Wednesday 10th February 2016
NEWS TICKER: Following a recent Morningstar Analyst Ratings meeting, the firm has downgraded the Morningstar Analyst Rating for the L&G All Stocks Index Linked Gilt Index fund to Bronze. The fund previously held a Silver rating. Jose Garcia Zarate, senior fund analyst at Morningstar says, “We continue to have a positive view on the fund’s price, its tracking accuracy, and the parent company’s commitment to the provision of passive investing solutions. However, we have concluded that the heavily long-dated nature of the underlying market exposes investors to a volatile return profile over a market cycle. In particular, a rules-based passive fund tracking this market is particularly vulnerable to the downside relative to category peers that have the discretion to tweak duration. As such, we feel a Bronze rating reflects more accurately our conviction in this fund’s ability to outperform its category peers over a full market cycle.” - The US Commodity Futures Trading Commission (CFTC) says it has rescheduled the Technology Advisory Committee (TAC) public meeting to Tuesday, February 23rd, from 9:45 a.m. to 3:45 p.m., at CFTC’s Washington, DC headquarters. The meeting was originally scheduled for January 26, but was cancelled because Federal Government offices in the Washington Metropolitan Area were closed due to inclement weather. The TAC will discuss: the CFTC’s proposed Regulation Automated Trading (Reg AT); swap data standardisation and harmonization; and blockchain and the potential application of distributed ledger technology to the derivatives market. The CFTC says members of the public who wish to submit written statements in connection with the meeting should submit them by Monday, February 22nd - Greek Prime Minister Alexis Tsipras has called a ministerial meeting this morning to discuss the latest key domestic developments including the open issues whose implementation is required for the completion of the 1st programme review as well as farmers’ escalating protests against the planned overhaul of the income tax and the social security pension system, says Eurobank in Athens. Minister of Finance Euclid Tsakalotos warned earlier this week that the programme review should conclude by the end of February noting that Greece will be “in trouble” if it carries on into May-June - India’s Power, coal and renewable energy minister Piyush Goyal yesterday offered a $1trn prize to Australian power and energy firms to come and invest in the country’s power sector. Goyal's pitch comes as the government is pegging economic growth at 7.3% for Q4 2015, marking a slight drop on previous quarters but still outpacing China. Goyal says India's power sector is at an inflection point as the Modi government is focusing on structural reforms with an integrated outlook for the energy sector – Tomorrow (February 11th), the Latvian parliament (Saeima) will hold a vote of confidence on the new composition of the Cabinet of Ministers set up by incoming premier Māris Kučinskis. The first ceremonial sitting of the new government will be held tomorrow at 15.00 in the Green Hall of the Cabinet of Ministers. Ināra Mūrniece, acting president and speaker of the Saeima will also participate in the sitting - freemarketFX, the currency exchange, has appointed services veteran Rich Ricci as Chairman. Formerly CEO of Barclays Corporate and Investment Banking - JP Morgan Asset Management has appointed Paul Farrell as head of UK Institutional Clients. Based in London, Farrell will join JPMAM in April and will report to Patrick Thomson, head of International Institutional Clients. Farrell will be responsible for leading the sales team that manages and builds client relationships with Institutional Pension Funds in the UK & Ireland. He will have responsibility for direct client relationship management in the defined benefit as well as business development in the defined contribution marketplace and will work closely with our consultant client team led by Karen Roberton. Farrell joins most recently from Dimensional Fund Advisors, where he served as Head of UK Institutional Clients and was responsible for new business development, client service and consultant relations. Before that he was head of UK Strategic Clients at BlackRock - Vistra Group, a provider of fund admin services, has bought UK-based business expansion services provider Nortons Group, the accounting and advisory service. The Nortons team, led by Andrew Norton and Pete Doyle, is joining the Vistra Group to boost their existing range of services and benefit