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23 Feb, 2008

deVere Insight –23rd February 2008

VIEWS– In this edition we feature the Market Outlook from NewStar at




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The dollar fell to three-week lows against the euro on Friday as a plunge in regional factory activity stoked U.S. recession fears and contrasted with the euro zone's surprising growth in the service sector. U.S. markets are now fully pricing in a half percentage point cut at the Federal Reserve's next meeting in March to 2.50% and factor in a small chance of a bigger 75 basis points reduction.

That would add to an unusually aggressive 125 basis points of cuts in January as the Fed tries to stave off a recession in the world's biggest economy.

"This is a little bit of an extension of the dollar selling that started yesterday when we got the Philadelphia Fed data," said Steven Butler, director of foreign exchange trading at Scotia Capital in Toronto.

The Philadelphia Fed said on Thursday its business index fell to minus 24 in February, its deepest contraction in activity since 2001, shocking many economists who had forecast minus 11.

"We need to get above $1.4875 now to see the next wave of euro buying. After $1.4875, I think markets are going to be keen on $1.50," Butler said.

The euro got a boost earlier in the session after euro-zone services PMI index rose to 52.3 in February from 50.6 the previous month, rising further from the 50 level which distinguishes between contraction and growth. The data dampened expectations of near-term interest rate cuts from the European Central Bank.

The euro rose to a three-week high of $1.4861 in the wake of the PMI data, before trading down to $1.4839, still up 0.2% on the day. Investors now see less than a 50% chance of an ECB rate cut by July, compared to pricing in almost two cuts on that time horizon two weeks ago.

"The composite PMI points to (euro zone) GDP growth of 1.25%," said Danske Bank in a research note.

"This number means that the ECB will continue to be sidelined for now, especially given the bad news ... on the inflation front with higher energy and food prices and the wage deals in Germany coming in high," it added.

The rise in the euro dragged down the dollar index to near a three-week low of 75.357. The index last traded at 75.508, down 0.1% on the day.

The dollar fell 0.1% to 107.15 yen, while the euro was slightly higher versus the Japanese currency at 159.04 yen.

The yen shrugged off news that the Japanese government had lowered its assessment of the economy. For details.

The Australian dollar was again one of the best performing currencies of the day, hitting its highest level since November at US$0.9250. The currency, which last traded at US$0.9223, is being supported by expectations that Australian interest rates could rise further from an already high 7.0%.

It has also benefited from a surge in metal prices such as gold, which the country exports, as well as a partial revival of carry trades, in which investors borrow funds in the low-yielding Japanese currency to buy higher-yielding assets.

The New Zealand dollar, with interest rates at 8.25%, rose to seven-month highs at US$0.8075. It last traded at US$0.8050

COMMODITIES - Platinum powered to an historic high near $2,200 an ounce on Friday as supply problems in top producer South Africa triggered speculative buying, but erased gains later on profit-taking. Bullish sentiment also helped gold to advance and trade near Thursday's record high above $950 an ounce, but fell nearly 1% in the afternoon session from its previous close.

Spot platinum jumped to a record high of $2,192 an ounce before falling to $2,150/2,160 an ounce at 1554 GMT. It was last quoted at $2,151/2,161 in New York late on Thursday.

"It's a long-term problem in South Africa and that's going to affect the platinum market for years to come. But for now, it looks like it's taking a breather," said Simon Weeks, managing director of precious metals at Bank of Nova Scotia. "We may go into sideways mode as with the economic picture looking poor, demand will also start to drop. Although it's unlikely to be enough to make up the supply shortfall, it should at least take the heat out of the panic buying."

Platinum, used in jewellery and auto catalysts, has jumped more than 40% this year after mines in South Africa, accounting for 80% of world output, were shut for five days at the height of last month's power crisis.

South African power utility Eskom said it had contracted 30 million tonnes coal of the 45 million tonnes it needs over the next two years to help resolve a crippling power crisis. 

Oil fell below $98 a barrel on Friday, handing back early gains in choppy trading, as falling U.S. stock markets put the focus back on economic woes in the world's largest oil consumer. U.S. crude futures for April delivery fell 28 cents to $97.95 a barrel by 11:06 a.m. EST, off a high of $99.37 earlier in the session. London Brent crude gained six cents to $96.30 a barrel.

Oil's surge earlier in the session was led by strong prices for heating fuel, and supported by a weak U.S. dollar and rising tensions in the Middle East after thousands of Turkish troops crossed into northern Iraq. It has also been boosted this week by a tide of investor cash chasing commodities as a safer investment option at a time of rising inflation and overall market turmoil.

U.S. crude's March contract hit a record high of $101.32 on Wednesday, taking it near its all-time inflation-adjusted high of $102.53 hit in April 1980. But a fall in U.S. stock markets after a firm start highlighted risks to the economy, especially the threat from an economic recession to demand for oil.

"The swinging perception pendulum had moved a bit too far towards economic optimism," MF Global analysts said.

U.S. government data released on Thursday showed a 4.2 million-barrel build in crude stockpiles last week, the sixth straight week of gains and nearly double forecasts. Gasoline stocks also rose to a 14-year high.


DUBAI - Dubai developer Nakheel is looking to raise about 5 billion dirhams ($1.36 billion) of equity to finance housing and infrastructure projects via an initial public offering of two real estate investment trusts (REITs).

