OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses.
The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II.
Saudi Arabia’s King Abdullah has targeted $75 oil as a fair price for consumers and producers and has the capacity to increase pumping by about 50 percent, or 4 million barrels a day, enough for all of Brazil. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10.
Monday, 9 November 2009
Qatar CBQ’s Bond May Yield 275 Basis Points Over Swap
Commercial Bank of Qatar, the Gulf country’s second-biggest bank by assets, plans to sell five-year senior and 10-year subordinate-fixed dollar bonds, a banker familiar with the transaction said.
The five-year bond may be priced to yield about 275 basis points above the midswap rate, while the 10-year bond may be priced to yield 400 basis points above the benchmark rate, said the banker who declined to be identified because the transaction isn’t completed.
Commercial Bank may raise about $1 billion from the sales, he said. The money raised will be used to shore up the bank’s Tier II capital that includes items such as undisclosed reserves and subordinated debt, the lender said in a statement last week. Morgan Stanley and Credit Suisse Group AG are managing the sale, another banker familiar with the transaction said last week.
Commercial Bank’s five-year floating rate note, maturing in 2011, was paying 96.5 cents on a dollar at 4:05 p.m. Dubai time, according to RBS Financial Markets prices provided to Bloomberg. The note rose to 97.75 cents on Sept. 17, a 12-month high.END
The five-year bond may be priced to yield about 275 basis points above the midswap rate, while the 10-year bond may be priced to yield 400 basis points above the benchmark rate, said the banker who declined to be identified because the transaction isn’t completed.
Commercial Bank may raise about $1 billion from the sales, he said. The money raised will be used to shore up the bank’s Tier II capital that includes items such as undisclosed reserves and subordinated debt, the lender said in a statement last week. Morgan Stanley and Credit Suisse Group AG are managing the sale, another banker familiar with the transaction said last week.
Commercial Bank’s five-year floating rate note, maturing in 2011, was paying 96.5 cents on a dollar at 4:05 p.m. Dubai time, according to RBS Financial Markets prices provided to Bloomberg. The note rose to 97.75 cents on Sept. 17, a 12-month high.END
Dubai’s Next Bond Will Be ‘Well Received,’ Ruler Says
Dubai’s second half of a $20 billion bond program will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up,” the emirate’s ruler Sheikh Mohammed Bin Rashid Al-Maktoum said.
“The second tranche of the bond program will be well received, it will be widely subscribed and will be used directly to meet Dubai’s obligations in the next few years,” Sheikh Mohammed said at a conference in Dubai today.
Dubai, the second-biggest of seven states that make up the United Arab Emirates, raised $1.93 billion last month from the biggest sale of Islamic bonds in the Gulf Arab region this year. The $1.25 billion dollar-denominated portion of the bond traded at a yield of 6.47 percent today, compared with a 3.89 percent yield investors are seeking for a five-year Abu Dhabi bond.
“The second tranche of the bond program will be well received, it will be widely subscribed and will be used directly to meet Dubai’s obligations in the next few years,” Sheikh Mohammed said at a conference in Dubai today.
Dubai, the second-biggest of seven states that make up the United Arab Emirates, raised $1.93 billion last month from the biggest sale of Islamic bonds in the Gulf Arab region this year. The $1.25 billion dollar-denominated portion of the bond traded at a yield of 6.47 percent today, compared with a 3.89 percent yield investors are seeking for a five-year Abu Dhabi bond.
Only 1,400 working in the DIFC after five years (Re-post)
Today marks the fifth anniversary of the founding of the Dubai International Financial Centre. The tally of 869 trade licenses is impressive but that includes the tailor and ice-cream parlour.
Less impressive is that after five years only 1,400 professionals work in the DIFC. Yes, that is not a misprint. Not 14,000 or 140,000. Just 1,400 or an average of less than two per trade license!
Big names, no staff
It is true that the big names have all set up in the DIFC. Some like Standard Chartered Bank have a staff of 950 in the centre. But clearly most of the big names of finance just have a name-plate.
With the skyscrapers of the DIFC complex now coming up for completion the centre must be hoping for an influx of staff to fill the office space reserved by these companies. But clearly after the biggest global financial crisis in living memory over the past year there may not be as many new banking professionals as expected.
The theory of the DIFC is fine: a banking sector regulated to Western standards and working in English in the middle of Arab oil wealth. The practice has been dogged by the volatility of local and global financial markets. There has been no shortage of energy, vision and astute management.
Take its regional stock market, now re-branded as Nasdaq Dubai. It launched just after the local Dubai Financial Market had suffered a huge crash. Now it is battling to achieve critical mass against the background of the unprecedented global financial crisis of the past year.
