Companies linked to Dubai’s government have nearly $14bn in debt coming due next year and with the 2009 debt debacle fresh in their memories many investors are nervous over the companies’ ability to pay.
But at least one analyst isn’t too worried – and has even upgraded some of the bonds.
Zafer Nazim of JP Morgan in London says about $3.3bn of next year’s total is “challenging”, including Islamic bonds issued by the Jebel Ali Free Zone Authority (JAFZA) and the Dubai International Financial Centre (DIFC).
Thursday 13 October 2011
MENA stock markets close - October 13, 2011
| Exchange | Status | Index | Change | ||||
 | TASI (Saudi Stock Market) | 6105.04 | -0.22% | ||||
 | DFM (Dubai Financial Market) | 1384.58 | 0.06% | ||||
| ADX (Abudhabi Securities Exchange) | 2477.8 | -0.36% | ||||
 | KSE (Kuwait Stock Exchange) | 5867.5 | 0.34% | ||||
 | BSE (Bahrain Stock Exchange) | 1149.93 | 0.21% | ||||
 | MSM (Muscat Securities Market) | 5515.76 | -0.06% | ||||
 | QE (Qatar Exchange) | 8396.53 | -0.26% | ||||
 | LSE (Beirut Stock Exchange) | 1218.88 | 0.07% | ||||
 | EGX 30 (Egypt Exchange) | 4152.29 | 2.52% | ||||
 | ASE (Amman Stock Exchange) | 1934.61 | 0.31% | ||||
 | TUNINDEX (Tunisia Stock Exchange) | 4616.44 | 0.05% | ||||
 | CB (Casablanca Stock Exchange) | 11484.8 | 0.25% | ||||
 | PSE (Palestine Securities Exchange) | 477.47 | -0.17% | ||||
Abu Dhabi Shares Fall to Two-Month Low as Oil, Europe Decline - Businessweek
Abu Dhabi’s benchmark index dropped to the lowest in two months, declining for a sixth week, as Investbank retreated and Europe’s stocks fell from a two-month high.
Investbank, an Abu Dhabi-based lender, plunged the most in two months. Agthia Group PJSC, which operates in companies in the food and beverage business, tumbled to the lowest level in almost two years. The benchmark ADX General Index declined 0.4 percent to 2,477.80, the lowest since Aug. 12, at the 2 p.m. close in the emirate. The measure extended its loss for the week to 0.7 percent. About 28 million shares traded in Abu Dhabi today, compared with this year’s daily average of 67 million, according to data compiled by Bloomberg. The Bloomberg GCC 200 Index was unchanged at 54.17.
“What’s been controlling the market is a lack of interest toward blue-chip companies, leaving the market to retail investors trying to close positions before the weekend,” said Marwan Shurrab, assistant fund manager and chief trader at Dubai-based Gulfmena Alternative Investments. The decline in European stocks prices also helped trigger the selling, he said.
Investbank, an Abu Dhabi-based lender, plunged the most in two months. Agthia Group PJSC, which operates in companies in the food and beverage business, tumbled to the lowest level in almost two years. The benchmark ADX General Index declined 0.4 percent to 2,477.80, the lowest since Aug. 12, at the 2 p.m. close in the emirate. The measure extended its loss for the week to 0.7 percent. About 28 million shares traded in Abu Dhabi today, compared with this year’s daily average of 67 million, according to data compiled by Bloomberg. The Bloomberg GCC 200 Index was unchanged at 54.17.
“What’s been controlling the market is a lack of interest toward blue-chip companies, leaving the market to retail investors trying to close positions before the weekend,” said Marwan Shurrab, assistant fund manager and chief trader at Dubai-based Gulfmena Alternative Investments. The decline in European stocks prices also helped trigger the selling, he said.
MIDEAST DEBT-Narrowing spreads could spur Gulf high-grade issuance | Reuters
After two months of inactivity due to the euro zone debt crisis and turmoil in global financial markets, high-grade borrowers from the Gulf Arab region may be close to resuming issuance.
There is a substantial number of bonds in the pipeline, and a partial improvement of sentiment in global markets in the past week -- although the euro zone crisis remains fundamentally unresolved -- has helped Gulf spreads tighten dramatically.
