Bahrain GCCs leading Financial Hub

Bahrain, with a visionary approach and the best regulatory regime for the banking and finance sector, has emerged as the leading financial centre in the Middle East. Which is getting a competition from Dubai, U.A.E.

The completion of an iconic $1.4b Bahrain Financial Harbour (BFH) and other multi-billion dollar infrastructure development projects have raised the Kingdom's status as one of the most vibrant and growing economies in the region, a senior Japanese government official yesterday said.

Kazunori Tanaka Senior vice Minister of Finance Japan, who is in Bahrain told a Press conference that Bahrain's expertise in banking and finance has attracted as an investment destination and would help to attract the Japanese companies.

The visiting minister, who was joined by the newly-appointed Japan's ambassador to Bahrain Takeshi Kondo, said: "Bahrain can be used by Japanese companies and investors as a gateway to the region due to the Kingdom's strategic location and close proximity to the region's largest economies like Saudi Arabia, Qatar and the UAE."

Talking about the existing potential between Bahrain and Japan, the minister said: "We see the infrastructure developments in Bahrain as a commitment from the government to maintain Bahrain's status as financial centre. These developments will be proved as a catalyst to attract more foreign investments including Japan.

Japan and Bahrain enjoy cordial ties and ties which go back over the decades and with Japan's keenness to cement the exiting ties with Bahrain the coming days will see many developments."
The minister said that Bahrain's expertise in Islamic banking and finance would help the Japanese institutions how to develop the shari'ah-compliant products and services for the client base.

"The economic and financial reforms initiated by the leadership in Bahrain have helped to make this country as a model democracy and one of the most leading economies. Japanese major banks and financial institutions as well as private sector players have chosen Bahrain as destination of choice. There are many joint ventures and in the most of the cases successful partnership between Japanese-Bahraini investors have paved the way to consolidate the existing two-way business.

Referring to the upcoming Bahrain-Qatar causeway, the minister said that Japan's booming construction and infrastructure development expertise can be of great help for carrying out major projects in Bahrain. "We have huge industrial base and we will continue to explore opportunities in Bahrain in trade, commerce, investment and other vital sectors."

In the backdrop of $110 billion bilateral trade between GCC and Japan in 2006, the minister said that the conclusion of the Japan-GCC free trade agreement would be a crucial for Japan and GCC as a bloc.

The minister, who held talks with Bahrain's Minister of Finance Shaikh Ahmed bin Mohammed Al Khalifa and discussed the developments on the Japan-GCC FTA and bilateral trade issues, said that it would be in the interest of both sides to conclude the agreement without wasting much of time.

He said that in the wake of successful talks on the FTA in Tokyo and Riyadh both sides should negotiate all relevant clauses and seal the agreement.
According to official estimates, the trade between Gulf Cooperation Council (GCC) and Japan increased 33 per cent year-on-year basis rising to staggering $110.45b last year.

Japan's imports from GCC increased at an average rate of 21 per cent per year from 2002 to 2006 and the average growth rate for exports to GCC stood at 13 per cent, which resulted in Japan's widening trade deficit. The rapid increase was primarily owed to Japan's soaring imports from GCC, which hit a record high of 11.1 trillion yen. Japan registered a deficit of nearly 9.3 trillion yen in its trade with GCC in 2006, with its exports to GCC remaining relatively stable.

The minister said that Japan's nuclear power technology could be one of the key areas of co-operation for GCC what we call the new era of green technology. "We have world's top quality expertise and technology in nuclear power generation. The US is one of the main recipients of Japanese expertise in nuclear power generation.

He said: "Japan has huge industrial base and an agreement between the GCC and Japan would help to trigger the activities in trade, investment and commercial sectors."

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Qatar - 900,000 Expat Workers by 2015

The size of the foreign labour force in economically vibrant Qatar is expected to be a little over 900,000 by the year 2015 as about 586,000 new jobs will be needed during the period from now until then.

According to details available with the Permanent Population Committee, the total Qatari workforce is likely to increase from 50,300 in 2004 to 117,600 in 2015. The Qatari workforce numbers are expected to grow at the rate of 6,100 per year taking the total for the above period to 67,300.

The demand for labour during the above period is likely to rise from 437,600 in 2004 to more than one million (1.024m) in 2015.

The shortage of labour in Qatar is especially visible in occupations to do with manual work and jobs that nationals do not want to take up. The shortfall is particularly evident in professional and technical jobs and those dealing with sales and service.

The size of the labour force in the country has more than doubled from 200,000 in 2004 to 444,000 in 2004. Qatari nationals accounted for only 12 per cent of the total labour force and only one per cent of private sector employment.

Qatari nationals mainly worked in areas like education, energy, public administration, health and social work, while expatriates dominate other jobs, mainly in the private sector.

