Investment News: Money Morning » Dubai http://www.moneymorning.com Investment News Provider Sat, 21 Nov 2009 18:52:59 +0000 http://wordpress.org/?v=2.8.4 en hourly 1 Dubai: More Bubble or More Boom? Time Will Quickly Tell http://www.moneymorning.com/2008/07/23/dubai/ http://www.moneymorning.com/2008/07/23/dubai/#comments Wed, 23 Jul 2008 00:16:16 +0000 Martin Hutchinson http://www.moneymorning.com/2008/07/23/dubai/ By Martin Hutchinson
Contributing Editor

Dubai has plenty of qualities that catch an investor’s eye.

So, why aren’t Dubai investments a screaming buy, where we should all be investing our money? After all, plenty of brokers think it’s just that.

From a short-term perspective, Dubai investments haven’t done too badly. The Dubai Financial Market General Index is down about 13% this year, far less than the much-hyped emerging markets of India and China, or even the United States.

But there’s a possible catch.

Whereas 2006 and 2007 were good years for investors in India and superb ones for investors in China, they were lousy for investors in Dubai. The DFM General Index hit its all time high in November 2005, declined pretty steadily over the next two years, and is currently sitting about 40% below that high. Even at that depressed level, the DFM General Index is still trading at about 17 times projected earnings for this year and 3.3 times book value, so it’s not cheap.

That immediately raises questions. While Dubai has little in the way of its own oil reserves, its economy rests fundamentally on its position as entrepôt for the immense oil-exporting region of the Middle East, and for the United Arab Emirates (UAE), the oil-rich federation of which Dubai is a member. Oil prices were around $60 per barrel in November 2005 when the DFM General Index was at its peak; oil is now trading in the neighborhood of $130 per barrel, even after last week’s big sell-off – so why is Dubai’s stock market down 40%?

It’s entirely possible that Dubai isn’t as solid as some of its proponents believe.

Two years ago – before the real estate crash – it might have seemed impressive that Dubai, with 0.02% of the world’s population, was employing more than 10% of the world’s tower construction cranes; today we know better. Dubai’s rate of inflation is around 20%, and it’s on the upswing, while home mortgage interest rates sit below 7%.  That means that the cost of making a home mortgage – in real terms – is negative 13%. The UAE government is considering allowing its currency, the dirham, to float upward against the dollar, but hasn’t done so yet.

Dubai received more than 7 million tourists last year, with 1 million of those coming in from Great Britain (who presumably prefer the climate) – but the British government currently rates Dubai’s terrorism threat at its highest level. It’s not hard to imagine what a terrorist attack could do to Dubai’s impressive tourist rates.

Dubai is also planning to spend $82 billion on aerospace projects to include the world’s largest airport – but with a population of only 1.5 million, it will need a lot of foreign traffic to fill up such a behemoth.

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The potential for that to come to pass is there, given the growing levels of investment that China and others are making in the Middle East, and because the Dubai project isn’t solely focused on tourism: The airport and aerospace hub is viewed as an economic-development project. But success is far from guaranteed, and an economic downturn could make the objectives tough – if not impossible – to achieve. Indeed, should the ongoing global financial crisis eviscerate worldwide growth, Dubai’s development strategy could be exposed as a bubble, not a boom.

To be sure, other small nations have engineered economic miracles. Consider, for example, the economic success of Singapore, which has a smaller land area but three times the population.

Like Dubai, Singapore has no core advantage, such as a wealth of natural resources. Nor does it have a bevy of natural tourist hot spots. And much like Dubai, Singapore’s only advantage is one of geographic position. However, Singapore has an income per capita at purchasing power parity of $49,700 (eighth highest in the world) compared to the UAE’s $37,300.

Singapore’s growth has been built on two factors:

  • The extremely high education level of its population (relative to income at first, in the 1960s, but in absolute terms now).
  • And an obsessive focus on moving up the value chain in everything it does.

Dubai has neither advantage; it supplements its small local population with a huge underclass of immigrants (more than 80% of the population in the UAE as a whole), rather than upgrading the capabilities of its own people, and it relies on building artificial tourism in an area where (because of the unpleasant climate and relative lack of natural or historic attractions) it’s possible that no natural flow of tourists would have otherwise occurred.

An economy built on construction, tourism, and a boundless flow of cash, without any special knowledge base, is one that could end up being derailed in the long run. And that long run could be more painful if it turns out that Dubai has been feeding a major construction bubble through deeply negative interest rates.

The other potential black cloud looming over the Dubai economy is that of oil prices, should $130 – $140 per barrel oil turn out to be a short-term speculative price spike.

With the Bush Administration pushing for offshore drilling and the world automobile industry devastated by consumer tastes that quickly shifted to small cars and trucks, increased supplies and decreased consumption could push oil prices down to a more reasonable level.