But as with the whole DIFC there is still reason to believe that such a good idea as a regional stock market will also turn into a business success story. Creating a regional futures market for 20 top stocks shows the way forward as in more developed markets futures trading is bigger than the equity markets they are written against.
Goldman Sachs
It is good to hear that three more brokers have joined Nasdaq Dubai as members in recent weeks, including the king-pin Goldman Sachs. Indeed, Nasdaq Dubai is the future as its platform opens up the region to global institutional share traders as well as locally based individuals.
Much the same could be said DIFC initiatives in many other areas of finance from Islamic sukuks to the Dubai Mercantile Exchange for commodities. But what will it take to bring in the thousands of professionals that will give the centre its critical mass? Office space is one thing. The actual flow of business is another.
A global economic recovery and much higher oil prices would do the trick. Regional business in general and Dubai in particular has taken a big hit in the global financial crisis with Dubai real estate ranked 46th out of 46 global markets for price performance over the past year.
But starting from a market bottom has its advantages in lowering the cost of doing business and promoting necessary consolidation and debt refinancing which is the business of the DIFC. Then the new uptrend can begin with higher trading volumes on the Nasdaq Dubai opening the way for initial public offerings and new listings.
The road to recovery
How long this process might take in anybody’s guess. There could well be another leg to the global financial crisis from which the recovery seems far too easy to be true. Oil prices might go down not up.
The DIFC is a long-term investment with a big pay-out when it comes. But let us not get too carried away with celebrating success before it has happened. The difficult part is still ahead: making the DIFC another engine for Dubai’s growth, like Jebel Ali Free Zone or Emirates Airline.
Going forward the DIFC has the potential to become a financial hub like London, New York, Singapore or Hong Kong. Its geographical position is favourable as are the stable politics of the UAE. Its regulatory structure fits with global best practice. Dubai’s low tax regime is especially attractive to financial professionals, and the city’s standard-of-living what they expect.
This is a winning hand but the DIFC needs to be dealt better cards if it is to win the game ahead. Otherwise it will continue to struggle amid tough financial markets, and might be forced to reconsider its business model.
That said the DIFC is still all upside to come for Dubai. What will 10,000, 20,000 or 30,000 white collar financial professionals mean ultimately for Dubai house prices, retailers, luxury car sales and restaurants? Financial hubs bring a rich prize for domestic demand, and it has not even started yet.END
Less impressive is that after five years only 1,400 professionals work in the DIFC. Yes, that is not a misprint. Not 14,000 or 140,000. Just 1,400 or an average of less than two per trade license!
Big names, no staff
It is true that the big names have all set up in the DIFC. Some like Standard Chartered Bank have a staff of 950 in the centre. But clearly most of the big names of finance just have a name-plate.
With the skyscrapers of the DIFC complex now coming up for completion the centre must be hoping for an influx of staff to fill the office space reserved by these companies. But clearly after the biggest global financial crisis in living memory over the past year there may not be as many new banking professionals as expected.
The theory of the DIFC is fine: a banking sector regulated to Western standards and working in English in the middle of Arab oil wealth. The practice has been dogged by the volatility of local and global financial markets. There has been no shortage of energy, vision and astute management.
Take its regional stock market, now re-branded as Nasdaq Dubai. It launched just after the local Dubai Financial Market had suffered a huge crash. Now it is battling to achieve critical mass against the background of the unprecedented global financial crisis of the past year.
But as with the whole DIFC there is still reason to believe that such a good idea as a regional stock market will also turn into a business success story. Creating a regional futures market for 20 top stocks shows the way forward as in more developed markets futures trading is bigger than the equity markets they are written against.
Goldman Sachs
It is good to hear that three more brokers have joined Nasdaq Dubai as members in recent weeks, including the king-pin Goldman Sachs. Indeed, Nasdaq Dubai is the future as its platform opens up the region to global institutional share traders as well as locally based individuals.
Much the same could be said DIFC initiatives in many other areas of finance from Islamic sukuks to the Dubai Mercantile Exchange for commodities. But what will it take to bring in the thousands of professionals that will give the centre its critical mass? Office space is one thing. The actual flow of business is another.
A global economic recovery and much higher oil prices would do the trick. Regional business in general and Dubai in particular has taken a big hit in the global financial crisis with Dubai real estate ranked 46th out of 46 global markets for price performance over the past year.
But starting from a market bottom has its advantages in lowering the cost of doing business and promoting necessary consolidation and debt refinancing which is the business of the DIFC. Then the new uptrend can begin with higher trading volumes on the Nasdaq Dubai opening the way for initial public offerings and new listings.
