Archive for the ‘Financial Services’ Category

Bloomberg reports that Citigroup has hired a former U.S. diplomat (financial attache at the U.S. embassy in Baghdad), Dennis Flannery, to head its Iraq division. In February, Citigroup included Iraq among the eleven economies with the most promising growth prospects in coming decades. In addition, February saw Iraq’s oil exports reach their highest level since the U.S. invasion in 2003. Mr. Flannery, who is initially to be based out of Amman, Jordan, had the following comments:

“We are very optimistic about Iraq over the next three to five years.” It will have “considerable wealth” from its oil exports and is poised to invest in the oil and gas industry, power generation and housing to boost growth. “Over the last year, Iraq’s security situation has improved very steadily.” Over a longer period, Citigroup may have “branches, a consumer business, a middle- market business” as well as a “full-service bank in the country.”

See also: IMF: “Iraq has maintained macroeconomic stability under difficult external & internal circumstances…” and Foreigners can own 100% of Iraqi companies, pay 15% flat tax, & take all profits home.

From the Economist Intelligence Unit, excerpts:

Positive factors

Banks in the UAE are well capitalised. The capital-adequacy ratio stood at 20.8% at the end of 2010. This is well above the Central Bank requirement of 12% (and the Basel II requirement of 8%). A high capital-adequacy ratio can be perceived as a cushion to cover risks that banks may incur in their lending and financing operations.
We expect most banks to have provisioned for the bulk of the write-downs in 2010. Although we may see further write-downs this year, we expect bank lending to resume at a moderate level.

Negative factors
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The WSJ’s Simon Nixon comments on the just-published Basel III rules and mentions some key risks. A summary follows with commentary by TradeFlow21 contributing editor Al Rio.

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Qatar’s sovereign wealth fund (SWF), the Qatar Investment Authority (QIA), is reported by the Financial Times to be interested in buying some of the U.S. Treasury’s 27% stake in Citigroup. Interestingly, while most other SWFs have shied away from bank investments after previously ill-timed ones in 2008, Qatar has fared well, notably from its investments in Credit Suisse and Barclays, according to the FT. QIA has $65 billion in assets, per a ranking of SWF assets on Wikipedia. There appears to be no mention of asset size on QIA’s website. In any event, the principals of TradeFlow21 view QIA’s potential investment as beneficial for all parties, including the capital markets at large.

In consecutive days the FT has reported on the situation for equities in the Gulf region (see clipped excerpts below). In spite of the U.S. induced credit withdrawal felt around the world, the fact remains that the Gulf is liquid in every sense and can intervene via SWFs, if truly need be, without longer term repercussions, unlike the funny money show on front stage elsewhere around the world.

clipped from www.ft.com Mideast states urged to prop up stocks Middle East governments and their sovereign wealth funds were yesterday urged to intervene in their domestic stock markets by a leading Gulf banker following sharp declines in the region’s equity markets. There are fears that, despite the unprecedented oil boom, the Gulf could be heading towards a dramatic correction, similar to 2006 when hundreds of billions of dollars were wiped off the region’s equity markets. On Tuesday the Kuwait Investment Authority, Kuwait’s $200bn sovereign wealth fund, started buying into the country’s stock exchange, which was up about 20 per cent in the first half of the year, but has since fallen 21 per cent. clipped from www.ft.com Flight of foreign capital adds to woes So much for decoupling. The MSCI Gulf index is down nearly a third this year, and paradoxically, the foreign capital that was supposed to decrease the volatility of regional equity markets has been blamed for much of the slump.