The six Gulf Co-operation Council states are witnessing the best investment climate and marking the highest growth in a decade. "This is substantiated by huge market capitalisation which has taken place and a likely entry of new initial public offerings (IPOs)", Hassan Salim Al-Ammari, CEO, Al-Tawfeek Co. for Investment Funds, said on June 15. The occasion was the launch of Shariah-compliant GCC Equity Fund, a Bahrain Monetary Agency-approved open-ended fund with a target capital of $100m.
The company has decided to invest the fund in listed and unlisted Shariah-compliant equity and equity-related securities in the GCC countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Ammari said: "We'll invest 70% of it in listed and the remaining 30% in unlisted Shariah-compliant equity and equity-related securities in the region".
The new fund offers an opportunity to invest in the GCC equity markets. It reflects Al-Tawfeek's confidence on the outlook of the GCC economies. It will broaden Al-Tawfeek's range of investment funds and provide an opportunity to invest in an exciting era of the GCC, dominated by ongoing economic reform and a period of extraordinary growth reminiscent of the oil boom of the 1970s.
Al-Tawfeek company is a member of the Saudi Dallah AlBaraka Group, a leading provider of Shariah-compliant investment funds in the region. Dhafer Salih Al-Qahtani, general manager of the company, gave a presentation on the fund and its focus on the GCC. The fund offers bimonthly liquidity after three months with a minimum subscription of $15,000 for individuals and $100,000 for institutions.
The fund was launched at a time when the region was at the centre of world attention. In 2004, the GCC posted its highest growth in a decade. The region's corporate earnings had a growth of more than 50% compared to 40% in 2003. The combined net oil exports of the GCC exceeded $180 bn in 2004, up $35 bn from 2003.
With over $765 bn in market capitalisation and a number of new entrants (new IPOs) expected from the Saudi-based National Commercial Bank and Almarai, a number of new investment opportunities are bund to follow. With plans underway for a new capital market law in Saudi Arabia and Qatar, the introduction of Bahrain's Financial Harbour and the launch of the Dubai International Financial Centre, the region aims to position itself among international financial markets, creating further depth and diversity.
Dubai-based SHUAA Capital has been appointed as the investment manager of the fund. "SHUAA Capital has a 25-year history and a strong track record of investing in the GCC equity markets", its Managing Director, Asset Management Group, Haissam Arabi, said. SHUAA Capital has won the 2004 Euromoney award for excellence for being the "best equities house in the UAE". In addition, SHUAA Capital has successfully completed a variety of transactions for a number of institutions in the UAE.
Bahrain-based Gulf Clearing Co. has been appointed as custodian and administrator of the fund. The firm is a big fund custody and administration service provider with assets under custody exceeding $5 bn, according to its Vice President Ali Al-Laith.
A Shariah board will advise on the fund's Shariah-compliance. The board includes Dr. Abdul Sattar Abu Ghuddah, Abdullah Ibn Suleiman Al-Manai, Dr. Abdul Latif Al-Mahmoud, Dr. Ezzedine Bin Mohammed Khouja, and Dr. Ahmad Mohieldin Ahmad.
Al-Tawfeek is a specialised financial firm incorporated in 1992 in the Cayman Islands. It is one of the financial arms of Dallah AlBaraka Group. The group is one of the largest conglomerates in Saudi Arabia with total assets exceeding $12 bn, and with companies operating from more than 40 countries. Since its inception, Al-Tawfeek has launched a number of Shariah-compliant investment funds covering a variety of asset classes including equities, corporate debt, real estate, private equity, venture capital, leasing and reconstruction. It has yielded high returns for its investors in a number of Shariah-compliant investment funds.
17.2.08
NBAD to launch GCC equity fund; bullish on Gulf and Mena markets Monday, February 11, 2008
NBAD to launch GCC equity fund; bullish on Gulf and Mena markets
Monday, February 11, 2008
ABU DHABI — The National bank of Abu Dhabi (NBAD) which is bullish on GCC and Mena markets will be launching a GCC equity fund in the first quarter of 2008.
"We are very optimistic on the GCC and Mena region due to accelerating liberalisation of markets and economies, more privatisation, more regional integration, sustainable and strong organic domestic growth. Our newly formed internationally credentialed team will be launching a very exciting GCC equity fund in the first quarter of 2008," revealed Nazem Al Kudsi Chief Investment Officer, Asset Management Group, NBAD.
He expects 2008 and 2009 will be positive years as well but cautioned investors to be patient. "The UAE, GCC and Mena markets are relatively new and are emerging. Hence, just like any growing market there will be huge growth spurts, followed by slowdowns and consolidations. It will not be a straight line up," he said.
But, for the patient, non-emotional investors who can ignore the day-to-day coughs and sneezes of the market the rewards should be plentiful. "We think the outlook for IPOs in 2008 and 2009 is very good, the broad economy is still strong and there is still an appetite from foreign investors for an attractive investment in the region," Al Kudsi concluded.
National Bank of Abu Dhabi (NBAD)'s local funds swept Gold, Silver and Bronze medals as they outperformed the market and other local funds in 2007, according to a study by Zawya-Dow Jones.
"NBAD research and portfolio management team put together outstanding performance numbers in 2007 as NBAD Growth fund, the top performing fund in the UAE, was up almost 63 per cent on a total return basis and beating the market by nearly 18 per cent or 1,800 basis points," he said.
NBAD UAE Trading Fund, the second top performing fund in the UAE, was up 60.31 per cent while NBAD UAE Distribution Fund, the third top performer in 2007, was up 59.23 per cent. NBAD UAE Growth, Trading, and Distribution Funds were the first three in the top 10 list of all funds in the UAE based on their performance in 2007 while NBAD Islamic Fund also featured in the top 10 list. NBAD UAE Growth Fund features in the top 10 list of all funds in Mena as the 6th best fund in the entire region last year.
