Archive for the ‘Markets’ Category

Earlier this week, Treasury Secretary Tim Geithner traveled to Saudi Arabia to “reassure Gulf nations on their holdings of Treasury bills.” In an ‘Alice-in-Wonderland’ moment of reversed roles and expectations, Mr. Geithner said the U.S. will defend the dollar and, by extension, the integrity of investors who are helping underwrite U.S. debt, which now totals a whopping $11 trillion. His stop in Jeddah underscores the ever-expanding influence of the greater Middle East market as both a U.S. creditor and consumer of goods and services. Mr. Geithner reaffirmed America’s commitment in “keeping its economy open to foreign investment” while expanding international trade in the region. Clearly, this is encouraging news for Connecticut companies seeking entry into the greater Middle East market of over 500 million consumers. (See full article in Financial Times)

Ambassador Shaun Donnelly, who currently serves as Sr. Director of International Business Policy at the National Association of Manufacturers (NAM), told TradeFlow21 – Middle East Trade Summit participants (April 24) that he acknowledges there are challenges for businesses amidst the current economic backdrop, but he said he believes there are “even more opportunities.” Heed the Ambassador’s word since NAM’s membership exceeds 13,000. Furthermore, he stated, “It’s hard to have a strategy if you don’t have an export strategy,” citing the fact that approximately 95% of the world’s consumers reside outside the U.S. TradeFlow21 is cognizant of this, and thus is presently focused exclusively on the Middle East given the region’s many attractive growth characteristics, in addition to the prospect of realizing security through commercial prosperity. So without further ado, let’s review the “12 Rules for Exporting to the Middle East.” Read the rest of this entry »

In a commentary posted on the TradeFlow21 website in advance of President Obama’s speech, we wrote that necessity:

1)      demands the cessation of hostilities between Israel and its neighbors, including the creation of a sovereign Palestinian state as the only viable means of resolving the Palestinian question

2)      requires a U.S. policy that summarily rejects those in all quarters who use division and discord as a means of maintaining their “competitive advantage” in the region

3)      dictates that economic development, through investment and trade, be embraced as the preferred path to establishing a more stable, secure world for all

In his long-awaited speech on American-Muslim relations today in Cairo, President Obama responded, arguing that

1)      “America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity and a state of their own”

2)      “as long as our relationship is defined by our differences, we will empower those who sow hatred rather than peace…conflict rather than cooperation…this cycle of suspicion and discord must end”

3)      “on economic development, we will create a new corps of business volunteers to partner with counterparts in Muslim-majority countries…I will host a summit on entrepreneurship this year to identify how we can deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world”

Thank you, Mr. President.  The partners of TradeFlow21 will join you in the cause to build a prosperous, secure Middle East through commerce and trade.  Let us now begin our work.

On Monday of this week, the Emirate announced the launch of an “exchange-traded fund backed by physical gold.”  The fund will allow regional investors to not only preserve capital but perhaps generate substantial returns.  The gold bullion, which will be held in London by HSBC, meets the hard-asset requirements of shariah. At the fifth World Islamic Economic Forum held in Jakarta also on Monday, participants ventured further in offering shariah-based banking as a viable alternative to the highly-leveraged transactions model.  For more, click on designated links to full stories in the Financial Times.

In his first address to a joint session of Congress on Tuesday night, President Obama committed to work with G-20 nations to “restore confidence in our financial system, avoid the possibility of escalating protectionism, and spur demand for American goods in markets across the globe.” This was certainly good news for Dubai World, which recently invested $400 million to construct east Africa’s ”most modern, highest capacity container port” in Djibouti. The Doraleh Container Terminal is expected to serve the undeserved and expanding markets of east Africa, including Kenya, Tanzania, and Ethiopia. Its strategic location will permit products to flow more efficiently from all corners of the earth, creating a new Middle East-Africa corridor of trade and opportunity.

With his stake in Citigroup (NYSE: C) now self-reported to be less than 4%, Saudi Prince Alwaleed bin Talal bin Abdulaziz Al Saud said Thursday that he will raise it back to 5%, to the same level he purchased back in the early 90′s for around $550M. The decision makes for good conversation in terms of why now, why not earlier, or why at all. But that’s for another time. Let’s not forget that another struggling household name, General Electric (NYSE: GE), which was reported this morning to be looking for SWF funding in Asia, actually has some implicit access to cash from the Gulf, as well.