Assuming OPEC doesn’t intercede and act to keep prices high, the right confluence of factors could potentially push oil prices back down under the Century Mark. And in a perfect world, with the right confluence of factors, oil could end up below $100 per barrel, or even as low as the $60-$80 range. And while that price level would still be well above the $10-$15 per barrel prevalent before 2002, it is far below oil’s current levels.

The Middle East in general has predicated their future plans on the oil bonanza continuing in full flow for the indefinite future. Even though $60-80 oil would provide ample revenue for their citizens to enjoy an excellent living standard, their economies are not properly set up to adjust to such a lower revenue flow. If oil prices were to fall, the inevitable effect would be tighter money as interest rates return to normal levels, exacerbated by an acute cash shortage.

Dubai is looking to diversify itself away from the petro-gusher, which is one reason it is trying to position itself as a global boom intermediary, benefiting from tourism and establishing itself as a new residential destination for the world’s uber-rich. It also aims to utilize its airport and aerospace ventures to fuel its real estate and global commerce aspirations.

But a key question remains: Is it still tied in so tightly to the Middle East “black gold” bonanza that it will suffer in kind should energy prices hit a deflationary downdraft?

The next few years will be telling. If its global growth aspirations get a needed lift, the tiny Gulf nation could become more than just a well-recognized name on a map; it could end up as a key stopping-off point for business executives traveling from one side of the world to the other, might one day even evolve into a commercial spaceport, and will stand as an example of a country that was able to engineer an economic makeover of massive proportions.

But should oil prices crater, Dubai’s aerospace venture fail to attain take-off speed, and its vision as a tourism and residential mecca of the future turn out to be ill-conceived as I fear, the opposite extreme is possible: With a construction bubble more inflated than the 2006 Florida condo market and a monetary policy looser than the one being operated by U.S. Federal Reserve Chairman Ben S. Bernanke, Dubai could shortly resemble a jungle of half-completed skyscrapers, with 10% occupancy rates and bankrupt landlords. Its landing would be painful, and, potentially, not long delayed. It’s not an investment for the risk averse.

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]]> http://www.moneymorning.com/2008/07/23/dubai/feed/ 2 A View From the Burj: Dubai’s Economy Fueled by High-Powered Government Investing http://www.moneymorning.com/2008/04/02/a-view-from-the-burj-dubais-economy-fueled-by-high-powered-government-investing/ http://www.moneymorning.com/2008/04/02/a-view-from-the-burj-dubais-economy-fueled-by-high-powered-government-investing/#comments Wed, 02 Apr 2008 01:09:22 +0000 Mike Caggeso http://www.moneymorning.com/2008/04/02/a-view-from-the-burj-dubais-economy-fueled-by-high-powered-government-investing/ By Mike Caggeso
Associate Editor

When flocks of tourists gaze from the top of the world’s tallest building – the colossal Burj Dubai, slated to be completed in 2009 – they’ll see a swath of construction cranes dotting the skyline and dozens of tankers awaiting arrival/departure from the world’s largest man-made harbor.

To the southwest, they’ll see – with binoculars – a vast desert spotted with dune buggies and recreational vehicles.

Looking down, they’ll see the emirate’s eight free economic zones, built to attract foreign companies such as Microsoft Corp. (MSFT), Nokia Corp. (NOK), Siemens AG (SI) and many more.

If they take a tour of the tower, they’ll find 30,000 homes, nine hotels, a mall and a man-made lake.

But nowhere will they see remnants of the Dubai of a half-century ago, when the city was better known as a pearl fishing village.

If there is one emblem of Dubai’s fast growth, it’s the Burj, whose completed height of 2,684 feet is a symbol of the emirate’s transformation into the Middle East’s financial and tourism hub.

Indeed, the Burj’s stated goal "is not simply to be the world’s highest building. It’s to embody the world’s highest aspirations."

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‘The World’ in its Hands 

That transformation began in 1971, when Dubai was incorporated into the newly formed United Arab Emirates, a coalition of seven Persian Gulf states rich in oil and natural gas.

Foreign investment in the emirates’ wealth of resources came easily, and the UAE quickly became a prosperous nation situated on one of the main waterways of the Middle East.

However, unlike its fellow emirates and neighboring Saudi Arabia and Qatar, Dubai’s source of natural resources is running low. Oil and natural gas contribute less than 6% of its revenues.

Instead, Dubai’s Jebel Ali Free Zone, an economic zone with lucrative business and tax incentives, is the primary source for the country’s revenues. Increasingly, however, the Emirates are evolving into a tourist destination.