Nakheel, owned by the Dubai government, is in talks with banks about creating two REIT companies, one to help finance infrastructure schemes and the other to fund residential projects, Chief Financial Officer Kar Tung Quek said on Thursday. Between them, the REITs would aspire to hold assets worth between 8 billion and 10 billion dirhams, Quek said.

"We'd sell assets into them," said Quek, whose Nakheel is developing about $60 billion of residential and commercial projects, mostly in Dubai, including three palm-tree shaped islands off the emirate's coast.

Nakheel wants to develop a business managing REITs, Quek said. "It's fee based and quite a lucrative business," he said. Typically, firms charge about 1% of the value for managing a REIT, Quek said.

A REIT is a listed property company which typically does not pay tax on its earnings as long as these are mostly distributed to investors in the form of dividends. They are prevalent in several countries including the United States, Australia, Japan, France and Britain. Nakheel said it would retain control of about 30% of shares in each of the REITs, selling the rest to institutions and the public.

HONG KONG - Chinese aluminium giant Chinalco, which this year led a $14 billion acquisition of 12% of Rio Tinto, said in remarks in an influential magazine that it will continue to seek acquisitions abroad.

But Chinalco President Xiao Yaqing left the company's options open regarding its next move on Rio Tinto, the world's second-biggest mining company, saying it would depend on circumstances.

Market speculation has swirled over whether Chinalco, aided by the government or otherwise might enter into a bidding war against BHP Billiton for Rio. In an interview with China's influential Caijing magazine published on Friday, Xiao was quoted as saying the Rio stake acquisition was purely a commercial decision and the next move would depend on circumstances.

"Rio is our groundbreaking deal in top-tier overseas mergers and acquisitions, but it will not be the last one," he said.

Chinalco's joint acquisition with U.S. aluminium producer Alcoa Inc is seen as a hindrance to BHP Billiton's takeover bid for Rio, putting a significant obstacle in the path of a merger that would create the world's second-biggest company but also crimp China's buying power over iron ore supplies.

"As Rio's largest single shareholder, we and Alcoa of course have a say and we will certainly protect our interests," Xiao told the magazine.

Analysts said state-owned Chinalco and its U.S. partner were in no rush to make their next move, which Xiao's comments in Caijing seemed to confirm.

SHANGHAI - Top U.S. electronics retailer Best Buy Co, facing stagnant sales at home, said on Friday it would ramp up its expansion in China but would not grow through partnerships with local rivals.

Best Buy will invest substantially and open a large number of stores in China in the next five years, and will launch online sales in the country in the next 24 months, Bob Willett, chief executive officer of Best Buy International, said in an interview. He declined to give specific figures.

Willett denied Chinese media reports that Best Buy was in talks on a possible share swap with GOME Electrical Appliances Holdings Ltd, China's top electronics retailer.

"We are not in the process of having any talks with GOME or other Chinese retailers on cooperation," he said.

Last week, Best Buy cut its full-year outlook, citing a softer U.S. economy, but remained ambitious in its expansion plans, aiming to increase the number of its stores in China by about 20% to as many as 193 in its 2009 fiscal year, which ends on March 1 next year.

The new stores planned in China include 20 to 25 Five Star stores and five to eight self-branded stores. All new Best Buy-branded stores will be based in or around Shanghai, where the company opened its first and only such store in China in early 2007.

Best Buy, which bought a majority stake in Jiangsu Five Star Appliance Co in 2006, will boost its ownership of the company to 100% by the end of 2010 as part of the purchase agreement, Willett said.

Best Buy faces tough competition in China from GOME and Suning Appliance Co, the country's second-largest electronics retailer.  Five Star now has 159 outlets, mainly in eastern China, while GOME has more than 600 shops and Suning more than 400 nationwide.

"We started carefully and slowly initially, to understand the Chinese market," Willett said. "We are now ready to scale up store expansion."

Best Buy is also looking to expand into new markets such as India, but has no concrete plans yet, Willett said. Under the plan disclosed last week, Best Buy will add 90 to 110 stores in the United States, and 38 to 49 stores in overseas markets including China, Canada and Mexico in fiscal year 2009.

FRANKFURT - Solar power will be a bright investment prospect as the appetite for green energy grows, even though the global credit crisis is making banks more wary of providing financing. In the short term, the sector will also have to contend with a shortage of silicon, a key ingredient for solar cells that turn sunlight into electricity, and possible changes in political support as elections take place.

"This year will be a very volatile year," said Sven Hansen, chief investment officer at clean technology investor Good Energies, which has about 7 billion Swiss francs ($6.38 billion) under management. "The industry will see fantastic growth, but it will be a bumpy ride in terms of how financial markets value photovoltaic companies."

The number of new large-scale solar energy plants has been growing rapidly particularly in sun-drenched countries like Spain and Italy, but also in Germany and the United States, where regulatory conditions offer incentives and stable returns for investors.

Conditions could change because of a presidential election in the United States and general elections in Spain in March.

"Whether there are support programs in place has a strong impact on markets' development," Hansen said.

Growth is still expected to be strong, driven by increased interest from institutional investors, such as pension funds and insurers, which are seeking alternative stable and long-term opportunities. Experts also expect the silicon shortage to ease next year as silicon makers hike up capacities and production.

"Leverage ratios are more difficult, but we will ride out the storm. The business is not shut," said Peter van Egmond Rossbach, director of investment at Impax Asset Management.

