Foreign investors are shedding positions in key Gulf markets considered immune to the political unrest sweeping the Middle East and local state institutions are running out of firepower to stem the slide.
Foreign investors were net sellers this week in Qatar and Oman -- considered least likely to see contagion from the turmoil -- and local institutions have been buying, bourse and broker data show.
Selling has been more evident in widely-held bluechip names, which are more easy to exit during crisis due to ample liquidity.
Thursday, 24 February 2011
Libya's oil output cut by up to 75 pct | Reuters
Turmoil in Libya has slashed its oil output by 75 percent or 1.2 million barrels per day, key Libyan oil sector player ENI said on Thursday.
This is the highest estimate to date of Libya's crude production reduction and has added steam to oil's price rally.
Oil surged on Thursday to near $120 a barrel because of the disruption , even though OPEC's leader Saudi Arabia has said it is willing to make up for any shortages while trading sources questioned ENI's high Libyan outage estimate.
This is the highest estimate to date of Libya's crude production reduction and has added steam to oil's price rally.
Oil surged on Thursday to near $120 a barrel because of the disruption , even though OPEC's leader Saudi Arabia has said it is willing to make up for any shortages while trading sources questioned ENI's high Libyan outage estimate.
UK corruption swoop: Mid East edition | beyondbrics – FT.com
Corruption at the very top of Arab governments is helping fuel the revolt sweeping the Middle East, toppling regimes in Tunisia and Egypt, and now threatening Libya and even the monarchy in Bahrain.
But bribery is also about to become a business risk, especially for British business, both individuals and companies.
Delayed guidance on the UK Bribery Act 2010 is expected to be published in the coming months and will be followed three months later by the implementation of this extra-territorial legislation, which can impose fines and recover assets from UK-linked companies involved in bribing officials and executives anywhere.
But bribery is also about to become a business risk, especially for British business, both individuals and companies.
Delayed guidance on the UK Bribery Act 2010 is expected to be published in the coming months and will be followed three months later by the implementation of this extra-territorial legislation, which can impose fines and recover assets from UK-linked companies involved in bribing officials and executives anywhere.
Bahrain's ratings cuts hit insurers - Bloomberg
Leading international ratings agency Standard & Poor's says it has placed two Bahrain-based insurers on "CreditWatch Negative," citing the mass unrest that prompted the earlier downgrade of the Gulf nation's sovereign rating.
S&P said Thursday the moves affected the ratings of the Bahrain Kuwait Insurance Co. and Takaful International Co. BSC.
Other ratings agencies have also recently either downgraded or put on review ratings for Bahrain and banks within the country as the mass protests that led to the ouster of Tunisia and Egypt's leaders spread throughout the Arab world.
S&P said Thursday the moves affected the ratings of the Bahrain Kuwait Insurance Co. and Takaful International Co. BSC.
Other ratings agencies have also recently either downgraded or put on review ratings for Bahrain and banks within the country as the mass protests that led to the ouster of Tunisia and Egypt's leaders spread throughout the Arab world.
Either the Saudis step in or oil prices are going to the moon (and other predictions)
Just yesterday I was listening to the chief economist at the Centre for Global Energy Studies explain calmly why the oil price was unlikely to hit $150 a barrel. Today, it has taken a huge jump in that direction, peaking at more than $119.Analysts are scrambling to update their forecasts. Here are some of their more important/interesting thoughts:
Saudi Arabia is key
Petromatrix says that if the Saudis don’t step in and replace what is being lost from Libyan supplies, then the only thing to make up the shortfall will be a price spike that effectively kills demand. As in 2008, this could be catastrophic for the global economy:
There are only two ways to answer any continuous supply shortfall from Libya: more supply from countries that have some spare capacity (Saudi Arabia but with some quality issue) or lower demand. Saudi Arabia had said that they would increase production when a supply disruption starts to develop. The supply disruption is occurring, Saudi Arabia is for now staying silent hence the market has to price the second solver which is lower demand, and lower demand comes through price demand destruction.The price surge of 2008 was quite effective for demand destruction but the process can be quite harmful and long lasting. Forecasts for oil to reach 200 $/bbl are starting to surface and if oil can go ballistic on any further fire in the Middle East, the aftermath will be probably be dramatic for the world economy.