Monday, February 11, 2008
ABU DHABI — The National bank of Abu Dhabi (NBAD) which is bullish on GCC and Mena markets will be launching a GCC equity fund in the first quarter of 2008.
"We are very optimistic on the GCC and Mena region due to accelerating liberalisation of markets and economies, more privatisation, more regional integration, sustainable and strong organic domestic growth. Our newly formed internationally credentialed team will be launching a very exciting GCC equity fund in the first quarter of 2008," revealed Nazem Al Kudsi Chief Investment Officer, Asset Management Group, NBAD.
He expects 2008 and 2009 will be positive years as well but cautioned investors to be patient. "The UAE, GCC and Mena markets are relatively new and are emerging. Hence, just like any growing market there will be huge growth spurts, followed by slowdowns and consolidations. It will not be a straight line up," he said.
But, for the patient, non-emotional investors who can ignore the day-to-day coughs and sneezes of the market the rewards should be plentiful. "We think the outlook for IPOs in 2008 and 2009 is very good, the broad economy is still strong and there is still an appetite from foreign investors for an attractive investment in the region," Al Kudsi concluded.
National Bank of Abu Dhabi (NBAD)'s local funds swept Gold, Silver and Bronze medals as they outperformed the market and other local funds in 2007, according to a study by Zawya-Dow Jones.
"NBAD research and portfolio management team put together outstanding performance numbers in 2007 as NBAD Growth fund, the top performing fund in the UAE, was up almost 63 per cent on a total return basis and beating the market by nearly 18 per cent or 1,800 basis points," he said.
NBAD UAE Trading Fund, the second top performing fund in the UAE, was up 60.31 per cent while NBAD UAE Distribution Fund, the third top performer in 2007, was up 59.23 per cent. NBAD UAE Growth, Trading, and Distribution Funds were the first three in the top 10 list of all funds in the UAE based on their performance in 2007 while NBAD Islamic Fund also featured in the top 10 list. NBAD UAE Growth Fund features in the top 10 list of all funds in Mena as the 6th best fund in the entire region last year.
Daman: IPO flow will be more robust for UAE and GCC
The Dubai International Financial Exchange (DIFX) will list its first United States-based company this week, paving the way for a series of similar public offerings set to come on board from the North American markets.
According to Dubai’s Daman Investments, lead manager of the initial public offering of Buffalo-based Nanodynamics, the move will go some way to cement the emirate’s place as a global exchange.
Shehab Gargash founded Daman (now Daman Investments) in 2001 and serves as Chief Executive Officer of the Dubai-based private joint stock company.
His company is capitalised at Dh200 million and is a privately held, non-bank financial services group focused on developing capital market opportunities within the UAE and the Middle East.
During his 12 years in the UAE banking industry, Gargash’s previous roles have been in marketing, distribution, trade finance and investment banking, first with Citibank, from 1989 to 1993 and later with the Emirates Bank Group (1993 to 2001).
With an MBA from the George Washington University in the United States, Gargash (pictured above) is also a founding board member of Young Arab Leaders and the Arabian Real Estate Investment Trust, and was appointed to the Dubai Chamber board of directors last March. He is a frequent public speaker and is well known for his popular daily column – now in its 10th year – in the Arabic newspaper Al Ittihad.
Gargash discussed with Emirates Business the regulatory hurdles facing regional stock markets, concerns over fair equity research and valuations, and monitoring front-running.
He gave his forecasts for the regional stock markets this year, and talked about the challenges that could slow down the rise in foreign investment in the UAE.
Gargash also warned the region’s asset managers to have “a sharper knowledge” of events happening beyond their borders, as the correlation gets closer between local and global markets.
What does the listing of the first US firm on the DIFX, announced last week, mean for the exchange?
I think it’s very significant because it’s exactly the reason an exchange such as the DIFX was set up. It was established to attract quality listings from around the world and to create a marketplace for people to be able to trade those securities.
Having a US company come in on the bourse is a fulfillment of that promise. I think it has put the DIFX on the road to a global-quality exchange.
What is the significance of an alternative energy and clean technology company listing on the DIFX and do you see this sector becoming an industry that will see gains in 2008?
Yes, with increased worries about environmental issues – and about the economic logic behind environmental matters – clean technology is becoming an area of increased importance for corporations.
Nanodynamics is a pioneer at utilising nano technology advances that enable companies to have more potent solutions, which are more cost-effective and very friendly for the environment.
Any other companies you are talking to for the UAE or regional stock markets?
We will give more details later but Nanodynamics is one of a chain of similar IPOs we are working to bring into the DIFX from the US markets.
All of them will be very nice IPO stories – very good management behind good business models. We are very selective in picking those companies we believe will be successful and those that show an ability or potential for continued success.
What do you think are the reasons behind the slowdown of the flow of initial public offerings?
I don’t think initial public offerings have been slow, I think they are a function of demand and we have just exited two years of a negative period in our stock markets. So by definition you are going to have fewer IPOs than usual.
But we have not seen them stop and that’s very important. We had some very important local IPOs over the past year and going forward into this year it looks very promising. So I think the IPO flow will be more robust going forward because the markets have sort of picked up now.
At the DIFX specifically we have seen a very successful IPO with Dubai Ports World. This one [IPO of Nanodynamics] hopefully is running very nicely and indications are good for the first US initial public offering on the DIFX.
And 2008 promises to be a very positive year for in terms of getting more companies on board and more activity through the exchange.
In the first half of 2007, foreign investor buying volume on the Dubai Financial Market tripled and foreign investors accounted for about 30 per cent of the total DFM trading, it was reported. It then retreated. Where do you think this figure will stand for the first half of 2008?
