
The UAE, a federation of seven emirates including Abu Dhabi and Dubai, currently releases budgets every year and uses an incremental budgeting process. Each emirate, meanwhile, devises its own budget.
Abigail Hofman: Schadenfreude, thy name is credit crunch(Registration required)
Eighteen months ago, the chief executives of major financial firms were revered. We envied their elevated status – the jets, the bodyguards, the limousines and the layers of gatekeepers. Now these men are reduced to squirming schoolchildren who’ve been caught stealing from the communal cookie jar.
Tadawul/Saudi Arabia Stock Market Monthly Report February 2009
Yearly Percentage Change: -56.8%
Daily Volume (In '000 shares)
Daily Volume (In '000 shares)
Gulf Liquidity: Shifting Petrodollar Assets (Registration required)
GCC Foreign Exchange Reserves, Stocks ($ thousand)
The UAE central bank reserves fell to just under $35 billion at the end of November (the most recent available data.) That represents a decline of about $6 billion in the month of November and an average decline of $5 billion a month since July. The reduction in UAE central bank reserves came significantly before the central bank agreed to buy $10 billion of bonds issued by Dubai last week and even before it stepped up dollar/dirham swaps in December in its effort to provide new liquidity to the banks.
The UAE isn’t the only central bank in the region reporting a decline in reserve holdings. Qatar’s reserves have fallen by a third from March to December 2008 and Oman’s slightly less. (see above). But the UAE does account for most of the change in the GCC reserves (excluding Saudi Arabia whose central bank has a large stock of nonreserve assets). Ex Saudi Arabia, GCC central bank reserves almost halved from March to December 2008, falling from $125 billion to around $70 billion. Just as it registered the sharpest increase in reserves in 2007 and early 2008 when GCC revaluation bets were in vogue, the UAE has witnessed the sharpest outflows. UAE reserves are now almost 2/3 lower than they were at the peak in February.
The UAE central bank reserves fell to just under $35 billion at the end of November (the most recent available data.) That represents a decline of about $6 billion in the month of November and an average decline of $5 billion a month since July. The reduction in UAE central bank reserves came significantly before the central bank agreed to buy $10 billion of bonds issued by Dubai last week and even before it stepped up dollar/dirham swaps in December in its effort to provide new liquidity to the banks.
The UAE isn’t the only central bank in the region reporting a decline in reserve holdings. Qatar’s reserves have fallen by a third from March to December 2008 and Oman’s slightly less. (see above). But the UAE does account for most of the change in the GCC reserves (excluding Saudi Arabia whose central bank has a large stock of nonreserve assets). Ex Saudi Arabia, GCC central bank reserves almost halved from March to December 2008, falling from $125 billion to around $70 billion. Just as it registered the sharpest increase in reserves in 2007 and early 2008 when GCC revaluation bets were in vogue, the UAE has witnessed the sharpest outflows. UAE reserves are now almost 2/3 lower than they were at the peak in February.
Palestine Securities Exchange Performance 2008
"In continuation of Global Investment House coverage on the Palestine Securities Exchange, we have come out with Palestine Securities Exchange Performance 2008.
What was once regarded as a limitation for the Palestinian economy turned out to be its saving grace in 2008, as the Palestinian Securities Exchange (PSE) was able to ward off the devastating effects of the global financial crisis in the year 2008. With Palestine being a relatively closed and small economy, its exposure to foreign financial markets was rather limited. Furthermore, PSE exhibited resilience midst the mounting political instability and
the grinding poverty in the West Bank and Gaza. Nonetheless, the PSE saw Al Quds Index shedding 16.2% in 2008 from its level in the previous year, unfazed by the sharp declines in regional bourses. The index reached a peak of 738.7 pts in April 2008, with an increase of 40.4%. However, troubled by the ongoing political turmoil in the Palestinian Territories and with the advent of the global financial crisis, the PSE began to witness some strain in its share prices and reached its lowest level of 407.3 pts on November 26, 2008 before recovering some of its losses toward the year-end to close at 441.7 pts, falling by 28.4% in the last three month of the year alone. The year 2008 witnessed a large increase in the total number of traded shares where 339.2 million shares exchanged hands, up by 13.3% from the 2007 level of 299.4 million shares. The value of traded shares increased by more than one fold reaching JD1.2 billion compared to JD576.4 million in 2008.
