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ARAB FINANCIAL FORUM NEWSLETTER MARCH 2011.

ISSUE I

Arab Financial Forum Newsletter


Monitoring the latest news

Dear Reader,

The tensions in the Arab world are escalating not without touching the local as well
as international financial markets.
This issue will provide you with the news on financial losses in the MENA states as
the outcome of the turmoil. Also, it reflects the uncertainties in global market and
the attempts of financial actors to find economic solutions in the face of current
challenges in the region.

Meanwhile Tom Stevenson, the editor from The Telegraph in his article entitled
‘Japan Could Emerge Stronger from this Catastrophic Quake’ telling us about
another economic impact on the global market caused by last week’s earthquake in
Japan.
If you have any news you would like to include in future issues please contact me. I
would also like to hear from those wishing to offer commentaries on current
developments in Arab financial markets. Also, let me know if there are others who
would like to receive the newsletter.

With warmest regards,


Aynur Hamidova
AFF Project manager

If you would like to learn more about this newsletter or forthcoming events, or would like to suggest
an event, article or include any comment for inclusion in the next edition. We welcome new readers,
if you would like to me to include new interest to our complimentary distribution of the newsletter,
please do not hesitate to contact me at projects@meconsult.co.uk.

MEC International Ltd. Granville House. 132-135 Sloane Street London SW1X 9AX
Tel: 020 7591 4816 Fax: 020 7591 4801 E-mail: projects@meconsult.co.uk
ARAB FINANCIAL FORUM NEWSLETTER MARCH 2011. ISSUE I

Read more
IN BRIEF
OPEC oil output rose nearly 30m
Unrest costs Middle East, North barrels per day in Feb – Platts
Africa markets $90 bln – Markaz
March 11, 2011
March 9, 2011
OPEC's crude oil production output jumped to
The Middle East and North Africa markets an average 29.8 million barrels per day (b/d) in
have lost nearly $90 billion year-to-date, February, as Saudi Arabia continued to boost
mostly due to rising tension in Libya, production, according to a new Platts survey.
according to analysts at Kuwait Financial
Centre (Markaz), who expect the upward Read more
pressure on oil prices could seriously threaten
the global economic recovery. Egypt: Arab League to Launch
First Global Real Estate Bourse
March 10, 2011

The Arab League Secretariat General


announced Thursday that it would launch its
first Global real estate bourse with Arab and
international participation aimed at developing
real estate investment.

Read more

Read more Loan impairments easing in Gulf,


Unrest in Arab World Costs says Standard Chartered
Saudi Market $ 54 Billion March 11, 2011

Credit quality and bank liquidity has improved


Saudi Arabia’s stock market has plunged by
in the Gulf following a sharp ease in loan
nearly $54 billion since the end of January as
impairment charges last year, the global CEO
investors remain under the grip of fear that the
of Standard Chartered Bank said.
current turbulence in the region could spill into
the world’s oil superpower.

Read more

SABIC upbeat on 2011, to


resume Japan ops Monday
March 13, 2011

Mohammed Al Mady, Saudi Basic Industries


Corp's (SABIC) chief executive told Reuters on
Read more
Sunday that SABIC shut down its plant in
Japan after a devastating earthquake there but
will resume operations on Monday.
ARAB FINANCIAL FORUM NEWSLETTER MARCH 2011. ISSUE I

Oil markets brace for Saudi Fitch Downgrades UAE-based


'rage' as global spare capacity Dubai Bank Ratings
wears thin
Fitch Ratings has downgraded UAE-based
March8, 2011 Dubai Bank's (DB) Individual Rating to 'D/E'
from 'D' and maintained it on Rating Watch
Goldman Sachs suspects that OPEC has been Negative (RWN).
pumping far above its agreed quota since
November and therefore cannot easily raise
output much without cutting deep into global
spare capacity.

Read more
UAE sees no capital outflows due
to unrest -Central Bank Read more

March 10, 2011

The United Arab Emirates has not seen Algeria to Supply Gas to
capital outflows due to unrest in the region, Morocco
the central bank governor said on Thursday,
adding that inflationary pressures would not March 1, 2011
be of concern despite high oil prices.
Algeria said Tuesday it was ready to supply
Morocco with gas from the southern Hasi Al-
Raml field.

Read more

Qatar paying 2.2 bln euros for 6.2


pct of Iberdrola
Read more March 14, 2011

Arab initiative to promote Qatar will buy 6.16 percent of Iberdrola SA


investment in tourism sector in for 2.2 billion euros ($3 billion), helping the
Spanish utility finance its Brazil operations
Egypt, Tunisia and further diluting unwanted suitor ACS.
An integrated Arab initiative is to be launched Read more
to promote the tourism sector which
deteriorated in several Arab countries topped
by Egypt and Tunisia in addition to seeking
investment in this sector which contributes to
combating unemployment.

