The Swiss banking giant UBS has downgraded the real estate sector in the United Arab Emirates (UAE), the Wall Street Journal reports.
The main drivers for the downgrade are seen as the massive oversupply of properties, expected price falls of up to 70% and prospects of widespread defaults.
Property prices in Dubai have nosedived since September 2008, when the effects of the U.S.-triggered world financial crisis and falling crude prices caught up with the property boom in Persian Gulf sheikhdoms.
The UBS research note, released on Tuesday, goes on to say: ""We believe the recent run up in equities with positive global market sentiment, U.A.E. government bailout as a backdrop is unsustainable,… We don't yet see fundamentals improving, hence we view overall systematic risk as mispriced.""
Monday, 27 April 2009
From CDO Salesperson To Exotic Dancer
'The financial markets are full of hard luck stories these days, so I thought it only right to share my experiences.
I joined Lehman Brothers straight out of college in 2004. Although I didn't really know what I was getting into, a friend of mine worked for the firm, and there was a vacancy in fixed income support, so I tried out for it and lucked out. When it came down to it, however, the job was really nothing more than a glorified PA, as I ran around photocopying things, and undertaking menial tasks like going out to get lunch for busy traders.
After a while, however, I started to get into what I was doing, and learning the lingo. Gradually, I learned what terms like 'ABS', 'MBS' and 'CDO' stood for (although I never really got what they actually were). In time (after 18 months or so), I even found myself on the telephone speaking to clients, who were eager to buy 'top-rated commercial paper' from the firm. Although nervous at first, I soon discovered that as long as the clients thought they were getting investments which would yield good returns, they didn't mind speaking to a young buck, and my confidence quickly grew. Very soon I had my own small portfolio of clients (mostly smaller clients who no-one else had the time to cover). Anyway, although I was never the best salesperson on the block, I closed several deals and walked off with a decent bonus in 2006 (not huge by any means, but substantially more than I ever expected to earn in any one year).
Kuwaitis make education a battleground
In the 1960s and 1970s Kuwait was dubbed the “pearl of the Gulf”, and laid claims to being a leader in the region in technological innovation and progressiveness.
It was a country where women wore the trendiest fashions and openly danced with men at mixed parties. But times have changed as a significant shift has seen the country grow more conservative in terms of religion, especially since the 1990-91 Iraqi invasion and occupation.
In recent years, Islamists have increased their strength in parliament and pushed an agenda of strict conservatism focused primarily on social issues, such as trying to force female lawmakers to wear the hijab and prohibiting mixed dancing in public places.
It was a country where women wore the trendiest fashions and openly danced with men at mixed parties. But times have changed as a significant shift has seen the country grow more conservative in terms of religion, especially since the 1990-91 Iraqi invasion and occupation.
In recent years, Islamists have increased their strength in parliament and pushed an agenda of strict conservatism focused primarily on social issues, such as trying to force female lawmakers to wear the hijab and prohibiting mixed dancing in public places.
Google aims for bigger Arab audience
When it comes to the internet, the Arab world punches well below its weight.
Less than 1 per cent of the internet’s content is in Arabic, while the world’s approximately 370m Arabs form more than 5 per cent of the global population.
Internet usage has jumped 1,000 per cent over the past seven years in the Middle East, yet it still lags well behind other regions. Overall internet penetration has reached 10 to 12 per cent, although with the region’s large number of shared connections, up to 50 per cent of the population is estimated to have access to the net.
Less than 1 per cent of the internet’s content is in Arabic, while the world’s approximately 370m Arabs form more than 5 per cent of the global population.
Internet usage has jumped 1,000 per cent over the past seven years in the Middle East, yet it still lags well behind other regions. Overall internet penetration has reached 10 to 12 per cent, although with the region’s large number of shared connections, up to 50 per cent of the population is estimated to have access to the net.
Reassurance must be sown in foreign fields
Driving south-east out of Riyadh, the highway soon snakes its way through scruffy desert and offers a glimpse of something of the unexpected in Saudi Arabia.
