UAE - Pax Americana Is Changing - Part 19C - Dubai & The Other Emirates.
The atmosphere in Iran generally is depressing, with a new government having to deal with a budget deficit inherited from the previous one. President Mahmoud Ahmadi-Nejad, elected on June 24 and in office since early August, is a man with $200m/day plan and a 20-year programme to re-engineer Iranian society: He would send 30m people from urban centres back to the rural world. He wants to tell the Iranians what to read and write and what "cultural products" to consume so as not to be contaminated by Western ideas. Iran is gradually being taken over by the Islamic Revolutionary Guards Corps (see news25cIranIRGCDec19-05) in one of new Iranian developments worrying the Arabs (see news26cArabsDec26-31-05).
The UAE has two booming stock markets: the Abu Dhabi Securities Market, with Abu Dhabi having and exporting the bulk of the union's oil and natural gas (see Part 19B in fap5bbUAE-2-Nov28-05), and the Dubai Financial Market. Each of the five other GCC states has an exchange. Although all the exchanges had a stellar performance this year, occasional corrections have sent shockwaves of a possible crash because the markets have been highly over-valued.
The market value of the GCC's seven exchanges, which stood at only $119 billion at the end of 2000, now is well over $1.15 trillion, a ten-fold rise in five years - mostly a bubble. The value was $526.3 billion at the end of 2004.
The markets have so far this year doubled their gains with their price earning ratios being the highest in the world and twice the ratio in other developing countries. Henry Azzam, CEO of Amwal Invest, said: "We are living in a period of prosperity unparallelled in the history of this region... More stability, less uncertainty and more regulations in the markets" (see down26Dec26-31-05).
The story of Dana Gas, a Sharjah-based firm which plans to import Iranian natural gas by pipeline, is one case in point. Dana Gas in October closed an IPO which caused unprecedented investor interest, including scuffles and arrests at banks receiving allocation applications from retail investors. The UAE's largest IPO to date was Aabar Petroleum, a newly-formed oilfield services firm, which was over-subscribed 800 times, raising $107 billion.
With plans for a common GCC market on the rocks, Dana's 2.1 bn dirham ($560m) IPO stunned both locals and foreign experts. Investors rushed from all over the UAE and the GCC to buy shares in the gas firm, which was open to all GCC nationals and wholesale investors from outside the region.
Subscriptions amounted to 288 bn dirhams, Dana said on Oct. 11. It said: "This is a strong sign of regional solidarity and confidence in the future of the region's economy...and the natural gas sector...". It said the 1.27 billion dirham wholesale tranche was 222 times over-subscribed by individual, corporate and institutional investors. The tranche was to be allocated on a pro-rata basis, an allocation per subscription of about 0.45%. The 700 million dirham retail tranche received 398,000 applications from small GCC investors. Around 44% were from the UAE and the rest were from Saudi Arabia, Kuwait, Bahrain, Qatar and neighbouring Oman.
Scuffles broke out at banks and travel agents struggling to cope with bookings of flights into the UAE, the only place with banks authorised to receive subscriptions. The IPO meant a windfall for UAE banks, pushing earnings from interest on loans, processing fees, and interest on money raised - over a bn dirhams - which remains with the bank. HSBC, which managed the IPO, was likely to take 2% of the profits - which could be anywhere between 20-40m dirhams. (UAE banks can lend at a 1:5 rate for IPOs, meaning an investor would only have to shell out 17 dirhams for a 100 dirham subscription purchase). Dana said it was to list its shares on the Abu Dhabi Securities Market before end-2005. The firm's vice president said in September Dana would allocate a third of its capital to new investments in the oil and gas sector. He said the firm was to acquire some companies in the regional energy sector.
Dana is to operate within and beyond Sharjah. It is the first regional private sector natural gas resource company in the Gulf and is expected to expand into gas E&P. It currently has assets in the supply, transportation, processing and marketing of natural gas.
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|Publication:||APS Diplomat Fate of the Arabian Peninsula|
|Date:||Dec 26, 2005|
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