Finance

Turkey: Bonding experience

Turkey is currently enjoying lower borrowing costs and benefitting from a stable domestic financial sector, which showed itself to be far more resilient to the external shocks than in the past. Although Turkish bonds are seeing an increase in investment demand, risk aversion continues to be the main theme in the markets. While some of its neighbors, most notably Greece, have seen their bond ratings downgraded to junk status of late, Turkey's standing in international finance markets has been steadily climbing, with ratings agencies Fitch, Standard & Poor's, and Moody's all upgrading Turkish bonds to just below investment grade in recent months. These improved ratings have been justified by price action in the bond and credit default swap markets over the past two years compared to developing European countries and even developed states such as Spain. Olgay Buyukkayali, a London-based emerging markets analyst with securities house Nomura International, suggests that Turkish debt is a good buy for investors. Turkish bonds will be bolstered by a stronger fiscal policy, a decoupling of debt dynamics from other countries and a continued slowdown of inflation, Buyukkayali told the Bloomberg news agency in late June. Investors could soon be given another chance to test how good a buy Turkish bonds will be, following on from a US$1.8bn euro-denominated international bond earlier this year. According to Emre Balibek, the Treasury's deputy general director in public finance, Turkey could float a yen-denominated bond as part of its program to diversify its foreign currency debt financing. (Source: OBG)

UAE's ADIB launches US$5bn sukuk issuance program

Abu Dhabi Islamic Bank plans to raise as much as US$5 billion through the sale of Islamic bonds, or sukuk, under a trust certificate issuance program detailed in a July 8 prospectus. The second-largest lender in the United Arab Emirates posted the prospectus on the London Stock Exchange, listing HSBC as the lead arranger on the Islamic bond program. State-controlled ADIB did not provide a reason for the sukuk issuance program, but the bank, like many other UAE financial institutions, has been forced to take provisions against bad loans amid the global financial crisis and turmoil over Dubai World's restructuring. In addition, ADIB's chief executive said in April that the bank is planning to expand in retail banking, with a target of 70 branches across the UAE by the end of the year compared with 55 at the end of the first quarter. ADIB said in a separate statement that it has postponed its board of directors meeting to approve second quarter earnings.

GCC moves to set up common credit network

Gulf oil producers are discussing plans to set up a common network for the exchange of credit information to face a fresh global fiscal crisis and more regional debt defaults, according to news reports appearing in Saudi Arabia. Central Bank governors in the six-nation Gulf Co-operation Council (GCC) discussed the project at previous meetings and are expected to hold more talks on the plan in the near future. Quoting unnamed sources in Riyadh, the news reports said the presence of some national credit agencies in the GCC would facilitate the project but added it would take time as more discussions are required. "GCC countries are in the process of setting up a joint network involving linking their financial institutions electronically in the field of credit information with the aim of exchanging relevant data to protect them against credit risks," it said. "GCC central bank governors have already discussed the project and some member countries have shown strong interest in it... The governors are now determined to push ahead with this project at talks in the next period." The report said the plan followed the 2008 global fiscal distress, the ensuing credit tightness worldwide, and regional debt default problems.

DFM starts Nasdaq Dubai securities trading

Dubai Financial Market (DFM) this month welcomed the trading of Nasdaq Dubai securities through its platform and said the consolidation will further diversify investment opportunities for 567,000 DFM investors and boost liquidity of Nasdaq Dubai. The Dubai bourse said with the commencement of the outsourcing agreement with Nasdaq Dubai, the trading, clearing, settlement and custody of Nasdaq Dubai securities will operate through trading platform of DFM, the major shareholder of Nasdaq Dubai. Under the new arrangements, investors will be entitled to trade on both exchanges using one Investor Number (IN), said a statement from DFM. Investors who do not have an Investor Number from DFM can apply to the exchange for their number free of charge, it added. Following DFM's announcement in December 2009 of its intention to fully acquire Nasdaq Dubai, by May 2010, the Dubai bourse completed the acquisition of two thirds of the shares of Nasdaq Dubai from Borse Dubai and Nasdaq OMX, the international exchange group. While working in parallel with the completion of the consolidation, DFM will acquire the remaining third in due course. The successful completion of the outsourcing agreement marks a major development in the consolidation process between the two exchanges.

Qatari Diar picks banks for benchmark dollar bond

Qatari Diar Finance, the property arm of Qatar's sovereign wealth fund, has appointed five banks to lead a dollar bond and will start meeting investors in London, a source at one of the banks said. It has appointed Barclays, HSBC, Qatar National Bank, Standard Chartered and RBS to lead a U.S. dollar-denominated benchmark issue. The 144a/RegS bond is to be guaranteed by the state of Qatar and will be rated at the sovereign level, the official at the arranging bank said. Reuters reported last month that the company was planning a US$3.5 billion two-tranche bond with five- and 10-year maturities. Qatar is rated Aa2 by Moody's and AA by Standard & Poor's, following an upgrade by S&P. Diar counts London's Chelsea Barracks among its high-profile overseas assets.