There you find “fields” where once there was only desert, with huge irrigation pivots that appear longer than a football pitch is wide, spraying water on to crops. Saudi Arabia has neither rivers nor lakes, yet the desert-kingdom boasts a thriving dairy and arable industry. The latter is largely the result of an initiative during the 1970s oil boom for the kingdom to become wheat self-sufficient. After spending tens of billions of dollars, the project succeeded – amazingly, to the point where the kingdom was a wheat exporter in the 1980s.
But last year the government acknowledged that producing 2.5m tons of wheat a year was unsustainable and production is to be phased out by 2016. The decision coincided with a food crisis that triggered a massive spike in prices and caused producing countries to introduce export restrictions.
There you find “fields” where once there was only desert, with huge irrigation pivots that appear longer than a football pitch is wide, spraying water on to crops. Saudi Arabia has neither rivers nor lakes, yet the desert-kingdom boasts a thriving dairy and arable industry. The latter is largely the result of an initiative during the 1970s oil boom for the kingdom to become wheat self-sufficient. After spending tens of billions of dollars, the project succeeded – amazingly, to the point where the kingdom was a wheat exporter in the 1980s.
But last year the government acknowledged that producing 2.5m tons of wheat a year was unsustainable and production is to be phased out by 2016. The decision coincided with a food crisis that triggered a massive spike in prices and caused producing countries to introduce export restrictions.
Dubai Says It Will Meet All Contractual Obligations
The government of Dubai, the second largest sheikhdom in the United Arab Emirates, denied a press report that it will not settle all of its debts with construction companies.
“The government of Dubai will continue to meet all its contractual obligations, including to construction contractors,” Dubai’s department of finance said today in an e- mailed statement. The government “has no intention to limit at any time the number of contractors licensed to operate in the emirate.”
The government statement was a response to an April 24 article in MEED magazine that said that Dubai will only settle debts with contractors that it wants to work with in the future.
“The government of Dubai will continue to meet all its contractual obligations, including to construction contractors,” Dubai’s department of finance said today in an e- mailed statement. The government “has no intention to limit at any time the number of contractors licensed to operate in the emirate.”
The government statement was a response to an April 24 article in MEED magazine that said that Dubai will only settle debts with contractors that it wants to work with in the future.
Saudi Arabian Banks’ Target Share Prices Raised by Deutsche
Al-Rajhi Bank and Samba Financial Group were among 10 Saudi lenders whose target share price was raised by Deutsche Bank AG because of the strength of their capital positions and “positive” first-quarter earnings.
Al-Rajhi’s price estimate was raised to 60 riyals from 49.5 riyals on the bank’s limited exposure to market risks, Deutsche Bank said in e-mailed note today. Deutsche increased target prices for the 10 lenders by an average of 15 percent.
“Existing levels of capital in the Saudi banks sector may be sufficient to weather any additional losses against investment portfolios, combined with high levels of government- led economic stimuli,” Deutsche said. “We regard the first quarter 2009 preliminary results as being broadly positive.”
Al-Rajhi’s price estimate was raised to 60 riyals from 49.5 riyals on the bank’s limited exposure to market risks, Deutsche Bank said in e-mailed note today. Deutsche increased target prices for the 10 lenders by an average of 15 percent.
“Existing levels of capital in the Saudi banks sector may be sufficient to weather any additional losses against investment portfolios, combined with high levels of government- led economic stimuli,” Deutsche said. “We regard the first quarter 2009 preliminary results as being broadly positive.”
Kuwait's KIA pumps $1.4bn in bourse fund
Kuwait Investment Authority (KIA), the Gulf Arab state's sovereign wealth fund, has injected about KD400m ($1.37bn) so far into a fund to support the bourse, an official said in published remarks on Monday.
Kuwait Investment Co (KIC), a unit of KIA, has managed the fund since Dec 24, the firm's Chairman Bader Al Subaie was cited as saying by local newspapers Al Qabas and Al Watan. KIC has managed to bring back gradual stability to the stock market through the fund, the papers added.
KIC could not immediately be reached for comment.
Kuwait Investment Co (KIC), a unit of KIA, has managed the fund since Dec 24, the firm's Chairman Bader Al Subaie was cited as saying by local newspapers Al Qabas and Al Watan. KIC has managed to bring back gradual stability to the stock market through the fund, the papers added.
KIC could not immediately be reached for comment.
