GCC Weekly Markets Report - 15/10/2009 (PDF)

Debt repayments of Dubai-based GREs through 2012 amount to nearly US$50 billion, says S&P

A report published today by Standard & Poor's Ratings Services answers questions related to its view on the likelihood of extraordinary government support for Dubai-based government related entities (GREs), and what factors may affect this in the future.

Specifically, the report answers the following questions:

• What are Standard & Poor's current expectations regarding the likelihood of extraordinary support from the Government of Dubai for its GREs
• What track record does the Government of Dubai have in supporting its GREs?
• To what extent are the ratings affected by Dubai's challenging debt burden?
• How might the GRE issuer credit ratings be affected by a restructuring of debt in an unrated GRE?
• How might the Nakheel repayment affect the GRE issuer credit ratings?
• Does Standard & Poor's believe the Government of Dubai has the resources to support its GREs?

Also read Reuters

Saudi Fransi Forecasts Saudi Economic Growth of 4% Next Year

Saudi Arabia’s economy, the largest in the Arab world, will grow 4 percent next year after a contraction of 0.9 percent this year, said Banque Saudi Fransi, the Saudi Arabian lender partly owned by Credit Agricole SA.

“While we are likely to see the beginnings of this turnaround in the final months of 2009, the rebound will be cautiously amplified next year as the private sector and banks become less risk averse and store less capital,” Saudi Fransi’s chief economist, John Sfakianakis, said in the e-mailed report.

If oil prices rise further, Saudi Arabia, the world’s largest crude exporter, may be able to avoid a contraction this year, central bank Governor Muhammad al-Jasser said on Sept. 29. Oil prices have risen to about $75 a barrel after falling below $40 in December from a peak of $147.27 July last year. Bank claims on the private sector rose to 4.4 percent in August from 3.6 percent in July.

Qatar, Abu Dhabi Shares Rise as Oil Gains; Qatar Shipping Soars

Qatar and Abu Dhabi shares gained, with the United Arab Emirates’ index rallying to a November high, as oil traded near $76 a barrel and emerging markets extended the longest rally in more than four years.

Qatar Shipping Co., a marine freight transportation company which plans to combine with Qatar Navigation, was poised for its highest close since January after it said nine-month profit advanced 13 percent. Qatar Navigation also increased. Arkan Building Materials Co. soared to its highest in two months. Crude oil reached a one-year high on optimism fuel demand will increase and the MSCI Emerging Markets Index advanced for a ninth day, the longest stretch of gains since September 2005. Dubai’s benchmark index declined.

“Positive sentiment remains intact ahead of earnings,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. “We’re seeing a mixed session, despite a strong backdrop to international markets and oil at a year-high, as retail traders may look to exit the market ahead of the weekend.”

Dubai, Abu Dhabi Need 150,000 Jobs to Fill Homes, Nomura Says

Dubai and Abu Dhabi need to create about 150,000 white-collar jobs to provide enough buyers for the houses and apartments being completed in the next two years, Nomura Holdings Inc. said.

An estimated 65,000 residential units will be built in Dubai and 15,000 more in Abu Dhabi by 2011, even as the number of foreign workers declines, Chet Riley, a Dubai-based analyst at Nomura, said in a note to clients today.

“We estimate around 100,000 white-collar jobs at least would need to be created in Dubai and 50,000 in Abu Dhabi alone to satisfy oncoming supply,” Riley said in the note. “This is in an environment where jobs (still real estate and construction related) are being cut.”

Dubai World to Save $800 Million on Reorganization

Dubai World, the state-run holding company with $59 billion of debt and other liabilities, expects to save more than $800 million in three years after completing a business reorganization and cutting its workforce.

Dubai World, which controls port operator DP World Ltd., property developer Nakheel PJSC and asset management firm Istithmar World PJSC, reduced its staff by 15 percent to less than 70,000 globally as part of the reorganization, the company said today in an e-mailed statement. In the United Arab Emirates, the workforce was cut by about 25 percent.

Dubai, the second-biggest in size of seven emirates that make up the U.A.E., was hurt as the global credit crisis hit its property, financial and tourism industries. Dubai’s real-estate and state-run investment companies are seeking to cut expenses by putting projects on hold and reducing staff as the recession cut access to credit and demand for property declines.

Saudi Stock Market Weekly Report - 14-October-2009

Law on transparency expected in 2010

A new corporate law intended to ensure that listed companies in the UAE exercise full transparency is to be introduced in April 2010.

"The law is at the drafting stage and will replace current guidelines and rules and regulations," said Mariam Al Suwaidi, Deputy CEO for Issuance, Research and Legal Affairs at the Emirates Securities and Commodities Authority (Esca).

