Dubai property prices to decline August 31, 2008
Posted by mylastresort in analysis.Tags: Apartment, Bonyan International Investment Group, Dubai, House, Property Prices, Real Estate, speculation, uae
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According to Bonyan International Investment Group the UAE mortgage market will tripple in the next 3 years to 64 billion dirhams, (KD 4.656 billion). Although I believe that Dubai’s residential property prices are expected to decrease about 10% within one year due to the over supply of newly constructed residential areas and the expectation that supply will increase while demand decreases in the coming years. In a move to discourage speculation, off-plan property sales must be registered with the land department and the developers will no longer be allowed to charge transfer fees. UAE’s housing rent jumped a staggering 18.8% in 2007.
Coming soon: “A Massive decline in oil prices” June 29, 2008
Posted by mylastresort in analysis, sovereign funds.Tags: analysis, Crude Oil, Decline, Decline in Oil, Energy, Finance, Futures, investment, Low, Margin Requirements, Oil, Prediction, Record Level, speculation, Speculators
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An emergency meeting by OPEC, a decision to raise output, rumors of prices well above $170, and news agencies covering the latest developments of oil prices all the while I am thinking of shorting! The price of oil, I beleive, will continue crawling at a steady pace upward and it might reach the levels predicted by the big investment firms and generate another 20% in the next couple of months. Again yes, I want to short oil. I am not contradicting myself!
I could do as most have done and follow the trend and be satisfied with the 20% return. On the other hand, if the market price declines we could see well above a 40% decline in prices. A closer look at the price of oil shows a decline in the making. I will explain my thoughts in the following points:
First, lets dissect the price of oil. Today, if oil is trading at $140, 29% ($40.60) of the price is composed of actual physical oil receivers, the remaining 71% ($99.40) are speculators in the market purely betting to make profits and then rolling over their positions never receiving the oil traded.
Second, oil is traded on the futures market. To trade crude in the market all you need to pay is a margin requirement of $10,000 for every 1000 barrels of crude oil (worth $140,000). Oil is sold in lots of 1000 on the exchange. The margin requirements for the exchange may change (and do change) periodically depending on market volatility. (Crude oil futures margin requirements have changed from $8000/1000 lots to $10,000/1000 lots four weeks ago)
Third, all investment portfolios are diversified in such a way that percentages are dedicated to sectors regardless of the amounts of dollars invested. For instance a hedge fund manager (major players in the market) running a $1,000,000,000 portfolio beleives that oil prices will increase therefore designates 20% of his portfolio to oil futures and the remaining to different sectors. They purchase oil until they satisfy the requirements of the 20%. An initial payment of $200,000,000 is needed to purchase the 20,000 lots required. (Equivalent to buying $2,800,000,000 worth of oil!)
My prediction is that the margin requirements of crude oil futures will (drastically and without warning) increase from $10,000/1000 lots to $20,000/1000 lots (even more) forcing speculators to sell half their holdings to meet margin requirements and new funds to purchase half the amounts they are purchasing today, leading to a 50% drop in the 71% ($99.40) of the price of oil taking it back down to atleast $90.30 [price including physical buyers of oil] instantaneously!
Waiting for the decline will pay more than the rise will, therefore I am going to start selling at $155 (approximate & may change) and cover once the price reaches $90.30.
Qatar lowers interest rate March 23, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: analysis, Appreciation, bahrain, Bank, Basis point, CBB, CBK, Central Bank, Countries, Currencies, currency, Cut, Depeg, Dove, economy, FED, Federal Reserve, Food, Gulf, inflation, kuwait, oman, Peg, Products, qatar, Qatari, Qatari Riyal, Rate cuts, Rent, Revaluations, saudi arabia, speculation
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Qatar has just announced a rate cut of 75 bp (basis points) on its depository facility rate to 2.25%. Thus far Saudi Arabia, Bahrain and now Qatar have been forced to lower their rates, despite rising inflation, to match the Fed cuts made in the previous week.
Annual inflation in Qatar has risen to 13.74% in December 2007. The second highest rate on record as food and rent costs surged in the economy. The Gulf central banks are torn between efforts to fight inflation and prevent appreciation of their dollar pegged currencies.
Speculation on the Gulf currencies revaluation has been seen to increase as inflationary pressures push the countries in to rapid reformation of their monetary policies. As of now the Qatari Riyal forward contract is has appreciated 3.9% to 3.4989 per dollar in a year.
