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Commentary By Majd Shafiq United Advisors: Middle East Investors Stake In Plus Markets
October 21, 2009--Recent news that a group of Middle East investors have taken a stake of around 17% in Plus Markets, an alternative trading platform in London, is an interesting development and a possibility that I had mentioned in a recent article entitled Middle East Exchanges: The case for consolidation.
The investment in Plus should prove a profitable exercise for Amara Dhari Investments. Plus is run by Simon Brickles, the former head of AIM, the London Stock Exchange’s junior, and at times, controversial sibling. So far, Plus has managed to capture most of the trading in about 300 AIM quoted companies. The alternative venue seems to have a defendable business model. Its core revenue stream is data sales; an increasingly coveted commodity given what MiFID has wrought on the European landscape.
It is not clear whether the Middle Eastern investors will attempt to take Plus home or not. There is certainly ample room for an alternative such as Plus, Chi-X or BATS to launch a regional network for the trading of certain securities in the Middle East. Riding on the coat tails of price discovery on the region’s established, government-owned exchanges, the alternative route could offer cheaper and more efficient trading and data dissemination services.
Arabian Gulf hydrocarbon projects worth $690bn
October 20, 2009--A full 30 per cent by value of hydrocarbon projects in the Gulf Arab countries have been put on hold or cancelled according to a new report, however GCC countries remain the most active construction markets in the world for the oil, gas and petrochemical industries with projects budgeted at more than $690bn.
The report published today by Dubai-based research house Proleads Global, was compiled following research into a total of 578 hydrocarbon projects across the six GCC countries, and found that 30 per cent by value have been placed on hold or cancelled with a further 30 per cent currently in construction and 40 per cent in the pre-construction phase.
Qatar to sell 379m Barclays shares
October 21, 2009-Qatar Holding, a unit of the Qatar Investment Authority, said today it plans to sell more than 379 million shares of Barclays. Qatar will first exercise warrants at 197.775 pence, and stands to make more than 630 million pounds ($1bn) on the transaction at today's market price, according to Bloomberg.
'The decision to exercise the warrants and dispose of the resultant shares forms part of Qatar Holding's portfolio management program and does not impact on our current intention to remain a long-term strategic shareholder in Barclays,' Chief Executive Officer Ahmad Al-Sayed said in a statement
ADX Signs MoU with ADCCG
Agreement to Enhance Investor Awareness and Market Transparency
October 19, 2009--Abu Dhabi Securities Exchange announced today the signing of a Memorandum of Understanding (MoU) with the Abu Dhabi Center for Corporate Governance (ADCCG) aimed at enhancing institutional cooperation in the UAE.
The agreement was signed by Rashed Al Baloushi, ADX’s Deputy Chief Executive and Director of Operations, and Khalfan Al Kaabi, Chairman of ADCCG in the presence of a number of officials from both organizations.
On this occasion Rashed Al Baloushi proposed that the agreement will assist in strengthening the mechanisms the exchange requires to ensure an orderly market while improving investor awareness.
Mr. Al Baloushi emphasized that the agreement reflects the desire of ADX and ADCCG to cooperate in all mechanisms aimed at supporting integrity, transparency and disclosure and related research and studies.
“The MoU with the Abu Dhabi Securities Exchange will help clarify the need for Corporate Governance for all the sectors including, public and private companies and government organizations through seminars, discussion groups and awareness sessions in addition to training and development programs”, said Khalfan Al Kaabi, Chairman for the Abu Dhabi Center for Corporate Governance.
“There are a lot of misunderstandings on the proper use of tools for Corporate Governance implementation in the market”, said Mr. Khalid Deeb, Director General for the Abu Dhabi Center for Corporate Governance (ADCCG), "This topic is still vague to many organizations, therefore, ADCCG intends to benefit from those MOU’s to increase the level of awareness in the country and get it to the required level”, Deeb added.
Rashed Al Baloushi also revealed that “achieving that goal will include organizing seminars and conferences, and providing training programs and specialized consultations in the field of corporate governance and related issues.”
“These tasks are to be accomplished by ADCCG in cooperation with ADX and in accordance with the highest standards, where the exchange plays a vital role in supporting economic development. Such a role is enhanced by this kind of agreement, which makes a direct contribution to the Abu Dhabi Economic Vision 2030,” the Deputy Chief Executive stated before adding, that this will further fortify international best practice principles of integrity, transparency and disclosure.”
GCC Oil and Gas Reserves Are Worth US$18.3 Trillion: DIFC Authority Report
The enormous energy commodity assets are large enough to finance the transformation of the GCC economies, as well as to impact global asset valuations
October 13, 2009-
The present value of the oil and gas reserves of the six countries of the Gulf Cooperation Council is estimated at US$18.3 trillion, larger than the 2008 GDP of the United States, according to an economic note released today by the Dubai International Financial Centre Authority (DIFCA).