A typical Dubai vacation (or business trip) can include indoor skiing, sand dune cruising, swimming in the Persian Gulf, paying top dollar for a stay on its heralded Palm Islands (predecessor to the soon-to-be completed The World, a man-made archipelago of 300 islands) and shopping during the heralded, month-long, citywide Dubai Shopping Festival.

Instead of oil, the economy has shifted its focus to services, and real-estate prices have cycled higher, in kind. The value of Dubai real estate is evident in the enormous skyscrapers and hotels, such as the Burj Dubai and Burj Al Arab, one of the world’s tallest hotels and the world’s only (self-proclaimed) "7-star" hotel.

Disneyland, Meet Wall Street

But this display of wealth can only go do so much to attract tourists, as Dubai city needs to develop larger sources of income – the kind that builds more skyscrapers.

And that’s where global investments come into play. Dubai’s government plays a very active role in the country’s economy. In the past year, Dubai’s sovereign wealth funds – controlled by the emirate’s ruler and UAE Vice President Shiekh Mohammed bin Rashid Al Maktoum – have doled out serious cash for projects around the world, including:   

  • $448 million for a stake in a Malaysian super city,
  • $1.26 billion in hedge fund Och-Ziff Capital Management Group LLC’s (OZM) Oct. 2007 initial public offering,
  • $5.1 billion for a 9.5% stake in MGM Mirage (MGM),
  • $942.3 million for Barneys New York Inc. luxury department stores,
  • $1.8 billion for two U.S. aviation-maintenance companies owned by The Carlyle Group, the noted Beltway buyout firm,
  • An undisclosed sum for a stake in Japan’s electronics and media juggernaut Sony Corp. (SNE).

Unlike other funds that "get strategic," Dubai is approaching its investment strategy both as a business, and as a means to an end – a business double-play that’s virtually certain to make it a winner with one or both of its strategic mandates.

With these kinds of big-time investments, Money Morning calls sovereign wealth funds, whether they’re from Dubai or elsewhere, "Global Cash Barons."

Following Cash Barons for Long-Term Profits

For U.S. investors, the problem with the government’s close attention to the emirate’s revenues is that relatively few public companies are listed overseas, let alone on the New York Stock Exchange.

Add that to the lack of liquidity in the young Middle Eastern indices, and all this talk about the burgeoning Middle East is a giant tease for U.S. investors.

Later this year, Middle East ETFs will be available, but for now, the best way to invest in Dubai is to shadow invest in the companies it – along with other sovereign wealth funds – is pouring billions into.

The investments that these massive cash pools make over the next 12 months will be some of the biggest profit opportunities investors will ever find. Shrewd individual investors would do well to closely watch the moves they make – and follow suit whenever possible.

"Sovereign wealth funds provide an important data point for investors," says Money Morning Investment Director Keith Fitz-Gerald. Despite what critics say, "sovereign funds operate out in the open, and their objectives are very clear. This is in stark contrast to the secret workings of hedge funds, that operate in private, and only divulge their holdings and objectives after the fact."

Many of those Cash Baron investments are U.S.-based companies – some beat down by the credit crisis, others well positioned to profit from global emerging markets such as China, India and Brazil.

Important to note: Cash Barons aren’t day traders. They’re investing for the long term.

Also keep in mind that investors shouldn’t blindly follow every public-company investment of sovereign wealth funds. 

That’s why Money Morning has identified two recommendations:

  • Citigroup Inc. (C), the beleaguered financial titan that has received a $7.5 billion cash infusion from Abu Dhabi Investment Authority, nearly $7 billion from Singapore Investment Corp. Pte. and $3 billion from the Kuwait Investment Authority.

"It all comes down to cash flow, as so many things do. And in this case, Citi’s valuations have been pummeled at a time when the underlying cash flow really hasn’t changed all that much," Fitz-Gerald said.

  • MGM Mirage (MGM), the Las Vegas-based casino-resort operator, whose China strategy received a major boost from the $5.1 billion it received from Dubai.

"At the most basic level, Dubai is hoping to grab a share of the ever-increasing power of the Chinese consumer at a time when China’s consumers have not yet formed opinions about branding or luxury travel experiences,’ Fitz-Gerald said. "Given that Asian consumers in general – and Chinese consumers in particular – tend to be much more highly brand savvy than their European and American counterparts, this is an especially important strategy to execute at the present time."

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]]> http://www.moneymorning.com/2008/04/02/a-view-from-the-burj-dubais-economy-fueled-by-high-powered-government-investing/feed/ 0 Dubai’s Shiekh Mohammed ‘Ponying’ up $400 Million for Another Huge Investment http://www.moneymorning.com/2008/03/25/dubais-shiekh-mohammed-ponying-up-400-million-for-another-huge-investment/ http://www.moneymorning.com/2008/03/25/dubais-shiekh-mohammed-ponying-up-400-million-for-another-huge-investment/#comments Tue, 25 Mar 2008 18:25:07 +0000 Mike Caggeso http://www.moneymorning.com/2008/03/25/dubais-shiekh-mohammed-ponying-up-400-million-for-another-huge-investment/ By Mike Caggeso
Associate Editor

Dubai has chalked up a string of foreign investments in the past year – mostly through its state-owned investment vehicles, or sovereign wealth funds.

