BUSINESS
Monday, January 4, 2010
23
Euro-zone’s new year heralds major debt crisis
ECB headquarters seen against a euro symbol at Frankfurt.
FRANKFURT: The euro-zone’s new year heralds a debt crisis that has alarm bells ringing and markets tracking government plans to tame the growing shortfall. Officials have borrowed heavily to pull the 16-nation zone out of its first recession, and debt levels are set to smash a huge hole in the ceiling set by the European Union in its Stability and Growth Pact. Soaring budget deficits, low growth and banking sector support “are feeding into significantly higher public debt levels,” the European Commission has warned. Average euro-zone “public debt could reach 84 percent of GDP (gross domestic product) by 2010, an increase of 18 percentage points from 2007,” it said, far above the pact’s limit of 60 percent. Government debt ratings
in the news Ajman Bank names Khokhar as chief DUBAI: UAE-based Islamic lender Ajman Bank said yesterday it named Mubasher Hanif Khokhar, a former Mashreq banker, as its new chief executive. Khokhar’s appointment is effective Jan. 3, according to a statement posted on the Dubai bourse website. Ajman Bank’s acting CEO, Ali Shaqoosh Al Mueen, will become the lender’s deputy chief, a spokesperson for the company told Reuters.
Aabar says has no investment in Arabtec DUBAI: Abu-Dhabi based Aabar Investments said it has not made an investment in Arabtec, after the Dubai-based construction firm last week said it was not in talks about any possible deal. “We can confirm that Aabar has not made an investment in the company mentioned in the Bloomberg report to which you refer in your facsimile,” Aabar said in a statement to the Abu Dhabi bourse. Arabtec denied the same report on Dec 30.
First Gulf Bank extends share buyback DUBAI: Abu Dhabi’s First Gulf Bank obtained the approval of the UAE markets regulator for an extension on plans to buy back 10 percent of its shares, a statement on the Abu Dhabi bourse website said yesterday. The bank requested an extension of one year. “The approval is granted to the bank in order to complete the buyback of 10 percent of the bank’s capital,” the statement said.
Savola sells storage facility for $80m DUBAI: Saudi sugar refiner Savola Group has sold a central storage facility to Al Rajhi Capital for 299 million Saudi riyals ($79.73 million), making a profit of 55 million riyals, the company said yesterday. Savola sold the facility on the condition that Al Rajhi Capital will rent it out to its subsidiary Al-Azizia Panda, one of the Gulf Arab region’s biggest supermarket chains, it said in a statement on the Saudi bourse website. Savola also holds a 26.5 percent stake in Almarai Co, the Gulf’s biggest dairy firm by market value.
Finance chiefs in UK upbeat about business recovery LONDON: Finance chiefs at the UK’s biggest companies are in their most confident mood for two years as recovery hopes grow, a survey said yesterday. The risk appetite among chief financial officers and finance directors is at its highest level since the beginning of 2008, financial services firm “Deloitte” said. Its quarterly survey of senior staff - including 39 major firms finance bosses said optimism about prospects for their own business was also at a twoyear high. Deloitte chief economist Ian Stewart said: “Today businesses are lifting their eyes from the recession and are looking for growth in 2010. The economy and the financial system are a long way from normal but things are looking up.”
Concerns about access to finance have also eased with many prepared to issue bonds or new shares to raise funds rather than rely on costly bank borrowing. Almost four in five finance bosses - 78% nonetheless believe the UK banking system is now strong enough to sustain a recovery. But the struggling economy remains the chief worry with nearly half - or 48% - concerned over a potential ‘double dip’ recession in 2010. The UK is expected to have returned to growth in the final three months of 2009 after a record six quarters of recession in a row, although prospects for early this year remain uncertain as VAT returns to 17.5% and spending cuts loom after a general election, the report added. —KUNA
Oman to spend $4.2bn on utility projects till 2017 MUSCAT: Omani authorities will spend 1.6 billion Omani riyals ($4.2 billion) on utility and water projects in the governorate of Muscat in the coming years. Omar Al-Wuhaibi, Chief Executive Officer of Oman Wastewater Services Company, said in a press statement yesterday that the forecast spending would cover projects, including water treatment plants and water networks, in the Muscat region till 2017. Overall cost of the projects, currently under execution in various regions of
the sultanate, has amounted to 562 million riyals, he said.Moreover, the company is currently building a central water treatment plant in the region of Bosher. The station, whose construction is projected to cost 36 million riyals, is designed to put out 55 cubic meters of water per day. The company is also building several water networks in the region. It is also constructing a central station for waste water treatment in the region of Al-Seeb. It will initially put out 60,000 cm of water per day. —KUNA
have been downgraded in Greece by all three major international agencies, and by some of them in Ireland and Spain as well. The Fitch agency has urged all governments with top ratings to tame debt, mentioning in particular Britain, which is not a euro-zone member, along with France and Spain, which are. Germany, long considered the cornerstone of euro-zone fiscal discipline, forecasts public debt at around 78 percent of GDP this year, while in France, the second biggest euro-zone economy, public debt jumped to a record 75.8 percent in the third quarter of 2009. Greece says its shortfall come to 120 percent of output in 2010. Debt is raising the cost of borrowing for many countries and adding to the weight of reimbursing obligations on future budgets.