IPIC Gets Credit Ratings From 3 Companies; May Tap Bond Market
International Petroleum Investment Co., an investment arm of the Abu Dhabi government which bought stakes in European companies including Daimler AG, received investment-grade ratings from three providers.
Moody’s Investors Service assigned an Aa2 rating, the third-highest level, while Fitch Rating and Standard & Poor’s allocated an AA grade, the credit rating companies said in statements received today. Businesses usually ask for credit ratings before tapping debt markets.
IPIC invested more than $2 billion in the past 18 months. The company’s managing director, Khadem al-Qubaisi, said Jan. 10 IPIC aimed to boost its holdings to as much as $20 billion in the next five years from $12 billion to $15 billion now as it seeks to benefit from falling asset prices.
Moody’s Investors Service assigned an Aa2 rating, the third-highest level, while Fitch Rating and Standard & Poor’s allocated an AA grade, the credit rating companies said in statements received today. Businesses usually ask for credit ratings before tapping debt markets.
IPIC invested more than $2 billion in the past 18 months. The company’s managing director, Khadem al-Qubaisi, said Jan. 10 IPIC aimed to boost its holdings to as much as $20 billion in the next five years from $12 billion to $15 billion now as it seeks to benefit from falling asset prices.
Abraaj, DIC among top PE companies
Dubai-based Abraaj Capital and Dubai International Capital Private Equity have been ranked among the world's top 300 private equity players as the two companies raised $8.8 billion (Dh32bn) over the last five years.
A Private Equity International report showed that Abraaj raised $6.49bn, while Dubai International Capital $2.37bn during the period. Abraaj Capital was ranked 54th worldwide and topped in the Mena region, while Dubai International Capital was ranked 127th globally.
Bahrain-based Investcorp and Arcapita were ranked 59th and 66th respectively. Investcorp's portfolio increased by $5.958bn and Arcapita raised $4.839bn in five years. Cairo-based Citadel also made into top 100 private equity players, ranked 75th by raising $4.1bn.
A Private Equity International report showed that Abraaj raised $6.49bn, while Dubai International Capital $2.37bn during the period. Abraaj Capital was ranked 54th worldwide and topped in the Mena region, while Dubai International Capital was ranked 127th globally.
Bahrain-based Investcorp and Arcapita were ranked 59th and 66th respectively. Investcorp's portfolio increased by $5.958bn and Arcapita raised $4.839bn in five years. Cairo-based Citadel also made into top 100 private equity players, ranked 75th by raising $4.1bn.
'Economy likely to recover in second half of this year'
Recovery in the UAE economy can be expected by the second half of this year and the region would outperform many other economies in 2010 and 2011, a senior economist has said.
"We have started to see early signs of recovery. For the coming few months, liquidity situation would be tight but UAE, which is structurally much stronger than many other economies, would see a growth of three to four per cent and outperform other economies," Marios Maratheftis, Regional Head of Research, Middle East, Standard Chartered Bank, told Emirates Business.
He said this year the region was expected to see a growth of around 0.5 per cent and recovery could start by the second half of this year. "It does not mean we would go back to previous growth levels. A growth rate of three to four per cent would be high enough if it is a good quality growth."
"We have started to see early signs of recovery. For the coming few months, liquidity situation would be tight but UAE, which is structurally much stronger than many other economies, would see a growth of three to four per cent and outperform other economies," Marios Maratheftis, Regional Head of Research, Middle East, Standard Chartered Bank, told Emirates Business.
He said this year the region was expected to see a growth of around 0.5 per cent and recovery could start by the second half of this year. "It does not mean we would go back to previous growth levels. A growth rate of three to four per cent would be high enough if it is a good quality growth."
Qatar ready to assist companies
The Qatari government is willing to pump cash into firms needing help during the financial downturn, after stepping in to support banks, a newspaper quoted the prime minister as saying on Sunday.
The government could help financial companies and other firms outside the banking sector by directly injecting cash if needed, and not through the country's sovereign wealth fund, Al Raya reported Shaikh Hamad Bin Jasem Al Thani as saying.
The government has bought stakes in local banks through the Qatar Investment Authority, the sovereign wealth fund, to support the economy and help boost financing for upcoming development projects, the prime minister said.
