Middle East ETF News Older than One Year
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
Source: Dubai International Finance Center (DIFC)
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.
Source: Dubai International Financial Centre (DIFC)
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.
Source: NASDAQ OMX
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.
Two distinct PDWGs have been launched: a PDWG Conventional and a PDWG Islamic.
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.
Source: Bahrain Financial Exchange (BFX)
Dubai Gold And Commodities Exchange Weekly Market Views - 11 October 09
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.
Source: Dubai Gold And Commodities Exchange (DGCX)
The Dubai International Financial Centre (DIFC) and the Multilateral Investment
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.
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.
Source: miga.com
Dubai Gold & Commodities Exchange Weekly Market Views - 4 October 2009
Other commodities are in a similar position: vulnerable to profit-taking and short-term selling. In this environment, prices could come off some. A series of holidays will reduce Chinese demand for most commodities over the coming week, which could serve as an occasion for opportunistic short-term selling. A stronger dollar, should one emerge, would be expected to contribute to such a sell-off in commodities. If the dollar does not break above its recent range, however, commodities may mark time. While the markets may show signs of being exposed to down-side moves, demand for gold and silver as safe-haven investments remains strong. Bargain hunting by fabricators and investors would be expected to limit any sell-off in commodities prices this week. Signs of economic recovery are continuing to mount, even as some economic data point to continued economic pain. The recovery is likely to be V-shaped, but with some aspects of demand subdued by on-going structural economic imbalances. Currencies Overview
Source: Dubai Gold & Commodities Exchange (DGCX)
MENA region represents $30bn in asset management revenue opportunities for developers
Like a vast majority of economic sectors and geographies, real estate in the GCC has been impacted by the existing economic climate.
Source: AME Info
DIFC and MIGA collaborating to support development of bond & Sukuk market and promote FDI into MENA
The two institutions are also co-operating closely on their overall aim of promoting Foreign Direct Investment (FDI) into the Middle East North Africa (MENA) region.
HE Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC) and Vice Chairman of UAE Central Bank said: “DIFC’s partnership with MIGA will contribute significantly to enhancing the growth potential of the bond and Sukuk markets in the region. This partnership supports DIFC’s long-term strategy for developing highly efficient and liquid capital markets. By providing the means for mitigating political risks, this partnership can play a significant role in stimulating foreign investment, which is critical to the region’s economic growth.”
As part of the initiative, the DIFC and MIGA hosted a conference for the region’s capital markets industry at the DIFC Conference Centre. The delegates were welcomed by Abdulla Al Awar, Chief Executive Officer of the DIFC Authority.
Announcing the joint initiative, Al Awar explained that: “By leveraging DIFC’s knowledge of the regional markets and MIGA’s experience in working closely with emerging markets, the initiative will help create cost-efficient, cross-border financial structures, which are critical for facilitating investments.”
The DIFC Authority CEO pointed out that the risk perception of the region, and particularly of the Gulf Co-operation Council (GCC) member countries, is reducing rapidly with the abatement of the global financial crisis. “Despite the financial crisis, there have been a couple of successful bond issues, in the UAE for example this year, indicating a continuing appetite. The DIFC and MIGA are working closely to nurture, assist and support the industry to expand and gain depth,” Al Awar said.
Source: Dubai International Financial Centre (DIFC)
Gulf States' Sovereign Wealth Funds Lose $350 Billion
The World Investment Report 2009, released last week, said that assets held by the four Gulf funds dropped to $1.115 trillion last year from $1.165 trillion at the end of 2007 and that government injections of $300 billion helped narrow their losses.
Source: NDTV
Expanding Middle East Technology Footprint With Eleventh Customer in
the Region
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.
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.
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.
October 5, 2009--Commodities Overview
Commodities prices may move sideways to lower next week. Oil prices may trade around $70. Gold and silver are vulnerable to a round of profit-taking, having recorded strong advances over the past several weeks.
Currency markets may see continued volatility, as traders and others seek direction in a directionless market. While there remains concern that the dollar could fall further, a growing body of evidence suggests the dollar may find strength against the euro and yen, if not other currencies, in the short term. There is a risk for dollar bears that a wave of short-covering could trigger stop-loss liquidation of massive short positions taken on in the past several weeks. Such a development would push the dollar quickly higher, at least for a time. Barring such an event, currency markets seem more likely to trade sideways in a volatile fashion. The markets will be watching to see if the dollar mounts a convincing defence above recent lows. It may, but it may not rise sharply. This week the World Bank and International Monetary Fund are meeting in Istanbul. It is expected that very little agreement about major, substantive economic and financial issues will emanate from the meeting. Recent G20 and other meetings have shown growing disagreement among the major industrialized economies’ governments, which may shine through in the meetings communiqués. This could lead to further currency market turmoil, with the dollar moving sharply in both directions.
October 4, 2009--.T. Kearney, one of the world's leading management consulting firms, sees an untapped revenue opportunity of $30bn in ancillary revenues for developers in the MENA region, of which around $5-10bn are in UAE and an additional $8-12bn are in Saudi Arabia.
October 1, 2009--The Dubai International Financial Centre (DIFC) announced today that it is working closely with the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), on an initiative to assist and support the development of the region’s bond and Sukuk market.
September 29, 2009--Sovereign wealth funds (SWFs) of four oil-exporting Gulf states lost around $350 billion last year due to the global financial crisis, according to a UN report.
If you are looking for a particuliar article and can not find it, please feel free to contact us for assistace.
