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mashreq Fixed Income Trading Daily Market Update Sunday, January 17, 2015 Quote of the Day "Wealth consists not in having great possessions, but in having few wants." (Epictetus) Market Update Iran sanctions lifted after IAEA confirms compliance with the nuclear deal, US firms set to miss out as US sanctions remain International sanctions on Iran have been lifted after IAEA, the UN nuclear watchdog confirmed the country had complied with a deal designed to prevent it developing nuclear weapons. The International Atomic Energy Agency concluded that the Islamic Republic had curbed its ability to develop an atomic weapon as required under an accord with world powers. The US and five other nations agreed in July’s accord to lift sanctions on Iran “simultaneously with the IAEA-verified implementation” of the deal. “Iran has undertaken significant steps that many people doubted would ever come to pass,” clearing the way for sanctions to end, US Secretary of State John Kerry said in Vienna late on Saturday after Iran’s compliance with the agreement was certified. Still, he said the accord “doesn’t wipe away all of the concerns” of the international community, and “verification remains, as it always has been, the backbone of this agreement." The EU foreign policy chief, Federica Mogherini, said the deal would contribute to improved regional and international peace and security. “Relations between Iran and the IAEA now enter a new phase. It is an important day for the international community,” Yukiya Amano, director general of the agency, said in a statement. “This paves the way for the IAEA to begin verifying and monitoring Iran’s nuclear-related commitments.” Ahead of the announcement Iran freed four Iranian-Americans as part of a prisoner exchange with the US that had been negotiated in secret for more than a year. Lifting the sanctions will unfreeze billions of dollars of assets and allow Iran's oil to be sold internationally. The sanctions have cost Iran more than more than USD160 billion (£102bn) in oil revenue since 2012 alone. Once they are lifted, the country will be able to resume selling oil on international markets and using the global financial system for trade. Iran has the fourth largest oil reserves in the world and the energy industry is braced for lower prices. Iran will also be able to access more than USD100 billion in assets frozen overseas. Lifting of sanctions also opens the door to foreign investors who are keen to enter a relatively untapped market of 77 million people. Most US companies will be on the sidelines because the deal lifts only those sanctions imposed on Iran to punish it for its nuclear program. It doesn’t touch the sweeping ban on US trade and investment with Iran put in place by the Clinton administration in 1995. The Obama administration has pledged to continue enforcing sanctions against Iran related to its ballistic-missile program, support for terrorism and human-rights violations. Republicans and some Democrats in the US Congress opposed the nuclear agreement and have vowed to press for fresh sanctions. European oil majors such as BP Plc, Royal Dutch Shell Plc, Total SA and Eni SpA have all said they are ready to pounce on opportunities on offer in the country. New exports could yield about USD5 billion a year. US-based heavyweights including Exxon Mobil Corp. and Halliburton Co. probably will have to wait and may miss out completely because of unilateral sanctions imposed by Washington to punish Iran for its involvement in terrorism and missile development. Those bans will stay in place despite the nuclear deal. (Bloomberg/BBC News) Terrorist attack on a hotel in Burkina Faso leaves 26 dead An attack by al-Qaeda militants at a hotel in the West African nation of Burkina Faso left at least 26 people dead and highlighted the militants’ shift to striking capital cities in the region. Burkina Faso’s military rescued at least 156 hostages from Ouagadougou’s Splendid Hotel, which is popular with foreigners, on Saturday, while 56 people were injured, Prime Minister Paul Kaba Thieba told reporters. It was the second attack claimed by al-Qaeda since gunmen took more than 100 people hostage in November at the Radisson Blu hotel in the capital of neighboring Mali, killing dozens. French special forces helped Burkina Faso’s army in the operation, Interior Minister Simon Compaore said by phone, as did the US military, according to the Department of Defense’s Africa Command. Among the victims were people from 18 nations. Al-Qaeda in the Islamic Maghreb, led by the one- eyed former Algerian soldier Mokhtar Belmokhtar, said it carried out the siege that began in the evening on Friday. The latest attack came