The government’s most recent investments include: a $448 million stake in a Malaysian super city; $1.26 billion in hedge fund Och-Ziff Capital Management Group LLC’s (OZM) Oct. 2007 initial public offering; $5.1 billion for a 9.5% stake in MGM Mirage (MGM); $942.3 million for Barneys New York Inc. fashion stores.

And that’s just to name a few.  

"Dubai is getting in on the ground floor of some very powerful trends," Money Morning’s Investment Director Fitz-Gerald said in a recent interview.

Now, Dubai’s ruler himself, Sheikh Mohammed bin Rashid al- Maktoum, will ‘pony’ up $400 million of his own fortune in another eye-catching investment:

More than 1,000 prize-winning Australian thoroughbred horses.

Specifically, Sheikh Mohammed bought Australia’s largest thoroughbred horse-breeding business – which also includes racetrack training facilities and stud farms around the country – from Ingham Enterprises.

Like his government’s many recent investments, Sheikh Mohammed’s buy is calculated. He already owns Godolphin stables and stud farms, an operation that spans five countries, Bloomberg reported, and this purchase makes him the world’s biggest thoroughbred horse owner.

"I have long admired the love Australians have for the horse and for racing," Sheikh Mohammed said in the statement. "The Ingham family have made a significant contribution to Australian racing and to the thoroughbred and I am looking forward to building on their success."

Ingham Enterprises was started by Austrailian thoroughbred tycoon Bob Ingham and his late brother Jack. Despite its success in the horsebreeding field, the company is known more for its poultry business. It employs about 7000 people, the Sydney Morning Herald reported.

Ingham said he will continue racing horses and has retained the rights to the family’s signature racing colors.

The acquisition is subject to approval from Australia’s Foreign Investment Review Board.

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]]> http://www.moneymorning.com/2008/03/25/dubais-shiekh-mohammed-ponying-up-400-million-for-another-huge-investment/feed/ 0 Dubai World Opens Wallet to Help Build Malaysian Super City http://www.moneymorning.com/2007/12/21/dubai-world-opens-wallet-to-help-build-malaysian-super-city/ http://www.moneymorning.com/2007/12/21/dubai-world-opens-wallet-to-help-build-malaysian-super-city/#comments Thu, 20 Dec 2007 22:01:19 +0000 admin http://www.moneymorning.com/2007/12/21/dubai-world-opens-wallet-to-help-build-malaysian-super-city/ By Mike Caggeso
Associate Editor

Dubai World’s worldwide holdings got another boost yesterday (Thursday), as its subsidiary, Limitless Holdings Pte, agreed to form a joint venture with UEM World Bhd. that will build $448 million (1.5 billion ringgit) in luxury homes in Malaysia’s Johor province.

The housing project will be built in a special zone called the Iskandar Development Region, which is roughly three times the size of Singapore. The region will be divided into five flagship zones that will be home to several financial districts, technology hubs, universities and ports.

Specifically, the housing project will be in a new city called Nusajaya on the southwest tip of Johor at Puteri Harbour, a 688-acre waterfront precinct fashioned after the French Riviera.

For a more concrete reference, Johor is the New Jersey to Singapore’s New York City, but with two major differences: Johor and Singapore represent different countries and through traffic over the Johor-Singapore Causeway is frequently congested, Johor isn’t typically host to daily Singapore work commuters.

Bloomberg reports that Malaysia’s government has eased investment rules for foreign companies in attempt to attract growth in Johor. Sensing opportunity, Dubai World opened its wallet. 

The new company formed from the joint venture will be called Haute Property Sdn. Under the proposed deal, Dubai World will have a 60% stake, with the other 40% being held by UEM.

The project will break ground in the second-half of next year and won’t be completed until 2013, UEM said.

Dubai World, a state-controlled holding company, has been aggressively seeking cross-market investments in seemingly every corner of the world. Earlier this year, Dubai World formed a joint venture with Singapore’s City Developments Ltd. to build a $1.7 billion project in the city-state.

And it’s not alone. Several sovereign wealth funds are gobbling sizable stakes in publicly listed companies, stock indices and private equity ventures such as the Johor project.

