UAE acts to shore up banking system and calm markets

AFP - Monday, November 30

DUBAI (AFP) - – The United Arab Emirates central bank on Sunday pumped more liquidity into its banking sector amid fears that local stock markets may plunge after debt-laden Dubai asked to suspend debt payments.

The intervention is seen as a step to soothe investors and bank depositors after the shock announcement that state-controlled Dubai World wants to halt payments to creditors until at least May next year.

"This is a step aimed to calm investors... Markets should be calmer (than feared) tomorrow," said Emirati financial analyst Nasser bin Gaith.

"This means that banks will be on the safe side," a UAE official who requested anonymity told AFP.

The central bank's move came just before the the stock markets in Dubai and neighbouring emirate Abu Dhabi have their first chance on Monday to react to the disclosure of the debt difficulties, which were unveiled just before the start of a four-day holiday for the Muslim holiday of Eid al-Adha.

The central bank said in a statement, unusually issued during a holiday, that it was providing banks with extra liquidity, stressing its support to the banking sector.

But bin Gaith expects the decision to have no real immediate impact on Dubai's debt problem, pointing out that Dubai World is largely indebted to foreign banks.

"On practical level,there is no direct impact... Local banks have limited exposure to Dubai World, unlike foreign banks," he said.

British banks reportedly have a total exposure of 30 billion dollars to Dubai World.

And until the UAE stock exchanges reopen on Monday it is uncertain to what extent investors will be reassured by the central bank's statement.

"I expect to see a drop in Dubai's market when it opens Monday... a minimum of two-three percent," Saudi financial analyst Ali Daqaq told AFP. Dubai stock market rules limit the index to a change of 10 percent in one day.

"The banking sector will be the hardest hit, due to exposure to loans, and the danger of default on this debt," he said, speaking before the central bank pledged support for banks.

The central bank said the UAE banking sector stands stronger and more liquid than a year ago and that it enjoys a "strong base of stable deposits."

Other Gulf stock markets have also been on holiday since Thursday for Eid al-Adha, sparing them an immediate impact from Dubai's announcement.

However, the news sent jitters throughout Asian and European stock markets on Thursday and the US market on Friday as investors feared a possible default by Dubai and its state-owned businesses, which together owe 80 billion dollars.

Some economists say the delay in the reaction by Gulf markets because of Eid might reduce the severe impact on those bourses.

"Market fundamentals say that the local market should be negatively affected by the announcement, especially banks and real estate stocks," bin Ghaith told AFP before the central bank announcement.

"The reaction by the global markets was psychological, and came strongly. I expect the reaction here to be less hard because the first shock was absorbed by the global markets," he said.

Dubai and Abu Dhabi will be the only Gulf stock markets to open on Monday, while Kuwait follows on Tuesday. Saudi Arabia's financial market, the largest Arab bourse in capitalisation, will remain on holiday until Saturday.

The markets of Dubai and Abu Dhabi will have only two days of trading before they go again on holiday until Sunday December 6, for the national day.

Gulf investors outside the UAE are worried about contagion from Dubai's problems.

"Even here in Saudi Arabia people are talking about withdrawing from the market when it opens (next) Saturday in fear of the impact of the banks' exposure to Dubai's debt," Daqaq said.

Saudi economist Abdulwahab Abu-Dahesh expects a crash in the region's markets. "I expect Gulf bourses to dive like the September crash last year," following Lehman Brothers bankruptcy, he said.

Dubai does not have big oil reserves, unlike Abu Dhabi which sits on around 95 percent of the UAE's crude deposits.

But doubts have been growing about Abu Dhabi's commitment to buoy Dubai, despite a full subscription by two Abu Dhabi-controlled banks to Dubai bonds worth five billion dollars, announced a few hours before Dubai hinted at debt default.

The once-rapidly-booming economy of Dubai came to a screeching halt -- most noticeably in its real estate sector, after being hit by financing shortage due to the global financial crisis.

Property prices in the once-booming desert city have slumped by 50 percent.

The latest edition of Britain's Sunday Times newspaper was barred from news-stands in Dubai because of a graphic showing the emirate's ruler Sheikh Mohammad bin Rashed al-Maktoum sinking in a sea of debt.

"The Sunday Times was not distributed today," an official from the UAE national media council told AFP, requesting anonymity.

"We cannot accept a personal insult. It is against our traditions," he said.