I think foreign institutional investors have discovered the UAE markets, both local markets and regional, such as the DIFX. They have discovered the Gulf is a very promising emerging market. The risk-reward proposition makes a lot of sense to them. So I expect to see more participation from them in local and daily activity here.
That will increase the volatility from one side but it will certainly increase the amount of traffic and volume we will see through our local exchanges on a daily basis.
What are other possible hurdles impeding the rise in foreign investment in the UAE?
The foreign investors are going to bring their own processes and logic to the market so we’re going to see a quantum shift in the way the market transacts.
We’ve seen that, if you compare today and five years ago, there is a big difference in that as well. But I think going forward we are going to see a more rigid interpretation of things like profitabilities, of reading the results of the companies, in daily trading volumes, in triggering stops, in short-selling eventually and in margin trading.
All of those will be new concepts coming into our market as it becomes a closer market, a closer reflection of what an international market looks like.
What is your 2008 forecast for regional stock markets?
I think it is a very significant shift we are seeing. We are seeing a natural shift, there is closer correlation than previously between what is happening locally and globally, and I think that’s why it’s very evident in the quick dip and pick up that we saw last week or the week before on the local exchanges.
Approximately 30 per cent of the daily volume is from foreign institutional investors on the DFM. That itself is a telltale sign that the correlation is going to increase and not decrease going forward.
So asset managers in the region today have to have a sharper eye and a sharper knowledge of what happens beyond their borders.
They could get away without that knowledge in the past but not anymore. For 2007, I remember I said 10 to 15 per cent from 2006 and I was proven wrong because until October we were negative. But then we jumped up about 30 per cent so I think quarter four made up for our expectations and exceeded it.
This year I will be anxious because of the volatility of the international markets, which was not as big a factor a few months ago as it is today.
Also, with oil price high it makes things a little more uncertain. I wouldn’t venture a guess but I would be very comfortable that 2008 will be a positive year and will be based on the results we are seeing in terms of the fourth quarter earnings from 2007 and going very early on into 2008.
I think the growth will remain healthy for the companies. Also, we can’t forget a new factor in 2008, which is the listing of private companies.
We have a whole batch of two-year-old companies on the local markets that are going to be listed. For instance Al Qudra announced it would list this year.
So you’ve got several of the similarly aged, two-year-old companies that are due for listing and will create a whole new cycle of momentum, at least on the speculative side that will be positive for the stock market indices.
So I will not give a number this time but I think 2008 will be a positive year and I think it’s going to be interesting. It won’t be for the faint-hearted because I think it’s going to be a roller coaster in terms of the dealings with short-term volatilities.
What do you think are some of the regulatory challenges facing the stock markets here?
I think the main thing is to successfully regulate the shift from a small, fairly quiet local market into the next emerging market.
You have to put in place proper guidance and enforce proper regulations to enable you to successfully do that so you don’t have a chaotic situation.
What do you think about the Securities and Commodities Authority’s recent concerns about equity research and the way some analysts are reaching their valuations? Do you think this type of research should be regulated?
I think the SCA has a reason to worry because while some research we see out there is very good, some other leaves a lot to be desired.
I think it will be important that we don’t put in place too many guidelines that stifle research, which get researchers worried about what they say so they end up saying nothing.
Because I think research is an important component of the environment and it gives good guidance to the investors in making their final investment decisions.
Do you think the SCA should monitor front-running?
The SCA needs to put in place a lot more practical and convenient guidelines for investors in general. It has done a lot since it was set up, but there is a lot more to do. I think it is on the right track.
How do you deal with front-running at Daman?
We comply [laughs]. We are regulated by the SCA or by the Central Bank, and by the Dubai Financial Services Authority. So we are regulated in three environments depending on which business it is.
We are in constant and very constructive discussions with the regulators because it’s very important for the regulators to also positively interact with the companies in the market to come up with an environment that is protected from one side, but that is also conducive to business.
How do you ensure that your brokerage research that is provided to clients is not mixed with the buy side?
We do not publish our research; it is done for our internal purposes now. In the future we will be publishing research but for now we do not have published research.
According to Dubai’s Daman Investments, lead manager of the initial public offering of Buffalo-based Nanodynamics, the move will go some way to cement the emirate’s place as a global exchange.
Shehab Gargash founded Daman (now Daman Investments) in 2001 and serves as Chief Executive Officer of the Dubai-based private joint stock company.
His company is capitalised at Dh200 million and is a privately held, non-bank financial services group focused on developing capital market opportunities within the UAE and the Middle East.
During his 12 years in the UAE banking industry, Gargash’s previous roles have been in marketing, distribution, trade finance and investment banking, first with Citibank, from 1989 to 1993 and later with the Emirates Bank Group (1993 to 2001).
With an MBA from the George Washington University in the United States, Gargash (pictured above) is also a founding board member of Young Arab Leaders and the Arabian Real Estate Investment Trust, and was appointed to the Dubai Chamber board of directors last March. He is a frequent public speaker and is well known for his popular daily column – now in its 10th year – in the Arabic newspaper Al Ittihad.
Gargash discussed with Emirates Business the regulatory hurdles facing regional stock markets, concerns over fair equity research and valuations, and monitoring front-running.
He gave his forecasts for the regional stock markets this year, and talked about the challenges that could slow down the rise in foreign investment in the UAE.
Gargash also warned the region’s asset managers to have “a sharper knowledge” of events happening beyond their borders, as the correlation gets closer between local and global markets.
What does the listing of the first US firm on the DIFX, announced last week, mean for the exchange?
I think it’s very significant because it’s exactly the reason an exchange such as the DIFX was set up. It was established to attract quality listings from around the world and to create a marketplace for people to be able to trade those securities.
Having a US company come in on the bourse is a fulfillment of that promise. I think it has put the DIFX on the road to a global-quality exchange.