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]]> http://www.moneymorning.com/2007/12/21/dubai-world-opens-wallet-to-help-build-malaysian-super-city/feed/ 1 Qatar Angles to Undermine Rival Middle East Cash Baron Dubai http://www.moneymorning.com/2007/12/04/qatar-angles-to-undermine-rival-middle-east-cash-baron-dubai/ http://www.moneymorning.com/2007/12/04/qatar-angles-to-undermine-rival-middle-east-cash-baron-dubai/#comments Mon, 03 Dec 2007 22:10:56 +0000 admin http://www.moneymorning.com/2007/12/04/qatar-angles-to-undermine-rival-middle-east-cash-baron-dubai/ By Keith Fitz-Gerald
Investment Director, Money Morning

In the race to buy global assets, Dubai seems unstoppable. After all, in the past few months they’ve spent billions on all sorts of global industries.

  • In May, DIFC Investments, a subsidiary of Dubai International Financial Centre, invested $2 billion in Deutsche Bank AG (FRA:DBK), Germany’s largest public bank.
  •  Dubai World announced in August it plans to invest over $5 billion in MGM Mirage (NYSE: MGM). 
  • And just last month, Dubai International Capital announced they had made a “substantial investment" in Sony Corp. (NYSE: SNE) as reported by Reuters. 

My sources tell me they’re prepared to pony up as much as another $100 billion in the next 24 months for more top tier companies.

It’s a situation that’s driving their Persian Gulf neighbor Qatar nuts, and with good reason.

Like Dubai, Qatar wants to be the Arabian financial center when the oil stops flowing. Qatar has also been investing in foreign ventures with a $1.5 billion investment in British-based supermarket group J. Sainsbury Plc (LON: SBRY) in June.  The problem is that they’re about 10 years behind the 8-ball when it comes to keeping up with Dubai.

That could change, however, should Qatar be able to acquire a controlling stake in a major European bourse, and it would be even better in Qatar’s eyes should they be able to slow down Dubai at the same time.

And Qatar may get its chance soon. Already, rumors are flying that Qatar may mount a takeover bid following Borse Dubai’s deal to purchase NASDAQ’s 28% ownership in the London Stock Exchange.

The Qatari Investment Authority has naturally denied the rumors, citing long-term ownership interests. But it has not gone unnoticed by some, including us here at Money Morning, that, between the Dubai and Qatar, some 52% of the venerable London Exchange now rests in Middle Eastern hands.

Should Qatar press ahead – and that’s a highly likely scenario given what’s at stake- they would do so on the grounds that future ownership in the London Stock Exchange would substantially improve the business development prospects in Doha, which it sees as the next great Middle Eastern financial center.

And that’s likely the real "deal" here.

In addition to immediately putting a damper on Dubai’s investment plans, such an unlikely partnership would provide new financial linkages into the cash rich Middle East, at a time when western companies, many of which trade on the NASDAQ, desperately need the cash.

In fact, NASDAQ CEO Bob Greifield said as much recently, in a read between the lines statement. "These strategic actions will provide us with a footprint unlike any other exchange…with operations in key markets around the world."

With regard to how investors might play this, it may be as simple as buying NASDAQ (NASDAQ: NDAQ) or the London Stock Exchange (LON:LSE or PINK:LDNXF) with the intention of holding one or both  for the next five years or so as these revenue streams and relationships build.

Of course, the risks here are pretty clear. The Middle East, despite being immensely wealthy and sitting on a gigantic pile of oil-induced cash, is hardly a paradigm of virtue or stability.

But then again, in today’s volatile markets, few things are.

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]]> http://www.moneymorning.com/2007/12/04/qatar-angles-to-undermine-rival-middle-east-cash-baron-dubai/feed/ 1 Dubai Ports World’s Record IPO http://www.moneymorning.com/2007/11/26/dubai-ports-worlds-record-ipo/ http://www.moneymorning.com/2007/11/26/dubai-ports-worlds-record-ipo/#comments Mon, 26 Nov 2007 12:54:04 +0000 admin http://www.moneymorning.com/2007/11/26/dubai-ports-worlds-record-ipo/ From Staff Reports

Dubai’s ambitions to become the leading financial hub of the Middle East got yet another lift last week when the initial public offering of Dubai Ports World raised nearly $5 billion, making it the biggest IPO ever in the region.

Strong demand for the port operator’s shares – priced at the top end of the range at $1.30 each – induced the firm to boost the percentage of the company’s equity offered from 17% to 23%. Last week, the government-owned holding company, Dubai World, said that the  $4.96 billion raised made it the largest-ever Middle East IPO, valuing DP World at $21.6 billion.

"We are delighted with the response to the IPO and pleased so many investors want to share in the future of DP World," company Chairman Sultan Ahmed bin Sulayem told journalists. "The fact the IPO has been so heavily oversubscribed reflects the market’s confidence in the business, its management, and the company’s potential in the future."