With unemployment rising and weak growth expected in 2010, officials cannot count on increased tax revenues for much help in paying down debt, a lot of which is owed abroad. “The (economic) crisis is weighing on the sustainability of public finances and potential growth,” the EU commission has warned as economists leave open the possibility of a “double dip” recession this year. Finances will be undermined further by an ageing population that will need expensive health care in the years to come. But tightening the financial screws, as many capitals have pledged to do, could choke off an economic recovery if officials act too soon, analysts warn. Natixis economist Patrick Artus said that in the near term, “it will not be possible to return to less expansionary monetary policies, at the risk of creating
huge problems” as money pumped out to boost activity has begun to generate fresh problems of its own. They include new speculative bubbles in emerging economy assets, commodities and possibly even real-estate, a key factor in the mid-2007 financial meltdown. Failing to act on deficits and debt however will spark a reaction at some point from financial markets which will demand higher interest payments on loans, especially from highly exposed countries like Greece. On Friday, the yield, or interest on 10-year Greek bonds was a hefty 2.36 percentage points higher than that for benchmark German bonds. Before the financial crisis erupted in August 2007, the spread was just 0.29 points, and in early December, Greek Prime Minister George Papandreou warned: “Either we
eradicate the debt, or the debt will eliminate the country.” The Greek debt debacle constitutes one of the euro-zone’s biggest tests ever as Europe’s single currency begins its 12th year in existence. That has weighed on the euro, which traded for $1.44 on Thursday ahead of the New Year holiday. Markets want to know if solidarity will prevail within the 16-nation bloc, as most analysts expect, or whether it will plunge into an existential crisis. European Central Bank governing council member Ewald Nowotny has underscored a “no bail-out” principle contained in EU treaties, while German Chancellor Angela Merkel, head of Europe’s biggest economy, has suggested otherwise. Merkel said last month that “we all share a common responsibility,” for Greece. — AFP
MIDEAST STOCK MARKETS
Emaar surges ahead of Burj Dubai opening, Gulf jump DUBAI: Emaar Properties lifted Dubai’s index to a two-week high yesterday, a day before the official opening of Burj Dubai, the developer’s flagship project and the world’s tallest structure. In a sentiment-driven rally, Emaar surged 7.8 percent to its highest close since Nov. 23, Gains elsewhere were more muted, with Saudi Arabia almost flat and Qatar edging slightly higher in sluggish trading on both bourses. Emaar’s gains were nearly matched by its rival developers, with Deyaar climbing 6.9 percent and Sorouh Real Estate adding 4.2 percent. “The opening of Burj Dubai is a sentimental issue, rather than an actual change in the company’s situation, although it does mean investors expect Burj Dubai revenues will be booked in the first quarter,” said Marwan Shurrab, vice-president and chief trader at Gulfmena Alternative Investments. Emaar, Arabtec and Deyaar between them accounted for almost two-thirds of all shares changing hands on Dubai’s index and analysts were divided over what this meant for the bourse’s immediate prospects. “The big volumes in Emaar and Arabtec mean the market should be able to go a bit higher tomorrow,” said Shawkat Raslan, Prime Emirates head of sales. “Emaar broke a strong resistance level at 4.04 dirhams on high volumes-this is new cash coming into the stock and it should continue upward.” Gulfmena’s Shurrab was more cautious, saying the focus on a handful of property-related stocks showed that short-term, retail investors were dominating trading. Saudi Arabia’s index rose for a second day as investors paused ahead of fourthquarter results following strong gains in 2009. “Everybody is waiting for the fullyear results and this is reflected in the lack of liquidity and turnover in the market,” said Saleh AlOnazi, vice-president of Principal Investment at Swicorp in Riyadh. “We have performed very well for the past year and the big investors are caught between realizing their profits and trying to work out where the market will go.” The Saudi measure was the top Gulf Arab performer in 2009, climbing 27 percent. Saudi Basic Industries Corp (SABIC) rose 0.3 percent, offsetting minor declines in Samba Financial Group and Al-Rajhi Bank. “Oil prices have done very well, but the big question mark is over banks’ transparency and the provisions they are taking,” added AlOnazi. Qatar’s index rose for the first session in four, although it remains down 8 percent since early October’s 11-month high. “Everyone is waiting to see what dividends banks will announce-until then, trading is likely to be conservative,” said Samer Al-Jaouni, General Manager of Middle East Financial Brokerage Co. “Qatar’s economy should do better than the rest of the Gulf and is seen as one of the top performers globally, but this has yet to really be seen in companies’ earnings.” The Bahrain and Kuwait markets were closed for a holiday. HIGHLIGHTS DUBAI The index climbed 3.4 percent to 1,866 points, its highest finish since Dec. 17. ABU DHABI The benchmark rose 1.1 percent to 2,772 points. SAUDI ARABIA The measure climbed 0.1 percent to 6,150 points. OMAN The index rose 1.6 percent to 6,470 points. QATAR The measure climbed 0.7 percent to 7,007 points. EGYPT The index rose 1 percent to 6,272 points, its third gain in four sessions. — Reuters
helping Dubai’s measure climb 3.4 percent. Other Gulf Arab bourses also advanced, with Oman hitting a 10-week high after a government official forecast the country’s gross domestic product would increase by 6.1 percent in 2010.
