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
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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…)
A look into Global’s Assets: The Insolvency Question December 28, 2008
Posted by Ali in analysis, kuwait.Tags: Bankruptcy, global, investment
7 comments
Investopedia.com defines insolvency as the company status when its liabilities value exceeds its assets value. In other words, it is the status at which it becomes impossible for the company to satisfy its debt obligations. In my previous post, Globals Desolution, I explained the dire seriousness that Global Investment House (Global) is facing this time I will use numbers to emphasize my point. (more…)
81.3% Correlation! December 26, 2008
Posted by Aziz in analysis, kuwait.Tags: KSE, Oil
6 comments
The chart above plots two interesting highly correlated assets if I may say, the Kuwaiti Stock Exchange (White line) and the price of the NYMEX Crude Oil (Orange line). the reason I chose the period between 2006 and 2008 is to show how they behave in a bull, bear market and at reversal points.
Got Oil? December 25, 2008
Posted by Aziz in analysis.Tags: NYMEX, Oil, OPEC
6 comments
I walked into the office thinking about the post i’m working on which is related to oil, so I open the daily monitor to look at the futures and there goes NYMEX Crude trading at $35.35 (-9.31%) from yesterday’s trading. Oil has lost 78% of it’s july 2008 highs.
- OPEC cuts oil production and will cut it even further(in my opinion) but that didn’t help.
- We still can’t see the light at the end of the tunnel (economy wise) which means nothing will increase the demand for oil.
KIC Funds delayed December 25, 2008
Posted by mylastresort in analysis, kuwait.Tags: Intervention, KIA, KIC
6 comments
Contrary to many statements in the news the Kuwait Investment Company (KIC) funds have not invested in the Kuwait Stock Exchange (KSE), yet. The KIC has received the funds for investment but decided not to act. Even after knowing that the funds were coming, they decided not to prepare for the investment until the funds arrive. Now that the funds were received, the company just decided to form a committee to study the potential investments. No statement was made public on behalf of the company.
In a press release on Monday, the government announced plans to invest KD 1 billion in the market. Due to the reckless behaviour on behalf of the KIC, investor confidence has reached an all time low. Any government press release will not be regarded as fact and dismissed due to the lack of trust in the government following the actions taken by KIA [Correction] KIC.
Collateral Stock Rules Unchanged December 25, 2008
Posted by mylastresort in kuwait.Tags: CBK, Intervention
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Kuwaiti banks face unknown punishment if they liquidate stocks held as collateral, in a regulation passed by the Central Bank in October. The rumors that this regulation was reversed was quickly refuted by the CBK governor.
“What is being reported, the rumors on this issue, is completely untrue”
- Shiekh Salem Abdulaziz Al Sabah, Governor
Every regulation generates greater innovation, thus banks have gone around this by asking customers to willfully consent to liquidating their portfolios which, technically, resolves the issue without the unknown penalty. The lack of transparency keeps the public from knowing the ‘punishment’ banks may receive by getting rid of the stocks in their portfolios. The market has fallen over 50% since its peak this year.
The Central Bank has previously stated that it expects some investment companies to run into trouble due to their exposure to the global arena.
Kuwaiti Oil Down $2.60 December 24, 2008
Posted by mylastresort in analysis, kuwait.Tags: kuwait, Oil, OPEC
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The Kuwaiti price for oil fell another $2.60 to end the day at $32.73 accordingto the Kuwait Petroleum Corporation (KPC). A global decline in the demand for oil has decreased prices substantially since July.
The price of a Kuwaiti barrel reached its highest level this summer to $135 before its downward spiral. Short term expectations are that oil prices will reach $20/barrel within the next couple of months. The oil cartel, OPEC, has recently announced more cuts in production while prices continue to decline.
Kuwaiti M1 Slows to 11.3% December 24, 2008
Posted by mylastresort in kuwait.Tags: CBK, kuwait, M1
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Kuwaiti M1 Money Supply Slows to 11.3% in November from 13% last month. Various central bank measures were taken to strengthen the local banking system and maintain the flow of lending. The measures include:
- Reducing Discount Rate
- Guaranteeing Deposits
- Raising the Loan-to-Deposit Ratio
- Injecting funds in to the interbank market
Reminder: M1 is the currency in circulation, demand deposits – and other deposits that are similar to demand deposits.
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
