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Arab Financial Newsletter: 2 June 2008 Arab Financial NewsletterSupporting Arab Financial Markets 2 June 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 edition, please find information on how the current food crisis is affecting the Arab world as well as continuing coverage of Gulf inflation. I would also draw the reader’s attention to articles concerning nuclear energy agreements the UAE and Jordan have individually signed with France, which can be found in the Energy section. The political and economic consequences of these deals ought to be watched.
I would also draw the reader’s attention to this event on Islamic Finance hosted by Clifford Chance in July 2008. If you like further details please see at: http://inform.cliffordchance.com/ve/ZZ95KI95a89L66MVO76
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
Banking
Ithmaar Bank posts 91% rise in net profit – Bahrain
Ithmaar Bank, a Bahrain-based investment bank with global reach, announced a 91 percent surge in its consolidated net profit for the quarter ended 31 March, 2008, to a record $59.3 million. This result, up from $31 million earned in the same period last year, comes as the bank and its subsidiaries and associates in the Middle East, Asia Pacific, Europe and North Africa continue their expansion into new markets. The operating profit, meanwhile, nearly doubled, from $32.5 million to $62.9 million. Earnings per share increased to 1.51 cents per share, compared to the 1.07 cents per share in the corresponding period last year. "We are pleased that Ithmaar Bank was able to sustain the momentum that has been building since it went public in 2006 and is able to report record results yet again. The bank has made substantial progress across the board, including in its private equity, fund management and advisory services," said Ithmaar Bank, CEO and member of the board, Michael P. Lee.
Bank of Jordan-Syria launched in Damascus
Bank of Jordan-Syria was launched on Monday at a capital totalling 1.5 billion Syrian liras. The Bank of Jordan has 49 per cent of the registered capital while other investors account for the remaining 51 per cent of the bank’s total equity. Tawfiq Fakhouri, chairman of the bank’s founding committee, said four branches of the bank will be opened in Damascus with 48 specialised cadres, voicing hope that the bank will be distinguished in its performance and services.
Energy
UAE’s Dana Gas to invest over $500 million in 2008
Dana Gas PJSC, the Middle East’s first and largest regional private-sector natural gas company, has announced investments of over US$ 500 million this year in the Company’s projects in Northern Iraq, Egypt and the UAE. Dana Gas posted revenues of over AED 1 billion in 2007 which was its first year of operations, and also saw the Company add to its UAE positions with major new entries into the gas upstream business in Egypt and the Kurdistan Region of Iraq, while raising US$1 billion in an international sukuk offering that had to be increased in size due to strong investor demand. Please Note: This story is cross-listed in the Investments, Stocks, & Commodities section.
UAE, France lay ground for nuclear partnership
French President Nicolas Sarkozy received yesterday Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai. A source at the Elysee Palace said after the talks that the UAE and France were laying the foundation for a partnership on joint cooperation in use of nuclear energy for peaceful, civilian purposes. "French President Nicolas Sarkozy holds the view that countries have the right to use nuclear energy for peaceful use and considers it the energy of the future.
The Dollar rise broadly After Oil Prices fall
The Dollar rose broadly on Tuesday after Oil prices fell and a report showed an unexpected rise in US new home sales in April, boosting expectations the economic slowdown is not as bad as feared. Meanwhile, data out of Europe raised concerns over the health of the euro zone economy. Demand for the European currency started to slow on news French business confidence slumped to a 2-1/2-year low this month while the forward-looking German GfK index pointed to an unexpected deterioration in consumer morale in June. Please Note: This story is cross-listed in the Inflation section.
Jordan, France to sign nuclear cooperation agreement
Jordan and France are scheduled to sign a cooperative agreement today in the field of nuclear energy for peaceful purposes. Jordan Nuclear Energy Commission (JNEC) President Khalid Touqan said the agreement, which will be signed by Foreign Minister Salah Bashir and his French counterpart Bernard Kouchner, includes the establishment of an electricity-generating nuclear power reactor in Jordan and assistance in the extraction and mining of uranium and other materials.
