December Confessions #1 December 30, 2008
Posted by Ali in Regulation, analysis, kuwait.Tags: December Confessions, Intervention, investment
6 comments
During December the market confessed three important facts. The first is that the Kuwait Investment Authority (KIA) will not provide the optimism needed to restore confidence in the market. The second is that investment banks will fail in succession amid the greatest government intervention since souk almanakh. Finally that oil prices will no longer be controlled by the oil cartel, OPEC.
The Mega Fund Investment Strategy
Over the previous month Mustafa Al-Shamaly, Minister of Finance, gave three different statements, over a period of three weeks regarding the date of the first acquisition of the Mega Fund. Following the third statement investor confidence turned to a new low as speculators lost faith in the market or the very existence of the Fund. (more…)
“K-Dow”: Scandal or Strategic Investment? December 29, 2008
Posted by Abdul in Regulation, analysis, kuwait.Tags: Dow Chemical, K-Dow, KPC, kuwait
16 comments
Named K-Dow, this joint venture (JV) represents one of the most talked about deals in the country. Petrochemical Industries Company (PIC), a wholly owned subsidiary of Kuwait Petroleum Corporation (KPC), announced a multi-billion dollar joint venture with the Dow Chemical Company (Dow) in December 2007, in which Dow would contribute its Oil and Gas arm totally into the deal, creating the largest Polyethylene provider in the world. Polyethylene is the main ingredient in plastics. K-Dow would be larger than the JV between GE Plastic and SABEC and Chevron Phillips.
Oil and Gas represents nearly 25-30% of Dow’s operations. In December 2007, the JV was valued at $19 billion. With the markets plunging since the deal was announced, the JV was revalued to $15 billion in late November 2008, in which Kuwait would provide $6 billion for a 50% stake in the JV. The worst-case scenario for this deal would provide a return of at least 10% annually, as announced by PIC Chairman Maha Mulla Hussain. The venture would employ more than 5000 people (Kuwaitis and non-Kuwaitis) and have annual revenue of about $15 billion. Agreements were signed on November 28th after approval from Kuwait’s Supreme Petroleum Council, the highest authority in the Ministry of Oil.
So where’s the problem? Sounds like a great deal for Kuwait and Dow. (more…)
Lets look at Madoff December 23, 2008
Posted by Aziz in Regulation, analysis.Tags: Hedge funds, Madoff, Ponzi Scheme
8 comments
Lets take it step by step..
Whats a Ponzi Scheme?
a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit. It is named after Charles Ponzi. The term “Ponzi scheme” is used primarily in the United States, while other English-speaking countries do not distinguish colloquially between this scheme and other pyramid schemes.
The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going. – Wiki
After the GBK Smoke…Kuwait’s Financial Regulation: Three is a crowd and one big mess! November 1, 2008
Posted by Jassim in Regulation.Tags: Ahmad Bager, GBK. CboK, Mustapha Al Shemali, Regulation
3 comments
Its about time the government circumcises powers of those who are incompetent to have them in the first place! Two great examples are:
- While, Minister of Commerce and Industry , Ahmad Bager was tasked with an “emergency” task force to deal with stock markets, he was quoted at the Society of the Revival of Islamic Heritage’s economic round table (I’m not being sarcastic here) saying that the stock market is a market of “adventure seekers” and even hinted at how interest rates (or “Ribaa”) have been the precursor to the current capital markets decline
- Minsiter of Finance, Mustapha Al Shemali, said a few weeks back that “People should buy now, rather than sell. This is a good time to buy in the stock market”!