The average yield on the HSBC Nasdaq Dubai GCC conventional dollar bond index fell to 5.039 percent on Wednesday from 5.245 percent at the end of last week. Average spreads, calculated over Libor, narrowed to 305.6 basis points from 345.6 bps. In the week to Oct. 5, net outflows from emerging market bond funds slowed to $1.4 billion from the previous week's $3.2 billion, according to IFR Markets.
There is a substantial number of bonds in the pipeline, and a partial improvement of sentiment in global markets in the past week -- although the euro zone crisis remains fundamentally unresolved -- has helped Gulf spreads tighten dramatically.
The average yield on the HSBC Nasdaq Dubai GCC conventional dollar bond index fell to 5.039 percent on Wednesday from 5.245 percent at the end of last week. Average spreads, calculated over Libor, narrowed to 305.6 basis points from 345.6 bps. In the week to Oct. 5, net outflows from emerging market bond funds slowed to $1.4 billion from the previous week's $3.2 billion, according to IFR Markets.
Dubai can manage $14bn debt with ease - Emirates 24/7
Dubai's government-related entities (GREs) can pay down or refinance nearly $14 billion in debt maturing next year with relative ease, a report by investment bank JP Morgan said on Thursday.
The capital market risk is limited primarily to Jebel Ali Free Zone (Jafza), a unit of state-owned conglomerate Dubai World that is looking to refinance its Dh7.5 billion ($2.04bn) Islamic bond, and the topping up needs of the Dubai Financial Support Fund (DFSF), which are about $2.5 billion to $3.5 billion.
"The $14 billion wall of debt maturities at Dubai GREs next year is not nearly as daunting as the headline number suggests," analyst Zafar Nazim said in a report dated October 12.
The capital market risk is limited primarily to Jebel Ali Free Zone (Jafza), a unit of state-owned conglomerate Dubai World that is looking to refinance its Dh7.5 billion ($2.04bn) Islamic bond, and the topping up needs of the Dubai Financial Support Fund (DFSF), which are about $2.5 billion to $3.5 billion.
"The $14 billion wall of debt maturities at Dubai GREs next year is not nearly as daunting as the headline number suggests," analyst Zafar Nazim said in a report dated October 12.
Qatar Shares Rise to October High as Industries Qatar Net Soars - Businessweek
Qatar shares rose to the highest this month after Industries Qatar QSC, the Middle East’s second- biggest petrochemicals company, reported a 46 percent surge in third-quarter profit.
Industries Qatar climbed to the highest in three weeks. Gulf International Services OSC, which provides services to the oil and gas industry, headed for the highest close this month. The benchmark QE Index gained 0.1 percent to 8,428.73 at 11:16 a.m. in Doha, the highest intraday level since Sept. 28. The measure has advanced 2.2 percent this week. The Bloomberg GCC 200 Index was little changed.
Industries Qatar’s “price is cheap and the earnings are good,” said Haissam Arabi, chief executive officer at Gulfmena Alternative Investments in Dubai.
Industries Qatar climbed to the highest in three weeks. Gulf International Services OSC, which provides services to the oil and gas industry, headed for the highest close this month. The benchmark QE Index gained 0.1 percent to 8,428.73 at 11:16 a.m. in Doha, the highest intraday level since Sept. 28. The measure has advanced 2.2 percent this week. The Bloomberg GCC 200 Index was little changed.
Industries Qatar’s “price is cheap and the earnings are good,” said Haissam Arabi, chief executive officer at Gulfmena Alternative Investments in Dubai.
gulfnews : Kuwait probe into alleged money-laundering scheme widens
A probe looking into an alleged money-laundering scheme in Kuwait worth hundreds of millions of dollars has traced links to Germany, Iran, Russia, and Britain, a Kuwaiti daily said.
According to Al Shahed, the money deposited in the accounts of two lawmakers, a former minister and a businessman was in installments of 15 million dinars ($54,267,200), 50 million dinars ($180,891,000) and 45 million dinars ($162,802,000) to reach 110 million dinars ($397,960,000).