In order to view the full report, kindly click on the headline."
What was once regarded as a limitation for the Palestinian economy turned out to be its saving grace in 2008, as the Palestinian Securities Exchange (PSE) was able to ward off the devastating effects of the global financial crisis in the year 2008. With Palestine being a relatively closed and small economy, its exposure to foreign financial markets was rather limited. Furthermore, PSE exhibited resilience midst the mounting political instability and
the grinding poverty in the West Bank and Gaza. Nonetheless, the PSE saw Al Quds Index shedding 16.2% in 2008 from its level in the previous year, unfazed by the sharp declines in regional bourses. The index reached a peak of 738.7 pts in April 2008, with an increase of 40.4%. However, troubled by the ongoing political turmoil in the Palestinian Territories and with the advent of the global financial crisis, the PSE began to witness some strain in its share prices and reached its lowest level of 407.3 pts on November 26, 2008 before recovering some of its losses toward the year-end to close at 441.7 pts, falling by 28.4% in the last three month of the year alone. The year 2008 witnessed a large increase in the total number of traded shares where 339.2 million shares exchanged hands, up by 13.3% from the 2007 level of 299.4 million shares. The value of traded shares increased by more than one fold reaching JD1.2 billion compared to JD576.4 million in 2008.
In order to view the full report, kindly click on the headline."
Kuwait: Note scandal forces financial panel head to step aside
KUWAIT: The head of the National Assembly's financial and economic affairs committee MP Abdulwahed Al-Awadhi said he will no longer take part in the debate of the economic stimulus bill after a note he wrote to the finance minister turned into a scandal. Al-Qabas newspaper published the note on its front page yesterday, saying it was sent by Awadhi to the finance minister during the committee meeting on Sunday that discussed amendments proposed by the Popular Action Bloc to the stimulus bill.
The note reads: "Cool down. We have worked to destroy the amendments. Behave in a nice way".
Awadhi admitted that he wrote the note and issued an apology, but added that he had "unintentionally misused" the word and that he only intended to create a proper atmosphere for the discussion of the bill. The lawmaker said from now on he will not attend the committee meetings while it discusses the bill in a bid to show that he did not intend anything wrong.
The note reads: "Cool down. We have worked to destroy the amendments. Behave in a nice way".
Awadhi admitted that he wrote the note and issued an apology, but added that he had "unintentionally misused" the word and that he only intended to create a proper atmosphere for the discussion of the bill. The lawmaker said from now on he will not attend the committee meetings while it discusses the bill in a bid to show that he did not intend anything wrong.
Banks face maturing debt
Several leading UAE banks will be required to settle substantial amounts of debt during this year even as unfavourable conditions remain on the deposit front, the financials of these institutions reveal.
Though the UAE Central Bank governor recently said only 15 per cent of the bank's Dh50 billion liquidity support facility has been availed of by the banks so far – thus negating a liquidity crunch in the system – most banks feel that a liquidity squeeze still poses a challenge to their functioning.
A report by the directors of RAK Bank unambiguously stated that despite the Finance Ministry's Dh70bn deposit programme, as well as the Central Bank's Dh50bn liquidity injection initiative, the market situation still remains a concern for the banks.
Though the UAE Central Bank governor recently said only 15 per cent of the bank's Dh50 billion liquidity support facility has been availed of by the banks so far – thus negating a liquidity crunch in the system – most banks feel that a liquidity squeeze still poses a challenge to their functioning.
A report by the directors of RAK Bank unambiguously stated that despite the Finance Ministry's Dh70bn deposit programme, as well as the Central Bank's Dh50bn liquidity injection initiative, the market situation still remains a concern for the banks.
ADX to list ETF in April, start trading derivatives this year
The Abu Dhabi Securities Exchange (ADX) would list its first exchange-traded fund (ETF) in April within a long-term strategy to diversify investments and turn itself into a global market, its Chief Executive Tom Healy said.
But Healy said he believed the UAE bourses would not recover from one of their worst periods unless global markets begin to improve and banking liquidity returns to its pre-crisis levels.
He also expected ADX to begin trading in derivatives before the end of this year. Relevant procedures and regulations have almost been completed, he told Emirates Business at the Abu Dhabi Economic Forum.
But Healy said he believed the UAE bourses would not recover from one of their worst periods unless global markets begin to improve and banking liquidity returns to its pre-crisis levels.