"We already have rules and regulations covering corporate governance," she said. "But this law will make it compulsory for listed companies to abide by all Esca rules and regulations," Suwaidi said on the sidelines of the first Abu Dhabi Corporate Governance Conference, organised by the capital's Centre for Corporate Governance.

Shariah Capital to launch Islamic ETF

Shariah Capital plans to launch a Shariah-compliant exchange traded fund (ETF) soon, CEO Eric Meyer told Emirates Business. The ETF will be simultaneously launched in London and New York, he added.

"Based on the success of our DSAM Funds Shariah Capital has now made the strategic decision to expand into ETFs," Meyer said.

"With 1.5 billion Muslims and estimates of $2.7 trillion (Dh9.91trn) invested into Shariah-compliant investments globally, the need for Islamic ETFs is evident.

Dubai home glut to worsen

The number of new homes in Dubai is expected to grow by 34,300 in the next two years, as a prolonged economic slowdown hits demand.

Dubai will have more than 340,000 residential units by the end of this year and is already oversupplied by 25 per cent, according to Colliers International, the property consultant.

“We see no reason to believe this will improve; it should actually worsen,” said JP Grobbelaar, the director of research and advisory at Colliers.

Damas in property deals

Tawhid Abdullah, the former chief executive of the Middle East’s biggest jeweller, quit Damas after US$165 million (Dh606m) in unauthorised property transactions were uncovered, it has emerged.

Mr Abdullah resigned on Monday after disclosing the irregularities to the board of directors.

The transactions at the centre of the controversy involved investments with an unidentified property company, said Gaetano Cavalieri, a Damas board member, in an interview from Italy.

Bank to block assets of suspected fraudsters

A Swiss bank in Dubai has been ordered by a court to freeze the assets of two Jamaican clients alleged to have defrauded up to 40,000 people.

Carlos Hill and his brother, Bertram, are being investigated by the Jamaican authorities on suspicion of establishing an unlicensed investment company that has defrauded Jamaicans and UK-based Caribbean residents. They are alleged to have lured the investors into handing over around US$2 billion (Dh7.3bn) into an unregulated investment scheme.

Hugh Wildman, the Jamaican court-appointed liquidator of Cash Plus, the company owned by the Hill brothers, announced in September that US$25 million was found in Dubai after the brothers were cited in Jamaican press reports as stating that the company had folded and had no funds.

On September 27, the Dubai International Financial Centre courts ordered Julius Baer Middle East, a Swiss bank in Dubai, to disclose the assets and freeze the accounts of the Hills. All correspondence between the bank and the defendants are also to be shared with the court. The court reconvened in a private session yesterday and held a video conference in which Julius Baer presented those documents.
See original Jamaican reports

Levelling the UAE playing field

The UAE federal government has been attempting to introduce a revised version of the 1984 companies law since 2005. The fact that it has taken so long is a major reflection of just how sensitive the issue is, since the UAE as a pragmatic and fast emerging nation is expected to update its laws periodically.

Just in the past year we have witnessed amendments to the media law, property law and residency law. These amendments and others, although controversial, were introduced without delay. In the UAE, the Dubai International Financial Centre (DIFC) has been carrying out test runs for the proposed changes in similar laws that it calls the DIFC Public Comment Policy. The latter invites the wider public to comment on draft versions of laws that are posted on the DIFC website. For instance, in November 2008, a new proposed DIFC companies law and insolvency law was made available for public consultation for one month and then presented to the ruler of Dubai for enactment. Why isn’t the same policy applied to the federal companies law, one might ask? Simply put, there are various elements that stand to lose should a drastically revised companies law be introduced.

Many UAE citizens operate small and medium size enterprises based on the current law and may be affected by a change in ownership structures in case they have an expatriate business partner. Also, if a new law is introduced that essentially flips the 51 per cent to 49 per cent local to foreign ownership ratio, it will affect major UAE national-owned businesses. Many of these giant corporations have enjoyed a monopoly status for the past four decades.

GCC - Banking sector in line for a result

Banking sector developments in the Gulf since the spring have been dominated by the fallout of troubled credit exposures to local and regional firms across the GCC. This has dissuaded the banks from lending to the private sector, increasing pressure on the rate of domestic economic growth.
In Saudi Arabia, for example, the availability of commercial credit to the private sector has become further constrained, with five out of the previous seven months showing a decline in lending to the private sector. In the UAE news was dominated by the disclosures regarding the banks' credit exposure to troubled Saudi groups. There was also news of a law allowing the government to guarantee the repayment of bonds and other instruments issued by banks. The largest bank in the UAE, Emirates NBD, boosted its capital ratio through a debt issue, exceeding the capital requirements of the Central Bank.