a day after al-Qaeda-linked militants in Somalia claimed to have killed 63 Kenyan soldiers in the southwest of the Horn of Africa country and two days after Islamic State said it carried out a gun- and-suicide bomb assault in central Jakarta, Indonesia. (Bloomberg) Indonesian police arrests suspects of Jakarta attacks, whereas a suicide bomber is arrested in Malaysia Indonesian police have arrested 12 suspected terrorists since the deadly attack in Jakarta on Thursday, one of whom had received fund transfers from Islamic State, said the country’s top police officer. The money was sent via Bahrun Na’im, an Indonesian militant who is believed to be heading an IS brigade of Indonesians in Syria, National Police Chief Badrodin Haiti said at a press conference in Jakarta. Indonesians returning from the Middle East who are suspected to have joined IS will be denied entry, Haiti said. Two civilians and five attackers were killed in the assault on a Starbucks cafe and a police post in the Indonesian capital. While unsophisticated, it was the first in Southeast Asia to be directed or inspired by IS and followed months of warnings by security officials that its members posed a threat to the region. A Malaysian man was detained just hours before planning to blow himself up at an entertainment venue in Kuala Lumpur, a government official said today, after authorities raised the alert level following bombings in neighboring Indonesia. The 28-year-old Malaysian was detained on Friday at a monorail station in Kuala Lumpur, said national police chief Khalid Abu Bakar. He said the man confessed he planned to blow himself up in an attack after receiving orders from members of the Islamic State group in Syria. The official told The Associated Press he was detained just hours before his planned suicide attack at an entertainment outlet, either a karaoke bar or a pub. Khalid said in a statement that the man also had been hanging Islamic State flags in several Malaysian states to oppose the government's crackdown on the militant group within the country. Khalid tweeted that "weapons and IS documents" were seized when the man was detained. Police have raised the security alert to the highest level following the deadly attacks in Jakarta last week. Security has been increased at public places such as shopping malls and tourist spots, with extra precautions taken at border areas to prevent any infiltration by militants, Khalid said. (Bloomberg) UAE's new economy is more than oil The UAE has done well to diversify its economy and lessen its reliance on oil, but more needs to be done. His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, is keen to increase the pace of reforms to tide over uncertain times as markets take a nosedive and oil prices hit new lows. Revenues from oil currently contribute to 30% to the UAE's GDP. It was 90% in the 1970s. The plan is to further cut dependence on oil to a mere 5% per cent by 2021. The country is seen as a safe haven, a sound investment destination, which has limited the impact of low oil prices on the economy. The IMF says the country's non-oil growth remained strong at 4.8%. This has been driven by real estate projects in Abu Dhabi and Dubai's growth as a global trade, transportation, tourist and hospitality centre. Economic storms may have skipped from the UAE after the downturn in 2008, but Shaikh Mohammed is in a hurry to wean the country off oil. "We decided to convene a ministerial retreat in the coming weeks in presence of local governments and economists to discuss UAE's economy beyond oil," he said. (Khaleej Times) Saudi Arabia plans new sovereign wealth fund Saudi Arabia plans to create a new sovereign fund to manage part of its oil wealth and diversify its investments, and has asked investment banks and consultancies to submit proposals for the project, according to people familiar with the matter. Plunging oil prices have strained Saudi Arabia's finances. The kingdom's state budget deficit is at a record high and net foreign assets dived more than USD100 billion in 15 months. The new fund could change the way tens of billions of dollars are invested and affect some of the world's leading asset managers, particularly in the United States, where the bulk of Saudi Arabia's foreign assets are managed. A source said the Saudi government sent out a "request for proposal" to banks and consultants late last year, seeking Page 1 mashreq Fixed Income Trading Daily Market Update Sunday, January 17, 2015 ideas on how to structure a new fund. The sources asked not to be identified because the plans are confidential. One source said the fund would focus on investing in businesses outside the energy industry, such industrials, chemicals, maritime and transportation.