He also expected ADX to begin trading in derivatives before the end of this year. Relevant procedures and regulations have almost been completed, he told Emirates Business at the Abu Dhabi Economic Forum.
Doha Bank assets up 30%
Doha Bank yesterday said assets rose 30 per cent from QAR30 billion (Dh30.2bn) in 2007 to QAR39bn in 2008, resulting in a net profit of QAR946.5 million.
Loans and advances grew 25 per cent from QAR19.2bn in 2007 to QAR24bn in 2008. Customer deposits grew 16 per cent as total deposits rose from QAR20bn in 2007 to QAR23.3bn in 2008, the banks said in a statement.
Shareholders' equity grew 36 per cent from QAR3.6bn in 2007 to QAR4.9bn in 2008. Return on average shareholders' equity and the return on average assets rose by 25.78 and 2.74 per cent respectively. The board has proposed a cash dividend of five per share or 50 per cent of the paid-up capital.
Loans and advances grew 25 per cent from QAR19.2bn in 2007 to QAR24bn in 2008. Customer deposits grew 16 per cent as total deposits rose from QAR20bn in 2007 to QAR23.3bn in 2008, the banks said in a statement.
Shareholders' equity grew 36 per cent from QAR3.6bn in 2007 to QAR4.9bn in 2008. Return on average shareholders' equity and the return on average assets rose by 25.78 and 2.74 per cent respectively. The board has proposed a cash dividend of five per share or 50 per cent of the paid-up capital.
$20bn bond enough to meet refinancing needs: StanChart
The issuance of the first tranche of a $20 billion (Dh73bn) bond by Dubai Government should be sufficient to meet the emirate's refinancing needs this year and lend stability to the economy over that time, Standard Chartered bank said in a research note yesterday.
"Yet, we believe more direct measures to improve liquidity need to be taken. The gap between bank deposits and loans at the end of January showed a need for over Dh100bn. This gap needs to be bridged in order for the advance-to-deposit ratio to drop and allow banks to resume lending," the bank said.
Last week the Dubai Government issued a $20bn long-term bond programme, selling the first half to the UAE Central Bank. Standard Chartered view reinforces what UAE Economy Minister Sultan bin Saeed Al Mansouri said at the Abu Dhabi Economic Forum on Monday that government measures taken so far should be sufficient to stabilise Dubai's economy for at least nine months.
"Yet, we believe more direct measures to improve liquidity need to be taken. The gap between bank deposits and loans at the end of January showed a need for over Dh100bn. This gap needs to be bridged in order for the advance-to-deposit ratio to drop and allow banks to resume lending," the bank said.
Last week the Dubai Government issued a $20bn long-term bond programme, selling the first half to the UAE Central Bank. Standard Chartered view reinforces what UAE Economy Minister Sultan bin Saeed Al Mansouri said at the Abu Dhabi Economic Forum on Monday that government measures taken so far should be sufficient to stabilise Dubai's economy for at least nine months.
Jafza Americas to be part of $700m project
Jafza Americas, a subsidiary of Dubai-based Economic Zones World, is being cast as the cornerstone behind an ambitious $700 million (Dh2.5 billion) plan to restore South Carolina's place in the global supply chain.
The proposal was outlined in a white paper distributed to members of the US Congress and the White House Office of Intergovernmental Affairs by the Orangeburg County Development Commission (OCDC) last week.
It calls for the creation of a new freight rail shuttle service between Charleston and Orangeburg, where containers would then flow in all directions from a planned 61-acre intermodal yard on Jafza's property.
The proposal was outlined in a white paper distributed to members of the US Congress and the White House Office of Intergovernmental Affairs by the Orangeburg County Development Commission (OCDC) last week.
It calls for the creation of a new freight rail shuttle service between Charleston and Orangeburg, where containers would then flow in all directions from a planned 61-acre intermodal yard on Jafza's property.
The odyssey of John Laing Homes
Emerging from several days of negotiations at a seaside resort in San Diego, California, Mohammed Ali Alabbar was exuberant.
In one fell swoop, the chief executive of Emaar Properties had bought a major US homebuilder and transformed his company into the world’s largest property developer.
“This agreement will provide Emaar with an important gateway into the US real estate market,” he said in June 2006, announcing that Emaar had acquired John Laing Homes for US$1.05bn (Dh3.85bn).