The road to recovery
How long this process might take in anybody’s guess. There could well be another leg to the global financial crisis from which the recovery seems far too easy to be true. Oil prices might go down not up.
The DIFC is a long-term investment with a big pay-out when it comes. But let us not get too carried away with celebrating success before it has happened. The difficult part is still ahead: making the DIFC another engine for Dubai’s growth, like Jebel Ali Free Zone or Emirates Airline.
Going forward the DIFC has the potential to become a financial hub like London, New York, Singapore or Hong Kong. Its geographical position is favourable as are the stable politics of the UAE. Its regulatory structure fits with global best practice. Dubai’s low tax regime is especially attractive to financial professionals, and the city’s standard-of-living what they expect.
This is a winning hand but the DIFC needs to be dealt better cards if it is to win the game ahead. Otherwise it will continue to struggle amid tough financial markets, and might be forced to reconsider its business model.
That said the DIFC is still all upside to come for Dubai. What will 10,000, 20,000 or 30,000 white collar financial professionals mean ultimately for Dubai house prices, retailers, luxury car sales and restaurants? Financial hubs bring a rich prize for domestic demand, and it has not even started yet.END
Dubai Shares Climb to Week High on G-20, Bond; Kuwait Falls
Dubai shares rose to the highest in a week as the Group of 20 governments agreed to maintain stimulus efforts and the emirate’s ruler said the sheikhdom’s next $10 billion bond will be “widely subscribed.”
Emaar Properties PJSC, the United Arab Emirates’ biggest property developer, and the Dubai Financial Market closed at their highest in a week. The DFM General Index increased 1.4 percent to 2,153.77, the highest close since Nov. 2. Abu Dhabi’s measure added 0.2 percent. Dubai’s gauge extended gains after the emirate’s ruler Sheikh Mohammed Bin Rashid Al-Maktoum said the second part of a $20 billion bond program will be “well received”, and those who doubt the unity of Dubai and Abu Dhabi should “shut up.”
European and Asian stocks rose as the G-20 agreed to keep interest rates low and maintain record budget deficits until recoveries take hold. The Dow Jones Stoxx 600 Index increased 1.6 percent at 4:51 p.m. in Dubai and the MSCI Emerging Markets Index added 1.8 percent. Oil prices gained 1.6 percent.
Emaar Properties PJSC, the United Arab Emirates’ biggest property developer, and the Dubai Financial Market closed at their highest in a week. The DFM General Index increased 1.4 percent to 2,153.77, the highest close since Nov. 2. Abu Dhabi’s measure added 0.2 percent. Dubai’s gauge extended gains after the emirate’s ruler Sheikh Mohammed Bin Rashid Al-Maktoum said the second part of a $20 billion bond program will be “well received”, and those who doubt the unity of Dubai and Abu Dhabi should “shut up.”
European and Asian stocks rose as the G-20 agreed to keep interest rates low and maintain record budget deficits until recoveries take hold. The Dow Jones Stoxx 600 Index increased 1.6 percent at 4:51 p.m. in Dubai and the MSCI Emerging Markets Index added 1.8 percent. Oil prices gained 1.6 percent.
UAE is a sanctuary during trouble and a partner in good times (Interview)
The UAE is a sanctuary in times of trouble and a partner in boom times, according to Sheikh Saud bin Saqr Al Qasimi, Crown Prince and Deputy Ruler of Ras Al Khaimah.
He told Emirates Business that the current economic downturn actually represented an opportunity, while forecasting that Ras Al Khaimah's gross domestic product would grow by eight per cent in 2009.
Sheikh Saud said tourism and infrastructure projects would drive this growth and mitigate the impact of the construction industry's troubles.
Education would also be a very important vehicle for RAK as it sought to create an environment that generated new ideas for businesses that could be established in RAK and elsewhere in the UAE.
What is your economic forecast for RAK in 2009? Which sectors will contribute to growth?
This year we should have eight per cent growth in GDP. All sectors have done well. Of course in 2009 you will not see growth in the construction sector. But if you look at tourism and all the infrastructural projects, you will see growth across the sectors.
He told Emirates Business that the current economic downturn actually represented an opportunity, while forecasting that Ras Al Khaimah's gross domestic product would grow by eight per cent in 2009.
Sheikh Saud said tourism and infrastructure projects would drive this growth and mitigate the impact of the construction industry's troubles.
Education would also be a very important vehicle for RAK as it sought to create an environment that generated new ideas for businesses that could be established in RAK and elsewhere in the UAE.
What is your economic forecast for RAK in 2009? Which sectors will contribute to growth?