The firm provides finance for renewable energy projects around the world and has $2 billion under management. Thirty percent is invested in solar, 40% in wind and the rest in other renewable energy projects, it said.

"It just means that (project financing) is getting more expensive and we have to bridge with equity," he added.

Tighter liquidity on global financial markets resulting from a crisis in the U.S. subprime mortgage market last year has made banks more risk-averse. As a result, conditions have become tougher, pushing up interest payments for loans and other financing costs, which reduces the cashflow and leads to higher purchase prices for investors.

"We notice it in the purchase prices," said Barbara Flesche, head of equity sales at Epuron, a project developer, which is fully-owned by German solar group Conergy. 

TOKYO - Japan Airlines Corp is looking at buying some Airbus' mid-sized A350 XWB planes after production delays for Boeing Co's 787 planes, two company sources told Reuters. Boeing faces increasing customer ire after announcing last month a second delay for the 787, pushing first deliveries out until early 2009 and the industry has been watching to see if any airlines will switch to Airbus.

The sources said JAL, which had planned to buy 55 787 planes, favouring their greater fuel-efficiency, was looking at purchasing Airbus planes as it wants to offset the cost of higher fuel prices quickly by using more mid-sized airliners.

JAL, one of Boeing's most loyal customers, had previously decided to buy only 787s, hoping to cut costs on parts replacement, maintenance and pilot training. That has changed, the sources said.

"The risk of procuring from one firm for our next-generation planes is large. We should procure from more than one," said a JAL executive.

The sources did not say how many planes JAL might purchase from Airbus. Boeing, the world's top aircraft maker, was not able to say if the latest delay, which it attributed to issues with suppliers, would be the final one. Airlines have so far ordered 857 of the 787 planes, worth $140 billion at list prices, and some are seeking compensation for the postponement. 

MADRID / DUBAI - The Investment Corporation of Dubai will spend more time going through the books of bid target Colonial, extending due diligence on the Spanish real estate firm until Feb. 27, the sovereign wealth fund said.

On Feb. 1, Colonial said it had opened its books to ICD for two weeks and the Dubai fund said it would announce its decision within three days of going through the accounts. The deal is also on hold as ICD is trying to renegotiate a syndicated loan of about 6 billion euros ($8.84 billion), led by U.S. bank Goldman Sachs, by extending its length or sweetening its conditions, a source said.

As Colonial has already breached covenants, creditors led by Goldman Sachs could gain control of the company, avoiding a sale to a third party and, instead, selling the company's assets, the source said.

"It's a war between the financier and the buyer," the source said on Thursday. Goldman Sachs declined to comment. Colonial shares fell 2.8% to 1.69 euros at 1620 GMT

DURBAN - Rating agencies Moody's and Standard & Poor's consider the government's decision to lend Eskom R60 billion as a positive step but are maintaining their outlook on Eskom, which was downgraded recently, until further details are available.

Moody's downgraded its outlook on Eskom last year while S&P last month placed the utility on credit watch with negative implications due to concerns over Eskom's funding of new generating capacity and high primary fuel costs.

The finance minister, Trevor Manuel, said this week that the government would set aside R60 billion for Eskom, of which a third is likely to be used over the next three years. Eskom plans to spend almost R350 billion in the next five years on new power plants, transmission and distribution.

Yesterday Konrad Reuss, managing director of S&P in South Africa, said: "We see this as a positive signal as government has recognised the need to do something about Eskom's balance sheet."

But S&P still has Eskom on a credit watch until it holds further discussion with it regarding its medium-term spending plans, the R60 billion loan and the medium-term outlook for the electricity tariffs. "Then we can make assumptions about what they can borrow," Reuss said.

Craig Jamieson, country manager for Moody's South Africa, said: "The announcement within the budget speech yesterday of monetary support for Eskom is a positive step."

In July Eskom's A1 rating was affirmed by Moody's but the baseline credit assessment (BCA), one of Moody's four rating inputs for government-related bond issuers, was increased to 8 points from 7. The BCA ranges from 1 to 21, with 1 representing the lowest credit risk. It measures the likelihood of an issuer requiring an extraordinary bailout.

SINGAPORE - Singapore's SembCorp Marine, the world's second-largest builder of offshore oil rigs, reported on Friday a 99% slump in quarterly profit, hit by foreign exchange losses.

SembCorp Marine (SembMarine), which is building the highest number of rigs after Singapore's Keppel Corp., said it reported a net profit of S$800,000 ($569,000), including losses from foreign currency trades, for the fourth quarter ending December, versus S$95.3 million a year ago.

It earned a full-year 2007 net profit of S$241 million, including the foreign exchange losses, versus S$238.4 million in 2006. This was below the forecast average of S$343.6 million from 15 analysts polled by Reuters Estimates. Excluding the FX losses, fourth-quarter earnings stood at S$309 million, thanks to robust demand for drilling rigs and vessels. Full-year net profit, excluding the losses, totalled S$549.2 million.

The company shocked investors in October when it alleged that its then finance director had lost over $300 million by engaging in "unauthorised" foreign exchange transactions. It claimed it was not liable for the losses as the trades were unauthorised.

On February 14 SembMarine said that it has reduced the forex losses to $258.7 million, had settled a row with most of the banks over those disputed trades and would account $208 million as expense in the fourth-quarter financial statement.