The government could help financial companies and other firms outside the banking sector by directly injecting cash if needed, and not through the country's sovereign wealth fund, Al Raya reported Shaikh Hamad Bin Jasem Al Thani as saying.
The government has bought stakes in local banks through the Qatar Investment Authority, the sovereign wealth fund, to support the economy and help boost financing for upcoming development projects, the prime minister said.
Mubadala seals oil deal with Bahrain
Mubadala Development and the US oil company Occidental Petroleum have signed a production sharing agreement with Bahrain’s government to boost output from the country’s main oilfield, finalising last month’s preliminary deal.
The partners said they would form a joint operating company for the project, with Occidental holding 48 per cent, Mubadala 32 per cent and the National Oil and Gas Authority of Bahrain (NOGA) 20 per cent.
Development activities aimed at doubling the field’s oil output to 75,000 barrels per day (bpd) within five years, and eventually to more than 100,000 bpd, would start immediately, they said.
The partners said they would form a joint operating company for the project, with Occidental holding 48 per cent, Mubadala 32 per cent and the National Oil and Gas Authority of Bahrain (NOGA) 20 per cent.
Development activities aimed at doubling the field’s oil output to 75,000 barrels per day (bpd) within five years, and eventually to more than 100,000 bpd, would start immediately, they said.
Global changes focus after losses
Global Investment House, a Kuwaiti investment bank, lost 360.5 million dinars (Dh4.53 billion) in the fourth quarter of last year due to sharp declines in the value of its investments and loan book.
Global now plans to move its focus away from investments and concentrate on generating income through fees, a profitable part of the bank’s business through the financial crisis, said Maha al Ghunaim, the chairman and managing director.
“[Last year] was a year of unprecedented global market turbulence. Global has not been immune to this and we unfortunately reported our first ever loss in 2008.”
Global now plans to move its focus away from investments and concentrate on generating income through fees, a profitable part of the bank’s business through the financial crisis, said Maha al Ghunaim, the chairman and managing director.
“[Last year] was a year of unprecedented global market turbulence. Global has not been immune to this and we unfortunately reported our first ever loss in 2008.”
Emaar says no credit notes for investors
Emaar Properties, the UAE’s largest property developer, has no plans to issue credit notes that allow customers to swap their investments between projects, the company said in a statement.
However the firm is allowing those who have invested in projects still to break ground to transfer their purchases to those that are under development.
“As part of our commitment to customers, we are currently offering several options including end-users having the option of transferring their purchases from projects that will be completed at a later stage to those in the advanced stages of development,” the statement said.
“Emaar has not issued or is planning any document that will enable customers to transfer their payment to others.”
The statement added that no projects launched by the firm have been put on hold and that “all the developments are progressing and in line with Emaar’s strategy to complete all commenced projects.”END
However the firm is allowing those who have invested in projects still to break ground to transfer their purchases to those that are under development.
“As part of our commitment to customers, we are currently offering several options including end-users having the option of transferring their purchases from projects that will be completed at a later stage to those in the advanced stages of development,” the statement said.
“Emaar has not issued or is planning any document that will enable customers to transfer their payment to others.”
The statement added that no projects launched by the firm have been put on hold and that “all the developments are progressing and in line with Emaar’s strategy to complete all commenced projects.”END
Warm reception for debt as markets start to thaw
Omar bin Sulaiman was surprised when he took the call from an international banker late one evening in February asking to buy the next round of Dubai’s government bonds.
A week earlier, the same banker had told him he had no cash to spend. Six months after the global financial crisis first began freezing regional credit markets, bankers say they now are willing to do whatever it takes to buy Gulf debt.
Dr Sulaiman, one of five members of the emirate’s supreme fiscal committee, shared the tale with a gathering of British businessmen in Dubai last week to illustrate how Gulf sovereign debt is back on the shopping list of international investors.
A week earlier, the same banker had told him he had no cash to spend. Six months after the global financial crisis first began freezing regional credit markets, bankers say they now are willing to do whatever it takes to buy Gulf debt.
Dr Sulaiman, one of five members of the emirate’s supreme fiscal committee, shared the tale with a gathering of British businessmen in Dubai last week to illustrate how Gulf sovereign debt is back on the shopping list of international investors.