What is the significance of an alternative energy and clean technology company listing on the DIFX and do you see this sector becoming an industry that will see gains in 2008?
Yes, with increased worries about environmental issues – and about the economic logic behind environmental matters – clean technology is becoming an area of increased importance for corporations.
Nanodynamics is a pioneer at utilising nano technology advances that enable companies to have more potent solutions, which are more cost-effective and very friendly for the environment.
Any other companies you are talking to for the UAE or regional stock markets?
We will give more details later but Nanodynamics is one of a chain of similar IPOs we are working to bring into the DIFX from the US markets.
All of them will be very nice IPO stories – very good management behind good business models. We are very selective in picking those companies we believe will be successful and those that show an ability or potential for continued success.
What do you think are the reasons behind the slowdown of the flow of initial public offerings?
I don’t think initial public offerings have been slow, I think they are a function of demand and we have just exited two years of a negative period in our stock markets. So by definition you are going to have fewer IPOs than usual.
But we have not seen them stop and that’s very important. We had some very important local IPOs over the past year and going forward into this year it looks very promising. So I think the IPO flow will be more robust going forward because the markets have sort of picked up now.
At the DIFX specifically we have seen a very successful IPO with Dubai Ports World. This one [IPO of Nanodynamics] hopefully is running very nicely and indications are good for the first US initial public offering on the DIFX.
And 2008 promises to be a very positive year for in terms of getting more companies on board and more activity through the exchange.
In the first half of 2007, foreign investor buying volume on the Dubai Financial Market tripled and foreign investors accounted for about 30 per cent of the total DFM trading, it was reported. It then retreated. Where do you think this figure will stand for the first half of 2008?
I think foreign institutional investors have discovered the UAE markets, both local markets and regional, such as the DIFX. They have discovered the Gulf is a very promising emerging market. The risk-reward proposition makes a lot of sense to them. So I expect to see more participation from them in local and daily activity here.
That will increase the volatility from one side but it will certainly increase the amount of traffic and volume we will see through our local exchanges on a daily basis.
What are other possible hurdles impeding the rise in foreign investment in the UAE?
The foreign investors are going to bring their own processes and logic to the market so we’re going to see a quantum shift in the way the market transacts.
We’ve seen that, if you compare today and five years ago, there is a big difference in that as well. But I think going forward we are going to see a more rigid interpretation of things like profitabilities, of reading the results of the companies, in daily trading volumes, in triggering stops, in short-selling eventually and in margin trading.
All of those will be new concepts coming into our market as it becomes a closer market, a closer reflection of what an international market looks like.
What is your 2008 forecast for regional stock markets?
I think it is a very significant shift we are seeing. We are seeing a natural shift, there is closer correlation than previously between what is happening locally and globally, and I think that’s why it’s very evident in the quick dip and pick up that we saw last week or the week before on the local exchanges.
Approximately 30 per cent of the daily volume is from foreign institutional investors on the DFM. That itself is a telltale sign that the correlation is going to increase and not decrease going forward.
So asset managers in the region today have to have a sharper eye and a sharper knowledge of what happens beyond their borders.
They could get away without that knowledge in the past but not anymore. For 2007, I remember I said 10 to 15 per cent from 2006 and I was proven wrong because until October we were negative. But then we jumped up about 30 per cent so I think quarter four made up for our expectations and exceeded it.
This year I will be anxious because of the volatility of the international markets, which was not as big a factor a few months ago as it is today.
Also, with oil price high it makes things a little more uncertain. I wouldn’t venture a guess but I would be very comfortable that 2008 will be a positive year and will be based on the results we are seeing in terms of the fourth quarter earnings from 2007 and going very early on into 2008.
I think the growth will remain healthy for the companies. Also, we can’t forget a new factor in 2008, which is the listing of private companies.
We have a whole batch of two-year-old companies on the local markets that are going to be listed. For instance Al Qudra announced it would list this year.
So you’ve got several of the similarly aged, two-year-old companies that are due for listing and will create a whole new cycle of momentum, at least on the speculative side that will be positive for the stock market indices.
So I will not give a number this time but I think 2008 will be a positive year and I think it’s going to be interesting. It won’t be for the faint-hearted because I think it’s going to be a roller coaster in terms of the dealings with short-term volatilities.
What do you think are some of the regulatory challenges facing the stock markets here?
I think the main thing is to successfully regulate the shift from a small, fairly quiet local market into the next emerging market.
You have to put in place proper guidance and enforce proper regulations to enable you to successfully do that so you don’t have a chaotic situation.
What do you think about the Securities and Commodities Authority’s recent concerns about equity research and the way some analysts are reaching their valuations? Do you think this type of research should be regulated?
I think the SCA has a reason to worry because while some research we see out there is very good, some other leaves a lot to be desired.
I think it will be important that we don’t put in place too many guidelines that stifle research, which get researchers worried about what they say so they end up saying nothing.
Because I think research is an important component of the environment and it gives good guidance to the investors in making their final investment decisions.
Do you think the SCA should monitor front-running?
The SCA needs to put in place a lot more practical and convenient guidelines for investors in general. It has done a lot since it was set up, but there is a lot more to do. I think it is on the right track.
How do you deal with front-running at Daman?
We comply [laughs]. We are regulated by the SCA or by the Central Bank, and by the Dubai Financial Services Authority. So we are regulated in three environments depending on which business it is.
We are in constant and very constructive discussions with the regulators because it’s very important for the regulators to also positively interact with the companies in the market to come up with an environment that is protected from one side, but that is also conducive to business.
How do you ensure that your brokerage research that is provided to clients is not mixed with the buy side?
We do not publish our research; it is done for our internal purposes now. In the future we will be publishing research but for now we do not have published research.
