#GCC and #MiddleEast Finance News: 18 Aug 2011

Thursday 18 August 2011

gulfnews : Bank Dhofar sees return to profit in second half of year

Omani lender Bank Dhofar said a $68 million (Dh249.7 million) lawsuit filed by rival Oman International Bank will not hit profit performance in the second half because it has already set aside funds to cover any penalty.

Mohammad Redha Jawad, acting chief executive of Oman's third-largest bank by assets, said the lender had seen the brunt of the impact in the first half when it slumped to a net loss.

Bank Dhofar was ordered to pay 26.1 million riyals ($68 million) into an enforcement court's account as part of the dispute. The case is continuing.

Number of IPOs in the Gulf region on decline - The National

Gulf initial public offerings (IPOs) have fallen by half in the first six months of this year as civil unrest and a global economic slowdown discouraged investors and delayed transactions.

PricewaterhouseCoopers (PwC) said deal values in the region, which includes Saudi Arabia and the UAE, have plunged by 57 per cent to US$358 million from $830m a year earlier.

Three out of the only four IPOs in the region in the first half were from UAE companies. Financial markets were rocked this year by the Arab Spring that ousted leaders in Tunisia and Egypt, followed by a US downgrade and worsening European debt crisis.

gulfnews : Committee to probe Kuwait Oil and Royal Dutch Shell contract

Kuwait's Oil Minister Mohammad Al Baseeri yesterday formed a committee to probe an $800 million (Dh2.9 billion) contract between state-owned Kuwait Oil Co and Royal Dutch Shell PLC (RDSA), an official statement said.

The six-member panel will review procedures leading to the awarding of the Enhanced Technical Services Agreement in February 2010 and examine the implementation of the deal, said the statement.

The contract was awarded to Shell to help the oil-rich emirate to develop its newly-discovered non-associated natural gas fields in the north of the country after initial production hurdles.

MENA stock markets close - August 18, 2011

Exchange

Status

Index

Change

TASI (Saudi Stock Market)

6088.25

0.57%

DFM (Dubai Financial Market)

1468.34

0.08%

ADX (Abudhabi Securities Exchange)

2583.55

-0.06%

KSE (Kuwait Stock Exchange)

5826.8

-0.10%

BSE (Bahrain Stock Exchange)

1261.21

-0.40%

MSM (Muscat Securities Market)

5527.09

0.71%

QE (Qatar Exchange)

8190.74

-0.15%

LSE (Beirut Stock Exchange)

1296.24

-0.03%

EGX 30 (Egypt Exchange)

4747.17

0.38%

ASE (Amman Stock Exchange)

2023.87

0.41%

TUNINDEX (Tunisia Stock Exchange)

4462.22

0.74%

CB (Casablanca Stock Exchange)

11348

-0.10%

PSE (Palestine Securities Exchange)

490.14

-0.06%

Omani shares rebound as Renaissance fights back - The National

Omani oil services firm rebounded from an all time low ahead of a conference call with investors to discuss second quarter results.

Shares of Renaissance Services jumped 10 per cent, following three days of declines after it reported fraud at its Topaz unit and posted a 77 per cent drop in net profit for the first half of the year. The stock was down 26 per cent prior to market open.

Oman's benchmark was up 0.7 per cent to 5526.45 points.

Mideast Bonds Rise as Investors Seek Haven From Europe Crisis: Arab Credit - Bloomberg

Middle Eastern sovereign bonds are rallying for a second month as economic growth and cash-rich banks lure investors seeking shelter from Europe’s debt crisis and the U.S. economic slowdown.

Schroder Investment Management Ltd., Abu Dhabi Commercial Bank PJSC and Fideuram Asset Management Ireland Ltd. predict the rise, fueled by Persian Gulf borrowers and Lebanon, may continue. The average yield on the region’s notes declined 17 basis points, or 0.17 percentage point, this month to 4.67 percent, the lowest since November, the HSBC/Nasdaq Dubai Middle East Conventional Sovereign US Dollar Bond Index shows. Rates on emerging-market government debt fell three basis points to 5.64 percent on Aug. 17, data compiled by JPMorgan Chase & Co. show.