from Vistra’s global reach. Martin Crawford, CEO of Vistra Group, says: “Offering support services to companies moving abroad is a core business for Vistra and of growing importance. Nortons has the expertise, the experienced staff, and the network to add significant value to this service line. We are very proud to welcome Andrew Norton, Pete Doyle, and their colleagues to our international team and look forward to expanding our global reach with their experience and leadership". The acquisition of Nortons is expected to complete by the end of February and will take the combined headcount of the Vistra Group, inclusive of the soon to be merged Orangefield Group, to over 2,200 staff in 39 countries - Asian markets had another tough day. Japan's Nikkei Stock Average fell 2.3% to its lowest closing level since late 2014, and reaffirming a trend across the last few months the yen remained near its strongest level against the dollar in over a year. Despite the Bank of Japan's decision last month to introduce negative interest rates, a policy that tends to weaken the local currency, the yen has strengthened in recent sessions to levels not seen since 2014. The Japanese 10-year treasury yield traded shortly in negative territory, and touched -0.08%, before stabilising above the neutral mark. The dollar was last up 0.1% against the yen at ¥ 115.00. Australia's S&P ASX 200 fell 1.2%, the downward drift being led by energy stocks. The Australian Dollar consolidated yesterday’s gains and is currently testing the next resistance, which lies at $0.71. AUD/USD up 0.21 in local trading. Other Asian currencies did well today against the dollar. The South Korean won rose 0.74%, the Taiwanese dollar edged up 0.60%, while the Indian rupiah climbed 1.05%. That uptick was not reflected in equity markets. The Topix index slid 3.02%. In Singapore the STI slipped 2.14%, while New Zealand equities were down 0.85% respectively. China's markets are still closed for the Lunar New Year holidays – The story today is all about Federal Reserve chair Janet Yellen’s testimony to the US Congress. Analysts say that the market is pricing in no further rate increases in the near future and given the volatility in the markets and the general air of panic right now among investors, it would be a catastrophic move for the Fed to raise interest rates even a quantum in coming months. Truth is that no matter how well Yellen paints the US economy is it a story of two halves: yes, job numbers are rising, but there looks to be a lot of slack in the overall economy and this is contributing to a gradual weakening of the US dollar (but not against the euro). In fact, Europe is making the US look good; hence the wild swings in investor sentiment. Still, bank stocks look to remain vulnerable for the remainder of the quarter. This week's economic calendar is light; hence the focus on the Fed. The other bit of advanced market news is that expectations are rising for a rate cut by Norges Bank. Emerging market currencies are broadly trading higher this morning. The South African rand rose 0.85% against the US dollar, with USD/ZAR back below the 16.0 mark at around 15.9350. The Russian ruble also took advantage of this respite and gained 0.65% versus the greenback, which helped USD/RUB to edge lower to 79.10. In terms of data, watch out for industrial and manufacturing production figures from France, the UK and Italy and CPI data from Denmark and Norway - In commodities, Brent crude oil was last up 2.4% at $31.05 a barrel in thin trade on speculation about possible production cuts, but remains down nearly 9% for the week and roughly 19% for the year. Peter Rosenstreich, head of market strategy at Swissquote Bank explains, "Crude oil has been able to rebound off the 12-year low ($27.78) after falling sharply by nearly 8% on Tuesday. The positive catalyst was the news that Iran has indicated that they would be willing to work with Saudi Arabia on production limits. However, markets remain sceptical of this or any coordinated production cuts. There seems to be no relief on selling pressure in sight as the US government released reports indicating that demand will remain soft by lower demand growth forecasts. In addition, the Paris based International Energy Agency (IEA) has warned that the supply glut will continue through 2016 as production cuts have been made at a slower pace than forecasted.” In other market news this morning, spot gold in London was down 0.2% at $1188.05 an ounce, while three-month copper futures on the London Metal Exchange fell 0.7% to $4,463 a ton.