11.2.08
KSE trading seen surging after 8.4% growth in Jan
KSE trading seen surging after 8.4% growth in Jan
GCC markets witnessed mixed trends as four out of six regional indices recorded monthly gains in Jan-08. However, the biggest bourse in the region in terms of market capitalization , Saudi Arabia, witnessed strong selling pressure as it benchmark index reported monthly decline of 13.4% in Jan-08. However, buying interest was seen in the Kuwait markets as its index recorded 8.4% growth during the month. We believe that the trading activity is likely to increase in the coming month as the investors take positions after analyzing annual results and corporate announcements.
Kuwait Budget 2008/09
Kuwait’s Cabinet has approved the country’s budget for the fiscal year 2008/09 (Apr’08 to Mar’09) which still needs to be sanctioned by Kuwait’s Parliament. The revenues estimated for 2008/09 is KD12.68bn, around 52.4% up from KD8.32bn estimated in the 2007/08 budget. As expected, a majority of Kuwait’s estimated revenues for 2008/09 will be on account of oil revenues. The oil revenue is projected to comprise around 92% of the total revenues for 2008/09. The oil revenues for 2008/09 is estimated at KD11.65bn, up 56.4% from KD7.45bn estimated for 2007/08. The non-oil revenues for 2008/09 is estimated at KD1.03bn, up only 17.9% from KD0.87bn estimated for 2007/08. The rise in non-oil revenue is attributed to an increase in taxes on net income and earnings for non-oil companies and fees on goods and services.
Similarly the total expenditures for 2008/09 is estimated at KD17.80bn, up 57.5% from KD11.30bn estimated in the 2007/08 budget. The higher expenditure projected for 2008/09 is due to the cabinet decree targeting the settlement of the KD5.47bn deficit to be paid in installments to the Public Institute For Social Security (PIFSS), which is Kuwait’s social security system. As per IMF Article IV report published in April 2006, PIFSS has accumulated a substantial actuarial deficit, which amounted to around KD7bn in 2004 and this move appears to be an attempt at recapitalization. However it is important to note that this expenditure of KD5.47bn is non-recurrent in nature. On account of this significant increase in the expenditure, Kuwait’s Cabinet has estimated a deficit of KD5.12bn for 2008/09. And considering the fact that around KD1.27bn of national revenue will be contributed to Reserve Fund for Future Generations (RFFG), the overall deficit for 2008/09 is estimated at KD6.39bn.
Without considering the transfer of KD5.47bn to PIFSS (which is non-recurrent in nature), the total expenditure projected for 2008/09 is KD12.33bn, which is 9.1% higher than the previous year. Though the break-up of this expenditure is not available at this point of time, we expect to see higher allocation of capital expenditure. Increase in capital expenditure has positive impact on the overall economy with maximum impact on sectors like construction, cement and real estate. This will have a trickle-down effect on other areas of economy as well by contributing to achievement of targeted rates of growth and creation of new jobs.
It is important to note that historically Kuwait has projected the budget on a conservative basis. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait achieved an actual budget surplus of KD5.20bn as against an estimated budget deficit of KD2.60bn. For the fiscal year 2007/08, Kuwait has estimated a deficit of KD2.98bn. However during the first six months of current fiscal, the country has already recorded a revenue surplus of KD5.75bn.
For the budget for the fiscal year 2008/09, sources at the Ministry of Finance have quoted that the oil revenue was estimated on the basis of a daily production of 2.2 million barrels of crude. We believe the Kuwait has again projected the budget revenues on a conservative basis. The actual average production for the first nine months of current fiscal was 2.48mb/day and we do not foresee a substantial reduction in view of higher prevailing oil prices. On the expenditure side, Kuwait has also historically spent less than budgeted figure. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait’s actual expenditure was KD10.31bn as against an estimated expenditure of KD11.12bn.
However the fiscal year 2008/09 might be different than the previous years. We might see an actual deficit in 2008/09 (unlike the previous years) in case the entire amount of KD5.47bn is paid during the year to PIFSS. As per our estimates, the actual deficit for 2008/09 will be lower than the projections by Kuwait’s Cabinet.
IPO frenzy in 2007
The number of new companies which offered parts of its shares to public (IPOs) reached 41 during the year 2007. Out of these 41 companies, 38 have been listed at the time of writing of this report and three are yet to be listed. Out of these, 36 issues were listed in 2007. Out of the 41 companies which floated their shares in 2007, 28 companies were from Saudi Arabia, six from UAE and two each from Oman, Qatar and Kuwait and one from Bahrain.
Out of 41 issues, maximum number (16) were from insurance sector, followed by services (9) and Industrial (8). Alahli Takaful Co has been the biggest gainer since float, gaining 1,017.5%, followed by Al Ahlia Cooperative Insurance Co. and Malath Cooperative Insurance and Reinsurance gaining 915% and 825% respectively. It is notable that we have found a negative correlation between the price change (on listing and after one month of float) and oversubscription. It means that appreciation in the price of any offering in secondary market is heavily determined by its fundamentals rather than just frenzy.
Improved capital market conditions have been driving the IPOs in the GCC region which have resulted in investors’ growing interest in the regional equity markets. Private companies and family businesses are opening up to the prospects of a public listing. There is also tremendous rise in disposable income and savings on the back of increasing oil prices has enabled investors to lap up the offerings made by the companies. This is also attracting corporate to go for listing as can be seen from the fact that more than 50 companies are looking to tap the market in the medium term.
Market activity
GCC bourses saw 39.9bn shares being traded in the month of Jan-08 as compared to 27.5bn in the previous month. Also, the value of shares traded on the bourses increased to US$136.7bn in Jan-08 as compared to US$100.5bn reported in the previous month.