Persian Gulf countries “do not represent any sovereign risk given the massive surpluses they have accumulated in the past 5 years as a result of high oil prices,” Rami Sidani, the Dubai-based head of Middle East and North Africa investments at Schroder, which oversees about $230 billion worldwide, said in an e-mail on Aug. 16. “We don’t expect yields to pick up before we see a general pick up in risk appetite.”

Oman's Renaissance defends disclosure delay amid stock slump | Reuters

Omani group Renaissance Services , defended itself against investor anger over late disclosure of troubles at its Topaz unit and said it will meet its short-term commitments as it focuses on turning around its troubled engineering unit.

The oil services company said on Monday it had uncovered evidence of fraud at an overseas arm of wholly-owned subsidiary Topaz Energy and Marine, which had been on the cusp of a $500 million London listing in March.

The news sent its stock down 26 percent this week and sparked questions about why Renaissance had not disclosed the financial misconduct, nor that Topaz's chief executive had resigned in May, until now.

Gulf Markets Worry About Oil Outlook: The Media Line

Fear that the days of global economic recovery and rising oil prices may fast be fading has sent shivers through Gulf stock markets.

Those worries reduced the market capitalization of the Saudi Stock Exchange, or Tadawul, by around $11 billion in the first half of August to $326 billion. Elsewhere around the Gulf, the Dubai Financial Market’s main index has shed close to 5% in the last two weeks while Kuwait's index reached a seven-year low on Sunday.

Many investors fear it may 2008 all over again. That was the year the U.S. housing market went under in a sea of mortgage debt, bringing oil prices to as low as $30 a barrel. But economists say that unlike 2008, Saudi Arabia and the region’s other governments are adequately cushioned for another slump in the world oil price, if it comes.

OPEC’s Crude Exports Increase 2% in June, Led by Saudi Shipments - Bloomberg

Exports of crude oil by OPEC member countries rose 2 percent in June after Saudi Arabia boosted shipments by 7.9 percent, according to data supplied to the Joint Organization Data Initiative.

The Organization of Petroleum Exporting Countries shipped 22.54 million barrels a day in June, up from 22.11 million in May, according to data posted today on the website. The association is supervised by the Riyadh-based International Energy Forum and compiles data from primary sources.

Saudi Arabia, the world’s largest crude exporter, exported 7.38 million barrels a day in June, up from 6.84 in the previous month, according to the figures. The June level was the highest since October 2008, when the kingdom shipped 7.51 million barrels a day. Oil shipments from Saudi Arabia increased as imports rose in Japan, South Korea and the U.S., according to the data.

Rushdi Siddiqui, Islamic finance, Kebabonomics, Big Mac index, Date index, Islamic dates index | alifarabia

I have been fortunate enough to be involved in many interesting conversations over the years from the potentially practical (Islamic stock exchange, Islamic LIBOR, convergence between Islamic finance and Halal industry), to potentially flawed (Islamic inflation, Islamic unemployment, consumer price index (CPI), Islamic car, Islamic washing machine), and the potentially feasible (Islamic currency, Dinar).

While some of these topics are ideally suited as conference panel sessions, research topics for academic papers, and even awards for innovation, we need to reflect on the source of ideas that connect to the roots of Muslims in a meaningful manner. Concurrently, these same ideas should also click and tick with the non-Muslim community.

SYRIA: Crisis may hurt economies of Turkey, Lebanon, Jordan, Iraq - latimes.com

Current events in Syria are expected to impact other states economically, especially neighboring Turkey, Lebanon, Iraq, and Jordan. The first potential effect is on bilateral trade between Syria and its neighbors. Turkey comes to the fore here, since its trade to and from Syria was valued at $2.27 billion last year.

The situation in Syria affects Turkey in two ways. The first is the potentially large drop in trade volume, especially since demand for imports and Turkish commodities –- which used to be high –- has dropped sharply since the beginning of the events. Some sources estimate that trade volume has dropped between 30% and 40%, and that these percentages could drop even lower with the expiration of prior arrangements and the continued state of chaos.

Meanwhile there is an absence of desire on both sides, Syrian and Turkish, to renew these contracts before matters become clearer. During 2010, Syrian exports to Turkey were valued at $1.6 billion, while Syrian imports from Turkey were around $630 million.

gulfnews : In Theory: GCC banks face dollar peg conundrum

Despite the financial and economic difficulties suffered recently by the US economy, the central banks of many Gulf Cooperation Council (GCC) countries have stressed that they will continue to peg their currencies to the dollar.