BANKING - Dutch-based bank ABN AMRO, which is being bought by three rivals led by Royal Bank of Scotland, unveiled some investment banking job changes on Friday that will take place once the deal closes.

ABN AMRO's current global head of equity capital markets and mergers and acquisitions advisory, Jan de Ruiter, will become Netherlands country head for RBS's global banking and markets unit once the merger goes through, said an ABN spokeswoman.

Tom Willett, currently ABN AMRO's head of UK M&A and co-head of European M&A, will become global head of M&A at the RBS business, she added.

His two fellow European M&A co-heads at ABN, Rutger van Nouhuys and Simon Hargreaves, will become regional head of retail and consumer coverage and head of M&A for Central and Eastern Europe, the Middle-East and Africa respectively.

ABN AMRO agreed last year to be bought by Royal Bank of Scotland, Santander and Fortis, which are splitting the Amsterdam-based bank's assets between them in a deal that will see Royal Bank of Scotland take on ABN's investment bank.

De Ruiter, Willett and Rutger will report to Alexandra Cook, Royal Bank of Scotland's head of global banking and markets for Western Europe. Hargreaves will report to Michiel de Jong, RBS's head of global banking and markets for Central and Eastern Europe.

WARSAW - Poland will propose Lech Walesa, leader of the Solidarity movement which helped precipitate the fall of communism in Eastern Europe, to join an EU group of "wise men" reviewing the 27-nation bloc's future, a source said.

EU leaders want to appoint a Reflection Group to look at the long-term future of the European Union. The group is to focus on Europe in 2020-2030, mostly on the economic challenges of globalisation.

The panel will also look at issues such as energy, climate change and justice matters. It is due to report its findings to EU leaders in June 2010.

"Walesa will be our candidate for the Reflection Group," a source close to the government told Reuters.

Walesa, former president of Poland who worked as a shipyard electrician in Gdansk, is a symbol of the overthrow of communism in Eastern Europe in 1989 and a winner of the Nobel Peace Prize.

Walesa told Reuters he would accept the nomination and that he saw a need for such a group to exist and to find a way to strengthen the fundamentals of European integration.

"I have seen a need to create such a group for a long time now, a group that would be able to raise questions about the future of the EU in an ever more globalised world, about the proper fundamentals of our European home and its (geographical) reach," Walesa said on Friday. 

JAKARTA - The Indonesian government and Newmont Mining Corp. failed to reach an agreement on Friday over the divestment of shares in Newmont's local unit, an energy ministry official said.

"The meeting has reached a deadlock. I'm going to report to the minister on Monday," said Simon Sembiring, director general of mineral, coal, and geothermal at the energy and mines ministry, after the meeting ended.

The two sides met for several hours on Friday when a deadline had been set for Newmont to wrap up a 10% share sale.

Indonesia last week said it might annul the contract of PT Newmont Nusa Tenggara, which runs the Batu Hijau copper and gold mine in the Nusa Tenggara island, as Newmont was not selling its shares quickly enough to local investors.

But Sembiring refused to comment when asked on Friday night whether the two sides' failure to reach an agreement meant that Newmont's contract would be terminated.

The ministry had given Newmont until Feb. 22 to fulfil its commitments, but the company said that it needed more time.

US MARKETS - U.S. stocks fell on Friday after a brokerage's downgrades on Fannie Mae and Freddie Mac, two biggest home-funding companies, sparked a sell-off in financial shares.

Merrill Lynch cut its rating on shares of Fannie and Freddie to "sell" from "neutral," citing more deterioration in financial markets and credit conditions.

Stocks were reacting to the latest woes of financial services companies, which stem from defaults in the subprime mortgage market and led to tightening credit conditions.

"It's going to be hard to rally without them. They are a big part of the market," said Frank Lesh, futures analyst and broker at FuturePath Trading LLC in Chicago. "They'll hold us back probably through the first half of the year. It doesn't look like the housing industry is turning around any time soon."

The Dow Jones industrial average .DJI dropped 57.23 points, or 0.47%, to 12,227.07. The Standard & Poor's 500 Index .SPX dropped 8.05 points, or 0.60%, to 1,334.48. The Nasdaq Composite Index dropped 14.86 points, or 0.65%., to 2,284.92.

Fannie Mae shares were down 4.3% at $27.75 while Freddie Mac stock dropped 7.8% to $25.60. The S&P 500 financial index was down 1.2%.

Shares of Intuit Inc were the worst drag on the Nasdaq after the tax preparation software company posted lower quarterly profit late on Thursday, sending its shares down more than 10% to $26.74. 

TOKYO - Japanese stocks slipped on Friday as weak economic data fed worries about a U.S. recession and spooked investors, with Canon Inc and other exporters down as the yen gained ground. Shares of mobile carrier KDDI Corp tumbled to a 20-month low after it announced a new pricing plan. But metals firms, including Toho Zinc, posted a second day of hefty gains on the surge in metals prices, helping to underpin the market.

The Philadelphia Federal Reserve's business activity index for the mid-Atlantic region in February slumped to its lowest level since 2001, the time of the last U.S. recession. The reading was worse than even the most pessimistic Wall Street forecast and suggested economic deterioration is occurring even faster than many analysts had expected.

"It seems clear now that the financial problems in the U.S. are quite deep and won't be taken care of that easily," said Takahiko Murai, general manager of equities at Nozomi Securities.