That figure assumes a conservative price of oil at US$50 per barrel and gas at US$9 per million BTU; if oil prices were to average US$100 per barrel and gas US$15, the present value of GCC energy reserves would be US$ 37.7 trillion, equal to the world's total stock market capitalization at the end of 2008.
According to Economic Note No. 6, prepared by the DIFC Authority's Economics unit and entitled "Wealth Effects in the GCC from Energy Commodity Prices", this energy commodity wealth is sufficient to finance the transformation of GCC countries into diversified economies through investments in infrastructure and education. The report's authors also note that this wealth, as it is extracted, will be invested worldwide, with "non-negligible repercussions on asset valuations and in particular on the continuing restructuring of the world's financial and corporate sectors."
Commenting on the economic note, Dr Omar Bin Sulaiman, Governor of the DIFC, said that the significance of the results cannot be overstated. "The DIFC considers it a part of its mission, not only to provide the legal, regulatory and operating infrastructure necessary to support the growth and deepening of capital markets in the region, but also to contribute to the body of research and analysis that is so crucial to efficient decision making by all participants in today's sophisticated global financial markets."
In announcing the study, Dr Nasser Saidi, Chief Economist of the DIFC Authority, said, "Higher oil and gas prices over the past five years have resulted in large budget and current account surpluses and an enormous increase in the net foreign assets and international reserves of the GCC countries, with global repercussions. However, what we have seen pales in comparison to the astounding value of hydrocarbon wealth still in the ground. The implications of this are enormous, both in terms of long-term policymaking and in terms of the behaviour of market participants."
"For example, GCC governments have effectively outsourced the management of their external assets to banks and asset managers in traditional financial centres. Yet the financial crisis has undermined the basis and credibility of this practice. Instead they need to invest in, and develop, their own capacity to manage their financial wealth, whether they are deploying or investing it in their domestic economies, or making foreign investments. There should be a strategy of concerted investment in financial human capital and a large and systematic investment in the banking and financial sector of a magnitude on a par with, if not larger than, the existing and prospective investments in the energy and petrochemical industries. As a strategic matter, and for the safety of their assets, the GCC should develop the capacity, markets and institutions to manage their wealth."
Commenting on the economic note, Dr Omar Bin Sulaiman, Governor of the DIFC, said that the significance of the results cannot be overstated. "The DIFC considers it a part of its mission, not only to provide the legal, regulatory and operating infrastructure necessary to support the growth and deepening of capital markets in the region, but also to contribute to the body of research and analysis that is so crucial to efficient decision making by all participants in today's sophisticated global financial markets."
Another implication of the study is that ratings agencies and other analysts should revise how they assess the fiscal situation and debt capacity of these countries, given "the vast current and prospective wealth of the GCC countries". While typically they make their decisions based on current flows of oil revenues, exports, GDP and other indicators, the study notes that they neglect the underlying natural resource and financial wealth of the countries. There should be a national balance sheet approach to credit assessments and ratings.
Breaking down the US$18.3 trillion total, the study shows that the present value to 2030 of GCC oil reserves is US$11.2 trillion, assuming a 3% rate of return (and discount rate) and a price of $50 per barrel (at 2009 constant prices), while GCC natural gas reserves would be US$7.1 trillion, assuming a discount rate of 3% and a price of US$9 per million BTU.
The analysis explores results under a variety of hypotheses, including energy prices with oil at US$25, US$50 and US$100 per barrel; gas prices at US$4, US$9 and US$15 per million BTU and three levels of the real discount rate, 1%, 3% and 5%.
The research calculations were conducted under the assumption that oil and gas production is kept constant at 2008 levels and that both oil and gas reserves in the GCC (as a result of new discoveries and/or improved recovery rates resulting from improved extraction technologies) grow, though at a decreasing rate from 0.5% in 2009 to 0 in 2030.
View the Economic Note 6: Wealth Effects in the GCC From Energy Commodity Prices
Dubai International Financial Centre
After successfully weathering the financial crisis and following reforms and structural changes, the regional banking and finance industry is poised for growth
October 13, 2009--After successfully weathering the global financial crisis, the Middle East banking sector is poised for growth in light of widespread regional market reforms and global structural changes favouring the region, said HE Dr Omar Bin Sulaiman, Governor of the DIFC and Vice Chairman of the UAE Central Bank.
“During a period of great strain on financial systems across the globe, markets, governments, regulators and institutions here in the Middle East have responded professionally and appropriately, working in concert to steadily bring this region through the most serious test ever of its systems and structures. The legacy of this experience is improved policymaking and more powerful monetary policy tools,” Dr Omar said during the opening keynote address to the Banking Outlook Middle East 2009 conference, which opened today in Dubai.