It also reflects the attraction of more-developed emerging markets like those of the Middle East to international investors looking to flee the financial turbulence of the Western markets – turbulence a growing percentage of experts now fear is a prelude to a major recession. Although the weak U.S. dollar is affecting Gulf countries with currency pegs to the greenback, the high price of oil and the diversified investments of the region’s sovereign wealth funds are boosting growth.

The boom in Middle East investors looking to sink their petro-dollars into more long-term investments has seen the financial capitals of the West get in on the act. And the so-called "Sovereign Funds" – investment vehicles funded and managed by the state – have played a huge role.

DP World operates 42 terminals in 22 countries, but its government-owned origins generated controversy when the company acquired P&O Ports North America in 2006. By December, DP World had sold its newly-acquired American assets to American International Group. Subsequent to that, the surge of activity of sovereign wealth funds for international investments has shown no sign of slowing. Qatar and Dubai have both competed for stakes in OMX, NASDAQ and the London Stock Exchange, while Qatar nearly shelled out $22 billion for British grocer J Sainsbury.

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]]> http://www.moneymorning.com/2007/11/26/dubai-ports-worlds-record-ipo/feed/ 0 Sales Soar at Dubai Airshow http://www.moneymorning.com/2007/11/14/sales-soar-at-dubai-airshow/ http://www.moneymorning.com/2007/11/14/sales-soar-at-dubai-airshow/#comments Tue, 13 Nov 2007 22:21:15 +0000 admin http://www.moneymorning.com/2007/11/14/sales-soar-at-dubai-airshow/ From Staff Reports

Both Boeing Co. (BA) and rival Airbus SAS secured hefty contracts at the Dubai Air Show, the world’s third-largest aerospace event. However, Boeing isn’t resting on its success, but is rather looking ahead to what it thinks will be a very lucrative market in the future.


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Orders topped $80 billion on in the first two days alone, with deals announced for more than 515 aircraft, Gulf News reported. Those figures include two letters of intent from Dubai Aerospace Enterprises for 200 aircraft, split evenly between Airbus and Boeing.

"Day two sent the show’s record sales tally soaring when Dubai Aerospace Enterprise signed a $13.5 billion letter of intent with Airbus for up to 100 aircraft," organizers said. "Within hours, DAE went on to sign a letter of intent for 100 aircraft, worth approximately $13.7 billion, with Boeing."

Reportedly, Boeing then won an order worth around $972 million, for six additional 787-8 Dreamliners from Dubai-based LCAL, an aircraft-leasing company.

Also, Boeing’s Chief Executive Officer Scott Carson announced yesterday (Tuesday) that his company is close to defining the market for a bigger version of its new 787 Dreamliner and is currently negotiating the sale of approximately 200 aircraft. 

 "We’re within a few months of defining the center of the market," Carson said in an interview with Reuters. "There are six to eight [sales] campaigns around the world [for the planned stretched 787-10] and each one wants a different thing."

Boeing hopes to satisfy those customers in coming months. The company’s shares closed yesterday at $93.70 each, up 84 cents, or 0.90%.

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]]> http://www.moneymorning.com/2007/11/14/sales-soar-at-dubai-airshow/feed/ 0 DP World’s IPO May Trigger Billions in Investments of State-Controlled Companies http://www.moneymorning.com/2007/10/31/dp-worlds-ipo-may-trigger-billions-in-investments-of-state-controlled-companies/ http://www.moneymorning.com/2007/10/31/dp-worlds-ipo-may-trigger-billions-in-investments-of-state-controlled-companies/#comments Tue, 30 Oct 2007 23:03:43 +0000 admin http://www.moneymorning.com/2007/10/31/dp-worlds-ipo-may-trigger-billions-in-investments-of-state-controlled-companies/ By Mike Caggeso
Associate Editor

After years of amassing a diverse portfolio, Dubai’s state-controlled holding company, Dubai World, is planning a Nov. 4 initial public offering of one of its subsidiaries, DP World, the world’s fourth-largest port operator.

The IPO would sell 20% of DP World’s equity and list on the Dubai International Financial Exchange, a move aimed at attracting investors from India, Africa and Europe. DP World manages 42 port terminals in 22 countries.

As P. Krishnamurty, chief executive officer of Dubai International Securities, told the Gulf News last week, DP World is not viewed as a local company. Investors who buy into this IPO are looking for a multinational company that is a blue-chip-quality investment with long-term potential, Krishnamurty said.

The stock offering is expected to raise an estimated $3.5 billion, giving DP World a total value of around $20 billion, the Economic Times reported.

The sale marks a 180-degree turn for the Dubai government – which through Dubai World, Dubai Holding and other private-equity firms has up to now been a big buyer, gobbling up such assets as real estate, national stock exchanges and even high-profile entertainment holdings.