Food Crisis
Food prices to fall as supply stabilises in Qatar
Food prices are expected to come down in the local market soon as supply has started stabilising in the international market, according to the senior official of a leading hypermarket here. Mohammed Altaf, director of Lulu Hypermarket, told The Peninsula yesterday that the pro-active measures being adopted by food exporting countries have resulted in streamlining the supplies in the global market. The impact of this development would be felt in Qatar very soon, he added.
Rice price set to rise in the UAE
Prices of all varieties of rice are expected to rise in the UAE following India’s decision not to relax a ban on rice exports imposed in March. India, the largest rice supplier to the Gulf, has been widely expected to ease curbs on exports of rice with the prospects of an imminent record crop. However, dashing hopes of easing export curbs, Trade Secretary Gopal Pillai said on Tuesday that despite the promise of a bumper crop in 2008, the country would not be following Cambodia’s lead in allowing shipments of rice. India is set to harvest a bumper crop. Output in the year ending June may reach a record 95.68 million tonnes, compared with 93.35 million tonnes produced a year earlier.
KSA- Steps taken to avert future flour crises
People in Makkah province will not face any flour shortage in the future as authorities have taken measures to ensure adequate supply. "We have enough stock for this year," said Saleh Al-Turki, chairman of the Jeddah Chamber of Commerce and Industry (JCCI). In a statement issued yesterday, Al-Turki said the joint efforts of public and private agencies, including the Ministry of Commerce and Industry and the General Organization for Grain Silos and Flour Mills (GOGSFM), was successful in ending the crisis.
Bahrain signs rice deal with Thailand
Bahrain has stepped up efforts to ensure the supply of essential food items including rice at competitive prices and in enough quantity. The Kingdom is also keen to promote Jasmine rice produced by Thailand to offer a quality alternative to Basmati rice lovers. The GCC will establish a joint entity to tackle the import, supply and price-related issues, a senior government official has revealed. Dr Hassan Abdulla Fakhro, the Minister of Industry and Commerce, in a briefing at the ministry complex in Seef said that the GCC ministers of trade and commerce who met in Doha have agreed in principle to establish an entity to deal with the import, storage of food items and price-related issues. Growth
Dubai fastest growing economy in ME
Dubai is the fastest growing economy in the Middle East and well positioned to provide a lead role particularly to the GCC states in achieving an impressive annual growth rate by efficiently using their oil and gas wealth. "The only need is to create competitiveness in all the sectors of the economies and Dubai in this behalf is fact becoming the hub for all major trade and financial activities in the region", said Arthur Bayhan, Vice-President The Competitiveness Institute (TCI). In an interview with Khaleej Times, he said that Dubai is a good candidate to hold global TCI annual conference in 2010 in collaboration with World Economic Forum (WEF).
Inflation
Bahrain - Call for national pricing policy
The Shura Council yesterday approved a draft law to roll back government expenditure and use the resultant funds to create facilities to attract more investments as well as a host of measures to rein in inflation. The extraordinary session also called for a national pricing plan. The council also urged the government to raise salaries to help public sector employees cope with inflation. The government should also encourage private sector companies to increase salaries of their employees as well, members said.
Please Note: This story is cross-listed in the Political section.
GCC’s steps to curb inflation unorthodox, say economists
The GCC countries continue to avoid addressing soaring inflation via the key source, the dollar pegs, as they try to buy time in expectation of a comeback of the greenback or a turnaround in US Fed policy, leading economic analysts said. Branding the measures taken by the GCC governments to ease inflationary pressures as unorthodox, economists warned that unbridled price escalation is presenting the region a key micro challenge as the oil windfall continues to boost infrastructure spending.
The Dollar rises broadly After Oil Prices fall
The Dollar rose broadly on Tuesday after Oil prices fell and a report showed an unexpected rise in US new home sales in April, boosting expectations the economic slowdown is not as bad as feared. Meanwhile, data out of Europe raised concerns over the health of the euro zone economy. Demand for the European currency started to slow on news French business confidence slumped to a 2-1/2-year low this month while the forward-looking German GfK index pointed to an unexpected deterioration in consumer morale in June. Please Note: This story is cross-listed in the Energy section.