In Kuwait there was no significant development with regard to the banks' exposure to troubled firms Global and the Investment Dar, while a committee was established to investigate the restructuring of the exposure. Meanwhile, National Bank of Kuwait (NBK) increased its stake in Boubyan Bank by purchasing the shares previously owned by Kuwait Investment Authority (KIA).

In Qatar banks appeared to have minor exposure to the troubled Saudi groups. The government completed the disbursement of a real estate package, the beneficiaries of which are nine local banks which had difficulty handling their real estate sector exposure. The support package was worth 15 billion riyals (Dh15 billion). This was the third state bailout for the banking industry, covering capital injection and portfolio buyouts.

Dubai World Said to Weigh Offering Equity to Reduce Debt Load

Dubai World, the emirate-controlled holding company with about $60 billion of debt and other liabilities, may offer equity stakes in units such as developer Nakheel PJSC to creditors or neighboring Abu Dhabi to avert potential defaults, people briefed on the matter said.

Dubai World’s options also include selling assets and seeking cash from the Dubai government, which could borrow from the United Arab Emirate’s central bank in Abu Dhabi, the people said, speaking anonymously because the talks are private. The plans are preliminary and are among several being discussed, the people said.

Granting equity in a unit such as Nakheel, the real-estate developer with $3.52 billion of debt due in December, may help Dubai World appease creditors and avoid a fire sale or bankruptcy of hotels, retailers and other assets the investment group amassed this decade, according to the people.

“The most pressing question for Dubai is what to do with Nakheel, because it’s the largest debt coming due until next year,” said Rachel Ziemba, a senior analyst covering sovereign wealth funds at Roubini Global Economics, a New York-based economic research firm. “Dubai is trying to hold out its asset sales in order to get better valuations.”

Abu Dhabi's IPIC H1 profit soars 15-fold

First-half profit of Abu Dhabi's International Petroleum Investment Co surged more than 15-fold to $2.12 billion on a one-off sale of Barclays instruments, state news agency WAM said on Wednesday.

WAM said IPIC's jump in profit from $136 million in the year-earlier period was due to sales of Barclays convertible instruments. In early June, IPIC made $2.5 million by selling the instruments that were due to convert into Barclays shares by the end of the month.

IPIC invests in oil-related projects for the government of Abu Dhabi, capital of the United Arab Emirates, which is the world's third-largest oil exporter

Dubai International Capital Seeks $550 Million Loan, Banker Says

Dubai International Capital LLC, a private equity investor controlled by the emirate’s ruler, is seeking to raise a $550 million syndicated loan to repay existing debt, a banker familiar with the transaction said.

Mashreqbank PSC, Noor Islamic Bank, Standard Chartered Plc and Royal Bank of Scotland Group Pls are arranging the loan, said the banker who didn’t want to be identified because the details are private.END

Saudi, Dubai Shares Rise to 2009-Highs on Higher Oil; Earnings

Saudi Arabian and Dubai shares advanced, with Saudi’s index closing at its highest level in a year, as crude prices gained and better-than-expected earnings spurred confidence the worst of the economic crisis is over.

Samba Financial Group, Saudi Arabia’s second-largest bank, climbed the most in two weeks after reporting a profit that beat analysts’ estimates. Saudi Chemical Co., the distributor of pharmaceutical drugs, and Qatar Electricity and Water Co. also rose on reported profit gains. Saudi Arabia’s Tadawul All Share Index added 1.6 percent to 6,449.81, the highest close since Oct. 18. The Dubai Financial Market General Index jumped 3 percent to 2,373.37, an 11-month high.

“The overall trend of earnings is better than expected and I don’t expect any big surprises,” said Mohamed Abu Ghoush, head of equity brokerage at Al-Ahli Bank in Doha. “Definitely oil above $74 is a very major factor for the GCC markets to gain today.”

Dubai begins to expel its economic demons

It is a strange, but telling, reaction: some commuters in Dubai are breathing a sigh of relief when they hit traffic jams.

“I rejoice when I grind to a halt,” says one businessman, who has watched with growing unease over the past year as vehicles disappeared from the roads as building activity fell silent and companies reduced the size of their workforces.

The gloom after the crash that followed Dubai’s period of petro-dollar and credit-driven growth is starting to clear, and residents have returned from the extended summer and Ramadan lull to a city that feels as though it is expelling its economic demons.