Mashreq Bank
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mashreq Fixed Income Trading Daily Market Update Sunday, July 05, 2015 Market Update • Abu Dhabi lenders’ earnings grow 11% in Q1 The total net earnings of Islamic and commercial banks in Abu Dhabi climbed 11.2% in the first quarter of 2015 in year-on-year period, showing the strengthens of the flourishing banking sector. Total earnings rose 1.5% in quarter-on-quarter comparison, said Statistics Centre Abu Dhabi complied, “Abu Dhabi-Based Banks Statistics Report”, for Q1 2015. (Khaleej Times) • Gulf Finance House planning acquisition GFH is planning to make an acquisition this year and sell a unit in an initial public offering. The expected moves are part of efforts to reshape GFH, which was hit hard by the 2008-2009 global financial crisis. “The new strategy of GFH is primarily focused on creation of a financial group rather than just an investment bank which it used to be before,” said Hisham Alrayes, the chief executive. “From the five pillars, we would like to have an equal participation of income, ideally.” Currently the Bahrain-based Islamic investment bank has four units: investment banking, commercial banking, real estate and industry. GFH, which is talking to one firm in Bahrain and two in Dubai, is banking on closing this year with at least one leveraged acquisition valued at about USD200 million. The firm is seeking to finance the acquisition through 30 to 40% equity and the remainder in debt. (Bloomberg) • Qatar National Bank and Bahrain's Arab Bank Corp more interested in acquiring Finansbank QNB and ABC did not follow up early interest in acquiring HSBC's Turkish business because they were more interested in National Bank of Greece's Turkish arm Finansbank, two people familiar with the matter said. Dutch lender ING Group is set to win the auction to buy HSBC's business, after being one of several banks to submit a non-binding bid in May. Arab Bank Corp (ABC) was one of the original bidders while Qatar National Bank (QNB) also showed some early interest, Reuters previously reported. Two sources told Reuters on Thursday that both QNB and ABC dropped out because they became interested in potentially acquiring at least part of Finansbank, the Turkish unit of National Bank of Greece. (Bloomberg) • UAE draft law on corporate tax, VAT soon The UAE is making headway in setting up a federal tax system to bolster government revenues, a senior Ministry of Finance official said on Thursday. The drafting of laws for introducing corporate tax and value-added tax (VAT) is expected to complete in the third quarter of this year. “The drafting of the corporate tax law and the value-added tax law has been discussed with the local and federal governments,” Younis Haji Al Khouri, undersecretary at the ministry, was quoted by Reuters as saying. He added that authorities were still evaluating the social and economic impact of the laws, but drafting was expected to be finished “very soon — within the third quarter of this year”. The decision to work towards the introduction of VAT was taken by the GCC officials. In May, a meeting in Doha of the GCC’s Financial and Economic Cooperation Committee adopted a draft agreement on VAT, which is widely expected to be endorsed by member governments. As per the Doha agreement, each GCC country is required to draft its own VAT law in the framework of the Gulf custom union principles. According to Reuters, a UAE Ministry of Finance report released on Thursday said the cabinet had approved versions of the corporate tax and VAT draft laws. It said the ministry was working on the creation of a federal tax authority, but did not say when the body might start operating. The six-nation GCC has been weighing the introduction of VAT since 2007 to broaden their revenue base, with negotiations happening jointly to avoid any one nation losing out in competition with others in the region. However, the sharp reduction in oil prices recently could lend a further push to introduce the levy, given that most Gulf states are expected to record budget deficits in the coming fiscal year and are reluctant to pare back spending on infrastructure and social spending aimed at developing their economies and improving the lives of citizens. The IMF has urged the UAE to consider introducing excise taxes and a uniform corporate tax for both local and foreign firms. (Al Khaleej Times) • Kuwait may issue bonds to finance deficit: Minister Kuwait is considering issuing bonds among various options to finance a budget deficit created by low oil prices, Finance Minister Anas Al-Saleh said on Thursday. “Going to the market and issuing bonds and so on, could it happen this year? Possibly yes,” he said in an interview with Al Arabiya television. “A specialized team