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Arab Financial Newsletter: 13 May 2008 AFF Newsletter 13 May 2008 Arab Financial NewsletterSupporting Arab Financial Markets 13 May 2008
Dear Reader,
Welcome to the latest Arab Financial Newsletter! The AFF newsletter is a fortnightly concise review of news related to the Arab Financial World.
In this newsletter you will find an article written by the AFF. It is published in the latest ABANA Review and it is about financial regulation in the Gulf. The creation of new regulatory bodies and the streamlining of market regulators demonstrate the increased focus on developing effective bodies.
I hope you enjoy this newsletter. Please let us know if you have any particular news items that you would like to have printed in the next newsletter.
All the best, Charles Beard Editor Arab Financial Forum http://www.arabfinancialforum.org
Growth
Abu Dhabi’s GDP to hit $300b by 2025
With steady growth of non-oil sector, Abu Dhabi’s GDP will hit $300 billion by 2025. Non-oil sector is predicted to touch 60 per cent of GDP, while oil sector is projected to reach 40 per cent of Abu Dhabi GDP, according to the weekly report released by department of planning and economy (DPE).
UAE’s nominal GDP to surge 24.5pc in 2008
The International Monetary Fund (IMF) yesterday said inflation in the UAE, estimated at 11 per cent in 2007, is set to drop to nine per cent in 2008, but cautioned that dirham’s de-pegging from the dollar or revaluation could have little impact in controlling escalating prices.
Inflation
Inflation feared to soar as UAE cuts key rate
The UAE and two other Gulf countries yesterday dropped their key interest rates by 0.25 per cent in line with a similar cut by the US Federal Reserve, sparking renewed concern about a flare-up in inflation. Most GCC countries, reeling under the impact of runaway inflation hovering above 10 per cent, have been forced to track the US Fed policies that are aimed at warding off recessionary trends because of dollar pegs maintained by their currencies. In the Gulf context, such measures serve only to fuel money supply.
Abu Dhabi rents soar 17% in three months
Rents in the UAE’s capital Abu Dhabi soared 17 percent in the first quarter, compared to the year-earlier period, the official news agency WAM reported yesterday, citing a Department of Planning and Economy report. Surging rent is attributed to the shortage of residential units as a result of landlords’ preference for renting out space for commercial rather than residential use, the report said.
This story is cross-listed in the Real Estate section.
Expert: GCC Inflation to Rise by 3% Inflation in Gulf Arab countries is expected to rise by about three percentage points in 2008 and will continue to rise for years, an expert at a regional business bloc said yesterday. Revaluing or depegging from the weak US dollar can ease inflationary pressures for Gulf Cooperation Council countries only if accompanied by expenditure cuts and tighter monetary policies, said Abul-Haleem Al-Muhaissen who heads the studies department at the Federation of Gulf Cooperation Council Chambers (FGCCC). IDB, WB Discuss Food Crises The high-level World Bank delegation and Islamic Development Bank (IDB) reviewed yesterday bilateral cooperation between the two institutions and discussed recent developments, including the food security crises, aid to Africa, water and climate change. President of the IDB Dr. Ahmed Mohamed Ali and World Bank President Robert Zoellick, who is visiting the Kingdom, also discussed the Arab World Initiative, a new strategy for World Bank engagement in the Arab region.
Islamic Finance
FTSE forecasts growth for Islamic equity
FTSE, one of the world’s largest equity index providers, is projecting a huge growth in Islamic equity products over the next few years including sophisticated value-added off the index products such as exchange traded funds (ETFs). And the index provider sees most of the demand and market growth coming from the GCC countries, especially Saudi Arabia, and southeast Asia, especially Malaysia. "From what we have heard, we expect the Islamic equity investment market growing at a much faster rate than the overall sector as a whole, because it is coming from a lower base," confirmed Donald Keith, Deputy Chief Executive of FTSE. "The Islamic finance sector per se, we are told, is growing at an annual rate of 15 percent to 20 percent. Islamic investors are increasingly looking to invest along the same lines as conventional ones. They want to access the same kind of opportunities and the same sort of markets. What we are trying to do is to mirror our global equity index series to cover both developed and emerging markets. We want to use that as the base and build up from there," he added.
