At the beginning of September market traders in the GCC were taking a deep breath after what had been a long, difficult summer. From the start of June until the end of August the Dubai Financial Market (DFM) collapsed in value by 18 per cent; Abu Dhabi Securities Exchange (ADX) fell by 13 per cent; and the Saudi Tadawul by eight per cent. Surely things could not get worse?
The expectation was that Ramadan would provide some breathing space, and that the usually calm trading during the holy month would result in a pick-up in business in October, when positive third-quarter results were expected. Generally, traders were optimistic and most felt the underlying fundamentals of the region were so good that they would be shielded from the problems in the West. Most observers were divided on whether liquidity was tight, with most not expecting a regional credit crunch.
However, events on Wall Street set the tone for the grimmest month in markets' history. In September, the Saudi index lost 15 per cent of its value; the DFM Index shed 13 per cent; and the ADX lost nine per cent. The GCC markets as a whole lost Dh477 billion (US$13bn) over the course of September. The DFM and ADX's banking and real estate indexes all fell by between 13-15 per cent in September.
Traders were left shaking their heads and wondering where it all went wrong.
The difference between September's collapse and the summer's were stark but both involved the decisive role of foreigners, albeit in very contrasting ways. One of the main causes of the GCC's summer of discontent was foreign investors pulling out - after piling into the markets the previous September on the expectation that local currencies would be revalued, and the peg to the dollar abandoned. Kuwait did so, but nobody else followed suit. In May it became clear this would not happen and as a result, large amounts of money were taken out of the country. In addition, turmoil in the West forced many investors to close their GCC positions in order to meet margin calls back home. According to the central bank, more than 90 per cent of "speculative money" had gone from the market. These events affected GCC liquidity, hitting lending which has been the fuel of so much growth in the Middle East.
Events of the summer were not conclusive in resolving the 'decoupling' theory, which states that the GCC has detached itself from the West and is no longer heavily influenced by events there. While foreigners were indeed causing much of the summer crisis by pulling money out, this was not a clear-cut, straightforward case of the GCC blindly following Western markets and economies, it was far more indirect than that.
The events of September have, however, completely blown the decoupling argument out of the water. Past weeks have seen the GCC rise when the US does, fall when the US does and stagnate when there is no positive news coming from Washington DC and New York on the resolution of the financial meltdown.
Indeed, the last week has seen GCC markets fluctuate merely on any news as to how well the passing of the US$700bn bailout was going. Latest answer: badly, and possibly not at all. The GCC markets can count themselves lucky that Congress voted down the bailout on Monday literally hours after they closed for Eid.
The GCC is now once again well and truly hitched back onto the US's corporate bandwagon, as indeed one could argue the rest of the world now is too. One can only imagine how badly markets will react when they reopen after the Eid holiday.
Udo Schaeberle, the director of clients at the Abu Dhabi branch of BHF Bank, is confident a second Congressional vote will see the measure passed before the GCC markets reopen on Sunday. If it is not, he believes the local markets will go into free fall, but will be limited by the 10 per cent floor the exchanges impose to prevent apocalyptic meltdowns.
"The reaction of the wester markets after the vote shows the potential of what the falls could be if it does not go through," he said.
Despite his optimism, he maintains markets will take a long time to recover to previous lending levels, and the world will have to endure some long-term suffering.
Mohammed Ali Yasin, the chief executive of Shuaa Securities in Dubai, said the difference between traders now and just a few months ago is discernible. "Now traders and speculators look at how the Asian markets have been performing overnight, and then follow the Europeans when they open because they know we can be affected by things around us now. This is one of the aspects now about emerging markets, that we are linked," he said.
The American influence may become even stronger over the coming months as it becomes clearer how much exposure local banks have to US toxic investments; the obvious local credit crunch seems to be heralding this new, dangerous stage.
The question now is what to do to prevent the global recession engulfing the GCC, rather than a slowdown which is now seen as inevitable.
The immediate problem is liquidity - inter-bank interest rates have been steadily rising since May, the amount of money being lent out for mortgages is falling, and bank capital is generally depleted after a summer of shrinking deposit bases and excess lending. If banks are not lending to each other, they are even less likely to lend to companies. In an official acknowledgement that there is a problem, the UAE's central bank recently announced a Dh50 billion emergency loan facility for local banks. Few - if any - have taken up the offer, declaring in private that it is too expensive. It is also seen as a sign of weakness to tap the central bank for funds.