West's finance demands threaten emerging markets
Demand for debt finance from developed economies struggling to emerge from the global financial crisis may squeeze the funding needs of smaller states, warns Sultan al Suwaidi, the Central Bank Governor.
Mr al Suwaidi’s comments come as Gulf states prepare to sell more than US$34 billion (Dh124.88bn) in sovereign bonds to try to stimulate lending and help revive their economies.
Regional governments have already raised $6bn from global buyers through bond issuances in the past three months, all of which have been several times oversubscribed.
Mr al Suwaidi’s comments come as Gulf states prepare to sell more than US$34 billion (Dh124.88bn) in sovereign bonds to try to stimulate lending and help revive their economies.
Regional governments have already raised $6bn from global buyers through bond issuances in the past three months, all of which have been several times oversubscribed.
'No projects on hold': Emaar
Emaar Properties spokesperson:
"No projects launched by Emaar Properties are currently on hold. All the developments are progressing and in line with Emaar's strategy to complete all commenced projects.
"As part of our commitment to customers, we are currently offering several options including end-users having the option of transferring their purchases from projects that will be completed at a later stage to those in the advanced stages of development.
"Emaar has not issued or is planning any document that will enable customers to transfer their payment to others.
"Being a listed company, all matters of significance to the Company are made available in public domain on a timely basis to avoid any speculation.
"Any information in contradiction to the above relate to misrepresentation of the facts."-Ends-
© Press Release 2009 from ASDA'A Public Relations
"No projects launched by Emaar Properties are currently on hold. All the developments are progressing and in line with Emaar's strategy to complete all commenced projects.
"As part of our commitment to customers, we are currently offering several options including end-users having the option of transferring their purchases from projects that will be completed at a later stage to those in the advanced stages of development.
"Emaar has not issued or is planning any document that will enable customers to transfer their payment to others.
"Being a listed company, all matters of significance to the Company are made available in public domain on a timely basis to avoid any speculation.
"Any information in contradiction to the above relate to misrepresentation of the facts."-Ends-
© Press Release 2009 from ASDA'A Public Relations
We aim to be the largest mortgage lender in UAE
Abu Dhabi Finance, launched amid the financial crisis in November 2008, wants to become the best and the biggest residential mortgage lender in the country and promises availability of liquidity in the market for property buyers.
The company, a five-way joint venture between Mubadala, Aldar, Sorouh, Tourism Development and Investment Company (Tdic) and Abu Dhabi Commercial Bank (ADCB), was launched with an initial capital of Dh500 million and with the aim of helping the booming real estate industry of the emirate.
The company, according to its CEO Philip Ward, has no immediate plans to spread its wings beyond Abu Dhabi, which remains the main focus at the moment. However, he did not rule out going into Dubai and other emirates' markets in the near future.
The company, a five-way joint venture between Mubadala, Aldar, Sorouh, Tourism Development and Investment Company (Tdic) and Abu Dhabi Commercial Bank (ADCB), was launched with an initial capital of Dh500 million and with the aim of helping the booming real estate industry of the emirate.
The company, according to its CEO Philip Ward, has no immediate plans to spread its wings beyond Abu Dhabi, which remains the main focus at the moment. However, he did not rule out going into Dubai and other emirates' markets in the near future.
Global Investment House plans to close investment arm
Troubled Kuwaiti investment bank Global Investment House said it plans to wind up its principal investment business as it swung to a full year loss.
The company posted a net loss of KD257.6m ($885.2m) in the year ended December 31 2008, compared with a profit of KD91.4m ($314m), after making impairment charges of KD297.4m ($1bn).
Global, Kuwait's biggest investment bank, posted a AED360.5m ($1.36bn) loss in the fourth-quarter alone - mainly due to impairment charges for investments and loans.
The company posted a net loss of KD257.6m ($885.2m) in the year ended December 31 2008, compared with a profit of KD91.4m ($314m), after making impairment charges of KD297.4m ($1bn).
Global, Kuwait's biggest investment bank, posted a AED360.5m ($1.36bn) loss in the fourth-quarter alone - mainly due to impairment charges for investments and loans.
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