The breadth of GCC stock markets was skewed towards decliners in Jan-08 as 280 stocks registered monthly decline as compared to 249 advancers. The strong sell-off seen in the Saudi market can be seen from the fact that the Saudi bourse saw only 13 advancers as compared to 97 decliners in Jan-08.
GCC markets witnessed mixed trends as four out of six regional indices recorded monthly gains in Jan-08. However, the biggest bourse in the region in terms of market capitalization , Saudi Arabia, witnessed strong selling pressure as it benchmark index reported monthly decline of 13.4% in Jan-08. However, buying interest was seen in the Kuwait markets as its index recorded 8.4% growth during the month. We believe that the trading activity is likely to increase in the coming month as the investors take positions after analyzing annual results and corporate announcements.
Kuwait Budget 2008/09
Kuwait’s Cabinet has approved the country’s budget for the fiscal year 2008/09 (Apr’08 to Mar’09) which still needs to be sanctioned by Kuwait’s Parliament. The revenues estimated for 2008/09 is KD12.68bn, around 52.4% up from KD8.32bn estimated in the 2007/08 budget. As expected, a majority of Kuwait’s estimated revenues for 2008/09 will be on account of oil revenues. The oil revenue is projected to comprise around 92% of the total revenues for 2008/09. The oil revenues for 2008/09 is estimated at KD11.65bn, up 56.4% from KD7.45bn estimated for 2007/08. The non-oil revenues for 2008/09 is estimated at KD1.03bn, up only 17.9% from KD0.87bn estimated for 2007/08. The rise in non-oil revenue is attributed to an increase in taxes on net income and earnings for non-oil companies and fees on goods and services.
Similarly the total expenditures for 2008/09 is estimated at KD17.80bn, up 57.5% from KD11.30bn estimated in the 2007/08 budget. The higher expenditure projected for 2008/09 is due to the cabinet decree targeting the settlement of the KD5.47bn deficit to be paid in installments to the Public Institute For Social Security (PIFSS), which is Kuwait’s social security system. As per IMF Article IV report published in April 2006, PIFSS has accumulated a substantial actuarial deficit, which amounted to around KD7bn in 2004 and this move appears to be an attempt at recapitalization. However it is important to note that this expenditure of KD5.47bn is non-recurrent in nature. On account of this significant increase in the expenditure, Kuwait’s Cabinet has estimated a deficit of KD5.12bn for 2008/09. And considering the fact that around KD1.27bn of national revenue will be contributed to Reserve Fund for Future Generations (RFFG), the overall deficit for 2008/09 is estimated at KD6.39bn.
Without considering the transfer of KD5.47bn to PIFSS (which is non-recurrent in nature), the total expenditure projected for 2008/09 is KD12.33bn, which is 9.1% higher than the previous year. Though the break-up of this expenditure is not available at this point of time, we expect to see higher allocation of capital expenditure. Increase in capital expenditure has positive impact on the overall economy with maximum impact on sectors like construction, cement and real estate. This will have a trickle-down effect on other areas of economy as well by contributing to achievement of targeted rates of growth and creation of new jobs.
It is important to note that historically Kuwait has projected the budget on a conservative basis. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait achieved an actual budget surplus of KD5.20bn as against an estimated budget deficit of KD2.60bn. For the fiscal year 2007/08, Kuwait has estimated a deficit of KD2.98bn. However during the first six months of current fiscal, the country has already recorded a revenue surplus of KD5.75bn.
For the budget for the fiscal year 2008/09, sources at the Ministry of Finance have quoted that the oil revenue was estimated on the basis of a daily production of 2.2 million barrels of crude. We believe the Kuwait has again projected the budget revenues on a conservative basis. The actual average production for the first nine months of current fiscal was 2.48mb/day and we do not foresee a substantial reduction in view of higher prevailing oil prices. On the expenditure side, Kuwait has also historically spent less than budgeted figure. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait’s actual expenditure was KD10.31bn as against an estimated expenditure of KD11.12bn.
However the fiscal year 2008/09 might be different than the previous years. We might see an actual deficit in 2008/09 (unlike the previous years) in case the entire amount of KD5.47bn is paid during the year to PIFSS. As per our estimates, the actual deficit for 2008/09 will be lower than the projections by Kuwait’s Cabinet.
IPO frenzy in 2007
The number of new companies which offered parts of its shares to public (IPOs) reached 41 during the year 2007. Out of these 41 companies, 38 have been listed at the time of writing of this report and three are yet to be listed. Out of these, 36 issues were listed in 2007. Out of the 41 companies which floated their shares in 2007, 28 companies were from Saudi Arabia, six from UAE and two each from Oman, Qatar and Kuwait and one from Bahrain.
Out of 41 issues, maximum number (16) were from insurance sector, followed by services (9) and Industrial (8). Alahli Takaful Co has been the biggest gainer since float, gaining 1,017.5%, followed by Al Ahlia Cooperative Insurance Co. and Malath Cooperative Insurance and Reinsurance gaining 915% and 825% respectively. It is notable that we have found a negative correlation between the price change (on listing and after one month of float) and oversubscription. It means that appreciation in the price of any offering in secondary market is heavily determined by its fundamentals rather than just frenzy.
Improved capital market conditions have been driving the IPOs in the GCC region which have resulted in investors’ growing interest in the regional equity markets. Private companies and family businesses are opening up to the prospects of a public listing. There is also tremendous rise in disposable income and savings on the back of increasing oil prices has enabled investors to lap up the offerings made by the companies. This is also attracting corporate to go for listing as can be seen from the fact that more than 50 companies are looking to tap the market in the medium term.
Market activity
GCC bourses saw 39.9bn shares being traded in the month of Jan-08 as compared to 27.5bn in the previous month. Also, the value of shares traded on the bourses increased to US$136.7bn in Jan-08 as compared to US$100.5bn reported in the previous month.