We are traders all. We barter and bargain, agree then rescind, resume and conclude negotiations for goods and services throughout our lives. We trade because we are inclined by nature to do so, regardless of how we earn our daily bread as defined by the color of our collar, blue or white. It is in our blood.

Next January, President-Elect Barack Obama will be severely tested on many fronts:  a two-theater war; dislocation of global markets; and a mounting environmental crisis that threatens to alter the face of the earth and the security of nations. He will be pressed for answers, not just explanations.

For many, the Middle East is the nexus of terror, provoking wars of intervention, and oil, which has created untold wealth for the region and pollution as a by-product of a fuel-addicted world. It is also a land of over 300 million people, where industry, entrepreneurship, and direct foreign investment have fed a development boom of unprecedented scale. Though Gulf states in particular have felt the effects of the current financial crisis, resulting in plummeting home prices in Dubai and the court-ordered closure of the Kuwait stock exchange, the Middle East’s influence in world markets is uncontested.

We urge the President-Elect to seize the moment and let trade flow freely into this intersection of the world, supplanting terror and war by transforming oil-dependent economies into highly diverse, fully integrated drivers of global growth and opportunity.

Let trade also rebalance a troubled region that for the past 60 years has employed a Cold War model with Israel as the sole arbiter of U.S. and Western interests.

Let trade transcend language, culture, and faith as democracies and theocracies find concord through commerce, with prosperity and security the dividends.

A $60 floor for oil prices seems reasonable at this point and is still profitable for the Gulf, although not quite like it was, when nearing $150/bbl. Abu Dhabi’s budget is reportedly based on $40-$50/bbl prices, while Saudi’s is said to be in the range of $55-$60/bbl. Meanwhile, Ahmed Al Mazrouie, Chairman of the UAE Contractors’ Association sees a silver lining: “Construction work in Europe and the United States will be cut back considerably as a result of the crisis and this will result in large supplies of raw materials on the market and a drop in prices. Gulf countries will benefit most from this.” See the images and clips below from Emirates Business 24/7.

clipped from www.business24-7.ae Abu Dhabi ‘will not be affected by oil price slide’  “The Abu Dhabi boom began when oil prices were still relatively low. And the really high prices, ranging around $140 per barrel, were based on speculation. The government knows prices go up and down and based their development plan on lower prices. Thanks to this strategy Abu Dhabi is very stable,” it quoted Abdulla Al Hamed, Chief Executive of Capital Group, as saying.”Indeed, officials used an estimated price of $45-$50 a barrel in the 2008 budget. This means that, with a current account surplus amounting to 25 per cent of the gross domestic product, Abu Dhabi has ample room for manoeuvre and sufficient liquidity reserves to balance its national budget.” clipped from www.business24-7.ae Realty projects will not be scaled down   The demand for housing units is growing in most of the emirates in the UAE. (IMAD ALAEDDIN)

As reported in a TradeFlow21 posting on September 29th, it was suggested that sovereign wealth funds  may soon join a list of suitors seeking bargains among Wall Street’s ruins.  In an interview with the Financial Times published today, Deputy US Treasury Secretary, Robert Kimmitt,  indicated that SWFs were “actively looking at US opportunities.”  While Gulf nations struggle to address liquidity issues in banks and stock exchanges at home, many of their sovereign funds may also be waiting for the US market to hit a ‘true bottom’ before increasing such activity.  Patience is the rule of thumb here–buy low, sell high.

In the past twelve months, nuclear Pakistan has survived a constitutional crisis that led to the temporary suspension of rights, the assassination of a beloved former prime minister, and the resignation of a contentious president.  With nations throughout the wider Middle East, including the Gulf, now pumping billions into banks and stock markets in an effort to blunt the blows from the global meltdown, Pakistan’s modest, emerging economy is also in need of a bailout.  A fast-sinking rupee has created a balance of payments crisis, which has reportedly prompted the Pakistani government to seek $4B in aid from the World Bank and other industrialized countries, including the United States and China.  See article in Financial Times, Pakistan calls on lender to help anchor rescue package.