This report hit before the Saudis ended their silence: let’s see if it has the desired effect.
MENA stock markets - February 24, 2011
| Exchange | Status | Index | Change | ||||
 | TASI (Saudi Stock Market) | 6263.79 | -0.21% | ||||
 | DFM (Dubai Financial Market) | 1479.61 | -1.30% | ||||
| ADX (Abudhabi Securities Exchange) | 2613.5 | 0.20% | ||||
 | KSE (Kuwait Stock Exchange) | 6481.1 | 0.22% | ||||
 | BSE (Bahrain Stock Exchange) | 1432.61 | -2.73% | ||||
 | MSM (Muscat Securities Market) | 6646.34 | -0.14% | ||||
 | QE (Qatar Exchange) | 8211.27 | 0.42% | ||||
 | LSE (Beirut Stock Exchange) | 1420.08 | -0.64% | ||||
 | EGX 30 (Egypt Exchange) | 5646.5 | -10.52% | ||||
 | ASE (Amman Stock Exchange) | 2257.11 | 0.81% | ||||
 | TUNINDEX (Tunisia Stock Exchange) | 4168.01 | -2.49% | ||||
 | CB (Casablanca Stock Exchange) | 12499.7 | 1.15% | ||||
 | PSE (Palestine Securities Exchange) | 483.52 | -0.13% | ||||
Saudi Arabia Says OPEC Willing, Able to Replace Libya Oil - Bloomberg
Saudi Arabia and other OPEC nations including those in West Africa are willing and able to replace any lost Libyan oil as soon as companies ask for it, including crude of the same quality, a Saudi Arabian oil official said.
There is no reason for oil prices to rise because Saudi Arabia and OPEC won’t allow shortages to exist, the official said by telephone today, declining to be identified by name.
As OPEC’s statute indicates, it is the responsibility of the group to ensure that the market is well balanced and that there is no shortage of supply, the official said.
There is no reason for oil prices to rise because Saudi Arabia and OPEC won’t allow shortages to exist, the official said by telephone today, declining to be identified by name.
As OPEC’s statute indicates, it is the responsibility of the group to ensure that the market is well balanced and that there is no shortage of supply, the official said.
Reforms Are The Need Of The Hour, Not Stimulus Packages - Money - Zawya
Gulf and regional monarchies must be yearning for the days when high oil prices were generally correlated to their citizen's state of contentment and happiness.
They look outside the window now and they can't believe oil was hovering at $90 a barrel for months, even before collective Arab anger spilled over the collective Arab streets.
Whatever the outcome of the widespread dissent against Arab rulers, one thing is for certain: Middle East governments can not go back to their old ways, and countries like Saudi Arabia can't paper over problems with stimulus packages (more of its $39-billion all-carrot package later).
They look outside the window now and they can't believe oil was hovering at $90 a barrel for months, even before collective Arab anger spilled over the collective Arab streets.
Whatever the outcome of the widespread dissent against Arab rulers, one thing is for certain: Middle East governments can not go back to their old ways, and countries like Saudi Arabia can't paper over problems with stimulus packages (more of its $39-billion all-carrot package later).
Dubai Shares Drop a Fourth Day This Week as Arab Unrest Worsens - Bloomberg
Dubai’s benchmark stock index fell for a fourth time this week as unrest in the Arab world intensified, with loyalists of Libya’s Muammar Qaddafi seeking to crush dissent in the North African country’s capital.
Emirates Integrated Telecommunications Co., the United Arab Emirates second-biggest phone company known as Du, declined a third day and Emirates NBD PJSC, the country’s largest bank by assets, dropped 1.6 percent. The DFM General Index slipped 0.9 percent to 1,485.36 at 11:29 a.m. in Dubai, bringing its loss for the week to 6.9 percent. Bahrain’s measure retreated 0.5 percent and headed for the lowest close in almost three weeks.