The breadth of GCC stock markets was skewed towards decliners in Jan-08 as 280 stocks registered monthly decline as compared to 249 advancers. The strong sell-off seen in the Saudi market can be seen from the fact that the Saudi bourse saw only 13 advancers as compared to 97 decliners in Jan-08.
7.2.08
Middle East on Front Lines of Global Talent War
Middle East on Front Lines of Global Talent War
Middle Eastern markets are booming, unlike those in Europe and the U.S. Now, the Gulf is attracting investors seeking to tap into the vast resources of the region. Wall Street banks are also expanding overseas in search of high-growth markets with the potential to boost revenue and offset volatility at home. Goldman Sachs, Morgan Stanley and other investment banks have already secured banking licenses and set up shop there. Meanwhile, Islamic finance is shaping up to be one of the fastest-growing sectors in global finance. A recent Lipper Hedge World report notes that demand is soaring for alternative investments that comply with Shariah law to take off in the second half of 2008.
Amid the trend, the need for talent in the Middle East is surging. A new study conducted by international communications consultancy, Hill and Knowlton, shows that the demand for talent has never been greater. According to executive search firm, A.E. Feldman, there is a lot of investment in the Gulf and with that comes increasing demand for talent. The firm reports that salaries are skyrocketing as banks seek to lure top candidates. Investment bankers as well as risk, private equity and real estate professionals are among those in short supply. Those able to demonstrate strong modeling skills, transaction experience and excellent communication skills are in a prime position to gain from the trend.
Soaring oil prices have made the Gulf not only one of the fastest-growing regions in the world, but also a pool of great wealth. The sovereign investment arms of Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), Oman and Kuwait have an estimated $1.5 trillion at their disposal, according to Reuters. The Dubai International Financial Centre (DIFC) is creating new infrastructure as part of its efforts to become a global Islamic finance hub, according to a Gulf News report.
As investors flock to the Middle East, job opportunities in the region are exploding. The Middle East is on the front line of the global war for talent, according to the results of the 8th Annual Corporate Reputation Watch study by international communications consultancy, Hill and Knowlton. Dave Robinson of Hill and Knowlton Middle East, says the report has highlighted a critical issue for the region. “With governments and companies in the Middle East adopting aggressive growth strategies and with the move towards international business practices, the need for the best graduate talent has never been greater.”
Meanwhile, interest in the Middle East as a market for alternative investments is at an all time high, according to a recent Hedge Week report. The report states, “The development of the Dubai International Financial Center and the growth of the financial industry in Qatar and Bahrain have focused attention on opportunities for asset managers in a region characterized by rapidly growing wealth and increasing investor sophistication.”
Islamic finance in the Gulf is gaining popularity and assets of banks in the sector are growing faster than their counterparts in conventional banking, reports Gulf News. Globally, assets of Islamic financial institutions are estimated to be more than $500 billion.
The main principle of Islamic finance is that all forms of interest are forbidden. All money must also be invested in purely ethical industries. And the Islamic financial model works on the basis of risk sharing. Banks and individuals share the risk of any investment on agreed terms, and divide any profits between them.
Though Shariah law obviously poses certain challenges for the hedge fund industry, financial engineers are examining how to create structures that provide attractive levels of performance while conforming to Shariah principles, according to Hedge Week. In fact, Lipper Hedge World reports that Deutsche Bank’s regional head of Middle East structuring said he expects demand for hedge funds that comply with Shariah law to take off in the second half if the year.
Middle Eastern markets are booming, unlike those in Europe and the U.S. Now, the Gulf is attracting investors seeking to tap into the vast resources of the region. Wall Street banks are also expanding overseas in search of high-growth markets with the potential to boost revenue and offset volatility at home. Goldman Sachs, Morgan Stanley and other investment banks have already secured banking licenses and set up shop there. Meanwhile, Islamic finance is shaping up to be one of the fastest-growing sectors in global finance. A recent Lipper Hedge World report notes that demand is soaring for alternative investments that comply with Shariah law to take off in the second half of 2008.
Amid the trend, the need for talent in the Middle East is surging. A new study conducted by international communications consultancy, Hill and Knowlton, shows that the demand for talent has never been greater. According to executive search firm, A.E. Feldman, there is a lot of investment in the Gulf and with that comes increasing demand for talent. The firm reports that salaries are skyrocketing as banks seek to lure top candidates. Investment bankers as well as risk, private equity and real estate professionals are among those in short supply. Those able to demonstrate strong modeling skills, transaction experience and excellent communication skills are in a prime position to gain from the trend.
Soaring oil prices have made the Gulf not only one of the fastest-growing regions in the world, but also a pool of great wealth. The sovereign investment arms of Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), Oman and Kuwait have an estimated $1.5 trillion at their disposal, according to Reuters. The Dubai International Financial Centre (DIFC) is creating new infrastructure as part of its efforts to become a global Islamic finance hub, according to a Gulf News report.
As investors flock to the Middle East, job opportunities in the region are exploding. The Middle East is on the front line of the global war for talent, according to the results of the 8th Annual Corporate Reputation Watch study by international communications consultancy, Hill and Knowlton. Dave Robinson of Hill and Knowlton Middle East, says the report has highlighted a critical issue for the region. “With governments and companies in the Middle East adopting aggressive growth strategies and with the move towards international business practices, the need for the best graduate talent has never been greater.”
Meanwhile, interest in the Middle East as a market for alternative investments is at an all time high, according to a recent Hedge Week report. The report states, “The development of the Dubai International Financial Center and the growth of the financial industry in Qatar and Bahrain have focused attention on opportunities for asset managers in a region characterized by rapidly growing wealth and increasing investor sophistication.”