NASDAQ OMX Forms Technology Partnership With the Kuwait Stock Exchange
Lars Ottersgard, Senior Vice President NASDAQ OMX Market Technology
said, "We look forward to partnering with KSE to support development of
its financial market, and, as part of this, deliver a state-of-the-art
system that will put them at the technology forefront among Middle East
exchanges. Kuwait is a key financial center in the Middle East region
and we are confident that our collaboration with KSE will act to
further attract investor awareness both to the exchange and Kuwait's
financial market as a whole."
A spokesman for Kuwait Stock Exchange said, "NASDAQ OMX's experience
and track record in implementing systems around and the world and
particularly in this region, together with their ability to contribute
to our development, led us to select them to work with us. KSE intends
to use the new IT systems to introduce new products and services in the
future. We also intend, with NASDAQ OMX's help, to implement best
practices and to ensure compliance with relevant international
standards. We look forward to enjoying a long and mutually rewarding
partnership with NASDAQ OMX."
Since January 2009 NASDAQ OMX has a regional office in Dubai driving
new business endeavours and supporting existing customers in the Middle
East, Africa and South Asia region. BFX Announces Product Development Working Group
This initiative is part of the BFX strategy which ensures that its products meet the needs of
its users whilst adding value, and is part of a process to ensure that BFX remains market driven.
The PDWG Conventional working group has a cross section of representatives with a high degree of expertise from the financial services industry in the GCC region.
It comprises of participants from Bahrain Mr. Fadhel Makhlooq, Principal, Investment and Treasury at SICO Bank, Mr. Hemant Kulkarni, Head of Funds and Investments, National
Bank of Bahrain, Mr. Yaser Humaidan, Acting Head of Investment Management, Gulf International Bank, Mr. Wayne Andrews, Regional Treasurer Gulf and Pacific Rim, Arab
Bank. Participants from UAE are Mr. Fozan Al Mofleh, Executive Sales Trader, Shuaa
Capital, Mr. Nabil Al Rantisi, Senior Vice President Brokerage, Rasmala Investment Bank,
and from Saudi Arabia, Mr. Saeed Saif, Head of Regions - Brokerage, NCB Capital.
Similarly the PDWG Islamic working group has been selected with a focus on satisfying the
specific market requirements of this dynamic industry.
The Islamic working group includes Mr. Marco Mauri, Head of Listed Securities - Asset
Management, Unicorn Investment Bank, Mr. Helmi Rashid, General Manager Treasury and
Capital Markets, Elaf Bank, Mr. Hussam Saif, Khaleeji Commercial Bank, Mr. Anjum
Shahzad, Head of Risk Management, Bahraini Saudi Bank.
Arshad Khan, Board Director at BFX expressed his happiness on completion of an important
milestone in the setting up of BFX and said “These groups consist of experts drawn with the
relevant background to ensure a robust process of product development and continual
improvement in the BFX products which will ultimately result in greater participation and
increased liquidity”.
He added “The PDWGs primary function is to provide input, guidance and feedback on the
requirements of market participants in the development of products and the suitability ofthese products, in satisfying that demand. I welcome all participants and look forward to
working with them and making the BFX product portfolio a market leader’’.
This achievement of the BFX underscores its commitment to the market for developing
products which are in line with market requirement and its users. Dubai Gold And Commodities Exchange Weekly Market Views - 11 October 09 The Dubai International Financial Centre (DIFC) and the Multilateral Investment
The programme will leverage DIFC’s in-depth knowledge of regional markets and market participants and
MIGA’s experience in working closely with clients in emerging markets worldwide to enable cost-efficient, crossborder
financial structures.
HE Dr Omar Bin Sulaiman, Governor of the Dubai International Financial Centre said: “The overarching goal of
this programme is to help develop efficient and liquid capital markets in the region, long one of the top priorities
of DIFC and of strategic importance in the light of current global conditions. MIGA is the ideal partner given its
global expertise, unique package of products, and ability to enhance global business confidence throughout the
regions in which it operates.”
As part of the MoU, DIFC – which has extensive expertise in Islamic finance innovation – and MIGA will
collaborate to design and implement a standardised Sharia-compliant guarantee template. Islamic bonds, or
sukuks, will be one type of security likely to benefit from this guarantee template.
Izumi Kobayashi, MIGA’s Executive Vice President, notes the initiative is strongly aligned with World Bank and
MIGA objectives as well as MIGA’s commitment to respond to countries hit by the financial crisis. “This initiative
responds to business demand for a programme aimed at enhancing market confidence in the Middle East and
could help facilitate much-needed foreign investment into creditworthy enterprises and projects.”
