Dubai’s Islamic Hub Hullabaloo
UAE shares were up 25 percent through February, far outpacing low single-digit Gulf gains elsewhere, as the market became the main regional destination and debt restructuring and sukuk activity further progressed. The electric utility followed the sovereign with an oversubscribed fixed-rate issue at a yield around half previous levels as overall GCC shariah-compliant volume is projected to double to $35 billion this year. The emirate plans to standardize the field though legal and religious support so it becomes a global center to rival Kuala Lumpur, and to join Abu Dhabi in reclaiming the top GCC spot taken by Saudi Arabia in 2012. As with diversion of banking and financial services flows since the Arab Spring investors and underwriters expect Egypt, Morocco and Tunisia to target sukuks there as they finalize borrowing frameworks. On the quasi-sovereign workout front the Dubai Group which is the ruler’s personal vehicle tabled a $6 billion deal with banks on an overall $10 billion debt pile after they rejected a 20 cents on the dollar offer. ICD seeks refinancing for $2 billion due in August, with stakes in the Emirates NDB bank that will soon repay government crisis lines and in Emaar Property which has reported good earnings on a pickup in top-end sales. The central bank has retreated from strict mortgage lending curbs designed to avoid another bust, as the UAE oil capital reactivated a 5-year 90 billion program for housing, infrastructure and leisure projects. The announcement came too late however to salvage the prospects of Abu Dhabi-based construction giant Al Jaber Group which must reschedule $4.5 billion in obligations to local and international holders. Consumption and fixed-investment recovery should again bring 4 percent GDP growth to the Emirates as fiscal space increases social spending, and higher exchange turnover could merit the elusive MSCI upgrade to core status at the next review.
Saudi Arabia is likewise in the graduation mix should direct foreign allocation be authorized as a new regulatory head was appointed. Qatar too must lift ownership limits, as its sovereign wealth fund recently agreed to pursue a credit rating to quell contingent liability doubts surrounding the AA grade and reported 50 percent of GDP net debt burden. Abu Dhabi’s Mubadala has already obtained one, and Qatar Holding has insisted its balance sheet is not leveraged despite expensive acquisitions abroad including in Barclays and mining giant Xstrata-Glencore. Foreign direct and portfolio commitments were estimated at $20 billion in 2011, and the upcoming World Cup host outlays could equal that sum. The disclosure effort is at the opposite extreme of Libya’s, where the new head of the LIA with supposed $60 billion in assets is “in limbo” on tracking investment and settling claims. On the second anniversary of the rebellion against Gaddafi the entity remains stymied in actions against advisers for derivatives and other losses as the justice wheels grind slowly at home and overseas.