US rebounds from recession

AFP - Friday, October 30



WASHINGTON (AFP) - – The United States rebounded from recession in the third quarter, posting its strongest economic growth in two years as government stimulus spurred consumer spending, official data showed Thursday.
After four negative quarters, the world's largest economy grew at a seasonally adjusted 3.5 percent annual rate in the July-September period from the second quarter, the Commerce Department said.
The increase was the first since the second quarter of 2008 and the strongest expansion since the 2007 third quarter, when a US subprime mortgage crisis triggered a global financial crisis that hammered the world economy.
The expansion followed an unrevised 0.7 percent decline in the second quarter.
The department's first estimate of third-quarter gross domestic product (GDP), a broad measure of the country's output of goods and services, was slightly higher than the 3.2 percent reading expected by most analysts.
President Barack Obama welcomed the data as "an affirmation that this recession is abating and the steps weve taken have made a difference."
But, he warned: "We have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression."
"The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research.
Unemployment remains a key hurdle to sustained recovery. The jobless rate rose to a new 26-year high of 9.8 percent in September and is expected to hit double digits. Since the official start of recession in December 2007, the number of unemployed has climbed by 7.6 million to 15.1 million.
The Labor Department reported Thursday that new weekly claims for unemployment benefits fell slightly.
"The recession is over, but don't be fooled by today's number -- the underlying rate of recovery is weaker," said Nariman Behravesh, chief economist at IHS Global Insight.
Behravesh said that underlying growth was closer to 2.0 percent and predicted momentum would only pick up in the second half of next year as consumers and businesses grow more confident.
After shrinking a sharp 6.4 percent in the first quarter, the world's largest economy has been on life support from the federal 787-billion-dollar emergency stimulus and other support measures.
The third-quarter rebound was led by consumer spending, which accounts for two-thirds of US economic activity and added 2.36 percentage points to GDP growth.
Consumer spending surged 3.4 percent after a 0.9 percent drop in the second quarter, a rise the department said "largely reflected" auto purchases under the government's popular "cash-for-clunkers" program in July and August.
Dean Baker, co-director of the Center for Economic and Policy Research, noted that, excluding the auto sector, consumption grew at a 1.0 percent annual rate.
"With disposable income falling due to continued job losses and declining hourly wages, and the reversal of the surge in car sales, consumption growth will almost certainly be negative in the fourth quarter," Baker said.
Other leading drivers of third-quarter growth were business inventories and home building.
The core inflation rate -- which strips out volatile food and energy prices -- fell to 1.4 percent from 2.0 percent, indicating inflationary pressures remain tame amid economic weakness.
The Federal Reserve, which keeps a close eye on the reading, is widely expected to leave its key interest rate unchanged at nearly zero when policymakers meet on November 3-4.
"If we do indeed get a second consecutive quarter of good growth, there will be a lot of pressure on the Fed to start raising rates," said Joel Naroff of Naroff Economic Advisors.
"Indeed, I wouldnt be surprised if the markets start pricing that into bond yields during the rest of the year."

JPMorgan Chase profit leaps to $3.6 bln

AFP - Thursday, October 15


NEW YORK (AFP) - – JPMorgan Chase said on Wednesday its third quarter profit jumped to 3.6 billion dollars in a further sign of the rebounding fortunes of the banking sector.

The profit however was heavily skewed to investment banking and trading results, which offset weakness in the consumer sector, especially in credit cards.

The group, among the healthiest of the major US banks, said earnings were nearly seven times higher than the 527 million dollars in the same period a year ago.

The results translated to 82 cents per share, much better than expected by analysts, who had called for a profit of 52 million dollars.

Revenues surged 81 percent to 26.6 billion dollars on a reported basis, due in part of the acquisition of failed lending giant Washington Mutual. Before accounting adjustments, revenues were 28.8 billion dollars.

Jamie Dimon, chairman and chief executive, said the results were positive but offered a cautious outlook.

"While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue," he said.
"Despite this near-term uncertainty about the path of the economy, our strong capital position and underlying earnings power will enable us to continue to invest in our businesses, creating a lasting franchise for many years to come."

More than half the profit, or 1.9 billion dollars, came from investment banking. The company lost 700 million dollars on credit card operations and 1.0 billion dollars in consumer loans.
It also set aside 3.8 billion dollars for credit losses, compared with 2.0 billion in the prior year, "reflecting continued weakness in the home equity and mortgage loan portfolios."

Commercial banking profits rose nine percent from a year ago to 341 million dollars, and asset management earnings increased 23 percent to 430 million.

Another big contributor to the bottom line was the corporate and private equity segment, including investment trading income. That amounted to a profit of 1.28 billion dollars, compared with a loss of 1.78 billion a year earlier.