Prices threaten Gulf currency union
High and widely varying inflation rates across the GCC countries could stall plans for a currency union in 2010, according to researchers at Fitch Ratings. Inflation in the GCC ranges from 5.2 per cent in Bahrain to 13.8 per cent in Qatar. Last year, inflation across the Gulf reached an average of 7.4 per cent, compared to 4.2 per cent in the preceding five years. The most recent estimates for inflation in the UAE put it at about 11 per cent. Saudi Arabia announced yesterday that inflation in the kingdom had advanced to 10.5 per cent in April, a 27-year high.
InfrastructureUAE railway network plans in final stages
The planning process for the UAE railway network is progressing well and is in the final stages, said Dr Nasser Saif Al Mansouri, Director-General of the National Transport Authority (NTA). He made the statement during a meeting with Shaikh Saud bin Saqr Al Qasimi, Crown Prince and Deputy Ruler of Ras Al Khaimah, while briefing him on the progress made in the planning for the UAE national railway network. Al Mansouri said: "We are right now in the final stages of planning and need to provide an alignment for the UAE national network." He added that the UAE national rail network would run from the country’s border with Saudi Arabia and would cover all the emirates.
Infrastructure works begin on GFH’s projects in Morocco
Gulf Finance House BSC, hereinafter called GFH, the leading Islamic investment bank specializing in conception and execution of economic infrastructures in some of the worlds fastest growing economies, today announced that infrastructure works have begun on two exceptional projects in the Kingdom of Morocco. Royal Ranches Marrakech and Royal Resort Cap Malabata in the cities of Marrakech and Tangiers respectively are both mixed use developments with a combined value of circa US$ 1.6 billion and will take shape over a total of 60 months while initial infrastructure work will occupy a period of 12 months.
Investments, Stocks, & Commodities
UAE- Shuaa profit surges 53pc to Dh400.5m
Shuaa Capital, the region’s leading financial services institution, yesterday announced its results for the financial year ended March 31, 2008. The record results were driven by the strong performance of all business lines in upbeat markets, the company said in a Press statement. The board of directors of Shuaa Capital has proposed a cash dividend of 45 per cent of the nominal value of shares (Dh0.45 per share) which is subject to approval at the upcoming Annual General Meeting.
HSBC launches diamond banking division in UAE
HSBC has established a diamond banking unit to finance the local and regional diamond trade. Jean Van der Donckt, Director, Diamond Finance, DMCC, said: "Diamond trade in the UAE has witnessed tremendous growth in the past few years with trade volumes expected to touch to $13.5 billion this year, up from $11.5 billion in 2007. However, ready access to diamond financing is crucial in order to translate transshipment trade through Dubai’s ports into physical trade within the emirate."
UAE’s Dana Gas to invest over $500 million in 2008
Dana Gas PJSC, the Middle East’s first and largest regional private-sector natural gas company, has announced investments of over US$ 500 million this year in the Company’s projects in Northern Iraq, Egypt and the UAE. Dana Gas posted revenues of over AED 1 billion in 2007 which was its first year of operations, and also saw the Company add to its UAE positions with major new entries into the gas upstream business in Egypt and the Kurdistan Region of Iraq, while raising US$1 billion in an international sukuk offering that had to be increased in size due to strong investor demand. Please Note: This story is cross-listed in the Energy section. Sovereign wealth and private equity forge strong links
The partnership between the multi-trillion dollar worlds of sovereign wealth funds and the private equity sector in the booming Middle East economies is growing closer and stronger, say senior financial industry observers. "The sovereign wealth funds of the Arabian Gulf are now a crucial source of capital and liquidity, as much of the rest of the world copes with slower economic growth," said Swati Taneja, director of the second Private Equity Forum organised by IIR Middle East, that takes place at Al Murooj Rotana Hotel, Dubai, 22-26 June 2008.
Jordan- Jordinvest concludes IPO preparations
Jordan Investment Trust P.L.C. (Jordinvest), one of the leading providers of comprehensive financial and investment services locally and regionally, announced the Initial Public Offering of Inwan Investment PLC, which will change name into Amlak Finance (Jordan) PLC, whereby Jordinvest will act as the Lead Manager and Financial Advisor, which will be the first public shareholding company specialized in mortgage financing services for the development and housing sectors in compliance with Shariah laws in Jordan. Please Note: This story is cross-listed in the Islamic finance section.