This year we should have eight per cent growth in GDP. All sectors have done well. Of course in 2009 you will not see growth in the construction sector. But if you look at tourism and all the infrastructural projects, you will see growth across the sectors.
Mashreq bank restructures its asset book
Mashreq, the largest private sector bank in Dubai, has restructured its asset book significantly by moving an additional Dh13.7 billion to the Central Bank and increasing loans to government and public sector entities byDh4.25bn, an analysis of the balance sheet said.
Thus the total funds between Central Bank deposits and loans to government and public sector entities have surged by about 250 per cent during the nine months, from Dh12.236bn as of December 31, 2008, to Dh30.239bn as of September end.
"Mashreq may have taken a 'wait and watch' strategy in the wake of the ongoing recession when the bank on its part has large exposure to the troubled Saudi group," an analyst told Emirates Business. Though there were unconfirmed reports that the bank's exposure to the Saudi groups could be in the region of $400 million (Dh1.46bn), a clear picture on the same is yet to be known. However, the bank is reported to have moved court on the issue
Thus the total funds between Central Bank deposits and loans to government and public sector entities have surged by about 250 per cent during the nine months, from Dh12.236bn as of December 31, 2008, to Dh30.239bn as of September end.
"Mashreq may have taken a 'wait and watch' strategy in the wake of the ongoing recession when the bank on its part has large exposure to the troubled Saudi group," an analyst told Emirates Business. Though there were unconfirmed reports that the bank's exposure to the Saudi groups could be in the region of $400 million (Dh1.46bn), a clear picture on the same is yet to be known. However, the bank is reported to have moved court on the issue
In The Pipeline: No bubble in Qatar gas projects
Qatar is to be congratulated on the 10th anniversary of liquefied natural gas exports (LNG), which coincided with the commissioning of the 6th LNG train, often described as "mega train", being the largest gas processing train in the world at 7.8 million tonnes a year of LNG product.
The train went into production successfully at the end of July 2009. There are three similar trains under construction and all expected to be commissioned in 2010 that will give Qatar a total capacity of about 77 million tonnes a year and make it the largest LNG exporter in the world.
All these projects were decided many years ago at a time when the outlook for natural gas demand was so bright.
The train went into production successfully at the end of July 2009. There are three similar trains under construction and all expected to be commissioned in 2010 that will give Qatar a total capacity of about 77 million tonnes a year and make it the largest LNG exporter in the world.
All these projects were decided many years ago at a time when the outlook for natural gas demand was so bright.
Building a new funding base
Brian Pepper is one of hundreds of property developers faced with the new realities of building in the Emirates. With no off-plan sales to help construction begin and little bank lending to sustain it, developers like him are being forced to work together and allow buyers to move their deposits while scaling back the ambitious plans of a year ago.
The Irishman launched three towers at the Marmooka City development, located off Emirates Road in Ajman. Now he can build only two, as the scheme that was slated for 204 towers looks more likely to actually have just 20 buildings. He says banks remain unwilling to fill the financing vacuum created by the demise of off-plan sales.
“In Ajman there was never bank finance. But if Ajman Bank gave finance, the whole of Emirates Road would come out of the ground,” he says.
The Irishman launched three towers at the Marmooka City development, located off Emirates Road in Ajman. Now he can build only two, as the scheme that was slated for 204 towers looks more likely to actually have just 20 buildings. He says banks remain unwilling to fill the financing vacuum created by the demise of off-plan sales.
“In Ajman there was never bank finance. But if Ajman Bank gave finance, the whole of Emirates Road would come out of the ground,” he says.
World Bank: reform UAE insolvency laws
Creditors of companies that go bust in the Emirates are likely to be paid less than in most other Arab countries, creating a deterrent to investment, says a report from the World Bank.
Policymakers in the country have been urged to focus their efforts on reforming the UAE’s insolvency framework to lay the foundations for a better business environment.
Creditors get an average of 10.2 cents (37 fils) in the dollar if a company in the UAE files for bankruptcy, data from the World Bank’s International Finance Corporation shows. In MENA, only Mauritania has a lower rate of recovery, at 6.7 cents. Bahrain has the highest rate of recovery in the region: creditors can on average expect to get back 63.2 cents in the dollar.
Policymakers in the country have been urged to focus their efforts on reforming the UAE’s insolvency framework to lay the foundations for a better business environment.
Creditors get an average of 10.2 cents (37 fils) in the dollar if a company in the UAE files for bankruptcy, data from the World Bank’s International Finance Corporation shows. In MENA, only Mauritania has a lower rate of recovery, at 6.7 cents. Bahrain has the highest rate of recovery in the region: creditors can on average expect to get back 63.2 cents in the dollar.