This story is cross-listed in the Stocks section.
Islamic Funds Outperforming Conventional Ones Islamic equity indices are outperforming conventional indexes 2:1 in the regional equities sector, confirms Rushdi Siddiqui, Global Director of Dow Jones Islamic Market (DJIM) Indexes. This is because Islamic equities have no exposure to the conventional financial sector stocks, which have been dogged by the credit crunch due to the subprime mortgage crisis in the US.
ITFC Signs 3 Murabaha Deals Worth $129 Million The International Islamic Trade Finance Corporation (ITFC) — established by the Islamic Development Bank as an autonomous entity — has signed agreements totaling approximately $129 million to finance three major deals in Morocco and Tunisia. The signings of the Murabaha agreements took place at ITFC headquarters in Jeddah recently.
Markets
World’s 1st full-service evaluation & clinical research org. in Jordan
The Middle East medical technology industry is on the threshold of a major breakthrough with the launch of a world-first in the Philadelphia Biological and Medical Product Development Centre in Jordan, according to Peggy Farley, Managing Director of the General Partner. The centre is geared to meet all of the requirements of the US FDA (Food and Drug Administration) and the European authorities for preclinical and clinical testing of innovative medical products.
GCC’s excess liquidity, record oil revenues offer golden chance
In the backdrop of unprecedented economic boom, the GCC has emerged as one of the most liquid regions in the world offering a rare business opportunity to the banks and financial institutions, a top official at the Standard Chartered Bank has said. Martin Fish, Chief Executive Officer who will be leaving Bahrain by the end of the month, said that due to excess liquidity and record oil revenues, billions of dollars projects have been launched recently in the region.
UAE drives $2.8t Middle East construction boom
With projects worth $931 billion currently under way, the UAE is a key driver, along with Saudi Arabia, of the $2.8 trillion Middle East construction boom, a new research reveals. A research by a database company, which monitors regional construction projects across all industry sectors in the Middle East, shows that there are now 3,339 projects estimated to be worth in excess of $2.8 trillion under way in the region, the bulk of these developments taking place in the UAE and Saudi Arabia.
This story is cross-listed in the Real Estate section.
Oil & Energy
Sustainability Specialist: Renewable sources of energy can ’fuel UAE’
Developing renewable sources of energy and giving a big push to the adoption of smart technologies remain the best direction and the biggest potential for the UAE today. Antoaneta Popova, sustainable specialist, says that solar energy in this country is yet to be developed to the extent that it can meet all the energy needs of the growing population and booming industries.
Exxon Mobil posts $10.9b Q1 profit
Exxon Mobil, the world’s largest publicly traded oil company said that it earned $10.9 billion in the first quarter of 2008, the second-biggest U.S. quarterly profit ever, Bloomberg reported. Year over year, earnings for the Irving, Texas-based company rose 17 percent, lifted largely by record crude prices. The only higher total in a three-month period was the $11.7 billion Exxon Mobil posted in the final three months of 2007.
Saudi Oil Revenue Set to Reach SR975bn in 2008 The rising oil prices expected to have a positive impact on the Saudi economy. The current account surplus may touch an all-time high this year and economic growth and the budget surplus will also be exceptionally strong. The Riyadh-based Jadwa Investment said in its monthly report yesterday that the lower oil prices in 2009 and 2010 mean that some of the headline numbers will not look as good, but the underlying picture will remain very healthy and in real terms economic growth will be stronger. Political & Legal
Jordan: Social Security subscribers increase by 95%
A recent study issued by the Department of Statistics (DoS) indicated that the number of workers subscribed to the Social Security Corporation increased by 95 per cent between 2000 and 2007, as the monthly minimum wage increased from JD80 to JD110. Overall wages and salaries have improved significantly, the report said, adding that the average monthly wage rose from JD60 in the mid-1970s to JD211 in the mid-1990s and JD280 in 2006.