The latest investment of the Dubai government’s investment arm will have Dubai International Capital taking a $1.26 billion (or 9.9%) stake in hedge-fund firm Och-Ziff Capital Management Group, which is slated for an IPO of its own, MarketWatch reported.

Dubai International Capital is based in the United Arab Emirates and is an investment company owned by the emirates’ ruler – Rashid Al Maktoum – is yet another of the fast-growing "sovereign-wealth funds" that have emerged as increasingly powerful players in global financial circles – thanks to booming oil profits that enabled them to amass a war chest of foreign currency reserves.

The funds currently control assets worth about $1.9 trillion, and analysts predict those war chests could swell to $7.9 trillion by 2011 and $12 trillion by 2015, according to estimates from Merrill Lynch and Morgan Stanley.

Transforming From Las Vegas to Financial Center

DP World’s IPO could trigger billions in investments of state-controlled assets. One of the names being floated around is Emirates, the Middle East’s largest airline. AHN News reported the government-owned airline is planning a $25 billion IPO, but that claim hasn’t been corroborated by major news outlets. Company president Tim Clark told Bloomberg News that there wasn’t a "definitive" plan to go public, adding that he estimates Emirates’ value between $20 billion to $30 billion.

Bloomberg also reported that 26 IPOs in the six Gulf Arab countries raised an aggregate $5.9 billion in the first nine months of 2007, citing a report this month from Abu Dhabi-based private equity firm Gulf Capital. The IPOs received more than six times the amount of bids than shares on offer.

On Monday, a Gulf News editorial lauded DP World’s IPO and encouraged the government to open up more of its holdings to the public: 

"A public offering of shares of similar companies implies that firstly, the levels of operations have transcended beyond the local level and that, secondly, it reflects an ambitious future expansion plan. For instance, DP World’s flotation is estimated to be the largest in the entire Middle East. But most important of all is the fact that the price of the shares which the public would be willing to pay would define that company’s positioning in the market, as much as how it would carry out its business in the future. It would also reflect a healthy and promising state of the UAE’s economy," the editorial said.

As Money Morning has reported on several prior occasions, all Dubai’s investments are tied to the same reason: It is experiencing explosive economic growth from its real estate and tourism industries, but especially from its Jebel Ali Free Zone, its tax-advantaged business district. And because the state can’t expand very much within its own borders [Dubai is a shade larger than Rhode Island), it is using its extra money to invest and expand internationally.

The next phase is showing investors that they can profit from Dubai’s economic expansion. Previously, its wealth was more show – state-of-the-art skyline, massive tourism industry, innovative and expensive real estate ventures (Palm Islands and The World) – than go, at least from an economic standpoint.

But its economic growth initiatives are successful, Dubai’s releasing of state-controlled assets will transform the emirate from the Las Vegas of the Middle East into a key financial center – and not just for the Middle East: Dubai will end up as a major financial player in the world’s capital markets, as well.

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]]> http://www.moneymorning.com/2007/10/31/dp-worlds-ipo-may-trigger-billions-in-investments-of-state-controlled-companies/feed/ 0 Dubai World Halts Investments in MGM Shares – For Now – But Las Vegas Firm Still Offers Great Promise From China http://www.moneymorning.com/2007/10/25/dubai-world-halts-investments-in-mgm-shares-for-now-but-las-vegas-firm-still-offers-great-promise-from-china/ http://www.moneymorning.com/2007/10/25/dubai-world-halts-investments-in-mgm-shares-for-now-but-las-vegas-firm-still-offers-great-promise-from-china/#comments Wed, 24 Oct 2007 22:59:20 +0000 admin http://www.moneymorning.com/2007/10/25/dubai-world-halts-investments-in-mgm-shares-for-now-but-las-vegas-firm-still-offers-great-promise-from-china/ From Staff Reports

Dubai World has temporarily halted its investments in MGM Mirage Inc. (MGM), after shares of the Las Vegas hotel-and-gaming firm soared well above the suitor’s target price.

A government-run venture investor, Dubai World used its Infinity World Investments unit to purchase 14.2 million common shares of MGM stock at about $84 a piece, for a total outlay of about $1.19 billion. MGM issued treasury-held shares directly to Infinity World, the entertainment, hotel and gaming company said Friday.

Because of the Dubai investment – and because of its own designs on the burgeoning mainland China tourism trade – MGM is viewed by some savvy investors as a way to play China, while still managing risk.

Infinity World Investments now owns 14.5 million shares, representing about 4.8% of total MGM shares outstanding. That also includes nearly 349,000 shares purchased by Dubai World via a cash tender offer made to MGM shareholders. That tender offer, which fell far short of its goal, expired Oct. 5.