Omanis count cost of funds fraud
When each of the 20 people were swindled out of 1,500 rials (Dh14,300) by a jomeea financing scheme, they had no option but to report the “crime” to the police. Even before they made the complaint, they knew they had little hope of getting their money back.
Jomeea is a tradition practised in Omani communities to raise funds for individuals to finance the purchase of a property, such as a farm, or the construction of a house. Each member of the jomeea, on a rotational basis, collects a fixed amount of money from the other members each month.
Members in a jomeea group can be as few as five but regularly number more than 30. The amount of money changing hands ranges from 50 rials to 2,000 rials a month, depending on the financial status of participants. Each member receives the amount he contributed when his turn comes. The person receiving the money continues to contribute until the round ends.
Jomeea is a tradition practised in Omani communities to raise funds for individuals to finance the purchase of a property, such as a farm, or the construction of a house. Each member of the jomeea, on a rotational basis, collects a fixed amount of money from the other members each month.
Members in a jomeea group can be as few as five but regularly number more than 30. The amount of money changing hands ranges from 50 rials to 2,000 rials a month, depending on the financial status of participants. Each member receives the amount he contributed when his turn comes. The person receiving the money continues to contribute until the round ends.
UAE business execs question crisis handling
The UAE economy is in decline and the government has not done enough to stem the economic crisis despite pumping billions of dollars into the banking system and struggling companies, according to new survey, the first to poll the government’s handling of the crisis.
Fifty-seven percent of respondents said business conditions in the UAE are in decline, while 51 percent said they are not satisfied with the government’s response to the crisis, the survey by consultancy Oliver Wyman and U.S.-based pollster Zogby International found.
Confidence in the government has been hit as a result, with 45 percent of respondents stating confidence has been slightly damaged and a further 26 percent saying confidence has been undermined.
Fifty-seven percent of respondents said business conditions in the UAE are in decline, while 51 percent said they are not satisfied with the government’s response to the crisis, the survey by consultancy Oliver Wyman and U.S.-based pollster Zogby International found.
Confidence in the government has been hit as a result, with 45 percent of respondents stating confidence has been slightly damaged and a further 26 percent saying confidence has been undermined.
Futures Markets Jockey for Benchmark
Saudi Arabia's decision to start using a new benchmark to price the oil it sells to the U.S. is setting up a battle between the two leading commodities exchanges, each hoping to become the dominant market for derivatives linked to the new benchmark.
IntercontinentalExchange Inc. and New York Mercantile Exchange parent CME Group Inc. are both launching crude-oil futures contracts based on the Argus Sour Crude Index, the index that Saudi Arabia is adopting for its U.S. oil sales in January. Saudi Arabia, which supplies about 5% of U.S. oil demand, had previously used West Texas Intermediate, or WTI, crude delivered in Cushing, Okla., as its benchmark. WTI is issued by Platts, a unit of McGraw-Hill Cos.
Saudi Arabia's move may create demand for new derivatives linked to the Argus index, a previously little-used benchmark that is based on lower-quality oil produced in the Gulf of Mexico. The index was launched in May by London-based energy-market information service Argus Media Ltd.
The exchange operators are quickly rolling out the new derivatives to hold on to Saudi Arabia's U.S. customers, who use futures to reduce the risk from the fluctuating price of physical oil. Futures tied to high-quality WTI wouldn't provide the same protection for low-quality oil priced with Argus. Companies would likely have turned to custom, off-exchange derivatives had CME and ICE not acted. Both earn 6% to 8% of revenue from futures linked to WTI, according to Fox-Pitt Kelton.
IntercontinentalExchange Inc. and New York Mercantile Exchange parent CME Group Inc. are both launching crude-oil futures contracts based on the Argus Sour Crude Index, the index that Saudi Arabia is adopting for its U.S. oil sales in January. Saudi Arabia, which supplies about 5% of U.S. oil demand, had previously used West Texas Intermediate, or WTI, crude delivered in Cushing, Okla., as its benchmark. WTI is issued by Platts, a unit of McGraw-Hill Cos.
The exchange operators are quickly rolling out the new derivatives to hold on to Saudi Arabia's U.S. customers, who use futures to reduce the risk from the fluctuating price of physical oil. Futures tied to high-quality WTI wouldn't provide the same protection for low-quality oil priced with Argus. Companies would likely have turned to custom, off-exchange derivatives had CME and ICE not acted. Both earn 6% to 8% of revenue from futures linked to WTI, according to Fox-Pitt Kelton.
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