Dubai World Trade Centre work delayed
Construction work on the first phase of the Dubai World Trade Centre District project has been slowed as the developer focuses on expanding exhibition space at the Dubai International Convention and Exhibition Centre.
The delay means the delivery of the first office buildings at the business hub, which will include seven office buildings, two hotels and retail outlets, will be about nine months late.
“As our immediate focus is on the construction of our new exhibition halls in order to meet regional MICE industry demands, we have pushed back our build programme for our Dubai Trade Centre District project, and completion of the first office buildings in phase one of the district is expected by the end of quarter three in 2011,” a spokesman for Dubai World Trade Centre (DWTC) said in a statement.
The delay means the delivery of the first office buildings at the business hub, which will include seven office buildings, two hotels and retail outlets, will be about nine months late.
“As our immediate focus is on the construction of our new exhibition halls in order to meet regional MICE industry demands, we have pushed back our build programme for our Dubai Trade Centre District project, and completion of the first office buildings in phase one of the district is expected by the end of quarter three in 2011,” a spokesman for Dubai World Trade Centre (DWTC) said in a statement.
Mubadala raises AMD stake
Mubadala Development has finalised a deal with Advanced Micro Devices (AMD) to take control of its semiconductor manufacturing operations and raise the state-owned firm’s stake in the company.
Advanced Technology Investment Company (ATIC), a unit of Mubadala, is now a 66 per cent owner of The Foundry Company, which manufactures microchips for AMD.
Mubadala also raised its stake substantially with an investment of US$125 million (Dh459.1m) in AMD, which has been hard hit by the drop in demand for computers. AMD’s stock price has dropped 71 per cent since June.
“The business case has not changed. This is a long-term investment in a cyclical industry,” said Waleed al Muhairi, the chief operating officer at Mubadala who was also named to the AMD board.
Advanced Technology Investment Company (ATIC), a unit of Mubadala, is now a 66 per cent owner of The Foundry Company, which manufactures microchips for AMD.
Mubadala also raised its stake substantially with an investment of US$125 million (Dh459.1m) in AMD, which has been hard hit by the drop in demand for computers. AMD’s stock price has dropped 71 per cent since June.
“The business case has not changed. This is a long-term investment in a cyclical industry,” said Waleed al Muhairi, the chief operating officer at Mubadala who was also named to the AMD board.
Nova Chemicals stalls layoffs after IPIC’s $500m offer
A Canadian chemicals firm set to be bought by Abu Dhabi’s International Petroleum Investment Company (IPIC) has cancelled 400 layoffs as it looks to the sale to improve its finances.
IPIC offered to buy Nova Chemicals for more than US$500 million (Dh1.83 billion) last week, leading the firm to shelve plans to restructure its plastics operations, a company spokeswoman told Reuters.
“That was all in the context of our previous reality, but in the context of this situation with the IPIC agreement, we’re going to take a new look,” the spokeswoman said.
Nova officials said the takeover by IPIC was the company’s best option in the face of insurmountable debts. But the deal was viewed with suspicion in some circles.
IPIC offered to buy Nova Chemicals for more than US$500 million (Dh1.83 billion) last week, leading the firm to shelve plans to restructure its plastics operations, a company spokeswoman told Reuters.
“That was all in the context of our previous reality, but in the context of this situation with the IPIC agreement, we’re going to take a new look,” the spokeswoman said.
Nova officials said the takeover by IPIC was the company’s best option in the face of insurmountable debts. But the deal was viewed with suspicion in some circles.
Call for agency to buy bad loans
Executives and economists yesterday called for the Government to create an agency that would buy loans from the country’s banks as part of efforts to thaw a freeze in lending that is starving even healthy companies of credit.
Gurjit Singh, the chief property development officer at Sorouh, called for the creation of a so-called “bad bank”, a special-purpose vehicle to buy distressed debt from local banks, as falling property prices lead to a rise in non-performing loans (NPLs). “We need to remove NPLs from the banks, so they can do their work,” he said.
Analysts said the ideas had merit. “It seems like a logical thing to do,” said Fahd Iqbal, the vice president of equity research at EFG-Hermes in Dubai. “Liquidity needs to be redirected to the market.”
Gurjit Singh, the chief property development officer at Sorouh, called for the creation of a so-called “bad bank”, a special-purpose vehicle to buy distressed debt from local banks, as falling property prices lead to a rise in non-performing loans (NPLs). “We need to remove NPLs from the banks, so they can do their work,” he said.