There have also been reports that bank consolidation is on the cards, in particular the possibility that Abu Dhabi Commercial Bank and National Bank of Abu Dhabi would merge. The two banks have, however, denied they are holding merger talks.
For Mr Yasin, more decisive action is needed, above and beyond mere loans - the central bank needs to take action to prop up long-term deposit bases, by depositing it with them like a customer, rather than just investing the cash abroad.
"Liquidity is in abundance and is in the hands of the government," he said. "We have a budget surplus, so are we going to put it in to keep things going? We need to pump liquidity into the system and make deposits available to banks. There is no other way in the short term to keep us moving and make sure banks go back to lending."
Mr Schaeberle said the main threat to the region will be a slowdown in large infrastructure projects if loans dry up, but added the region may be rescued from contracting growth by the one commodity it has striven to escape from its dependency on - oil.
"The world is connected and linked but maybe the future story is still decoupling, even if the region suffers lower growth - because of oil. All the GCC will grow next year as long as oil stays above $60," said Mr Schaeberle.
His bank, BHF, is confident that even in a global recession the price of oil will only drop to around the $60-70, which will be enough to keep the GCC ticking over.
He adds there may be a repatriation of GCC funds from abroad - he said he has noticed his clients start to move capital back to local banks in their home countries because it is seen as safest, so this may counterbalance the summer's net outflow of funds from the Middle East.
It is hard to predict how the following year will turn out, just as few people guessed the current situation a year ago at the start of the credit crunch.
As Mr Schaeberle said, six weeks ago he thought all the big European banks were safe to deal with - now, he just can not know, because in Europe and the US, "there is no safe haven".
afoxwell@thenational.ae
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Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
ANDROID%20VERSION%20NAMES%2C%20IN%20ORDER
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UAE currency: the story behind the money in your pockets
FFP EXPLAINED
What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.
What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.
What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.
The biog
Name: Greg Heinricks
From: Alberta, western Canada
Record fish: 56kg sailfish
Member of: International Game Fish Association
Company: Arabian Divers and Sportfishing Charters
European arms
Known EU weapons transfers to Ukraine since the war began: Germany 1,000 anti-tank weapons and 500 Stinger surface-to-air missiles. Luxembourg 100 NLAW anti-tank weapons, jeeps and 15 military tents as well as air transport capacity. Belgium 2,000 machine guns, 3,800 tons of fuel. Netherlands 200 Stinger missiles. Poland 100 mortars, 8 drones, Javelin anti-tank weapons, Grot assault rifles, munitions. Slovakia 12,000 pieces of artillery ammunition, 10 million litres of fuel, 2.4 million litres of aviation fuel and 2 Bozena de-mining systems. Estonia Javelin anti-tank weapons. Latvia Stinger surface to air missiles. Czech Republic machine guns, assault rifles, other light weapons and ammunition worth $8.57 million.
Tu%20Jhoothi%20Main%20Makkaar%20
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3ELuv%20Ranjan%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3ERanbir%20Kapoor%2C%20Shraddha%20Kapoor%2C%20Anubhav%20Singh%20Bassi%20and%20Dimple%20Kapadia%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203%2F5%3C%2Fp%3E%0A
ENGLAND SQUAD
Goalkeepers Pickford (Everton), Pope (Burnley), Henderson (Manchester United)
Defenders Alexander-Arnold (Liverpool), Chilwell (Chelsea), Coady (Wolves), Dier (Tottenham), Gomez (Liverpool), James (Chelsea), Keane (Everton), Maguire (Manchester United), Maitland-Niles (Arsenal), Mings (Aston Villa), Saka (Arsenal), Trippier (Atletico Madrid), Walker (Manchester City)
Midfielders: Foden (Manchester City), Henderson (Liverpool), Grealish (Aston Villa), Mount (Chelsea), Rice (West Ham), Ward-Prowse (Southampton), Winks (Tottenham)
Forwards: Abraham (Chelsea), Calvert-Lewin (Everton), Kane (Tottenham), Rashford (Manchester United), Sancho (Borussia Dortmund), Sterling (Manchester City)
Four%20scenarios%20for%20Ukraine%20war
%3Cp%3E1.%20Protracted%20but%20less%20intense%20war%20(60%25%20likelihood)%3C%2Fp%3E%0A%3Cp%3E2.%20Negotiated%20end%20to%20the%20conflict%20(30%25)%3C%2Fp%3E%0A%3Cp%3E3.%20Russia%20seizes%20more%20territory%20(20%25)%3C%2Fp%3E%0A%3Cp%3E4.%20Ukraine%20pushes%20Russia%20back%20(10%25)%3C%2Fp%3E%0A%3Cp%3E%3Cem%3EForecast%20by%20Economist%20Intelligence%20Unit%3C%2Fem%3E%3C%2Fp%3E%0A
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
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THE BIO
Ms Al Ameri likes the variety of her job, and the daily environmental challenges she is presented with.
