22 November, 2007

DP World raises $4.96 Billion in IPO, 15x oversubscribed

Read the full story here.
Dubai Financial Market saw 30% growth in the last one year, and ADSM 41%.
With the stock markets across the world on the decline, how regulated and controlled are the UAE markets?
Are these growth rates sustainable or we headed towards a black day in UAE, similar to that of Saudi in February last year (2006), when the index went up to 19,000 points, only to wipe out SR 80 Billion?
Petrodollars, excessive liquidity in the market & not enough investment opportunities make for unrealistic growth figures, along with over-valuation of businesses. Or maybe i'm missing something here?!


nzm said...

Hemlock: I think that you're pretty spot on with your analysis!

Next to float locally will be Emirates Airlines and then they'll all move offshore, like Emaar to London which ties in with the article that you link to - with the report that Dubai has bought stakes in Nasdaq and the London Stock Exchange Group.

nzm said...

Just thinking this out further:

Dubai (and other UAE emirate companies) are investing heavily into offshore companies and buying into the stock exchanges.

Added to this, they float local companies such as Emaar and Emirates Airlines on local and international stock markets - encouraging both local and overseas investment.

That's some pretty heavy integration of investment in the UAE on a global basis.

If it all collapses in the UAE, would this trigger a worldwide crash on the stock markets and lead to another recession on the scale of 1929 or 1987?

What's the tipping point?

Come in, John Chilton!

hemlock said...

not so sure about that nzm... there IS a lot of politics associated with "brand dubai".

a stock market crash in DFM/ADSM would have a very strong (i think negative) impact on DIFC (the international market).

Sh. Mo has vowed to bring DIFC to par with the international stock exchanges. he wont let that happen.

radiculus as it sounds, the fact that these markets can be manipulated by one or two men alone may give one a sense of security, because they dont want your money, and will do what it takes to protect the brand they are working so hard to build.
at the same time, the other "players" with large stakes in the markets can wipe out smaller investors at the drop of a hat.

with very little to fall back on, dubai needs a very strong tertiary sector to attract people. for that we see an attempt to develop systems.

that said, there just ISNT enough going around to keep all the liquidity/funds utilized... hence the risk. does that make sense?

for example, the DFM stock itself has grown 400% in the last three-four months. this may be a correction after the last crash... but in any developed market, such figures are preposterous.

there is so much contradiction in what's going on here, it confuses the cr*p out of me.

nzm said...

Good comment, but if they want to align DFM with the rest of the world's stock markets, then there can no longer be adjustments made by "Brand Dubai", and if there is, then it's evident that something is grossly wrong with the situation.

If the stocks grew so much how come there has been a 20 billion dirhams erosion in market capitalisation because of UAE stock losses as reported here in Gulf News? And it seems that every report I read records a fall in stock price for Emaar!

You're right - it is all very confusing. Perhaps that's the plan - bamboozle everyone to the point where no one can really work out what's going on!

Editor said...

29 August 2007
"President H.H. Sheikh Khalifa bin Zayed Al Nahyan has issued federal law no. 10 for 2007, pertaining to amending some provisions of federal law no.8 for 1984 on commercial companies.
The law provides for a new definition of the local family-owned businesses that convert into public companies, allowing them to list a minimum stake of 30 percent.
Article 1 of the law provides for addition of a new article to the existing article no. 273 of the law no. 8 for 1984. T he new article defines local family business as a company fully owned by members of one family extending up to fourth generation, regardless of the nature of the company.
The law also allows local family-owned businesses that convert into public companies to retain a maximum stake of 70 percent and to list a minimum stake of 30 percent.
The law shall be published in the official gazette and shall come into effect on the date of its publication."


"Experts expect a flood of initial public offerings (IPO) in the Gulf in 2008 and beyond following the massive success of two record listings in the last month, according to speakers at the Dubai International Financial Centre (DIFC) Week on Thursday...."


"Jebel Ali Freezone, a state-owned business park around the Middle East's largest container port, said it would start selling benchmark-sized Islamic and conventional bonds on Sunday...."

"Dubai Electricity and Water Authority (Dewa) plans to raise at least $2 billion through a sale of Islamic or conventional bonds...."

"Abu Dhabi National Energy (Taqa) could sell as much as $6 billion of bonds early next year to pay for acquisitions if credit markets improve, a company vice president said...."

"Dana Gas PJSC, the Middle East's first regional private-sector natural gas company, announced today that it has successfully placed its Convertible Sukuk issue of US$ 875 million. The size of the issue was increased from its initial amount of US$ 750 million following strong market interest....."

"UAE's Amlak Finance plans to sell $250 million (AED918.2 million) worth of sukuk - Islamic bonds - by September in a bid to secure its long-term funding and finance expansion, its chief executive said yesterday. The Islamic mortgage provider is set to go to market "within the next two months," Arif Al Harmi told Bloomberg TV in an interview...."

"Dubai jewellery group Damas, which is preparing for a bourse listing at home, may also list shares in its Italian unit DIT in the next three or four years, Damas managing director Tawhid Abdullah said ......."

If UAE Community Blog launches IPO along with the rest, I may be interested to buy some few shares ;-)))

nzm said...

Maybe the banks have stopped lending and they've all hitched onto the idea of a public float to raise more money!

It's a scary situation.

Editor said...

Recently the bank deposit interests were reduced down to cope with the inflation. The banks will tighten the lending procedures because is not visible to give loans at the moment. Extra cash will be at hand to invest......I am not sure if it's just coincidence, but the situation is very suitable for some........

Editor said...

"Since its establishment in September 2004, the DIFC has become the world's fastest growing financial hub..............http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/business/2007/November/business_November658.xml§ion=business&col=

hemlock said...

nzm: emaar's balance sheet raises a few red flags, which makes the conservative investor weary. but the invetsment companies and a couple of industries are logging phenominal growth in stk prices.

editor: interest rates are increased to cut inflation, because it gives the consumer an incentive to consume less and save more.

the interest rates have been cut to match the US interest rates (they were reduced to save the banks in trouble because of the subprime mortgage market)

since the dirham is pegged to the $, banks with $ deposits can invest (over night) in UAE banks at a higher interest rate. to curb the inflow of dollar and a hit on the interest expense, the uae central bank had to cut rates to match those of the UAE treasury.
the Saudi central bank did the same yesterday.

incidently, faced with excessive liquidity and no where to invest, the banks are giving personal loans at what i think is the lowest ever (7-8% flat rate).

this is likely to increase inflation as low i-rates encourage consumer spending. with inflation close to double digits and interest rates in single digits, the consumer is better off spending today than saving.

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