“Investor worries are increasing as the situation worsens and naturally they won’t want to enter markets in a region as politically unstable as this one,” said Waleed Al Khateeb, senior finance manager at Dubai-based Daman Securities LLC. “The impact the unrest will have on the Gulf Cooperation Council is still unclear” after protests spread to Bahrain.
Emirates Integrated Telecommunications Co., the United Arab Emirates second-biggest phone company known as Du, declined a third day and Emirates NBD PJSC, the country’s largest bank by assets, dropped 1.6 percent. The DFM General Index slipped 0.9 percent to 1,485.36 at 11:29 a.m. in Dubai, bringing its loss for the week to 6.9 percent. Bahrain’s measure retreated 0.5 percent and headed for the lowest close in almost three weeks.
“Investor worries are increasing as the situation worsens and naturally they won’t want to enter markets in a region as politically unstable as this one,” said Waleed Al Khateeb, senior finance manager at Dubai-based Daman Securities LLC. “The impact the unrest will have on the Gulf Cooperation Council is still unclear” after protests spread to Bahrain.
UPDATE 1-Etisalat sees finance agreement on Zain by end-Feb | Reuters
UAE telecoms firm Etisalat (ETEL.AD), bidding for a 46-percent stake in Kuwait's Zain (ZAIN.KW), sees a bank deal to finance the $12 billion offer done by the end of February, it said on Thursday.
Etisalat, the Gulf's largest telecoms firm, saw its bid for Zain face a setback this week after Zain's board rejected all bids for its Saudi affiliate, a key condition of the deal. [ID:nLDE71J02K]
The Abu Dhabi-based operator, which says it will meet a February deadline to complete due diligence on Zain, said it would agree final terms with lenders for the three-part financing it wants by the end of this month.
Etisalat, the Gulf's largest telecoms firm, saw its bid for Zain face a setback this week after Zain's board rejected all bids for its Saudi affiliate, a key condition of the deal. [ID:nLDE71J02K]
The Abu Dhabi-based operator, which says it will meet a February deadline to complete due diligence on Zain, said it would agree final terms with lenders for the three-part financing it wants by the end of this month.
Kuwait's Gulfinvest asked to liquidate assets - Maktoob News
Gulfinvest International, dropped from the list of investment firms in Kuwait, was asked by the Ministry of Trade and Industry to liquidate its assets, a local paper said on Thursday citing sources.
Arabic newspaper al-Rai said the ministry asked the company to hold an ordinary annual general meeting for 2009, and an extraordinary meeting for 2010 within the next two weeks, citing sources that it did not identify.
"The shareholders will be asked to take the liquidation procedures, based on the Ministry of Finance's decision in this regard," said the sources.
Arabic newspaper al-Rai said the ministry asked the company to hold an ordinary annual general meeting for 2009, and an extraordinary meeting for 2010 within the next two weeks, citing sources that it did not identify.
"The shareholders will be asked to take the liquidation procedures, based on the Ministry of Finance's decision in this regard," said the sources.
A Closer Look at Oil « Alpha Dinar- talking Gulf finance
In the financial world, oil is traded on various oil bourses based on different financial terms, chemical profiles, and delivery locations with the three most quoted oil products West Texas Intermediate (WTI), Brent Crude, and the UAE Dubai Crude acting as a gauge for the entire oil industry. Depending mostly on density and sulphur content oil products are categorized and priced. Brent is a waterborne crude, while WTI is a landlocked American benchmark. Historically, mainly due to location and supply-demand factors, Brent Crude has traded at +/- 3 USD/bbl to the WTI Spot price. Whenever price anomalies appeared between the two, arbitrageurs captured the price differential and normalized the spread. The graph below compares the price of WTI for delivery in Cushing, Oklahoma with that for Brent in Europe.