The overall results drew positive analyst comments.

Jon Ogg at 24/7 Wall Street said the report represented "very impressive earnings" from "the cleanest bank in America."

"The results are strong enough that it has set a very high bar for its peers," he said.
Patrick O'Hare at Briefing.com said the group "easily eclipsed consensus earnings estimates" and set a positive tone on Wall Street.

The report was the first from the major US banks, which have been struggling with an unprecedented crisis stemming from a collapse of the housing bubble and a global credit squeeze.
JPMorgan has managed to navigate the global financial crisis and maintain profitability better than most of its peers, and has expanded to become the second-largest US bank by assets.
It acquired Wall Street giant Bear Stearns last year in a government-brokered deal to avert a collapse of the Wall Street firm.

It then scooped up Washington Mutual after the deepening of the financial crisis forced the giant thrift into bankruptcy, in a vast expansion for JPMorgan's retail banking.

In June, the New York firm repaid the government for its 25 billion dollar capital injection, which was part of a massive effort by authorities to shore up the financial sector suffering from the worst crisis in decades.

OCBC to buy ING Asia private bank for $1.5 bln-sources

Reuters - Thursday, October 15


* Beats HSBC in the race, DBS dropped out earlier -sources
* Deal to be announced at noon - sources
* OCBC shrs up 0.8 pct before suspension pending announcement
By Clare Jim and Saeed Azhar

HONG KONG/SINGAPORE, Oct 15 - OCBC , the smallest of Singapore's three local banks, has agreed to buy ING's private banking unit in Asia for $1.5 billion, sources said on Thursday, a surprise outcome in a complex drawn-out auction.

OCBC beat HSBC to the deal, which could be transformational for it since its private bank is smaller than its Singapore rivals' and the wealth management business in Asia is relatively untapped. Singapore's biggest bank DBS pulled out of the race for the ING asset a few weeks ago. "They had a very small private banking operation. What this would do is put the private bank on a firmer footing," Trevor Kalcic, banking analyst at RBS in Singapore, said of OCBC.

ING's sale of its Asian private bank with an estimated $16 billion in assets is its third major disposal in less than a month and the second in the Asia-Pacific region, as it seeks to raise capital to pay back bailout money to the Dutch government.

OCBC, which halted its shares pending an announcement that sources said was due around 0400 GMT, was the unexpected winner in a deal bankers earlier had said could be clinched by HSBC.
OCBC, which has not disclosed its private banking assets, lost a third of its bankers to foreign rivals in 2006. It also controls insurance firm Great Eastern and asset manager Lion Global Investors.

OCBC had surplus capital of S$15 billion , or a tier-1 ratio of 15.4 percent as of June, exceeding 12.5 percent for its peers, according to Citigroup analyst Robert Kong.

This suggests that OCBC enjoys excess tier-1 capital of S$2.5-3 billion over its peers, giving it ample ammunition to seek M&A opportunities, Kong said.

ASSET PRICES QUESTIONED
ING's private bank in Asia is run by Renato de Guzman, who has been instrumental in building the business in his home country Philippines and Indonesia. For a newsmaker on the banker click on [ID:nSP25815]

The sale of the Asian assets came after it struck a deal to sell its Swiss private banking unit to Julius Baer for 344 million euros on Oct 7. For stories on Dutch financial sector turmoil, click on [ID:nL1574170]

ING is in the midst of raising 6 billion euros to 8 billion euros through asset sales under a restructuring program it announced in April. It plans to ultimately exit 10 of the 48 countries where it does business.

The restructuring follows 10 billion euros in state aid ING received in Oct. 2008 and a 22 billion euro asset guarantee it received from the Dutch state in Jan. 2009. [ID:nLH689463]

Both its restructuring plan and the asset guarantee are under review by the European Commission, though the asset guarantee in particular has received a frosty reception.
On Sept.15, the EU extended its review of the facility, saying it appeared the Dutch state may have paid too much for the assets and ING might have gotten an unfair deal. [ID:nLF346783]

That review is expected to be completed by the end of this year, European Competition Commissioner Neelie Kroes told the Dutch parliament on Oct. 13. [ID:nLD706728]

Analysts' worst-case scenarios envision a hit to ING of up to one billion euros if the portfolio is repriced -- enough to potentially push its core Tier I capital ratio below 7 percent.