Complete health cover for government staff in Dubai
The Dubai government yesterday announced a comprehensive health insurance programme for public employees and their dependants. Government employees, including UAE nationals and expatriates, will now have access to a range of healthcare services and facilities for the first time.
UAE, Cement Producers Group sign MoU to stabilize cement prices & local market
The UAE Ministry of Economy and the Cement Producers Group have today (Monday, May 05, 2008) signed a Memorandum of Understanding (MoU) to implement the necessary measures to ensure the availability of cement in the local market at reasonable prices, in a move to enhance the national economy and boost the country’s comprehensive development process.
Kuwait’s commerce ministry signs anti-piracy MoU
The Ministry of Commerce and Industry signed a memorandum of understanding (MoU) with the Business Software Alliance (BSA) on Tuesday, in move aimed at intensifying anti-piracy initiatives in the country. The ministry’s Intellectual Property Rights (IPR) Manager of Kuwait, Rasha Al-Sabah, said at a press conference on this occasion, "The (ministry) is pleased to collaborate with BSA and its partners such as Microsoft in conducting a comprehensive program that aims to enhance awareness about the detrimental effects of piracy."
Real Estate
Real estate firm to develop plans for UAE’s Almulla properties
A financial real estate company is being established to develop plans for an international chain of Shariah-compliant hotels with 150 properties worldwide, up to 90 of them in the Middle East and North Africa. Dubai-based Almulla Hospitality, which is planning to tap into the growing Muslim travel market with a hotel chain operating under universal codes such as no alcohol and Halal food only, has announced that it has signed Jasper Capital Group of the UK to structure the real estate company to develop the plan.
Abu Dhabi rents soar 17% in three months
Rents in the UAE’s capital Abu Dhabi soared 17 percent in the first quarter, compared to the year-earlier period, the official news agency WAM reported yesterday, citing a Department of Planning and Economy report. Surging rent is attributed to the shortage of residential units as a result of landlords’ preference for renting out space for commercial rather than residential use, the report said.
This story is cross-listed in the Inflation section.
UAE drives $2.8t Middle East construction boom
With projects worth $931 billion currently under way, the UAE is a key driver, along with Saudi Arabia, of the $2.8 trillion Middle East construction boom, a new research reveals. A research by a database company, which monitors regional construction projects across all industry sectors in the Middle East, shows that there are now 3,339 projects estimated to be worth in excess of $2.8 trillion under way in the region, the bulk of these developments taking place in the UAE and Saudi Arabia.
This story is cross-listed in the Markets section.
Regulation
Time to call the Sheriff? – Financial Regulation in the Gulf
In the latest ABANA Review you can find an article from the AFF (Page 9):
The Gulf Cooperation Council (GCC) countries are enjoying massive financial surpluses that thanks to record oil prices. Alongside the sovereign wealth funds of the Far East, the GCC’s investment vehicles have made waves in the world markets to an extent not since the 1970s. The legacy of those particular good times was a circle of boom and bust in the Gulf region’s market. But more than three decades later, the absorptive capacity of GCC economics has increased and we are witnessing significant regional investment in infrastructure, and market growth within a considerable more sophisticated regional financial sector. The challenge now is to develop the right type of regulations that will provide a solid foundation for growth while protecting against fall out from some of the recent excesses that have shaken Gulf markets.
Qatar to have Financial Regulatory Authority in six months
The Financial Regulatory Authority is likely to be established in the first half of this year, but a transition period of about two years is envisaged in order to facilitate a smooth transition to a single regulatory regime. This was stated by Minister of Finance and Acting Minister of Economy and Commerce H E Yousuf Hussein Kamal in an exclusive interview to be published in the forthcoming Oxford Business Group’s (OBG) ’The Report: Qatar 2008’.