The MENA region has historically received a disproportionately small share of global FDI, while at the same
time having many creditworthy enterprises hampered in their ability to attract cross-border financing because of
investor demand for a high risk premium. This is because many of these enterprises are located in jurisdictions
with low sovereign ratings. The current global financial crisis has highlighted difficulties faced by enterprises in
obtaining international financing, as investors have become even more risk sensitive.
David Eldon, Chairman of DIFC Authority, said: “The signing today is a turning point for the region because it
reflects the continued maturing of MENA capital markets, as well as the growing sophistication among regional
companies and projects regarding how they secure financing.”
MIGA can insure eligible investments made by investors in a MIGA member country into a developing member
country. The types of investments the agency can cover include equity, shareholder loans, certain shareholder
loan guarantees, management contracts, asset securitisations, capital market bond issues, and leasing,
services, franchising and licensing agreements. The political risks that MIGA can cover include currency inconvertibility and transfer restrictions; expropriation;
war, terrorism, and civil disturbance; breach of contract; and non-honouring of sovereign financial obligations.
The memorandum of understanding will seek wherever possible from a legal and operational perspective, and
at the request of clients, to have DIFC as the jurisdiction for the issuance/guarantee. As well, DIFC will, in the
course of its operations, identify and refer to MIGA enterprises and projects in the region seeking foreign
financing that could benefit from political risk insurance (PRI) coverage. DIFC also will provide insights into
trends and market dynamics across the MENA region in order to help MIGA refine its regional strategy and
products.
The potential demand from enterprises for this programme is significant, given that in the MENA region PRI
already guarantees investments in excess of US$18 billion, up from US$7.8 billion in 2005. This level of PRI
activity is unprecedented and demonstrates the high demand for this instrument. Moreover, almost 50% of
current PRI coverage is focused on investments in sub-investment grade countries, jurisdictions where MIGA’s
guarantees are most useful.
At the same time, the international market has an appetite for MENA securities, given that even in the current
environment, several highly rated MENA sovereigns have been able to obtain financing from international
investors.
Globally, concerns about investment environments and perceptions of political risk often inhibit foreign direct
investment, with the majority of flows going to just a handful of countries and leaving the world’s poorest
economies largely ignored. MIGA addresses these concerns by providing political risk insurance for foreign
investments in developing countries.
Expanding Middle East Technology Footprint With Eleventh Customer in
the Region
Under the agreement signed today in Kuwait City, NASDAQ OMX has
committed to provide strategic advisory services to the KSE management
team, with the objective to support the exchange's compliance with
international standards and its contribution to development of the
national capital market. A critical part of this initiative is the
implementation of a new electronic trading platform at KSE. The trading
platform will be used for equities, bonds and derivatives. Roll out of
initial product classes is scheduled for the first half of 2011.
October 11, 2009--Bahrain Financial Exchange (BFX), the first multi - asset exchange in the Middle East and
North Africa, launching in Q1, 2010, has announced the establishment of its Product
Development Working Groups (PDWGs) for Islamic and Conventional asset classes.
Two distinct PDWGs have been launched: a PDWG Conventional and a PDWG Islamic.
October 12, 2009--Commodities
Gold, silver, and oil prices have risen sharply over the past
several trading days. While prices came off a bit last Friday,
gold remains at record highs, while silver and petroleum are at
levels that are confounding some of the more bearish market
participants.
Other commodities have followed this trend,
although not as sharply. This reflects the role of investors and
commodities trading banks in the rise in commodities prices
over the past several weeks: Gold, silver, and crude oil are the
most traded commodities, and financially driven trades have
a more pronounced influence in these markets. A weaker U.S.
dollar, and concerns over currency market instability, is helping
investors see commodities as attractive investments. This trend
should continue. That said, prices may come off slightly this week
on profit-taking, following sharp increases last week. If the price
increases pause, banks covering of their shorts also will pause,
and that would open the door for investors to take profits. If
this occurs this coming week, prices could fall. The longer term
trends fueling investor interest in all three commodities, and
commodities in general, remain in place, however, so any drop
in prices due to such profit-taking would be expected to be limited in time and depth.
MoU with the World Bank’s MIGA will assist cross-border financing in the Arab world
October 6, 2009--The Dubai International Financial Centre (DIFC) and the Multilateral Investment
Guarantee Agency (MIGA), a member of the World Bank Group, have signed a Memorandum of Understanding
(MoU) to promote foreign direct investment (FDI) into the Middle East and North Africa. Under the MoU, MIGA
and DIFC will explore opportunities for co-branding of existing political risk insurance products, joint business
development efforts, and development of a mutual referral process.
Through the initiative, public and private sector enterprises could benefit from improved access to cross-border
financing as a result of MIGA’s provision of political risk insurance, which helps international investors mitigate
non-commercial risks.