Regular contact with wildlife is the most appealing part of her role at the Environment Agency Abu Dhabi.
She loves to explore new destinations and lives by her motto of being a voice in the world, and not an echo.
She is the youngest of three children, and has a brother and sister.
Her favourite book, Moby Dick by Herman Melville helped inspire her towards a career exploring the natural world.
RESULTS
5pm: Maiden (PA) Dh80,000 1,400m, Winner SS Lamea, Saif Al Balushi (jockey), Ibrahim Al Hadhrami (trainer).
5.30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 1,400m, Winner AF Makerah, Sean Kirrane, Ernst Oertel
6pm: Handicap (PA) Dh80,000 1,600m, Winner Maaly Al Reef, Brett Doyle, Abdallah Al Hammadi
6.30pm: Handicap (PA) Dh90,000 1,600m, Winner AF Momtaz, Antonio Fresu, Musabah Al Muhairi
7pm: Handicap (PA) Dh80,000 2,200m, Winner Morjanah Al Reef, Brett Doyle, Abdallah Al Hammadi
7.30pm: Handicap (TB) Dh100,000 2,200m, Winner Mudarrab, Jim Crowley, Erwan Charpy
2.0
Director: S Shankar
Producer: Lyca Productions; presented by Dharma Films
Cast: Rajnikanth, Akshay Kumar, Amy Jackson, Sudhanshu Pandey
Rating: 3.5/5 stars
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Moving%20Out%202
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Disability on screen
Empire — neuromuscular disease myasthenia gravis; bipolar disorder; post-traumatic stress disorder (PTSD)
Rosewood and Transparent — heart issues
24: Legacy — PTSD;
Superstore and NCIS: New Orleans — wheelchair-bound
Taken and This Is Us — cancer
Trial & Error — cognitive disorder prosopagnosia (facial blindness and dyslexia)
Grey’s Anatomy — prosthetic leg
Scorpion — obsessive compulsive disorder and anxiety
Switched at Birth — deafness
One Mississippi, Wentworth and Transparent — double mastectomy
Dragons — double amputee
The%C2%A0specs%20
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E4.4-litre%2C%20twin-turbo%20V8%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3Eeight-speed%20auto%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E617hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E750Nm%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3Efrom%20Dh630%2C000%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
A cryptocurrency primer for beginners
Cryptocurrency Investing for Dummies – by Kiana Danial
There are several primers for investing in cryptocurrencies available online, including e-books written by people whose credentials fall apart on the second page of your preferred search engine.
Ms Danial is a finance coach and former currency analyst who writes for Nasdaq. Her broad-strokes primer (2019) breaks down investing in cryptocurrency into baby steps, while explaining the terms and technologies involved.
Although cryptocurrencies are a fast evolving world, this book offers a good insight into the game as well as providing some basic tips, strategies and warning signs.
Begin your cryptocurrency journey here.
Available at Magrudy’s , Dh104
'I Want You Back'
Director:Jason Orley
Stars:Jenny Slate, Charlie Day
Rating:4/5
Australia (15-1): Israel Folau; Dane Haylett-Petty, Reece Hodge, Kurtley Beale, Marika Koroibete; Bernard Foley, Will Genia; David Pocock, Michael Hooper (capt), Lukhan Tui; Adam Coleman, Izack Rodda; Sekope Kepu, Tatafu Polota-Nau, Tom Robertson.
Replacements: Tolu Latu, Allan Alaalatoa, Taniela Tupou, Rob Simmons, Pete Samu, Nick Phipps, Matt Toomua, Jack Maddocks.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