The yen's climb against the dollar after the poor U.S. data depressed exporter shares. Some market participants said the Nikkei's recent gyrations -- it hit a two-week high earlier this week, followed by a one-week low -- reflected the current tug-of-war between bad news and an underlying optimism that stocks can sustain a recovery.

"Until around mid-March, I believe nearly everyone is optimistic and trying for a recovery," said Masayoshi Okamoto, head of dealing at Jujiya Securities, adding that many market players believe shares have bottomed out already.

"Of course, there'll be days like this when news from the U.S. has an impact, but into March things should be strong. The situation after that is much harder to read."

ABU DHABI - Japan's Isuzu Motors expects a 30% year-on-year increase in its UAE sales of commercial trucks and pickup vehicles in 2008, a senior executive of its sole distributor in the country said. Ossama Akkache, assistant general manager for Genavco, the UAE distributor of Izuzu vehicles, said in 2007 they sold 4,500 commercial trucks and pickups.

In this category, Isuzu is currently among the top motor companies by sales in the UAE and competes with Mitsubishi, Humo, Toyota, Nissan Diesel, Mazda and Daihatsu.

"We sell one-tonne pickups and commercial vehicles of two tonnes to 45 tonnes. Our vehicles sell in a price range of Dh50,000 to Dh300,000," said Akkache, adding that Isuzu's pickups are manufactured in Thailand, while its commercial trucks are made in Japan.

"Of the Isuzu vehicles we import in the UAE, about three per cent are meant for the re-export market," said Akkache. He said Isuzu plans to open a warehouse in Jebel Ali in the near future to distribute parts to dealers in the Middle East and African countries.

Genavco officially launched Isuzu showrooms in Abu Dhabi and Al Ain on Wednesday. The showrooms will display Izuzu's range of world-renowned light, medium and heavy duty trucks.

"The UAE is one of the most important markets for Isuzu in the Middle East. The country's phenomenal growth in recent years has positively affected the road transport sector, including the demand for medium and heavy duty trucks, and these new showrooms will go a long way in effectively catering to customers in Abu Dhabi and Al Ain," Shintaro Mochizuki, president of Isuzu's Thailand operations, said.

HONG KONG - Hong Kong stocks fell on Friday as weak U.S. economic data stoked fears that the world's biggest economy may have slid into recession, prompting investors to sell across the board.

Bourse operator Hong Kong Exchanges and Clearing (HKEx), now trading at September levels, sank further amid dwindling market turnover and a Goldman Sachs downgrade.

The Philadelphia Federal Reserve Bank said an index of manufacturing shrank again in the U.S. mid-Atlantic region in its worst reading in seven years. The data is the latest in a series of indicators pointing to the possibility of a recession.

"A soft landing has been priced in, but anything worse than that hasn't been priced in yet," said Erwin Sanft, head of Hong Kong and China research at BNP Paribas. "We see a hard landing for corporate earnings and this earnings season should be the worst since 2002," Sanft said, referring to the last major bear market, which began in 2000 and bottomed around October 2002.

The benchmark Hang Seng Index .HSI ended at 23,305.04. The China Enterprises Index of Hong Kong-listed mainland companies, or H shares, finished down 1.7%. Mainboard turnover came to HK$73.89 billion ($9.48 billion) compared to Thursday's HK$75.4 billion.

HKEx, one of the day's most heavily traded stocks, dropped for a third straight day, ending down 4.1% at HK$146.90. Goldman Sachs cut the stock to neutral from buy, saying a slowing Chinese economy and a possible U.S. recession would likely dampen market sentiment.

Metal stocks, one of the session's few bright spots, found support after global copper prices hit 21-month highs and gold set yet another peak. Jiangxi Copper jumped 3.5% to HK$18.90. Gold producer Zijin Mining climbed 1.8% to HK$10.38.

Aluminium Corp of China (Chalco), the country's top producer of the metal, jumped 0.9% to HK$15.08. Investors also took shelter in defensive stocks. Hongkong Electric Holdings Ltd leapt 3.6%.

Investors sold shipping stocks, seen as a proxy for demand in the overall global economy. China COSCO skidded 3.1% and Pacific Basin tumbled 3.2%.

Shares in Hong Kong property developers underperformed a day after HSBC Holdings said the city's banks may not follow any further rate cuts in the United States. The Hang Seng sub-index of property shares fell 2%. Cheung Kong (Holdings) Ltd dropped 2.35%. Henderson Land declined 4.1%.

ABU DHABI - The Abu Dhabi Tourism Authority (ADTA) will shortly issue licences to about 100 tourist guides for the first time, the head of the ADTA's tour-ism training said yesterday. Abu Dhabi last year embarked on a strategy to attract three million visitors per year by 2015.

"Those undergoing training with us are employed with the government and private sectors, there's a balance between the two," Michelle Sabti told Gulf News. Sabti said the candidates will undergo more than 100 hours of training before they graduate and they will be taught about culture and tourism.

"About 15 per cent of the trainees are UAE nationals. The licensed guides will deal with visitors in the emirate of Abu Dhabi, including Al Ain," said Sabti. Sabti said there are diverse nationalities among the trainees.

They come from as far as France, Germany, India, Norway, Morocco, the US and the UK.

Sabti said the assessment of the trainees is competency-based and they are tested for both their skills and knowledge.