The asset sale program is seen as one potential way to offset a capital hit, though analysts have been unhappy with the sales thus far. In particular, they have found fault with both the prices paid and the fact that ING is selling assets in a still-depressed market.
(Additional reporting by Ben Berkowitz in Amsterdam; Editing by Neil Chatterjee and Muralikumar Anantharaman)

Global economic growth engine 'starting up': IMF chief

AFP - Thursday, September 24



NEW YORK (AFP) - – International Monetary Fund chief Dominique Strauss-Kahn on Wednesday said the global economy appears to be recovering from recession but the crisis was not yet over.
"Financial conditions have improved and the growth engine seems to be starting up again," Strauss-Kahn said in a speech at an international leadership meeting in New York, according to prepared remarks.
"Not so long ago, the global economy stood at the edge of the abyss," he said, but he warned "the crisis is by no means over."
The IMF managing director noted the 186-nation institution has devoted much of its resources to fighting the global financial crisis and the worst economic slump since the Great Depression.
Recalling the "outright panic" that followed the collapse of Wall Street investment bank Lehman Brothers in September 2008, Strauss-Kahn said that at the time "economic activity began a downward spiral."
Fears of another Great Depression "were not unfounded," he told the Global Creative Leadership Summit, a meeting of heads of state, business and international institution leaders and Nobel laureates.
"But today's world looks different. The crisis is not over, but I hope the worst is now behind us. We seem to have averted disaster."
The IMF chief underscored that the fund was projecting a global recovery in the "first part" of 2010.
"And as this crisis unfolded, I think we proved our worth with our realistic forecasts, both for growth and for credit losses," he said.
The IMF is scheduled to publish updated world economic forecasts on October 1.
"As we look at the current global financial crisis, the worst since the Great Depression, the risks were incredibly high," he said. "The global economy could have faced a meltdown. But we pulled back from the brink, and the IMF certainly played its role."
On the eve of the Group of 20 (G20) summit in the United States, Strauss-Kahn also underlined the role of the IMF "as a policy advisor, emphasizing in particular the need for common, coordinated, action."
"The IMF was among the first to pinpoint the policy responses that have now become part of conventional wisdom, especially the fiscal stimulus and the need to restructure the banking system," he said.
Strauss-Kahn highlighted his institution's promotion of economic stability and world peace.
"The stakes are particularly high in the low-income countries, where populations are especially vulnerable," he said.
He noted that the IMF was created in the aftermath of World War II to fight the economic roots of war.
"In many areas of the world, what is at stake is not only higher unemployment or lower purchasing power, but life and death itself," the former French Socialist finance minister said.
"Economic marginalization and destitution could lead to social unrest, political instability, or a breakdown of democracy. We could see war. This is what we must avoid," he insisted, calling for "sustained help" to countries in need.
"When the nations of the world come together to address common challenges in a spirit of solidarity, we can attain a virtuous cycle of peace and prosperity, and avoid a vicious cycle of conflict and stagnation. On first glance, this might seem incidental to the role of the IMF. But it is not. It underpins our mandate."
Strauss-Kahn's speech came on the sidelines of the United Nations General Assembly and ahead of the two-day meeting of leaders of the G20 developed and developing countries that opens Thursday in Pittsburgh, Pennsylvania.
Hosted by US President Barack Obama, the G20 leaders are expected to discuss their unprecedented efforts to stem the economic efforts, reform of the financial system and climate change.

SGX proposes to reduce minimum bid sizes for securities

Posted: 01 September 2009 1856 hrs

SINGAPORE: Singapore Exchange (SGX) is proposing to reduce the minimum bid sizes for securities in certain price ranges.

This reduction will apply to securities in three price range groups – those that are below 20 cents, those between S$1 and S$1.99, and those whose price range is S$10 and above.

SGX said on Tuesday this would lower the investors' costs of trading as it allows them to quote at more optimal levels, resulting in tighter bid-ask spreads.

It said the move would also align its minimum bid sizes in those price range groups with those of other major Asian exchanges.

In addition, SGX has also proposed to apply the same minimum bid sizes for debentures and exchange traded funds.

Market participants and the public are asked to give feedback and suggestions on the proposed amendments by September 21.


- CNA/so

IMF expects Singapore economy to grow 2.5% next year

Posted: 01 September 2009 1345 hrs

SINGAPORE: The International Monetary Fund (IMF) is projecting that Singapore's economy would grow 2.5 percent next year.

This was unveiled in its latest report following a recent consultation with Singapore.

IMF also describes Singapore's policy response to its worst recession since independence as being "forceful".

Such policy measures include a large fiscal stimulus, an easing of monetary policy and moves to stabilize the financial sector.