By looking at a long-term graph, you usually cannot differentiate between the prices of the two. However, late 2010 the divergence started to appear eventually reaching over $11/ bbl by the end of January 2011. There has been a lot of speculative reasoning for the sharp price divergence, such as volatile currency movements, demand variation, and political. On February 17th 2011 the spread reached a record $16.51 reflecting ample stockpiles at Cushing Oklahoma, civil unrest in the MENA region, and unknown future demand of China. With Brent pricing being used to determine prices of approximately 70 percent of traded oil and supply shocks expected to arise from the unrest in Libya one can expect the a spread to persist, but an important question remains and it is that where have the arbitrageurs disappeared?
David Cameron brokers £2bn gas deal between Centrica and Qatar - Telegraph
The agreement, announced on Wednesday during the Prime Minister's visit to the Gulf state, will give Centrica enough gas to meet around 10pc of the UK's total residential demand over three years.
It understood that the deal was broadly agreed at a meeting between Centrica chief executive Sam Laidlaw and the Emir of Qatar at Number 10 last October.
Mr Cameron was instrumental in bringing the two sides together and was also present at the meeting.
It understood that the deal was broadly agreed at a meeting between Centrica chief executive Sam Laidlaw and the Emir of Qatar at Number 10 last October.
Mr Cameron was instrumental in bringing the two sides together and was also present at the meeting.
FT.com - Analysts look for long-run rewards
The market resurgence experienced across the Middle East and north Africa towards the end of last year has been cancelled out by the uncertainty stemming from the wave of unrest across the region in the past two months.
Contagion has spread from the uprisings in Tunisia and Egypt to threaten regimes throughout the Arab world, first in the Gulf business hub of Bahrain and now oil-rich Libya.
The Dow Jones MENA Index has returned to levels not seen since last September, when the summer lull was replaced by optimism about growth as the global economy showed signs of recovery after the financial crisis.
Contagion has spread from the uprisings in Tunisia and Egypt to threaten regimes throughout the Arab world, first in the Gulf business hub of Bahrain and now oil-rich Libya.
The Dow Jones MENA Index has returned to levels not seen since last September, when the summer lull was replaced by optimism about growth as the global economy showed signs of recovery after the financial crisis.
Zain director claims Etisalat bid is over - The National
The likelihood of success for Etisalat's US$12 billion (Dh40.4bn) bid for a controlling stake in Zain grew more remote last night as a top executive and shareholder of the Kuwaiti company said the deal would not happen.
Etisalat offered to buy the 46 per cent stake in Zain for 1.7 dinars a share last September.
But one of the conditions of the deal was the sale by Zain of its Saudi Arabian unit. Zain rejected three bids for the unit on Sunday and no further offers are on the table.
Etisalat offered to buy the 46 per cent stake in Zain for 1.7 dinars a share last September.
But one of the conditions of the deal was the sale by Zain of its Saudi Arabian unit. Zain rejected three bids for the unit on Sunday and no further offers are on the table.
gulfnews : Nasdaq considers NYSE bid in new twist to exchange deal dash
Nasdaq OMX Group Inc could launch a rival bid for NYSE Euronext to avoid being left on the sidelines, a source said, as traditional exchanges race to merge to see off upstart electronic rivals.
This is one option Nasdaq, valued at $5.7 billion, (Dh20.96 billion) is considering as a spate of deals shakes up an industry under intense cost pressure from new entrants such as BATS Global Markets, which last week snapped up rival Chi-X.
Nasdaq's alternatives include tying up with IntercontinentalExchange Inc or the Chicago Mercantile Exchange (CME) to wrest NYSE from its planned $10.2 billion takeover by Deutsche Boerse, the source familiar with the matter said.
This is one option Nasdaq, valued at $5.7 billion, (Dh20.96 billion) is considering as a spate of deals shakes up an industry under intense cost pressure from new entrants such as BATS Global Markets, which last week snapped up rival Chi-X.
Nasdaq's alternatives include tying up with IntercontinentalExchange Inc or the Chicago Mercantile Exchange (CME) to wrest NYSE from its planned $10.2 billion takeover by Deutsche Boerse, the source familiar with the matter said.