However, according to Al Rai daily that first broke the news about an alleged $300 million money-laundering scheme, around $180 million were deposited in the accounts after the amount was taken on a private plane from Kuwait to Amsterdam.
According to Al Shahed, the money deposited in the accounts of two lawmakers, a former minister and a businessman was in installments of 15 million dinars ($54,267,200), 50 million dinars ($180,891,000) and 45 million dinars ($162,802,000) to reach 110 million dinars ($397,960,000).
However, according to Al Rai daily that first broke the news about an alleged $300 million money-laundering scheme, around $180 million were deposited in the accounts after the amount was taken on a private plane from Kuwait to Amsterdam.
EM funds: torrent of losses | beyondbrics – FT.com
The plunge in emerging markets is hitting EM fund managers even harder than expected. Shares in Ashmore (ASHM:LSE), the specialist EM fund manager, fell as much as 7 per cent on Thursday after it reported a 10 per cent drop in funds under management over just three months following heavy investment losses.
AUM plummeted by $6.9bn to $58.9bn at the end of September – twice as much as analysts had forecast. There will be plenty of other EM managers facing similar headaches.
As this table from Ashmore’s statement shows, the decline was particularly severe in equities, which saw AUM drop nearly 27 per cent. Corporate debt bucked the trend but these assets are only a sliver of Ashmore’s overall portfolio:
AUM plummeted by $6.9bn to $58.9bn at the end of September – twice as much as analysts had forecast. There will be plenty of other EM managers facing similar headaches.
As this table from Ashmore’s statement shows, the decline was particularly severe in equities, which saw AUM drop nearly 27 per cent. Corporate debt bucked the trend but these assets are only a sliver of Ashmore’s overall portfolio:
Arab Spring will be ''Positive for Economy'' by 2014, says HSBC MENA clients - Zawya
At the first HSBC MENA Global Banking and Markets Leadership Forum, 62% of the region's most senior business leaders stated that the impact of the Arab Spring would be positive, when viewed over a three year horizon, supporting HSBC's view that the region will continue to play a key role on the global stage.
Despite this, only 28% of respondents were planning to invest in MENA, with the vast majority (45%) looking to invest in Asia. However, when questioned on asset class investment, only 11% where planning to put money into the stock market, against 19% who were looking at gold and 36% real estate.
Mohammad Al Tuwaijri, Head of Global Banking and Markets and Private Banking, MENA said: "This is an ideal time to bring together our most important clients from the region. In times of stress - more than any other - our clients need a bank that they can rely on, not just for effective product solutions, like our award winning risk management capability, but for expert advice they can use, when they need it most."
Despite this, only 28% of respondents were planning to invest in MENA, with the vast majority (45%) looking to invest in Asia. However, when questioned on asset class investment, only 11% where planning to put money into the stock market, against 19% who were looking at gold and 36% real estate.
Mohammad Al Tuwaijri, Head of Global Banking and Markets and Private Banking, MENA said: "This is an ideal time to bring together our most important clients from the region. In times of stress - more than any other - our clients need a bank that they can rely on, not just for effective product solutions, like our award winning risk management capability, but for expert advice they can use, when they need it most."
Iranian Bomb Plot Exposes Economic War with Saudi Arabia - The Daily Beast
The alleged Iranian plot to blow up Saudi Arabia’s ambassador in Washington made for blazing headlines even as it obscured a deeper truth: Iran and Saudi Arabia have been engaged in a different sort of war of attrition over the past few decades, with economics, not explosives, the weapon of choice. Both regimes are keenly aware that although bullets may kill, they can’t bankrupt: only a sudden collapse in oil revenue can do that.
Skeptics who find it implausible that the oil markets can be harnessed as a weapon, and that oil can be turned into a financial super bomb to destabilize a national economy, should heed the words of a leading member of the Saudi royal family. Prince Turki al-Faisal, previously his country’s head of intelligence and ambassador to Washington, has long enjoyed a reputation for frank talk. Three and a half months ago, he delivered an address to a select group of NATO officials at an air base deep in the heart of the British countryside. In his remarks, the prince fired a shot across the bows of the Iranian regime.