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Fortunes divide in infrastructure spending in the GCC

Monday, 03 October 2011
Fortunes divide in infrastructure spending in the GCC The growing disparity of fortunes in the GCC project segment was starkly exposed by a Citigroup report, which highlighted the fact that while some $170bn of projects in the United Arab Emirates have been put on hold or cancelled outright, the MENA region has seen a substantial uptick in infrastructure project spend. Who are the winners and runners up in the GCC project stakes right now? http://www.ftseglobalmarkets.com/

The growing disparity of fortunes in the GCC project segment was starkly exposed by a Citigroup report, which highlighted the fact that while some $170bn of projects in the United Arab Emirates have been put on hold or cancelled outright, the MENA region has seen a substantial uptick in infrastructure project spend. Who are the winners and runners up in the GCC project stakes right now?

Citigroup’s latest MENA construction tracker report holds that the value of projects either delayed or cancelled rose to $170bn in August alone; a signal indication that the construction segment, particularly related to real estate in the Emirates, is still suffering from the fallout of local construction firms overstretching their credit exposure in the early years of this century. The figure is significant; the value of projects cancelled or delayed accounts for 56% of the all stymied projects across the survey area and is up 13% on July’s figures.  The property boom in the Emirates has now been languishing for over 3 years, with some prices of private property estimated to have fallen by as much as 60% in Dubai. No wonder many developers have been forced to abandon projects.

Projects cancelled or on hold across the wider MENA region in contrast, fell slightly to $1.69bn, compared with $1.7bn in July.  However, key markets in the GCC continue on the fast track in terms of new project spend. Saudi Arabia added $81bn worth of projects to the already $100bn it intends to spend on infrastructure in general and $20bn it will spend on downstream petrochemical projects over the coming five years.  Saudi Arabia, the UAE, also Jordan and Egypt are reportedly now pushing forward the idea of building nuclear power capacity across the MENA region; with the estimated value of projects topping $400bn over the next 15 years.  Saudi Arabia will again dominate this segment, with a planned $350bn spend on the King Abdullah City of Atomic and Renewable Energy project, which aims to establish a zeroCo2 emissions city using a mix of nuclear and other renewal energy sources.  Around 16 separate nuclear units are planned.



Kuwait ($20bn) and Qatar ($2bn) also have projects that are in preliminary stages of construction. In contrast, the UAE also showed a $12bn decline in preliminary projects to $118bn.

It is a contrasting picture with the situation even two years ago. While the outlook for countries such as Saudi Arabia look strong in the near term, revised data issued by the Saudi Arabian Monetary Authority shows that the build up to the current construction pipeline was rather slow in 2009 and the first half of 2010. There was an uptick in growth in 2010, with the industry posting 3.7% year-on-year real construction industry growth, while an average growth in construction projects of some 4% a year over the next four years is expected, backed by a healthy project pipeline, strong government support, an ability to invest and local demand for infrastructure keeps the industry stable.

The country’s Ninth Development Plan announced a touch over a year ago sets out an investment spend on infrastructure of some SAR1, 444bn ($385bn) between 2010 and 2014. Then, in response to stirrings elsewhere in MENA, now called the Arab Spring, the government created two packages of social benefits worth $130bn to finance further investment in education, healthcare and housing projects. SAR250bn ($66bn) was pledged for housing alone, with 500,000 new units in the pipeline. Around 7% of development plan investment will be channelled into housing, encompassing some 1m new houses to be built on a public-private partnership basis.  Another 19% will be invested in healthcare, involving the build of some 117 hospitals and 750 so-called primary care units.  The government also has an $80bn 10-year investment plan for electricity infrastructure underway in parallel with the infrastructure investment plans, which run out to 2018. Some 20GW of electricity capacity is currently under construction, worth around $30bn.

In a boost to local construction firms, the Saudi Industrial Development Fund has announced it will finance up to 75% of costs for investment projects in under-developed regions.

The current crop of investments underway includes the SAR40bn expansion of the Grand Mosque, underscoring the Kingdom’s pivotal role in Islam. The expansion, in the northern part of the Grand Mosque will cover an estimated 356,000 square metres, ultimately accommodating up to 1.2m worshippers.  It includes the construction of four giant bridges allowing access to the northern courtyards inside the Grand Mosque. It is the largest expansion project within the Grand Mosque complex to date and will showcase the country’s move into the 21st century, while retaining its sacred role as protector of the Islamic faith.

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