Read more
ARAB FINANCIAL FORUM NEWSLETTER MARCH 2011. ISSUE I

HSBC provides $435m for new In the short term, the impact on the Japanese
economy will be negative, in part due to
Saudi steel plant physical damage to infrastructure and capital
stock and because of the psychological trauma
13 March 2011
suffered by the Japanese, which is likely to
trigger risk aversion.
HSBC Middle East said on Sunday it had
signed a $435m deal to finance a steel plant
Further out, the rebuilding effort will probably
and rolling mill in Jubail, Saudi Arabia to be
stimulate the economy via construction and
run by a unit of petrochemical giant SABIC.
other capital spending. The net impact on GDP
might be positive, not least because the Bank of
Japan quickly made it clear it will provide
whatever liquidity is required. With the
earthquake striking so close to the end of the
trading week in Tokyo, the full stock market
impact will not become apparent until
tomorrow morning. The 1.7pc fall in the Nikkei
on Friday was as much a knock-on from
Thursday's poor showing on Wall Street as a
reaction to the unfolding disaster.

The stock market impact of Kobe was


prolonged, as the chart shows, with the
Read more Japanese market underperforming the S&P 500
for many weeks. In part this was a response to
the fast appreciation of the yen as overseas
investments held by Japanese investors were
COMMENTARY repatriated.

AND ANALYSIS Foreign assets tend to be liquidated first when


there is an urgent demand for capital, and in the
weeks following the Kobe quake insurance
This piece entitled ‘Japan could emerge stronger companies sold off US Treasury bonds – their
from this catastrophic quake’ is contributed by Tom most liquid holdings – in order to meet a surge
Stevenson, editor from The Telegraph. in claims by their Japanese customers.
Markets conducted their pitiless audit of the This time around, the currency market response
likely impact on Friday and will continue doing was initially to sell off the yen as hot money
so tomorrow. Their calculation is roughly this: flowed out of Japan, but this was almost
the most recent comparable disaster in Japan, immediately reversed and it is likely the
the 1995 Kobe quake, incurred a heavy human Japanese currency will remain underpinned by
and economic cost from which the important international flows for some time.
seaport has arguably never fully recovered.
More than 6,000 perished in Kobe, while the The insurance sector was unsurprisingly in the
financial cost was estimated at around $100bn spotlight on Friday. The re-insurers are quite
(£62bn). heavily exposed to a Japanese earthquake and
they have experienced a busy year already for
With the affected area this time representing a natural catastrophes, so further losses could hit
relatively small share of Japanese output, the their balance sheets hard. What is not yet clear
impact could be rather lower but it is too soon is whether the price tag is heavy enough to
to tell with any certainty. Kobe was a major trigger higher premiums during the renewal
logistics hub so supply chains were seriously season which starts in April.
compromised.
ARAB FINANCIAL FORUM NEWSLETTER MARCH 2011. ISSUE I

It is difficult to generalise from previous natural


disasters about what the longer-term market and
economic impact will be. Hurricane Katrina
cost $45bn and is estimated to have taken 1pc
off US GDP, but its market impact was
minimal. In New Zealand, the Christchurch
quake has already led to a half-point cut in
interest rates, bringing them to an all-time low.
Australia's floods had little immediate impact
but a $1.8bn tax hike to fund reconstruction
was taken badly by investors.

Friday's quake came at a bad time for global


markets. Already, the two-year anniversary of
the bottom of the bear market in March 2009
had turned into a damp squib. Last week was
characterised by an intensification of the
turmoil in North Africa and the Middle East,
concerns over Chinese inflation and the re-
emergence of the eurozone as a serious concern
following the downgrade of the sovereign debt
of both Spain and Greece.

The key question for investors is the extent to


which the global economic recovery could be
derailed by this perfect storm of man-made and
natural disasters. The answer is probably less
than you might think, transfixed as we are by
TV footage of a tidal wave sweeping across
defenceless rice fields.

For the latest updates please access our website:

http://www.arabfinancialforum.org/

If you would like to learn more about this


newsletter or our forthcoming events, or would
like to suggest an event or article for inclusion in
the next edition, please do not hesitate to contact
me at projects@meconsult.co.uk.

MEC International Ltd.


Granville House
132-135 Sloane Street
London SW1X 9AX
Tel: 020 7591 4816
Fax: 020 7591 4801
E-mail: projects@meconsult.com