Unemployment rates for Qatari males and females were 3.9 per cent and 4.9 per cent, respectively, in 2004.

The majority of the unemployed were youths who were new entrants into the job market after having completed secondary or university education.

The phenomenon is attributed to several factors, prominent among them being a lack of consistency between education system outputs and the requirements of the Qatari job market.

The Permanent Population Committee has made several recommendations to correct this anomaly.

One of the proposals is to have in place a stable recruitment and employment policy whose focus should be on restricting the hiring of foreign workers.

Besides, policies concerning nationalisation of jobs, economic empowerment of women, minimum wages for nationals, their training and education are also required.

The accent of the job nationalization policy is on employing more and more citizens and training them to improve their work skills so that they are able to gradually replace expatriates, particularly in private sector jobs.

As for economic empowerment of women, a major challenge the country faces is changing the negative attitude of society towards women's work and certain jobs being viewed as taboo for local females.

A beginning can be made by introducing a part-time work culture among local women and opening up of day-care centers for the children of female workers.

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Kuwait Financial Center launched GCC Index for Volatility

Kuwait Financial Center (Markaz) has recently launched a new innovative index to measure stock market volatility in the emerging market and GCC region. The index is code named as MVX and has a base date of 1st January 2004. Markaz has developed a proprietary model to construct and maintain the index. The model considers many statistical properties of the underlying GCC stock markets in order to calculate the volatility index. The index will be published at least on a monthly basis.

According to Markaz report, Oman stock market has the highest volatility level at 2119 followed by Abu Dhabi (2075) and Dubai (1909). Among the GCC countries, Kuwait enjoys lowest volatility at 502.

Volatility levels across GCC showed signs of slowing. Global markets and emerging markets however showed signs of increasing volatility. Saudi Arabia showed marked reduction in volatility as MVX-Saudi Arabia at 1042 represented a reduction of nearly 4% from the previous month level. The current index level for Saudi Arabia is nearly 16% lower than the long-term average. Kuwait continues to be a stable market in terms of volatility with the current MVX-Kuwait at 502 being 38% lower than what it was one month before. Qatar's volatility dipped by 17% during June to 1342 and is now 32% lower than its long-term average. Dubai and Abu Dhabi volatility index declined by 3% and 6% respectively during the month. Both the indices are below the average MVX.

Oman has been the only market wherein the volatility has increased during the current month. The MVX at 2119 is higher by 16% as compared on a Month over Month basis. The index is close to its average mark.

Markaz's earlier research (Managing GCC Volatility) has established the fact that GCC stock markets are one of the most volatile stock markets in the world even out pacing Emerging markets.

Volatility is a risk measure used to gauge the degree of fear that prevails in stock markets at any point in time. It can be measured through many ways using advanced application of statistical tools. From a stock market perspective, higher volatility is viewed riskier compared to lower volatility. Much like returns, volatility also has a "wave-like" pattern alternating between highs and lows. Higher levels would indicate investor fear while lower levels would indicate complacency. It will certainly be useful to know if GCC investors are being gripped by fear or complacency at any point of time. It is an emotional gauge.

It is certainly possible to formulate trading strategies built around the evolution of volatility. In most of the cases, a rise in volatility signals impending negative performance and vice-versa. However, different markets react with different lags. At a broad level, reducing exposure during periods of increasing volatility and vice-versa is a suggested strategy.

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Arab Fund for Economic and Social Dev. and Bahrain TieUp

The Kingdom of Bahrain and the Arab Fund for Economic and Social Development (AFESD) signed a financing agreement yesterday whereby the AFESD will contribute an amount of KD19 million (BD24.7 million). The agreement was sealed by Minister of Finance Shaikh Ahmed bin Mohammed Al Khalifa and Abdullatif Y. Al Hamad, fund director-general and chairman, at ministry premises.

The minister praised the continuous support provided by AFESD and other Arab development funds to leading development projects in the Kingdom of Bahrain. He also stressed the keenness of the government to accelerate implementation of infrastructure projects having a direct impact on the daily life of the people and playing a crucial role in fostering an investment-friendly environment.

According to the agreement, AFESD will contribute to financing the BD 74.2 million reconstruction of the Sitra causeway project, said Aref S. Khamis, ministry assistant undersecretary for financial affairs. The project aims at easing the traffic flow in Bahrain and facilitating the increasing land transport between Manama and Sitra.

It also enhances the overall road network in Bahrain. The signing ceremony was attended by Shaikh Ebrahim bin Khalifa Al Khalifa, ministry undersecretary, along with a number of ministry and AFESD officials.

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Saudi Traded Shares Devalue by 52.58%

The total value of Saudi shares traded for the first half of 2007 dropped 52.58 percent compared to the same period of the previous year to reach at SR1,488.34 billion ($396.89 billion).