Qatar's interest in Lloyds and RBS is more than a little premature | guardian.co.uk
It was very nice of Hamad bin Jassim bin Jabr al Thani to express an interest in buying a few shares in Royal Bank of Scotland and Lloyds Banking Group, but the prime minister of Qatar ought to know that a few hurdles have to be cleared before the great UK banking sell-off can begin.
For one, Sir John Vickers' independent banking commission has to report its recommendations on competition and structural reform, which won't happen until September. The government then has to decide whether to adopt, adapt or ignore the findings. That process could involve much argy-bargy – not least between chancellor George Osborne and business secretary Vince Cable.
Both banks would be different investment propositions if ordered to undergo major structural reform. So it would be a complete no-no for the government, whose senior members have the best idea of their post-Vickers intentions, to attempt to sell down the state's stake before matters are decided.
In fact, it's odd that the government itself doesn't make that point loudly. Instead, it seems happy to indulge the banks' own musings on the timing of a sell-off. Ministers should put the horse firmly before the cart: decide what kind of banking system they want before trying to sell shares in it.
For one, Sir John Vickers' independent banking commission has to report its recommendations on competition and structural reform, which won't happen until September. The government then has to decide whether to adopt, adapt or ignore the findings. That process could involve much argy-bargy – not least between chancellor George Osborne and business secretary Vince Cable.
Both banks would be different investment propositions if ordered to undergo major structural reform. So it would be a complete no-no for the government, whose senior members have the best idea of their post-Vickers intentions, to attempt to sell down the state's stake before matters are decided.
In fact, it's odd that the government itself doesn't make that point loudly. Instead, it seems happy to indulge the banks' own musings on the timing of a sell-off. Ministers should put the horse firmly before the cart: decide what kind of banking system they want before trying to sell shares in it.
FT.com - Qatar has credit in the bank
Treasury officials as well as executives at Royal Bank of Scotland and Lloyds Banking Group are not the only ones likely to welcome Qatar’s purchase of stakes in Britain’s part-nationalised banks.
Any deal will come as good news for bankers at Credit Suisse, which has strong ties with the emirate. The Gulf state holds more than 6 per cent of the Swiss bank, which has provided Qatar’s sovereign wealth fund with advice on acquisitions.
Last year, Credit Suisse’s Middle East head of M&A, Anthony Armstrong, moved to state investment arm Qatar Holding. He oversaw the purchase of Harrods, a deal where the Swiss bank provided advice. If the emirate goes ahead with investments in Royal Bank of Scotland or Lloyds Banking Group, to sit alongside Qatar Holding’s other investments including stakes in J Sainsbury, the London Stock Exchange, and Barclays, Mr Armstrong will no doubt be charged with crunching the numbers.
Any deal will come as good news for bankers at Credit Suisse, which has strong ties with the emirate. The Gulf state holds more than 6 per cent of the Swiss bank, which has provided Qatar’s sovereign wealth fund with advice on acquisitions.
Last year, Credit Suisse’s Middle East head of M&A, Anthony Armstrong, moved to state investment arm Qatar Holding. He oversaw the purchase of Harrods, a deal where the Swiss bank provided advice. If the emirate goes ahead with investments in Royal Bank of Scotland or Lloyds Banking Group, to sit alongside Qatar Holding’s other investments including stakes in J Sainsbury, the London Stock Exchange, and Barclays, Mr Armstrong will no doubt be charged with crunching the numbers.
Zardari quietly visited UAE to explore options | Newspaper | DAWN.COM
As the rest of the country was watching the Raymond Davis saga unfold, President Asif Ali Zardari took an unannounced trip to Dubai to find an answer to the country’s economic woes.
He visited the Gulf state for a couple of hours a few days ago to seek the intervention of the UAE leadership for the payment of $800 million that Etisalat owed to Islamabad for the country’s largest privatisation transaction — Pakistan Telecommunication Company Limited — Dawn has learnt.
Etisalat has been holding back payment of about $800 million, of the $2.8 billion PTCL’s privatisation proceeds for about four years because of a dispute with the Pakistan government over legal transfer of land and property titles.