Analysts said the ideas had merit. “It seems like a logical thing to do,” said Fahd Iqbal, the vice president of equity research at EFG-Hermes in Dubai. “Liquidity needs to be redirected to the market.”
Bankers, Developers Differ on Crisis Lending Strategy
Sharp differences are emerging between bankers and developers on the possibility of changing the lending levels by the banks in the UAE in the backdrop of the global financial crisis.
Discussions at the Abu Dhabi Economic Forum on the second day on Tuesday underlined the diverging perceptions of the two sectors on steps to be taken to revitalise the real estate sector.
While the developers said that the banks should ease lending by reducing the interest rates, the representatives of the banks noted that the global financial crisis has forced them to more cautious. The bankers said that they would be able to resume lending in full pace only after they assessed the depth of the crisis.
Discussions at the Abu Dhabi Economic Forum on the second day on Tuesday underlined the diverging perceptions of the two sectors on steps to be taken to revitalise the real estate sector.
While the developers said that the banks should ease lending by reducing the interest rates, the representatives of the banks noted that the global financial crisis has forced them to more cautious. The bankers said that they would be able to resume lending in full pace only after they assessed the depth of the crisis.
US slaps sanctions on firms tied to Iran bank
WASHINGTON (AP) — The Obama administration imposed sanctions Tuesday on 11 companies tied to an Iranian bank that the United States and others say is helping to fund Iran's nuclear and ballistic missile programs.
The penalties announced by the Treasury bar any transactions between the firms, which are either owned by or linked to Iran's Bank Melli or its subsidiaries, and U.S. citizens and freeze any assets the firms may have in U.S. jurisdictions.
The companies targeted by the sanctions include several manufacturing and investment concerns in Iran, along with holding firms based in Dubai and some with offices in the Cayman Islands, Treasury said in a statement.
The penalties announced by the Treasury bar any transactions between the firms, which are either owned by or linked to Iran's Bank Melli or its subsidiaries, and U.S. citizens and freeze any assets the firms may have in U.S. jurisdictions.
The companies targeted by the sanctions include several manufacturing and investment concerns in Iran, along with holding firms based in Dubai and some with offices in the Cayman Islands, Treasury said in a statement.
MGM Mirage warns of debt default risk
MGM Mirage, the gaming operator that owns some of the world’s best-known casinos, warned on Tuesday that it is at risk of defaulting on its debt, underscoring the steep downturn in the global gaming sector.
In a regulatory filing to explain the delayed release of its fourth-quarter earnings, MGM Mirage – which counts billionaire Kirk Kerkorian as its biggest shareholder – said it was “still in the process of assessing its financial position and liquidity needs”.
The group owns the Bellagio, MGM Grand and Mirage casinos in Las Vegas, and other properties in Atlantic City. It is trying to complete construction of CityCenter, a $9bn gaming and hotel complex on the Las Vegas Strip that is the costliest such development ever.
In a regulatory filing to explain the delayed release of its fourth-quarter earnings, MGM Mirage – which counts billionaire Kirk Kerkorian as its biggest shareholder – said it was “still in the process of assessing its financial position and liquidity needs”.
The group owns the Bellagio, MGM Grand and Mirage casinos in Las Vegas, and other properties in Atlantic City. It is trying to complete construction of CityCenter, a $9bn gaming and hotel complex on the Las Vegas Strip that is the costliest such development ever.
Kuwaitis consider sale of Aston Martin stake
Investment Dar, the Kuwaiti investment group, is considering selling a stake in Aston Martin, the luxury car maker it took over two years ago, as part of a debt restructuring.
The investment group has received several expressions of interest in a stake in Aston Martin as a part of the company’s plans to restructure its debt, according to people close to the situation.
In 2007, Investment Dar and its Kuwaiti investing partner Adeem Investments led a consortium of British and US investors in purchasing a majority stake in Aston Martin from Ford Motor for almost £500m.
The investment group has received several expressions of interest in a stake in Aston Martin as a part of the company’s plans to restructure its debt, according to people close to the situation.
In 2007, Investment Dar and its Kuwaiti investing partner Adeem Investments led a consortium of British and US investors in purchasing a majority stake in Aston Martin from Ford Motor for almost £500m.