SAO PAULO - Brazil's stocks seesawed near the unchanged mark on Friday as drops in shares of Petrobras and steelmaker CSN were partially offset by gains in retailer Lojas Renner and real estate company Cyrela.

The Bovespa index of the Sao Paulo Stock Exchange was 0.2% lower at 63,637.84 points.

The real was little changed, gaining 0.18% to 1.708 per U.S. dollar, after breaching the 1.7-per-dollar mark earlier for the first time since May 27, 1999. The central bank bought dollars on the spot market, helping blunt the real's gains.

"Everyone is focused on economic fundamentals and foreign investors are stepping in," helping increase dollar inflows, said Julio Cesar Vogeler, a trader at Didier Levy brokerage in Sao Paulo.

Interest-rate futures on the BM&F commodities and futures exchange in Sao Paulo were mostly lower.

The heaviest weighted stock in the Bovespa index, Petrobras, lost 1.38% to 82.81 reais as crude prices edged lower in New York.

Steelmaker CSN tumbled 4.5% to 66.85 reais as investors sold the stock after a surge in recent sessions. The stock bolted nearly 26% between Feb. 8-21, rising in nine of 10 sessions in that period on expectations the company would benefit from the sale in international markets of excess iron ore from its Casa de Pedra mine.

Clothing retailer Lojas Renner jumped 6.8% to 32.95 reais. The company said late on Thursday fourth-quarter profit jumped 57% to 62.8 million reais as "efficiency gains" helped lift margins in the quarter and net sales expanded.

Real estate developers Cyrela rose 2.52% to 25.99 reais and MRV Engenharia was up 1.42% to 35.6 reais. Goldman Sachs initiated coverage of Brazilian homebuilders, rating Cyrela and MRV shares a buy, calling the stocks "excellent vehicles to capture the sector's growth."

Problems in the U.S. housing market have many economists predicting a recession in the United States.

MEXICO CITY - Mexican stocks fell sharply on Friday after a brokerage's downgrade of the top two U.S. home funding providers spooked investors worried about the health of the U.S. economy. The benchmark IPC stock index slipped 1.01% to 29,065 points, with market bellwether America Movil dragging hardest on the index.

Mexico sends about 80% of its exports to the United States. Merrill Lynch cut its rating on shares of Fannie Mae and Freddie Mac to "sell" from "neutral," citing more deterioration in financial markets and credit conditions.

Problems in the U.S. housing market have many economists predicting a recession in the United States.

The peso firmed 0.11% to 10.781 per dollar. The currency was largely unchanged after an inflation report showed consumer prices rose a less-than-expected 0.13% in the first half of February but closely watched core inflation was and above-expected 0.24%.

Many economists see Mexico's central bank lowering interest rates later in the year, though interest rate futures hardly reacted to the price report, suggesting investors did not change their bets on the timing of a cut.

The bank has said high world prices for food such as wheat and corn and a tax hike enacted this year will keep the inflation rate as high as 4.5% through the third quarter.

GERMANY - European shares fell on Friday as downbeat results from Germany's RWE hit utilities and poor U.S. data fed concern that the world's largest economy is heading into recession, which weighed on the banking sector. The FTSEurofirst 300 index of top European shares ended down 0.9% at an unofficial 1,317.59 points. The index has fallen nearly 13% since the start of the year.

The broader European market has risen for the second week in a row, but sentiment has been plagued by worries about the resilience of the U.S. economy and corporate profitability.

"The markets are being pulled between information on the here and now, which is quite discouraging and hopes that more aggressive action to try to reflate the U.S. economy in say nine months time, things will look a lot better," said Andrew Bell, a European strategist at Rensburg Sheppards.

RWE shares dropped 6.1%., making them the biggest percentage losers on the European market, after the company reported profit below expectations. That weighed on German rival E.ON, which fell 2.5%.

France's BNP Paribas was down 1.1% and Germany's Postbank gained 1.1%. UBS shares fell 1.9%.

MOSCOW, - Russia's largest oil firm, Rosneft, said on Friday it had raised a $3 billion syndicated loan from a group of international banks to repay bridge loans raised last year to finance acquisitions.

The firm said it had raised the loan, secured by export contracts for sale of crude oil, at LIBOR +0.95%.

The facility is arranged and fully underwritten by a group of international banks including ABN Amro Bank, Barclays Bank, BNP Paribas, Deutsche Bank AG, ING Bank, JPMorgan and others.

KUALA LUMPUR - Malaysian shares are likely to fell for a third straight day on Friday, tracking Wall Street's losses, with builders expected to take a hit, a dealer and an analyst said. Construction stocks, such as IJM Corp, are expected to lose some ground after builder Gamuda Bhd's managing director sold shares in the firm, sending nervous tremors through the market, said the dealer with a local brokerage.

Gamuda said on Thursday its managing director, Lin Yun Ling, sold 70 million shares in the company for "estate-planning purposes" and remained optimistic about the firm's prospects. "I don't think the jitters about Gamuda are finished," the dealer said. "The sale could signal that Lin doesn't have much confidence in the outlook."

Shares of shipper MISC Bhd could also fall after the firm reported on Thursday a 53% drop in third-quarter profit and warned of tough times ahead. The broader market was expected to ease, following a drop in U.S. stocks, said the research chief with a local bank.