DUBAI: Traders watch the price movement at the Dubai stock market. Emaar Properties lifted Dubai’s index to a twoweek high yesterday. —AP
Mobinil case shows minorities protected: Egypt regulator CAIRO: The decision of an Egyptian appeals committee to approve France Telecom’s latest bid for Mobinil shows Egypt is prepared to protect minority interests, the Egyptian regulator said yesterday. The committee on Saturday rejected Orascom Telecom’s request that the regulator scrap its decision to allow France Telecom to pay 245 Egyptian pounds ($45) for each share in Mobinil, Egypt’s largest mobile operator by subscribers. “At the end, we are trying to implement what will achieve the public interest, what will achieve the reputation and stability of the market,” Chairman of the Egyptian Financial Supervisory Authority (EFSA) Ziad Bahaa El-Din told reporters. The appeals committee overseeing the case is an independent body including members from the State Council, a senior official of the EFSA and a member appointed by the Ministry of Investment. Orascom said it would challenge the committee’s decision. Orascom and France Telecom, the two main shareholders in Mobinil, took their years-long battle for control of the company to an arbitration court in 2007, which ruled the French company should buy Orascom’s stake. The Egyptian regulator rejected three previous offers by the French company to buy the minority stake in Mobinil. The prices offered in the earlier offers were 187 pounds, 237 pounds and 230 pounds, all below the price of the arbitration ruling. Orascom had argued France Telecom should have offered 273 pounds, equivalent to a price set by the Egyptian court last April for Mobinil shares held by Orascom through a holding company, and which the court ordered France Telecom to buy. In May last year, France Telecom said minority shareholders of Mobinil were ready to sell stock at 230 pounds a share. Orascom Telecom could net more than $1.6 billion if it sold its 20 percent direct stake in Mobinil at 245 pounds and its stake in the holding company at 273 pounds. Bahaa El-Din said the decision to accept France Telecom’s latest offer ensured minority interests in Mobinil were protected and that fair practice was followed. —Reuters
Oman says project boom needs expatriate labor MUSCAT: Oman’s spending on new projects, spurred by the recovery of oil prices, will raise the demand for foreign labor in 2010, the sultanate’s national economy minister said yesterday. The Gulf Arab country expects to create 4,000 jobs in 2010 for nationals through the 937 million ($2.4 billion) allocated for new projects, but Ahmad Mekki said the projects will also drive demand for foreign workers. “We will need more expatriates to keep up with the pace of the development from new projects next year,” Mekki told reporters, without giving figures for foreign workers. “There are not enough nationals to fulfill all the jobs in demand.” According to the latest national economy statistics, there are 852,000 foreign workers in Oman, five times the number of nationals working in the private sector. Foreign workers make
up nearly 30 percent of Oman’s population of 2.9 million people. Industry analysts said the sultanate depended heavily on foreign labor in the construction sector, where nationals lacked expertise or were not willing to take on jobs. “We don’t have enough experts in civil engineering to cater for the rising demands,” Rashid Alawi, managing partner at Muscat Investments Co told Reuters. “Young Omanis also are not willing to work as laborers because they see it as demeaning.” Oman has allocated an expenditure of 7.18 billion Omani rials in 2010, up from 6.42 billion a year earlier. Plans include building four new airports, three ports, power plants and petrochemical projects. Oman fetched 12.5 percent more from oil income in 2009, basing its budget on an oil price of $45 per barrel, but selling its oil at an average price of $56.7 per barrel. —Reuters
MUSCAT: Oman’s spending on new projects, spurred by the recovery of oil prices, will raise the demand for foreign labor in 2010, the sultanate’s national economy minister said yesterday.