GCC equity funds worth $20 billion
In a recently monthly publication by Kuwait Financial Centre ("Markaz"), it is stated that total assets managed by mutual funds under "Equity funds" is slightly more than $20bn. The report states the total number of funds as 118 and assets under management as $21.3bn. Nearly 40 percent of this is from Islamic segment. Saudi Arabia leads the table with nearly $10bn of which 63% are Sharia compliant. Kuwait is the next highest with $6.3bn of assets managed over 27 funds. However, the share of Sharia equity funds is 15 percent. Saudi Arabia and Kuwait together account for 76 percent of the total. Assets managed by these mutual funds as equity funds account only for 2 percent of market capitalization, implying the strong presence of retail investors in the market.
Kuwait’s real estate sales dropped 35% in April
According to official data published by the Kuwaiti government, the country’s real estate sales dropped roughly 35 percent in April 2008, Gulf News reported. Data further showed that Kuwait’s inflation jumped to a record 9.5 percent in January of the current year, mainly driven by a 16.1 percent increase in housing costs.
Gulf demand for concrete and steel set to double
Demand for ready mixed concrete, reinforcing steel and stone cladding is set to more than double next year as civil building construction projects peak across the Arabian Gulf but tail off in 2010, according to the latest market analysis. "The phenomenal scale of building right now places the Gulf at the centre of the world’s most concentrated construction boom," said Bernard Walsh, Managing Director of dmg world media Dubai, organisers of The Big 5, the region’s largest trade show for the construction industry and associated suppliers taking place from November 23-27, 2008 at Dubai International Exhibition Centre, a Press release said.
Gulf’s consumer electronics industry to grow 30% to Dh18.35b
The consumer electronics sector has emerged as a key growth industry in the Middle East, driven mainly by rising regional disposable incomes, a large product, and technology hungry expatriate population, and a burgeoning tourism industry, according to UAE Minister of Foreign Trade Shaikha Lubna Al Qasimi. Shaikha Lubna was speaking at the International CES Hometech Conference after inaugurating five major trade shows organised by Epoc Messe Frankfurt at the Dubai International Convention and Exhibition Centre (DICEC) yesterday.
Read more..
UAE- Foreign firms, individuals main buyers of Dubai properties
Dubai has the tower cranes with $100 billion worth of new development projects now in hand. But who is buying all the freehold properties in the Emirates. According to a study, two out of three of all new freehold properties in the emirate are bought by foreign companies or individuals who live outside the country. MAG Group Property Development, which is looking to grow its portfolio of new property projects to more than 10 billion dirham ($2.1 billion) by 2012, says final home owners currently account for just 30 percent of the market and only 5 percent of them are UAE nationals.
Islamic finance
Bahrain readies to develop Islamic finance in Singapore
Rasheed al Maraj, Governor of the Central Bank of Bahrain, held talks with the visiting Managing Director of the Monetary Authority of Singapore (MAS), Heng Swee Keat and his accompanying delegation. The two sides discussed issues of mutual interest, particularly the development and growth of the banking and financial sectors of Bahrain and Singapore. Areas of interest to the Singapore apex monetary agency included CBB’s experience and knowledge of Islamic finance in view of its recent announcement to issue sovereign-rated sukuk to meet the needs of Islamic financial institutions there.
UAE- UNB launches Islamic fund
Union National Bank has launched the Al Samaha Islamic Fund, a Shariah-compliant fund investing mainly in the UAE and with the flexibility to seek opportunities in other GCC countries, MENA and other emerging equity markets. The open-ended fund, has a minimum subscription of Dh10,000 and thereafter in multiples of Dh1,000. Investment in units is open to all individuals without restrictions. The subscription will start on 18/5/2008 till 11/6/2008.
Jordan- Jordinvest concludes IPO preparations
Jordan Investment Trust P.L.C. (Jordinvest), one of the leading providers of comprehensive financial and investment services locally and regionally, announced the Initial Public Offering of Inwan Investment PLC, which will change name into Amlak Finance (Jordan) PLC, whereby Jordinvest will act as the Lead Manager and Financial Advisor, which will be the first public shareholding company specialized in mortgage financing services for the development and housing sectors in compliance with Shariah laws in Jordan. Please Note: This story is cross-listed in the Investments, Stocks, & Commodities section.