"Company results have either been in line or below expectations," said the research head. "The market could suffer from further profit-taking."

The dealer pegged support for the main share index at 1,380 points and resistance at 1,400. On Thursday, the Kuala Lumpur Composite Index fell 1.38% to 1,394.76 points, led by Gamuda, which dropped 15.7%. The February futures contract KLIG8 put the index at 1,385.0 and the March contract KLIH8 put it at 1,380.5. U.S. stocks fell more than 1% on Thursday as bulging oil inventories deflated energy shares and the weakest reading on mid-Atlantic manufacturing since 2001 added evidence the economy was in recession.

DUBAI - United Arab Emirates shares advanced for a third day, led by real estate companies, as investors speculated economic growth in the Gulf region will benefit from higher oil prices.

Emaar Properties, the Middle East's biggest property developer, climbed for a second day after HSBC Holdings Plc initiated coverage of the stock with an "overweight" recommendation. Sorouh Real Estate Co. jumped to a record. Air Arabia rose to the highest in almost three weeks after launching a new route.

"Gulf economies are expected to outperform other emerging markets and oil crossing the $100 has definitely sent a positive psychological signal," Rami Sidani, vice-president at Shuaa Capital PSC, said yesterday.

Shuaa manages the equivalent of $1.2 billion. "Coverage on stocks such as Emaar helped support the market after the share was given a fair value at double its current price."

The Dubai Financial Market General Index added 0.5% to 5,893.90, bringing its three-day increase to 3.3%. The Abu Dhabi Securities Market Index climbed 1.1 per cent, while Oman's Muscat Securities Market 30 Index rose 1.2%.

The UAE's economy will grow at 7.2%, while Oman's economy will expand at 5.5 per cent in 2008, according to the median estimates of seven economists polled by Bloomberg in December. That compares with Brazil economic growth of 4.5% this year, according to a Bloomberg survey.

Crude oil futures, which jumped as high as $101.32 a barrel in New York on Wednesday, have climbed 16% from this year's low on February 7.

Emaar rallied 4.6% to Dh12.65, bringing its two-day gain to 11%. HSBC set its 12-month share-price estimate at Dh23 ($6.23).

"Emaar is trading at very attractive levels compared to other property developers here," Sherif Abdul Khalek, head broker at Al Futtaim HC Securities, said in a telephone interview from Dubai.

The stock trades at 12 times estimated earnings, according to data compiled by Bloomberg News. That compares with multiples of 21 for Sorouh and 23 for Deyaar Development.

Sorouh, a property developer controlled by the Abu Dhabi government, rose 1% to Dh10.3. The stock has surged 6.4 per cent in its three-day rally.

Air Arabia PJSC advanced 1.4% to Dh2.11, the highest since February 4. The UAE-based low-cost airline will fly to Kozhikode, India, from its Sharjah base three times a week starting February 26.

Five of the six benchmarks in Gulf markets operating and tracked by Bloomberg News advanced yesterday. Qatar's Doha Securities Market Index added 0.1%, while the Kuwait Stock Exchange Index fell less than 0.1%.

The Bahrain All Share Index increased 0.4%, bringing the four-day advance to 2%. Saudi Arabia's market was closed yesterday for the weekend.

The following stocks also rose or fell in Gulf markets. Al Ahlia Holding Co. gained 2% to 260 fils, the highest since February 13. The Kuwaiti investment firm said full- year net income surged more than fivefold to 36.4 million dinars ($133 million).

Arabtec Holding rose 1.7% to Dh11.9. Arabtec Construction Co., a wholly owned unit, won a Dh360 million ($98 million) contract to build a 421-room four-star hotel by the Abu Dhabi National Exhibitions Co.

Aref Energy Holding climbed 7.6% to a record 355 fils. The Kuwaiti energy investment firm said it will sell 645 million shares to existing shareholders at 105 fils apiece.

FRANKFURT - Shares in Germany's Deutsche Postbank rose 2% in late afternoon trade on Friday on market talk of bid interest from Royal Bank of Scotland (RBS), traders said.

"We're hearing RBS for Deutsche Postbank at the 90 euro per share level," said one trader in London. Deutsche Postbank was not immediately available for comment.

At 9:53 a.m. EST, Deutsche Postbank shares were 1.6% higher at 64.54 euros, the third-biggest gainers on Frankfurt's DAX, which was down 1%. RBS was up 2.5%.

ABU DHABI - The Abu Dhabi government has put a ceiling of Dh70 million on loans at easy terms that it provides to citizens to invest in commercial property.

General Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, issued a decree on Wednesday stating that the amount of a commercial property loan a national can obtain should not exceed Dh70 million.

The term 'commercial buildings' refers to the real estate generating commercially feasible returns as opposed to public housing. Nationals in Abu Dhabi have been enjoying loan facilities from the government for years at comfortable terms compared with funding provided by commercial banks.

"The decree sets some order in the government's funding for commercial buildings developed by local investors," Khalfan Al Ka'abi, chairman of the construction and development committee at the Abu Dhabi Chamber of Commerce and Industry, told Gulf News.

The decree specifies in detail the role of Abu Dhabi's Department of Treasury in supervising the utilisation of the funds, including service of the loans, in the form of administrative fees varying from one per cent up to the prevailing interest rate set by the UAE Central Bank for Certificates of Deposit, with a maximum limit of five per cent.