On Aug. 22, Dubai World agreed to purchase as many as 28.4 million shares in billionaire Kirk Kerkorian’s MGM and 50% of the company’s $2.7 billion CityCenter hotel-and-casino project. The group sought to buy half its targeted total of MGM shares through that public tender offer, capping the purchase price at $84 each. But the shares last closed below that price on Sept. 18.

MGM shares closed Friday at $90.73, and have traded as high as $100.50.

Dubai stopped buying shares in MGM because the stock was overpriced. But it will resume purchases – in some form – when the Middle East investor views them as a "good value" again, Sultan bin Sulayem told Bloomberg News.

"We can always buy in the market to achieve the 9% to 9.5% of MGM that we want," bin Sulayem told Bloomberg, declining to specify just what price represents an attractive one for the purchases to resume. "There is no closing window [for Dubai to invest] and we will look at it [again] if the market gets better."

As part of its agreement, Dubai can actually purchase as much as 20% of MGM.

"Dubai is one of the world’s most sophisticated investors," and is investing heavily in Asia, with a special focus on China, says Keith Fitz-Gerald, a professional trader and Money Morning contributing editor who is a well-known expert on the Asian market and on Asian investments.
Dubai is making investments throughout the world via its state-run investment fund, and through other investments – such as the MGM deal. Indeed, shrewd U.S. investors would do well to keep a close watch on Dubai for any investment moves it makes, since its strategies may create other openings for retail investors, Fitz-Gerald said in a recent interview.

Indeed, Fitz-Gerald recommends MGM as a great way to benefit from Dubai’s aggressive global investing plans, and from China’s soaring growth. [For Money Morning's investing report, "Here's Why MGM is a High-Profit Play on China," which includes an interview with Fitz-Gerald, please click here. The report is free of charge].

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]]> http://www.moneymorning.com/2007/10/25/dubai-world-halts-investments-in-mgm-shares-for-now-but-las-vegas-firm-still-offers-great-promise-from-china/feed/ 1 Solid Regional Growth Helps Emirates Telecommunications Report Profits of $1.5 Billion Through Year’s First Nine Months http://www.moneymorning.com/2007/10/16/solid-regional-growth-helps-emirates-telecommunications-report-profits-of-15-billion-through-years-first-nine-months/ http://www.moneymorning.com/2007/10/16/solid-regional-growth-helps-emirates-telecommunications-report-profits-of-15-billion-through-years-first-nine-months/#comments Tue, 16 Oct 2007 11:20:21 +0000 admin http://www.moneymorning.com/2007/10/16/solid-regional-growth-helps-emirates-telecommunications-report-profits-of-15-billion-through-years-first-nine-months/ By Mike Caggeso
Staff Writer

Dubai-based Emirates Telecommunications Corp. (generally referred to as Etisalat), the third-largest Arab telecommunications company, reported that profits for the first nine months of this year jumped 14% (or $490.2 million) to $1.5 billion, as the company added more customers in the rapidly growing area, Reuters reported.

Though Etisalat’s coverage area reaches from Pakistan to Nigeria, domestic cell phone customers account for more 60% of the company’s revenue. Overall revenue in the nine-month period reached approximately $4.17 billion. That represented an increase of 30%, the company said in a statement.

Etisalat isn’t SEC registered and therefore isn’t available for U.S. investors to buy into. Even so, the strong growth is important because Dubai is a market savvy U.S. investors are watching very closely.

"Dubai is one of the world’s most sophisticated investors," and is investing heavily in Asia, with a special focus on China, says Keith Fitz-Gerald, a professional trader and Money Morning contributing editor who is a well-known expert on the Asian market and on Asian investments.

Dubai is making investments throughout the world via its state-run investment fund, and through other investments – such as a deal to buy into the U.S.-based gaming-and-hotelier MGM Mirage (MGM). That deal alone merits a close watch on Dubai by U.S. investors. But shrewd U.S. investors would do well to keep an eye on anything related to Dubai for hints on future moves, Fitz-Gerald said in a recent interview.

Indeed, Fitz-Gerald recommends MGM as a great way to benefit from Dubai’s aggressive global investing plans, and on China’s growth. [For Money Morning's investing report, "Here's Why MGM is a High-Profit Play on China," which includes an interview with Fitz-Gerald, please click here. The report is free of charge.]

And cell phone use – like housing statistics and Internet use figures – is an excellent indicator of economic growth.

But this growth is different than, say, China’s. There, first-time cell phone users and home owners are enjoying newfound expendable incomes, indicating long and unpredictable growth. Dubai and neighboring Qatar are already wealthy. Though slower than China, the growth rates in these emirates have a more-solid foundation to build on because the growth is backed by higher per capita wages and savings.

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