Central Bank of Bahrain to launch Islamic repo
As part of its effort to unveil a host of initiatives to stimulate the Islamic finance market, the Central Bank of Bahrain would soon launch an Islamic version of the Repurchase Agreement (Repo). "We are engaged in the development of the Islamic repo, which we plan to bring to market very soon," the Governor of Central Bank of Bahrain, Rasheed Al Maraj said yesterday after inaugurating the fourth annual World Islamic Fund and Capital Markets conference. Repos, or repurchase agreements, allow investors to borrow money by selling securities and simultaneously promising to buy them back at a higher price and at a specified time.
Political
UAE - Labour disputes on the rise in Dubai
Over the past few years there has been a dramatic increase in the number of labour disputes in the emirate of Dubai, according to Judge Abdul Qader Moosa Mohammed, Chief of Preliminary Labour Court at the First Instance Court, Dubai Courts. He attributes the trend to Dubai’s fast-paced growth as a business hub with regional and international business houses launching their operations in every conceivable business activity. Another factor, according to him, is that a greater number of expatriate workers have chosen to take up assignments in the emirate.
Bahrain - Call for national pricing policy
The Shura Council yesterday approved a draft law to roll back government expenditure and use the resultant funds to create facilities to attract more investments as well as a host of measures to rein in inflation. The extraordinary session also called for a national pricing plan. The council also urged the government to raise salaries to help public sector employees cope with inflation. The government should also encourage private sector companies to increase salaries of their employees as well, members said.
Please Note: This story is cross-listed in the Inflation section. Taxation
UAE - Dubai Customs rebuffs IMF on VAT
Dubai Customs, rebuffing International Monetary Fund’s views that implementing value added tax would fuel inflation in the UAE, said VAT would have significant positive impact on the economy. Reacting to the observations made by Mohsin Khan, IMF regional director for the Middle East, about the chances of inflation surging in the UAE and the GCC region by two per cent in the wake of VAT introduction, Abdulrahman Al Saleh, Executive Director of Corporate Support Sector at Dubai Customs, said his statements were incompatible with an earlier IMF report that praised VAT and stressed the need for an immediate implementation to strengthen the UAE economy.
Syria- Tax Times
Syria is to impose a flat rate value added tax (VAT) next year as part of the government’s ongoing programme to open up the economy and boost state revenues, though the exact details of what the tax will cover and what goods and services will be exempt have yet to be decided. Syria is to impose a flat rate value added tax (VAT) next year as part of the government’s ongoing programme to open up the economy and boost state revenues, though the exact details of what the tax will cover and what goods and services will be exempt have yet to be decided.
Trade
Jordan looking forward to stronger trade among OIC members
King Abdullah on Thursday said Jordan is eager to benefit from the Trade Preferential System the Organisation of the Islamic Conference (OIC) plans to implement as of 2009. During its Dakar meeting earlier this year, the OIC set January 1 as the deadline to put in place a Trade Preferential System expected to be the "starting point to reach the 20 per cent ratio in trade" among the organisation’s member countries.
Jordan ready to set up joint free zone with Iraq
Jordan is ready to cooperate with Iraq for establishing a joint free zone at the Karama border to ease the future flow of goods between the two countries. Free Zones Corporation Director General Mahmoud Qteishat described the trade volume between investors from Jordan and Iraqi as "good", expecting a sharp increase in business if security prevails in the war-torn country.
Bahrain enters top free economies list
Bahrain, the financial capital in the Middle East with over 400 banks and financial institutions, emerged as one of the freest economies in the world with economic freedom of 99.7 per cent. Bahrain’s economy is 72.2 per cent free, which makes it the world’s 19th freest economy. Its overall score is 1 percentage point higher than last year, partially because of an improving investment climate, according to latest Heritage Foundation 2008 assessment. The negative changes, according to the Foundation, have been caused by worsened scores in inflation and corruption. Bahrain is ranked 1st out of 17 countries in the Middle East/North Africa region, and its economy is ideal in several respects, such as tax and banking freedom. Read entire article @ |
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