There are technical reasons for this. There is the link between oil revenues and the dollar, as well as the financial and monetary complications that may surface as a result of the de-pegging process, due to the current global financial situation. Also, an important part of Gulf central banks' reserves are pegged to the dollar.

All this seems reasonable. However, there have been announcements by certain governors of Gulf central banks that GCC banks do not own any financial instruments issued by the US government — including US treasury bonds — because of the drop in the revenues of these securities. This contradicts prior data from the same sources which said that 97 per cent of their reserves are dollar denominated.

gulfnews : Shaheen Financial Brokerage to close due to tough conditions

Tough market conditions are continuing to take their toll on the UAE's financial brokerages as another company plans to close its doors amid dwindling volumes on regional bourses and growing volatility across global equity indexes.

Shaheen Financial Brokerage, which manages clients trading across the Dubai Financial Market (DFM), the Abu Dhabi Securities Exchange (ADX) and the Dubai Gold and Commodities Exchange, will cease operations in the near future, a senior company official told Gulf News Wednesday without elaborating on the details.

Shaheen was established in 2005 and has a paid-up capital of Dh30 million, according to its profile on the DFM. Dozens of local brokerages have suspended or shut operations over the last few years as costs continue to rise and revenues tumble.

Power price freeze cools bold ambitions - The National

Businesses cheered Dubai's decision this week to freeze power and water prices for the next few years.

The move, however, represents an abrupt U-turn in the emirate's energy strategy.

As recently as last month, the emirate's Supreme Council of Energy, a policymaking body, warned that utility tariffs would rise with the cost of fuel.

Full: GCC must urgently invest in educating the next generation - The National

The six nations of the GCC are experiencing a unique demographic period in which one half to one third of their population is under 25.

This youth bulge presents these governments with an opportunity to propel their nations forward: these young people can bring creativity, energy and productivity to local economies. With their contributions, the region can accelerate its development and continue building knowledge economies.

But a recent survey by Booz & Company of young people aged 15 to 24 in Qatar, Saudi Arabia and the UAE shows there are also challenges to overcome.

Oil Consumed by OPEC Members Rises 2.1% in June, Led by Kuwait - Bloomberg

Consumption of crude within OPEC member nations rose 2.1 percent in June on higher use in Kuwait, data supplied to the Joint Organization Data Initiative show.

Organization of Petroleum Exporting Countries consumed 7.85 million barrels a day in June, compared with 7.69 million barrels in May, data posted today on the website showed. The association is supervised by the Riyadh-based International Energy Forum and compiles data from primary sources.

The majority of the increase came from Kuwait, the group’s fourth-largest producer. Its domestic USE rose 26 percent to 922,000 barrels a day from 730,000 barrels a month earlier, the data showed. Saudi Arabia, the group’s largest producer, reported a 4.3 percent decrease in domestic crude oil consumption to 1.89 million barrels a day.

UAE bank valuations at lowest level in six months - The National

The valuations of banks on the UAE's stock markets have fallen to their lowest level in six months, despite a recovery in bank capital and earnings.

Emirates lenders are now the cheapest bank stocks in the Middle East relative to earnings, apart from Egypt. But the deep discounts have yet to prompt a wave of buying because of weak liquidity in Abu Dhabi and Dubai.

'There is value in these public companies but in a depressed market it doesn't matter if it's gold, people won't buy it if there is no liquidity,' said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi.

Middle East Bonds Rise, Become Safe Haven in Global Slowdown: Arab Credit - Bloomberg

Middle Eastern sovereign bonds are rallying for a second month as economic growth and cash-rich banks lure investors seeking shelter from Europe’s debt crisis and the U.S. economic slowdown.

Schroder Investment Management Ltd., Abu Dhabi Commercial Bank PJSC and Fideuram Asset Management Ireland Ltd. predict the rise, fueled by Persian Gulf borrowers and Lebanon, may continue. The average yield on the region’s notes fell 15 basis points, or 0.15 percentage point, this month to 4.69 percent, the lowest since November, the HSBC/Nasdaq Dubai Middle East Conventional Sovereign US Dollar Bond Index showes. Rates on emerging-market government debt rose six basis points to 5.73 percent Aug. 16, data compiled by JPMorgan Chase & Co. show.