This past year, the Saudi royal family was caught off-guard by the Arab Spring uprisings and badly shaken by the overthrow of old friends and allies in Egypt and Tunisia. The Saudis blame their neighbor Iran for inciting and stoking the troubles as part of a sinister plot to divide, weaken, and eventually topple the region’s conservative Sunni monarchies. Prince Turki made it clear that after six months of being on the defensive, the Saudi royal family had rallied and was about to fight its corner by unleashing the most powerful weapon in its arsenal: the kingdom’s massive oil reserves.
GCC remains resilient in the face of global crisis - Money - Zawya
Even though the economic environment in the GCC (Gulf Cooperation Council) region has continued to improve steadily in the course of the summer, the increasingly alarming global backdrop is fueling risk aversion and reviving fears of a relapse in the global crisis. As the euro zone continues to stumble from one inconclusive exercise in crisis management to the next, the situation in the US has taken a turn for the worse with increasingly weak economic data, a political stalemate, and a consequent decision by Standard & Poor's in August to downgrade the country. The GCC remains vulnerable to these risks because of renewed worries about oil demand erosion as well as heightened risk aversion in financial markets. This has created a paradoxical situation where the regional growth drivers in the GCC are strong but the effects of the global uncertainty on investor sentiment once again risks leaving growth disproportionately dependent on the public sector, the National Commercial Bank (NCB) has said in its GCC Economic Review.
The European situation has taken a significant turn for the worse as a result of mounting concerns about the ability of the European Financial Stability Facility (EFSF) with its current resources to address the stress points in the euro zone economy.
Efforts are underway to increase the capital of the facility from $440 million to $780 million but the ratification process is still to be completed. In the meantime, the European Central Bank (ECB) has taken a more active role in crisis management.
Khazanah Said to Revive Its Offering of World’s First Yuan Islamic Bonds - Bloomberg
Khazanah Nasional Bhd., Malaysia’s state investment company, has started taking orders for the sale of the world’s first yuan-denominated Islamic bonds after an initial delay, according to two people familiar with the matter.
The three-year bonds, which pay returns from assets that comply with religious tenets, may price to yield about 3 percent, said one of the people, who asked not to be identified because the details are private. Average yields on yuan bonds sold in Hong Kong are 28 basis points lower than those on global Islamic notes, according to data from HSBC Holdings Plc.
Khazanah, which controls some of the Southeast Asian nation’s biggest companies including power producer Tenaga Nasional Bhd. and Malaysian Airline System Bhd., planned to sell 500 yuan of Islamic bonds last month, two people familiar with the matter said on Sept 14. Its deferment made sense given the volatility in global financial markets, central bank Governor Zeti Akhtar Aziz said on Sept. 26.
The three-year bonds, which pay returns from assets that comply with religious tenets, may price to yield about 3 percent, said one of the people, who asked not to be identified because the details are private. Average yields on yuan bonds sold in Hong Kong are 28 basis points lower than those on global Islamic notes, according to data from HSBC Holdings Plc.
Khazanah, which controls some of the Southeast Asian nation’s biggest companies including power producer Tenaga Nasional Bhd. and Malaysian Airline System Bhd., planned to sell 500 yuan of Islamic bonds last month, two people familiar with the matter said on Sept 14. Its deferment made sense given the volatility in global financial markets, central bank Governor Zeti Akhtar Aziz said on Sept. 26.
Gulf companies made to offer prized assets as loan collateral
Credit markets are sending a harsh message to Gulf companies slowly emerging from the global financial crisis and now seeking expansion opportunities: line up your best assets as collateral to secure financing.
The sovereign debt troubles in the euro zone, sluggish growth of the global economy and a recognition that they may have lent too freely in the past are prompting banks to become more cautious in their lending, and to demand tangible assets as backing for loans rather than implicit guarantees.
“The financing environment currently is certainly not conducive to borrowers in the region,” said Suketu Sanghvi, head of structuring and investments at Essdar Capital, an investment banking and fund management firm in Dubai.