According to the Saudi Stock Exchange's (Tadawul's) report released on its website yesterday, at the end of the first half (June 2007) the Tadawul All-Share Index (TASI) declined by 46.98 percent to close at 6,969.72 points compared to 1,3145.26 points for the same period of the previous year. The index was lower by 6.98 percent compared to May 2007.

On a YTD basis TASI lost 963.57 points (12.15 percent). The report said highest close level for the index during the first half of this year was 8,783.43 points on March 20.

The market capitalization at the end of the first half also fell 43.49 percent to SR1.113 trillion ($296.7 billion) compared to the same period of the previous year.

According to the Tadawul report, the total number of shares traded reached 33.65 billion shares for the first half compared to 39.29 billion shares for the same period of the previous year, decreasing by 14.35 percent.

The report said the total number of transactions executed during the first half of this year dropped 20.41 percent to 38.95 million compared to 48.94 million trades for the same period of the previous year.

In the first half of this year, Advanced Polypropylene Co. (APPC), Al-Abdullatif Industrial Investment Company, Malath Cooperative Insurance and Reinsurance Co., the Mediterranean and Gulf Insurance and Reinsurance Co. (MedGulf), Saudi Vitrified Clay Pipes Co. (SVCP), SABB Takaful Co., Saudi IAIC Cooperative Insurance Co. (Salama), Saudi Kayan Petrochemical Co. and Arabian Shield Cooperative Insurance Company Co. were listed on the Tadawul.

During the first half, Al-Babtain Power & Telecommunication Co., Fawaz Abdulaziz Al-Hokair Co., APPC, Al-Abdullatif, Malath and MedGulf were added to the Tadawul index.

The report said the Saudi Capital Market Authority (CMA) suspended stocks of Bishah Agriculture Development Company and Anaam International Holding Group Co. from trading.

Stocks of Al-Baha Investment & Development Co. were suspended from trading for a period of ten days on June 6 to allow shareholders to settle the remaining value of their shares amounted to SR2.5 per share. Trading in the stocks of Al-Baha, however, was resumed on June 23 in respect of those shares the installments of which have been paid.

The report said in the first half of this year Falcom Financial Services, EFG — Hermes KSA, Jadwa Investment, Rana Investment Company and Saudi Swiss Securities joined the Saudi Stock Exchange to provide financial brokerage services.

The second quarter was dominated by the newly listed insurance companies as SABB Takaful shares jumped by 1,220 percent, followed by Salama 680 percent, Arabian Shield 500 percent and Malath Insurance by 197.50 percent.

Meanwhile, TASI gained 41.38 points to 6,989.17 yesterday. Over SR4.21 billion worth of shares changed hands yesterday.(arabnews)

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Analysis: Malaysia a booming market with Palm oil and Relaxed controls

After several years of lackluster performance, Malaysia is currently one of Asia's best-performing stock markets, drawing strength from attractive valuations, a fast-growing economy and more prudent government policies.

The Kuala Lumpur Composite Index has gained 23% year-to-date, outperforming many Asian markets, including Thailand, India, Indonesia, Singapore and Taiwan.

"Malaysia was really off people's radar screens for a couple of years," said David Riedel, president of the Riedel Research Group. But political uncertainty in neighboring Thailand, the relaxation of controls imposed during the economic crisis in the late 1990s and a surge in demand for palm oil, a key component of bio fuel, are combining to boost investor interest and confidence.

"If you put Malaysia in the context of Southeast Asia, political concerns about Thailand have forced managers to look for opportunities in other markets," he said. "People have been looking for an alternative. Malaysia has had relative undervaluation."

Equity funds tracked by EPFR Global were net buyers of Malaysian equities from November 2006 till April this year. In April alone, for example, those funds bought $523 million in Malaysian equities. Sentiment was slightly hurt in May, however, when these funds sold a net of $140 million.

"Without a doubt, Malaysia is in a bull market as the KLCI [Kuala Lumpur Composite Index] has risen 51% in the past 12 months," said Terence Wong, strategist at CIMB Research, in a recent research report.

The rally is good for another 12 months because earnings growth is continuing to beat expectations, Wong said.

But there are risks.

"While we remain bullish about stock market prospects, the greatest risk continues to be the performance of regional markets and Wall Street as a repeat of a major correction on this front will surely drag down Malaysia as well," Wong said. "However, it is reassuring that regional P/E valuations are undemanding, being mostly in the mid-to-high teens."

Diverse population

In the wake of a military coup last year in Thailand, Malaysia is seen as relatively stable. It has a multi-ethnic, multi-religious population of over 26 million. Its main exports are electronic equipment, petroleum and liquefied natural gas, wood products, rubber and palm oil. In 2006, the economy grew at 5.9%, while growth over the next two years is forecast at around 7%.