at the central bank are studying this issue and the decisive factor will be what’s best for the country, in addition to the economic benefit to the markets.” Saleh did not specify if Kuwait was considering international or domestic bonds. The government does not have outstanding dollar bonds and has only a modest amount of domestic debt. Figures showing a budget deficit of 2.31 billion dinars (USD7.6 billion) in the last fiscal year to March 31, the first deficit since 1999/2000, came as a surprise, Saleh said. The preliminary figures were released on Wednesday. Parliament approved on Wednesday a budget for the current year that envisages a deficit of 8.18 billion dinars. In addition to issuing bonds, Kuwait could run down assets in its sovereign wealth fund to cover its deficit, as Saudi Arabia has been doing. The Kuwaiti fund holds USD548 billion of assets, estimates the Sovereign Wealth Fund Institute, which tracks the industry. (Gulf Base) • Iran talks breakthrough seen as UN expects end to military probe United Nations monitors say they will be able to assess the possible military aspects of Iran’s past nuclear program by December, overcoming one of the last remaining hurdles to a deal between world powers and the Islamic Republic. International Atomic Energy Agency director general Yukiya Amano rejoined negotiators from six world powers and Iran on Saturday in Vienna. Bringing the 12-year investigation into Iran’s possible military work to an end would pave the way for Iranian sanctions relief under an agreement that would curb the country’s nuclear program. “With the cooperation of Iran, I believe we can issue a report by the end of the year,” Amano told reporters. “Progress was made on the way forward.” (Bloomberg) Page 1 mashreq Fixed Income Trading Daily Market Update Sunday, July 05, 2015 • Tunisia calls 30-day state of emergency after beach attack Tunisian President Beji Caid Essebsi declared a 30-day state of emergency, saying the country is “not safe” after the killing of 38 people at a beachfront resort. “The extraordinary circumstance in Tunisia after the last terrorist attack and other continuous threats put the country in a state of war,” Essebsi said in a nationally televised address. “We have declared a state of emergency.” The north African nation has been on heightened alert since a gunman with links to Libyan militants attacked mostly British vacationers at the resort on June 26. The attack in Sousse, claimed by Islamic State, was the worst assault on tourists in the country’s history and threatened an industry that provides jobs for about 15% of the workforce. “We need foreign investments but don’t currently have a safe atmosphere for that,” Essebsi said. The attacks on tourists in Tunisia are “credit negative” by threatening the nation’s economic outlook, investment activity and travel industry, a key component of GDP, the ratings agency Moody’s said on July 1. (Bloomberg) • China freezes IPOs in attempt to stem stock market bleeding China is suspending initial public offerings, creating a market stabilization fund and telling investors not to panic in an effort to shore up its stock market, which has had the largest three-week drop since 1992. The move was ordered at a meeting of the State Council, China’s cabinet, and will be enforced by the China Securities Regulatory Commission, the financial magazine Caijing reported on its website on Saturday, without saying how it obtained the information or how long the planned freeze would last. The Securities Association of China said Saturday in a statement on its website that a group of 21 brokerage firms led by Citic Securities Co. will invest the equivalent of 15% of their net assets as of the end of June, or no less than 120 billion yuan (USD 19.3 billion) in total, to set up a stock-market fund. The fund will invest in exchange-traded funds of highly capitalized stocks, it said. The funds should be available on Monday, Caijing said in a separate report. In another development, top executives from 25 Chinese mutual funds, including China Asset Management Co. and E Fund Management Co., promised to “actively” buy stock funds and hold them for at least one year, according to a statement on Asset Management Association of China’s official website. (Bloomberg) • Greece Referendum -- Nai or Oxi ? Greeks are heading to the polls Sunday, evenly split on a referendum to chart a new course in their five-year economic crisis. The vote on whether to endorse further budget cuts and tax increases in return for aid comes in the most trying circumstances Greeks have faced in the euro era. Banks are shut, commerce is grinding to a halt, pensioners are coping with rationed payments, and Prime Minister Alexis Tsipras and his supporters are isolated in the currency bloc.