UAE nationals in Abu Dhabi can also enjoy significant discounts in cases of early settlement of loans acquired to fund commercial buildings, ranging from 15% if the outstanding balance exceeds 50 per cent of the loan, to four per cent if the remainder is less than 105.

"The decree has great significance as demand for loans to finance commercial buildings is soaring due to the huge gap in the commercial property market in Abu Dhabi, along with robust growth in the emirate, which is attracting more and more foreign investors and businesses," Al Ka'abi said.

The decree also replaces the Department of Social Services and Commercial Buildings by the Abu Dhabi Department of Treasury, which is now in charge of financing commercial buildings in the emirate.

"The Department of Treasury is transferring all the buildings it manages to Abu Dhabi Commercial Bank [ADCB], as a vast majority of the buildings will be delivered by July 1. New applications for loans are now being considered by the Financing Committee within the department," a source at the Department of Treasury told Gulf News.

NAIROBI - Centrum Investment Company Ltd plans to invest about Sh500 million in the region within the next five years.

The firm, that until Thursday was known as ICDC Investment, says the investment is in line with its strategic plan that seeks to expand and diversify its investments into sectors that are not prone to exposure.

"We plan to invest 20% of our investments into the region within the next three to five years. We are keen to continue our private equity investment portfolio with a special interest in companies that are looking to expand and have robust business models," the firm’s managing director Mr Peter Mwangi said.

The company had investments worth Sh2.9 billion as at June last year. Mwangi said the company was evaluating several investment prospects in energy, financial services and fast moving consumer goods sectors.

Mwangi was speaking at the company’s annual general meeting in Nairobi on Thursday in which the shareholders approved the change of name from ICDCI to Centum Investment Company Ltd. The shareholders also re-elected Mr Isaac Awuondo and Trade and Industry PS as company directors.

Centum chairman, Mr James Muguiyi, said the change of name was meant to avoid the constant confusion with ICDC and also revamp and revitalise the company’s corporate look.

"The name sounds international and thus giving the company the opportunity to leverage on business opportunities outside Kenya," said Muguiyi.

Mwangi also announced a change in the company financial reporting cycle from July–June to April-March. This in effect means that the current financial year 2007/08 will run for nine months to March 31.

According to Mwangi, the change was to ensure the reporting cycle coincides with those of associate companies. The company is the largest and publicly quoted investment company in the region with a diverse investment portfolio in financial services, beverages, manufacturing, infrastructure and real estate.

In the Last financial year, it posted record earnings in its 40-year history returning Sh1.1 billion in pre-tax profits, a growth of 84 per cent compared to Sh607million in the previous year.

KAMPALA - A team of Ugandan computer scientists has created a new accounting software that will help thousands of microfinance institutions and saving and credit societies to cut operation costs and increase efficiency at work.

Savings Plus, which was unveiled by the Minister of ICT, Dr Ham Mukasa Mulira, recently, is an information management system that manipulates an entity's balance sheets, income statements, banking transactions, loan modules and members' registers.

Mr Vincent Tumwijukye, the chief executive of FLT, t he company that developed the software, said the administrative solution was developed to increase efficiency, and ease accounting work of thousands of MFIs and Saccos in Uganda, besides providing a relevant service to the market. There at least 3,155 Saccos are in operation in Uganda.

"We thought solutions were being development in a whole different economic setting and were not relevant to the needs of our people. So, we decided to develop a solution that is basically going to take care of the accounting needs of consumers with special attention to their income constraints, and computer illiteracy levels," Mr Tumwijukye said at the launch.

According to FLT, most of the available software on the market is imported from developed countries where most people are computer literate and has no consideration for the developing world's computer illiterate.

The software comes in two packages including the Single user License and the Multi-user license costing $770 (Shs1.3 million) and $1,200 (over Shs2 million) respectively. Speaking at the ceremony, the Minister of ICT, Dr Ham Mukasa-Mulira commended FLT for the  innovation.

"Saving Plus will increase the efficiency and transparency of microfinance institutions and Saccos hence improving the livelihoods of our ordinary citizens," he said.  


BRUSSELS - EU and U.S. senior officials said on Friday they would crack down on counterfeiting of computer components after they seized over 360,000 fake items in just two weeks in a joint operation at the end of last year. Integrated circuits and computer components of over 40 trademarks including Intel, Cisco and Philips, worth more than $1.3 billion, were seized during the operation, the officials said.

"Traffickers and counterfeiters have become much more sophisticated ... They are no longer confining themselves to trafficking in some of the traditional goods we used to see them in, such as footwear or handbags," U.S. Customs and Border Protection Assistant Commissioner Dan Baldwin said.

"There are increasing numbers with high-tech goods, goods that impact our critical infrastructure," Baldwin told reporters after talks with European Union counterparts in Brussels.

Integrated circuits are used in a wide range of products including computers, aircraft, cars and telecommunications. U.S. and EU officials said both sides of the Atlantic would work with importers to see how the fakes entered their markets, launch criminal investigations and take up the matter with China, where most of the fakes came from.

"We've identified a pretty significant problem, a fairly high risk for critical infrastructure," Baldwin said. "There will be criminal investigations."

Officials could not say at this stage if the importers knew they were trading counterfeit products and whether the problem came from a few factories or was more widespread. But he warned the problem could affect all producers and said the industry needed to cooperate better to help them identify fakes. 



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