He visited the Gulf state for a couple of hours a few days ago to seek the intervention of the UAE leadership for the payment of $800 million that Etisalat owed to Islamabad for the country’s largest privatisation transaction — Pakistan Telecommunication Company Limited — Dawn has learnt.
Etisalat has been holding back payment of about $800 million, of the $2.8 billion PTCL’s privatisation proceeds for about four years because of a dispute with the Pakistan government over legal transfer of land and property titles.
London gets jump on New York in Islamic finance
The cavernous ballroom of a London hotel is buzzing with the sound of networking and deal–making between hundreds of bankers, lawyers and investors from the Middle East, Asia and Europe.
The annual Islamic Finance conference in the British capital has grown exponentially over the past decade, attracting all the key international players and underscoring fears that political rhetoric is leaving the United States sidelined in an increasingly lucrative global industry.
In a post credit–crisis world, Islamic banking is tipped to be a major growth area for international financing. It currently represents around just 2 percent to 3 percent of global financial assets, or almost $1 trillion, but it is growing at an average of 25 percent each year.
The annual Islamic Finance conference in the British capital has grown exponentially over the past decade, attracting all the key international players and underscoring fears that political rhetoric is leaving the United States sidelined in an increasingly lucrative global industry.
In a post credit–crisis world, Islamic banking is tipped to be a major growth area for international financing. It currently represents around just 2 percent to 3 percent of global financial assets, or almost $1 trillion, but it is growing at an average of 25 percent each year.
Bahrain's Economic Plans in Jeopardy - NYTimes.com
Bahrain’s plans to diversify its economy and move away from oil dependence could be derailed by the unrest in the island kingdom, say analysts, raising concerns over the future of its financial industry.
“The events of the last week are a blow to Bahrain’s diversification strategy because it creates a reputational problem in the long run,” said Moritz Kraemer, managing director of sovereign ratings for the Middle East, Europe and Africa for Standard and Poor’s, based in Frankfurt. “Diversification, particularly into the financial sector which is sensitive to shocks, will be a challenge for a country that depends highly on oil, but is not an oil superpower like Saudi Arabia with reserves for many years to come.”
Nearly 80 percent of Bahrain’s government revenue comes from oil and natural gas sales, according to S.&P. research, although Bahrain has only 0.01 percent of the world’s proven oil reserves — compared with 19.8 percent in Saudi Arabia and 7.3 percent in the United Arab Emirates, according to the C.I.A. World Factbook.
“The events of the last week are a blow to Bahrain’s diversification strategy because it creates a reputational problem in the long run,” said Moritz Kraemer, managing director of sovereign ratings for the Middle East, Europe and Africa for Standard and Poor’s, based in Frankfurt. “Diversification, particularly into the financial sector which is sensitive to shocks, will be a challenge for a country that depends highly on oil, but is not an oil superpower like Saudi Arabia with reserves for many years to come.”
Nearly 80 percent of Bahrain’s government revenue comes from oil and natural gas sales, according to S.&P. research, although Bahrain has only 0.01 percent of the world’s proven oil reserves — compared with 19.8 percent in Saudi Arabia and 7.3 percent in the United Arab Emirates, according to the C.I.A. World Factbook.
Egypt jitters rise as market stays shut | beyondbrics – FT.com
When Egypt’s stock market finally reopens, nobody doubts what will happen: prices will tumble. That’s probably why the day of reckoning got postponed again on Wednesday, when the Cairo stock exchange delayed its reopening for the umpteenth time until next week.The longer the market is closed, the more jittery and frustrated some investors get – although others seem glad to defer the pain. For neighbouring stock markets, however, the impact of Egypt’s closure has been inescapable.
Mohamed Ebeid, managing director and head of western institutional sales at EFG-Hermes in Cairo, told beyondbrics:
Some fund managers are facing outflows from their funds, but they can’t price or sell Egyptian equities. So in that case they have to sell in other markets to raise the capital. This is why there is a spillover effect in other Middle East markets, which are under pressure anyway due to expectations that political pressures will spread.