The sovereign debt troubles in the euro zone, sluggish growth of the global economy and a recognition that they may have lent too freely in the past are prompting banks to become more cautious in their lending, and to demand tangible assets as backing for loans rather than implicit guarantees.
“The financing environment currently is certainly not conducive to borrowers in the region,” said Suketu Sanghvi, head of structuring and investments at Essdar Capital, an investment banking and fund management firm in Dubai.
National Bank of Kuwait Q3 net profit beats poll | Reuters
National Bank of Kuwait , the Gulf state's largest bank, beat forecasts with a 0.5 percent fall in third-quarter net profit and said it was optimistic about its regional expansion strategy.
"NBK's regional plans remain generally intact. We have tightened our levels of control and risk management in light of the ongoing operating challenges in the Arab world," chief executive Ibrahim Dabdoub said on Wednesday.
NBK reported a third-quarter net profit of 78.9 million dinars ($286 million) on Wednesday, compared with a forecast for 74.7 million. Net profit for the nine-month period rose 0.5 percent to 225.6 million dinars.
"NBK's regional plans remain generally intact. We have tightened our levels of control and risk management in light of the ongoing operating challenges in the Arab world," chief executive Ibrahim Dabdoub said on Wednesday.
NBK reported a third-quarter net profit of 78.9 million dinars ($286 million) on Wednesday, compared with a forecast for 74.7 million. Net profit for the nine-month period rose 0.5 percent to 225.6 million dinars.
Shuaa charts new course to wealth management - FT.com
Shuaa Capital’s new chief executive wants to rebuild the Dubai-based investment bank as a platform for wealthy clients across the Middle East as traditional business lines languish in a prolonged downturn.
Investment banking fees are drying up fast as volumes fall on Gulf markets, putting banks’ business plans in jeopardy and triggering redundancies.
Michael Philipp, who says the outlook will remain tough for the next 18 months, plans to use the downtime to turn Shuaa from Dubai’s brokerage-focused, in-house investment bank into an advisory business spread across Abu Dhabi, Saudi Arabia and Kuwait.
Investment banking fees are drying up fast as volumes fall on Gulf markets, putting banks’ business plans in jeopardy and triggering redundancies.
Michael Philipp, who says the outlook will remain tough for the next 18 months, plans to use the downtime to turn Shuaa from Dubai’s brokerage-focused, in-house investment bank into an advisory business spread across Abu Dhabi, Saudi Arabia and Kuwait.
UAE squeezes federal spending - FT.com
The government of the United Arab Emirates will increase spending next year by less than forecast inflation while other oil-rich Gulf states such as Qatar and Saudi Arabia hike outlays to boost living conditions.
The UAE said on Wednesday that it was boosting federal spending by Dh1.1bn ($300m) to Dh41.8bn, a meagre increase of 2.6 per cent, according to the official WAM news agency.
The federal budget, which covers spending across the seven emirates which make up the UAE, is generally overshadowed by the budget of Abu Dhabi, the oil rich capital, which is not published on a regular basis. Abu Dhabi’s expenditure plans last year were five times larger than federal spending this year.
The UAE said on Wednesday that it was boosting federal spending by Dh1.1bn ($300m) to Dh41.8bn, a meagre increase of 2.6 per cent, according to the official WAM news agency.
The federal budget, which covers spending across the seven emirates which make up the UAE, is generally overshadowed by the budget of Abu Dhabi, the oil rich capital, which is not published on a regular basis. Abu Dhabi’s expenditure plans last year were five times larger than federal spending this year.
BRIC exchanges join up the dots for alliance
The exchanges of the emerging markets bloc of Brazil, Russia, India and China are forming an alliance to help deepen their liquidity and offer investors pooled exposure to their markets.
This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg yesterday.
The initiative brings together BOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalising outstanding requirements.
This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg yesterday.
The initiative brings together BOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalising outstanding requirements.
BRIC exchanges join up the dots for alliance
The exchanges of the emerging markets bloc of Brazil, Russia, India and China are forming an alliance to help deepen their liquidity and offer investors pooled exposure to their markets.
This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg yesterday.
The initiative brings together BOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalising outstanding requirements.
This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg yesterday.
The initiative brings together BOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalising outstanding requirements.