IMF notes that the "skilful implementation of a broad range of policy instruments has helped lessen the impact of the shocks".

It also considers monetary policy settings to be broadly appropriate, supporting domestic demand without undermining exchange rate stability.

On Singapore's financial sector, IMF says the industry "has shown remarkable resilience". It expects the sector to be able to withstand an even deeper and more prolonged global downturn.

Going forward, IMF says priority should continue to be given to rigorous stress-testing as asset quality is likely to deteriorate.

- CNA/ir

Sembcorp Marine says terminates a rig contract

Reuters - Wednesday, September 2

SINGAPORE, Sept 1 - Sembcorp Marine said on Tuesday its subsidiary Jurong Shipyard Pte Ltd has terminated its contract with Petroprod D&P I Ltd for the construction of a jack-up rig as payments due under the contract were not received.

The company did not give the value of the contract in a statement to the Singapore bourse, but said there were buyers who had shown interest and it was confident it would be able to receive the amount it should have earned from the sale of the rig.

Singapore's DBS picks Citi's SE Asia head as CEO

* Piyush Gupta to take up role in November

* Appointment comes nearly 5 months after former DBS CEO died

* Shares rise as much as 2.7 pct; outperform flat market

* JPMorgan sees appointment as catalyst for stock rise

By Kevin Lim and Saeed Azhar

SINGAPORE, Sept 1 - Singapore's DBS Group , Southeast Asia's biggest lender, has named Citigroup's Southeast Asia head Piyush Gupta as its new chief executive to drive its growth in India and elsewhere in Asia.

DBS, which has struggled to grow outside Singapore and Hong Kong, is keen to expand across Asia at time when the region is recovering from an economic slump and the financial crisis is forcing foreign banks to scale back.

"Given Piyush's experience in ASEAN and Asia, we would not be surprised if there is a renewed focus on DBS' domestic operations and potential regional opportunities, especially in Indonesia and India," said Kar Weng Loo, a banking analyst at Bank of America-Merrill Lynch, who has a buy rating on the stock.

The decision to appoint Gupta, 49, who oversees Southeast Asia and the Pacific for Citi, was unexpected after analysts had speculated DBS might choose an insider for the post.

Citi bankers were traditionally more experienced in consumer banking and the move "could signal a focus towards retail banking," said Raymond Tang, chief investment officer at CIMB-Principal Asset Management in Kuala Lumpur, who owns DBS shares.

The appointment came nearly five months after DBS's previous CEO Richard Stanley died of cancer and after the bank saw a rise in bad debts in its second quarter. [ID:nSIN202704]

Analysts are more optimistic about its outlook, citing its ability to take advantage of an economic recovery because of its strong corporate and investment banking business.

Gupta, who has been with Citi for 27 years, will join DBS in November. Stanley had also joined DBS from Citi.

"This appointment should remove a key overhang for the stock in the near term and should prove to be a catalyst," said Harsh Wardhan Modi, a banking analyst at JPMorgan.

DBS shares rose as much as 2.7 percent and closed 0.6 percent higher in a broader market <.FTSTI> up 0.1 percent. The stock has risen 52 percent this year, slightly outperforming a 47 percent rise in the benchmark Singapore index.

Gupta, an Indian who has spent 20 years in Southeast Asia and Hong Kong, may be able to help DBS expand in India, where the Singapore bank has 10 branches and is seeking permission to open eight more. [ID:nBOM448596]

His experiences in his home country have not all been smooth sailing, however.

Gupta left Citigroup in 2000 at the height of the dotcom bubble to head a firm called go4i.com, which subsequently folded despite backing from India's Birla family, which runs the Hindustan Times, and the private equity arm of Chase Manhattan Bank.

DBS, 28 percent-owned by state investor Temasek Holdings [TEM.UL], currently earns 90 percent of its profits from Singapore and Hong Kong.

"We are confident he will help to strengthen our franchise and grow our footprint in Asia," said DBS Chairman Koh Boon Hwee, who has been running the bank this year.

Gupta's appointment is subject to regulatory approval, DBS said.

Citi, which has been badly hit by the financial crisis, has lost many high profile bankers in recent months. In June, Mastercard hired Citi's Asia head Ajay Banga. [ID:nN19518802]

"While it is not unusual for Citi bankers to be sought after for leadership positions in other organisations, we are fortunate that Citi has a particularly deep bench of senior talent both in Asia and around the world," said Shirish Apte, Citi's CEO for the Asia-Pacific.

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