Qatar likely to make Zakat levy compulsory for shareholding firms
Qatar is likely to make payment of the yearly Zakat levy mandatory for shareholding companies in the country. In an exclusive interview, Jassim Mohammed Al Kubaisi, the Director of the state-run Zakat Fund, said payment of the annual levy was not compulsory up to now for companies and individuals. But at a meeting of GCC officials responsible for collecting and managing Zakat, held in Doha in November 2007, it was agreed to make payment of the annual levy compulsory for companies. "We agreed to give recommendations to our respective governments," he added. Saudi Arabia has already made it obligatory for companies to pay Zakat and UAE will make it obligatory by 2009.
Sovereign Wealth Funds
Saudi Arabia: Sovereign wealth fund launch
Saudi Arabia, the largest economy in the Gulf Cooperation Council (GCC) and the world’s biggest oil exporter, has announced it is in the "final stages" of launching its first sovereign wealth fund (SWF). The as yet unnamed SWF will be administered by the Public Investment Fund (PIF), and is due to have initial capital of SR20bn ($5.3bn). According to the PIF’s secretary general Mansour Al Maiman, the new fund will focus on "maximising long-term rates of return".
Stocks
Saudi equity market cap jumps to SR1.86t
The Saudi stock market showed signs of uptrend last month reflecting investor confidence. The announcements of the first quarter results of listed companies also helped surge in the stock market. At the end of April, the Tadawul All-Share Index (TASI) closed at 10,066.16 points. The index increased by 11.94 percent or 1,073.63 points in April over the close of the previous month. On an YTD basis TASI lost 972.5 points, or 8.81 percent. Highest close level for the index was 10,089.52 points as on April 29.
FTSE forecasts growth for Islamic equity
FTSE, one of the world’s largest equity index providers, is projecting a huge growth in Islamic equity products over the next few years including sophisticated value-added off the index products such as exchange traded funds (ETFs). And the index provider sees most of the demand and market growth coming from the GCC countries, especially Saudi Arabia, and southeast Asia, especially Malaysia. "From what we have heard, we expect the Islamic equity investment market growing at a much faster rate than the overall sector as a whole, because it is coming from a lower base," confirmed Donald Keith, Deputy Chief Executive of FTSE. "The Islamic finance sector per se, we are told, is growing at an annual rate of 15 percent to 20 percent. Islamic investors are increasingly looking to invest along the same lines as conventional ones. They want to access the same kind of opportunities and the same sort of markets. What we are trying to do is to mirror our global equity index series to cover both developed and emerging markets. We want to use that as the base and build up from there," he added.
This story is cross-listed in the Islamic finance section.
TASI Breaks 10,000 Points Barrier The Saudi stock exchange kept up its upward trend last week amid a noticeable rise in trading volumes that reflected growing investor confidence. The Tadawul All-Share Index (TASI) gained 3.2 percent, surpassing the psychological barrier of 10,000 points and closing at 10,066.16 points, compared with previous week’s close at 9,754.10 points. Tourism
Dubai Hotel visitors to cross 10m by 2010
The Dubai Tourism and Commerce Marketing (DTCM) has projected the number of hotel visitors to Dubai to rise to ten million by 2010, from about seven million in 2007. The projections have been released on the eve of Arabian Travel Market (ATM) 2008, which will be held at the Dubai International Convention & Exhibition Centre from May 6 to 9.
Trade
Bahrain-Iran trade up 200%
Bahrain-Iran trade, commercial and investments ties have entered into a new era of progress and development with total trade increased almost 200 per cent in last couple of years. Bahrain-Iran non-oil trade volume rose from BD12.7 million in 2004 to BD37.5 million in 2005, up 195.3 per cent and stood at BD37.6 million in 2006. Bahrain’s trade with Iran is about 1.3 per cent of the Kingdom’s international non-oil trade.
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