Islamic finance in the Gulf is gaining popularity and assets of banks in the sector are growing faster than their counterparts in conventional banking, reports Gulf News. Globally, assets of Islamic financial institutions are estimated to be more than $500 billion.
The main principle of Islamic finance is that all forms of interest are forbidden. All money must also be invested in purely ethical industries. And the Islamic financial model works on the basis of risk sharing. Banks and individuals share the risk of any investment on agreed terms, and divide any profits between them.
Though Shariah law obviously poses certain challenges for the hedge fund industry, financial engineers are examining how to create structures that provide attractive levels of performance while conforming to Shariah principles, according to Hedge Week. In fact, Lipper Hedge World reports that Deutsche Bank’s regional head of Middle East structuring said he expects demand for hedge funds that comply with Shariah law to take off in the second half if the year.
Dubai’s commitment to world class institutions profiled by Oxford Business Group
Dubai has committed to establishing world-class institutions in a variety of fields, from finance to communications, and from health care to education, says The Report: Dubai 2007, published by Oxford Business Group (OBG), the highly acclaimed UK-based publishing, research and consultancy service organization.
As a result of this determination to invest in development as a centre for finance, technology, communications, advertising and many other sectors, the emirate's nationals now enjoy one of the highest per capita incomes in the world, and yet, says The Report, Sheikh Mohammed bin Rashid Al Maktoum, ruler of Dubai, likes to mention that he has realized only 10% of what he wants to build for Dubai.
Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai and Chairman, Dubai Executive Council, highlights this when he tells The Report in an exclusive interview: "The success of the government relies heavily on the availability and skills of the public sector workforce.
"We need to ensure that the government continues to maintain and develop its capabilities of attracting, developing, motivating and retaining skills and talent to ensure it keeps pace with the evolving requirements of the economy and the citizens.
"In addition, a structured focus on quality and efficiency is necessary to ensure that service levels are continuously upgraded through the streamlining of processes and leveraging of IT."
Referring to the Mohammed bin Rashid Al Maktoum Foundation for Dubai, Sheikh Hamdan says: "Sheikh Mohammed bin Rashid Al Maktoum launched this personal initiative to develop future leaders and create a knowledge-based society throughout the region.
Based in the UAE, the foundation aims to promote knowledge and human development, focusing specifically on research, education and promoting equal opportunities for the personal growth and success of youth in the region. The foundation's programmes are also aimed at further enhancing the standing of scholars and intellectuals throughout the Arab world.
"Another objective of the foundation is to encourage efforts to find innovative answers to obstacles that are preventing economic and social development. Therefore, it will help establish small and medium sized enterprises and create a panel of decision makers in all relevant fields to communicate with one another and exchange insights that will go towards finding fast and efficient solutions.
"The foundation's mandate is significant since it is seeking to reverse a negative trend in the Arab world by identifying gaps and investing its efforts in filling them. Job creation, for instance, is a critical matter considering the fact our region now needs 15m jobs in the next 20 years. The Arab world needs 74m-85m new jobs. Emphasis needs to be placed on improving the work environment.
Currently, the Arab world is ranked 107 among 170 countries in terms of establishing new businesses. These figures represent major obstacles to the region's development - challenges, essentially, which the foundation intends to turn into opportunities for improvement and growth."
The Report: Dubai 2007, available in print form or online, is regarded as the premier guide for foreign direct investment into the emirate's vibrant economy, and an invaluable guide to many facets of Dubai, including its macroeconomics, infrastructure, political landscape and sectoral developments.
As a result of this determination to invest in development as a centre for finance, technology, communications, advertising and many other sectors, the emirate's nationals now enjoy one of the highest per capita incomes in the world, and yet, says The Report, Sheikh Mohammed bin Rashid Al Maktoum, ruler of Dubai, likes to mention that he has realized only 10% of what he wants to build for Dubai.
Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai and Chairman, Dubai Executive Council, highlights this when he tells The Report in an exclusive interview: "The success of the government relies heavily on the availability and skills of the public sector workforce.
"We need to ensure that the government continues to maintain and develop its capabilities of attracting, developing, motivating and retaining skills and talent to ensure it keeps pace with the evolving requirements of the economy and the citizens.
"In addition, a structured focus on quality and efficiency is necessary to ensure that service levels are continuously upgraded through the streamlining of processes and leveraging of IT."
Referring to the Mohammed bin Rashid Al Maktoum Foundation for Dubai, Sheikh Hamdan says: "Sheikh Mohammed bin Rashid Al Maktoum launched this personal initiative to develop future leaders and create a knowledge-based society throughout the region.
Based in the UAE, the foundation aims to promote knowledge and human development, focusing specifically on research, education and promoting equal opportunities for the personal growth and success of youth in the region. The foundation's programmes are also aimed at further enhancing the standing of scholars and intellectuals throughout the Arab world.
"Another objective of the foundation is to encourage efforts to find innovative answers to obstacles that are preventing economic and social development. Therefore, it will help establish small and medium sized enterprises and create a panel of decision makers in all relevant fields to communicate with one another and exchange insights that will go towards finding fast and efficient solutions.
"The foundation's mandate is significant since it is seeking to reverse a negative trend in the Arab world by identifying gaps and investing its efforts in filling them. Job creation, for instance, is a critical matter considering the fact our region now needs 15m jobs in the next 20 years. The Arab world needs 74m-85m new jobs. Emphasis needs to be placed on improving the work environment.
Currently, the Arab world is ranked 107 among 170 countries in terms of establishing new businesses. These figures represent major obstacles to the region's development - challenges, essentially, which the foundation intends to turn into opportunities for improvement and growth."
The Report: Dubai 2007, available in print form or online, is regarded as the premier guide for foreign direct investment into the emirate's vibrant economy, and an invaluable guide to many facets of Dubai, including its macroeconomics, infrastructure, political landscape and sectoral developments.
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