U.A.E. Central Bank Should Add Liquidity, NBAD Says

The United Arab Emirates’ central bank should either buy securities from local banks to help ease liquidity in the economy or loosen a cap on lending, the chief executive officer of the country’s second-biggest bank said.

“There has to be either some quantitative easing by the central bank broadly speaking by buying in securities” from banks and giving them money “or some easing in the ratios,” Michael Tomalin, head of the National Bank of Abu Dhabi PJSC, said in an interview in Abu Dhabi yesterday. “Because banks are tight for liquidity, there is quite a bidding war for deposits,” and “this is keeping interest rates higher than they should be.”

Banks in the U.A.E. have faced a shortage of funds as the global credit crisis shut access to foreign borrowings and investors speculating on a currency revaluation withdrew money from local banks. The gap between commercial bank loans and deposits in the U.A.E. rose to 110 billion dirhams ($30 billion) in March, before falling to 91 billion dirhams, central bank governor Sultan Bin Nasser al-Suwaidi said on May 7.

UAE company enters Northern Iraq's lucrative exploration and production market

BlackGold – a fully owned subsidiary of Al Zarooni Enterprises – has become one of the first UAE companies to enter the lucrative energy exploration and production market in northern Iraq, according to its CEO.

Najib Al Zarooni, Chief Executive Officer of BlackGold, said it had invested millions of US dollars in the Northern Iraq project, and that exploration is scheduled to start in 2010, with production likely commencing in early 2011.

“Northern Iraq holds great promise for both exploration and production investment, and we are excited to be one of the first UAE companies to boldly move into this new regional energy frontier.

BlackGold sees this project as an historic investment opportunity in a time of regional expansion,” said Zarooni.END

Saudi Stock Market Weekly Report - 5-August-2009

Al Naboodah eyes Asian emerging market pie (Interview)

After half a century of operations in the UAE, the Dubai-based Al Naboodah Commercial Group (ANCG) is now testing waters abroad, its Managing Director Samar Roy told Emirates Business.

The company is looking at emerging markets in Asia, and India particularly, is high on its radar, said Roy, adding that an announcement in this regard could be made in a few months' time.

The company, Roy claimed, has recorded 40 per cent growth over the past several years and it will manage to show the same performance it did in 2008. Its growth trajectory will not recede into negative quarters, he said.

UAE praised for helping to crack global laundering racket

A United States court's decision to seize $4.3 million (Dh15.7m) from the Manhattan accounts of a group of Dubai-based businessmen and trading companies has created a new sense of alert among local traders to strictly process transactions through official banking channels, especially when trading with or through the United States.

Late last month, the US Attorneys Office in New York allowed the recovery of $4.3m seized from bank accounts in New York that had been allegedly used to launder proceeds of contraband in Europe.

The judgement, issued on June 22, praised law enforcement authorities in the UAE, Europe and the US, whose efforts led to the arrest of 40 individuals in the UAE under the anti-money laundering law for using hawala and money exchange routes for the illegal operation.

Dubai will be the first to rebound in region: Moody's

Despite the fact that 30 per cent of Moody's corporate issuers in the GCC are on negative outlook watch, a majority of them in Dubai, the agency believes the emirate is the best-placed economy in the region to come out of the crisis once things improve on a global level.

"Dubai has been the most dynamic economy in the region, and is likely to be the first to rebound once global markets recover," Philipp Lotter, Senior Vice-President, Moody's Investors Service in Dubai, told Emirates Business.

"The absence of a sovereign wealth fund/oil fund is the primary reason why the global recession has a far greater impact on Dubai than other economies that directly benefit from oil," Lotter said citing reasons for Dubai's dismal run of late.

Interbank lending best left to private sector

You say “eether”, and I say “either”. You say “Eebor”, and I say “Eibor”. Banks in the UAE have been trusted to come up with the Emirates interbank offered rate, or Eibor, themselves, but now the Central Bank wants to call the whole thing off.

Eibor, it seems, is too high for the Central Bank’s liking. So it wants to oversee the reporting and compilation of the measure. Earlier this week, it called bankers into its headquarters to tell them it would be setting up a new, official interbank rate that will be “a fair representation of the prevailing market conditions”.

Interbank rates such as Eibor refer to the rates that banks charge each other for very short-term loans, as in overnight. Banks usually trust each other more than they do any other borrower, and to the extent that they can trust each other, they trust that conditions are unlikely to worsen significantly overnight.

Aabar undervalued as asset base grows

Aabar Investments, the Abu Dhabi government-backed company with interests from sports cars to space travel, has grabbed the attention of local investors seeking elusive returns from turbulent markets

Depsite a 40 per cent rally in the last month, the company which now owns a 32 per cent stake in Virgin Galactic, is still under-valued, analysts say.

Al Mal Capital said yesterday it was updating its net asset value on Aabar given the significant gains in the company’s investments in listed equities, especially its 9.1 per cent stake in Daimler, the world’s second-largest maker of luxury cars.