"After several years of lackluster returns, Malaysia started the year as one of the more attractively valued countries within the region in aggregate," said Andrew Foster is portfolio manager of the Matthews Asia Pacific Equity Income Fund MAPIX, which is overweight in Malaysia.

"Investors over the last several years have come to have a higher level of confidence in the new government -- reasonably higher degree of openness and transparency to foreign investors," Foster said.

However he acknowledges that the gains so far this year have made it less compelling. "By most measures, Malaysia is one of the more expensive markets now," Foster said. "The discount at the beginning of the year is less apparent."

David Semple, portfolio manager of the Van Eck Emerging Markets Fund GBFAX, shares that positive sentiment.

"We do find a lot of interesting stocks to buy," Semple said. "Domestic demand is going to be robust. It still has a somewhat undervalued currency and stable politics. It tends to be a little bit more defensive."

In Malaysia, he finds "solid, but not outrageous returns."

Two stocks he likes are the KNM Group , which designs and constructs equipment for the oil and gas industry, and the Dreamgate Corporation , which supplies gaming and amusement machines.

Attractive sectors

The consumer and infrastructure sectors are the most attractive on the Malaysian stock market, Riedel said. One gaming stock he likes is Genting ..

As for palm oil, he prefers manufacturers in Indonesia. Primarily grown in Malaysia and Indonesia, palm oil can be used to produce biofuel; it is also an ingredient in a host of other products.


"With the inflows of capital from equity investment and palm oil, the government is increasing infrastructure spending -- the full gamut of infrastructure -- roads, bridges, ports," he said. He recommends construction company WCT Engineering as a way to play infrastructure.

Wong of CIMB Research is very bullish on a number of sectors including airlines, banking, construction, gaming, infrastructure, oil and gas, plantation, property, rubber gloves and utilities.

His top five stock picks draw from these sectors. He likes construction company MRCB, because it is "one of the frontrunners for at least two local mega projects and will later add stable highway concession earnings to its income stream."

The other four are infrastructure group Gamuda; Maybank Group, the largest banking group in Malaysia; SP Setia, which is involved in construction and wood-based manufacturing; and Kencana Petroleum, which is involved in engineering and fabrication of production facilities for the oil and gas industry.


One way for American investors to gain exposure to the country is through the iShares Malaysia ETF EWM.

"In the context of global emerging markets, you'll see Malaysia continue to be strong," Riedel said. "[However,] if you see a real change in investor appetite for risk, if you see the carry trade unwind, it will be one of the first markets to suffer."

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Branding Industry a Pillar in Economic Development

Branding industry has emerged as one of the strongest pillars for the economic development of any country and the world's largest economy — the United States — has over 50 percent of the global brands share, making it a trendsetter in this highly specialized but vital business worldwide, the president of the International Advertising Association (IAA) Bahrain chapter, Khamis A. Al-Muqla said at the opening of five-day workshop of regional public relations conference being held in Bahrain.

The branding industry is a multi-trillion dollar industry worldwide and now coming big way in this part of the world and has a bright future due to latest means of communication, i.e., electronic, print and ICT infrastructure development.

Al-Muqla said that the GCC countries need to concentrate on branding and public relations as effective tools for enhancing the businesses while living in a cutthroat competition environment.

"Brands, "branding" and brand equity have become increasingly important components of culture and the economy, now being described as "cultural accessories and personal philosophies.

"Brand recognition and other reactions are created by the use of the product or service and through the influence of advertising, design, and media commentary. A brand is a symbolic embodiment of all the information connected to the product and serves to create associations and expectations around it.

He said: "Public relation and communication are vital subjects and need to be taken seriously in this part of the world where we are still in early stages of developing our own brands. The political, economic and social reforms can be made more meaningful by using the latest tools like branding, public relations and mass communication."

Al-Muqla said "Bahrain's advertising industry showed modest growth compared to other markets in the GCC last year, with 3.8 percent growth in Bahrain's advertising market in 2006 compared to Qatar's leading the field with a remarkable 101 percent increase."

The Gulf advertising sector saw a 21.9 percent growth last year to $5.4 billion. Oman, the UAE and Kuwait recorded increases of 32 percent, 22 percent, and 12.7 percent, respectively, and Saudi Arabia's advertisement sector grew seven percent."

According to figures, Bahrain's advertising market now stood at $107 million. Al-Muqla hoped that the year 2007 would be a good year for this sector.

"Our industry is growing, but our responsibility is also growing at the same time, so therefore we need to move forward and benefit from the IAA and address the key issues relating to our industry and our community." (ARAB NEWS)

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