Saudi Arabia to launch petrochemical ETF on bourse

Saudi's Falcom Financial Services said it will launch an exchange-traded fund (ETF) for Saudi petrochemical shares on the Arab world's largest bourse. The world's top oil exporter is trying to attract more investment to its bourse and has allowed local brokerages to launch ETFs, the latest step after granting foreign share ownership via swap agreements in 2008. ETFs are like index funds, which are traded on a stock market. Saudi investment bank Falcom Financial Services said the fund, which has an initial value of 25 million riyals (US$6.7 million), will focus on petrochemicals and will start trading on July 10, according to a bourse statement. Sitting on more than a fifth of global oil reserves, Saudi Arabia is home to several big petrochemical firms, including Saudi Basic Industries Corp (SABIC), which competes with BASF and Dow Chemical. Falcom did not say whether the fund would be open for foreigners but analysts expect it to after the firm allowed it for its first fund launched in April.

OPIC to invest US$100m in Citadel funds

The Overseas Private Investment Corporation (OPIC), a US trade promotion agency, will invest US$100 million in Citadel Capital's funds. OPIC's board of directors approved up to US$100 million to finance new investments by private equity firm Citadel's Joint Investment Funds, according to a statement. Stephen Murphy, managing director of institutional relations at Citadel Capital, said that the money will be invested alongside the private equity firm's targeted US$500 million MENA and Africa Joint Investment Funds, across selected deals ranging from traditional buyouts to turnarounds, greenfields and growth capital opportunities. "Sectors of interest to Citadel Capital and its funds include waste management, transportation and logistics, manufacturing, and alternative energy," Murphy added in the statement, "We will invest a significant amount of capital in Egyptian companies, which will be used as platform investments to expand throughout the region." Citadel Capital Managing Director and Co-Founder Hisham El-Khazindar described OPIC's selection of Citadel as another "vote of confidence in our firm's strategy." Citadel Capital has US$8.3 billion in investments under control. OPIC said it will invest up to US$455 million in five private equity funds in the MENA region as part of US President Barack Obama's push to boost ties with the Muslim world.

Kuwait confirms investment in China IPO

Kuwait's Minister of Finance has confirmed that its sovereign wealth fund was interested in taking a US$800 million stake in the initial public offering of China's Agricultural Bank. Sources told the news media that the Kuwait Investment Authority (KIA), the country's sovereign wealth fund, was involved in a deal to invest US$800 million in the bank's IPO, which is likely to raise US$23 billion. Asked to confirm the report, the Minister of Finance, Mustaphaal-Shamali, told reporters at Kuwait's parliament: "Yes, it's a long-term investment." The sources, who are directly involved with the deal, have also confirmed that the Qatar Investment Authority agreed to investUS$2.8 billion in China's AgBank. Excluding over-allotment shares, the bank that Mao Zedong founded in 1951 as the rural unit of the central bank hopes to raise around US$12 billion through an offering in Hong Kong and around US$11 billion through a listing in Shanghai.

Bahrain's Mumtalakat plans US$500 million bond

Bahrain's sovereign wealth fund Mumtalakat plans to raise at least US$500 million from a sale of bonds maturing in a minimum of five years, banking sources have reported. The bond sale could be launched in the next few days to take advantage of a global rally and a boost from China's vow to allow a more flexible yuan exchange rate. Beijing's move has boosted global stocks and led to a fall in U. S. debt prices. "They could raise between US$500 million to US$1 billion depending on market conditions," said a banking source familiar with the matter. "The market has been looking good in the last few days." Two other sources who attended the investor meetings said Mumtalakat was eyeing at least a benchmark-sized bond with a tenor of five years. Benchmark sized is usually taken to meanUS$500 million. Ratings agencies Fitch and Standard & Poor's have assigned 'A' ratings to the expected issue.

Saudi Arabia's SABIC signs US$1.2bn loan with NCB

Saudi Basic Industries Corp (SABIC) said it had signed credit facilities worth 4.5 billion riyals (US$1.2 billion) as part of overall project funding at the world's biggest petrochemicals group. SABIC signed the deal with Saudi Arabia's National Commercial Bank (NCB), according to a stock market statement. The news comes two weeks after Saudi bank Alinma granted a US$1 billion credit facility to SABIC. SABIC's financial arm SABIC Capital last month delayed a benchmark dollar bond issue due to jitters that hit global credit markets over fiscal problems in some euro zone countries. Between July 2006 and May 2008, state controlled SABIC raised US$4.26 billion from three Islamic bond issues. It raised US$533.2 million in December 2009 from a private bond placement.