Etisalat unit under scrutiny

India’s anti-corruption department is set to intensify its investigation into Etisalat’s Indian venture, raising questions over the UAE company’s telecommunications licence less than a year after it paid US$900 million (Dh3.3 billion) for a 45 per cent stake.

The inquiry by the Central Vigilance Commission (CVC) revolves around Swan Telecom, the company Etisalat bought into in India nine months ago. Swan was then renamed and rebranded to Etisalat DB.

“The CVC’s technical examiner is looking into the files of Swan,” said CVC commissioner Pratyush Sinha. “We found that the allocation of 2G spectrum to private companies, including Swan, on a first-come, first-serve basis was not transparent.”

Don’t Rush to Invest in Jordan (Re-post)

Andy Serwer writes today on the Fortune magazine website an article entitled “Can Jordan Build on its Relative Success?” Even the title is a give-away of modest expectations: “relative success”? The article lists some of Jordan’s undeniable achievements over the past seven or eight years: free trade agreements with the U.S. and the European Union that have caused exports to soar, some measure of macroeconomic stability, continued GDP growth even in the current economic crisis, improvements in education and health care, and reform and liberalization of several key areas of the economy. Having spent quite a lot of time working in Jordan, I agree with Mr. Serwer’s assessment of Jordan as the most secure and pleasant place to live in the neighborhood – in which he includes Egypt, Saudi Arabia, Iraq, Syria, Lebanon, and Israel – though Beirut’s nightlife and the topless sunbathers in Tel Aviv outshine any of Jordan’s more sedate attractions. But it is easy to overstate the case.

I have reservations about the World Bank’s “Doing Business” rankings and the methodology they use, but it’s worth noting that the 2009 “Doing Business” report ranked Jordan 101st out of 181 countries surveyed in overall ease of doing business, compared with 94th the previous year, just behind Zambia (100th) and ahead of Sri Lanka (102nd). Compared to its neighbors, Jordan beats out Egypt and Syria, but lags behind Lebanon, Kuwait, Israel, the United Arab Emirates, and Saudi Arabia. Some of the more problematic indicators for Jordan are: “starting a business,” “protecting investors,” and “enforcing contracts,” none of which augur well for the country’s prospects of attracting international investment. If you’re not too bothered by not being able to drink or wear shorts in public, Saudi Arabia (ranked 16th) is a far better place to do business.

Turkey’s Banking Sector: Picture of Health (Registration required)

Once Turkey’s Achilles Heel, the banking system dramatically turned around following the 2000-01 financial crisis and is now one of the country’s main strengths. The Turkish economy contracted a sharp 13.8% y/y in the first quarter of 2009 as high unemployment, weak external demand and slowing capital inflows took a toll. Nevertheless, the soundness of Turkey’s banking system, in comparison to earlier this decade and relative to many of its peers, will help speed up the country’s return to growth. As the IMF notes: “[S]lowdowns and recessions preceded by banking-related stress tend to last longer and be associated with larger average GDP losses than those preceded by other types of financial stress or by no financial stress at all.”

Bottom Line: The banking sector is in good shape in the wake of reforms implemented after the 2001 crisis, meaning Turkey will likely experience a faster return to growth than those countries experiencing financial sector distress. While 2009 will not be a banner year for the Turkish economy, the tide could turn quickly next year.

Comment: Wild Gulf markets need taming

Taking their cue from global markets and the lack of direction of oil prices, Gulf Co-operation Council equity markets have come under immense selling pressure, and this has led to significant volatility in indices.

Yet even before the financial crisis, GCC markets were peculiarly volatile. Much of this is because of rampant speculative trading by local investors.

In GCC markets, where market makers are barely present, some speculative activity is healthy, helping to maintain liquidity and depress bid-ask spreads.

Financial bias sinks Bahrain bourse

While most other bourses enjoyed a spring rally, the performance of the Bahrain stock market has been lacklustre, declining even further on low trading volumes this summer.

The Bahrain stock exchange has lost nearly 17 per cent of its value this year, the worst decline in the Gulf. Over the past 12 months it has shed nearly half its value, only outpaced by the Dubai Financial Market.

The companies in the MSCI Bahrain index have slumped 71 per cent during the past year, by far the worst performance of all Gulf indices.

Dubai legal system on trial

Charles Ridley, a Bahrain-based British businessman, is facing trial in the Dubai court system. He is one of seven people accused of defrauding Dubai Islamic Bank of more than $500m, charges which he denies.

However, Mr Ridley, standing in white prisoner’s uniform in Dubai’s court of first instance, can understand proceedings only when the translator relates a direct question from the judge, or when the testimony turns to English. Even then he has to overcome the poor acoustics of the wood-panelled court.

“I need a translator so I can understand what is going on,” Mr Ridley says.