“We are fixed against the dollar” – Qatar March 18, 2008
Posted by mylastresort in qatar.Tags: Abdullah bin Saud al-Thani, Central Bank Governor, De-peg, De-pegging, gcc, inflation, Interest Rates, Pressure, qatar, Qatari, Revaluation, Riyal, Sheikh, speculation, subprime
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Inline with todays reports of the US lower interest rates Qatar’s Central Bank Governer has talked to the press regarding the heavy speculation on the Qatari Riyal.
“We are fixed against the dollar since 2001 and we will stick to this policy… We are sticking to the policy of no revaluation and sticking to the policy of no change against the dollar… In Qatar, there are a lot of things to fight inflation but the issue of inflation is about government expenditure in all countries, and also the growth which is happening in the GCC”
- Sheikh Abdullah bin Saud al-Thani, Qatari Central Bank Governor
When asked about how Qatar might react to a probable cut in U.S. interest rates on Tuesday, he said:
“At that time, we will look at the liquidity in the market and look at the state of the Qatari economy, and make the decision.”
Oil price unrelated to global market fundamentals March 17, 2008
Posted by mylastresort in analysis.Tags: bahrain, Emergency, Futures, kuwait, Kuwait's acting Oil Minister, Market fundamentals, Meeting, Mohammad al-Olaim, Oil, oman, OPEC, Organization of Petroleum Exporting Countries, Output, Price, qatar, Record, saudi arabia, speculation, uae, United Arab Emirates
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US Oil Futures hit a fresh record of $111.80 on Monday. Organization of Petroleum Exporting Countries (OPEC) have claimed repeatedly that it is ‘due to factors beyond [their] control for the surge in prices’ – therefore output has been left unchanged. Kuwait’s acting Oil Minister, Mohammad al-Olaim, stated that, high oil prices are not related to oil market fundamentals but are due to speculation and international political tension. He also stated that OPEC does not control the price, instead works to ensure market stability.
“There is no problem at all with world oil inventories”
Qatar to keep Riyal peg, for now March 13, 2008
Posted by mylastresort in analysis, qatar.Tags: analysis, bahrain, banking, currency, currency pegs, economy, forex, gcc, inflation, kuwait, news reports, qatar, Qatari Central Bank Governor, saudi arabia, Sheikh Abdullah bin Saud al-Thani, speculation, subprime, uae
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According the Qatari central bank governor, Sheikh Abdullah bin Saud al-Thani, Qatar will keep its currency pegged to the dollar at the same rate for now. The oil producer is grappling with near-record level inflation and speculators waiting for the QAR to apprectiate.
”The view of the Central Bank of Qatar until the moment is: there is no change in policy about depegging from the dollar… We are still pegging the riyal against the dollar and we will continue at the moment… I want to emphasise that we are still fixed against the dollar and we will continue pegging our currency against the dollar at the moment…”- Sheikh Abdullah bin Saud al-Thani, Qatari Central Bank Governor
For the past months the Qatari prime minister, finance minister and an economic advisor to the Emir have all spoken in favor of currency reform mainly to fight a 13.74% reported in 4th Quarter 2007. Qatar said this month it would freeze rents for two years on many housing contracts and the country is also considering introducing subsidies on some commodities to fight inflation.
Kuwaits inflation not eliminated by revaluation – BBH March 12, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: bahrain, Brown Brothers Harriman (BBH), Central Bank, De-pegging, Dinars, Dirhams, Dollar, Economy Speculators Inflation, Federal Reserve, Gulf, Gulf countries, kuwait, oman, qatar, Revaluation, Riyals, saudi arabia, speculation, uae
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A report today by Brown Brothers Harriman (BBH) reckons that Gulf countries are not ready to abandon their dollar denominated pegs, yet.
“We attribute inflation to the strong economies that have driven up domestic costs rather than the falling dollar especially given the dollars role as an invoicing currency in the region” – BBH
The dollar has been setting record lows against major currencies this month & the Fed is agressively cutting rates to save its crumpling economy. Speculators are persistent that Gulf currencies will re-consider their pegs in the face of increasing inflationary pressures. BBH’s standpoint is in the fact that Kuwait’s inflationary problems were not eliminated by its de-pegging in May 2007.
more pressure to revalue… March 11, 2008
Posted by mylastresort in analysis, bahrain, qatar, rumors, saudi arabia.Tags: Currencies, global, Gulf, inflation, Revaluation, speculation
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Inflationary pressures around the globe are adding to pressure on the U.S. dollar as central banks from China to Chile choose to fight rising prices by letting their currencies appreciate. Gulf currencies have been seen fluctuating greatly by speculators in an attempt to gain by a revaluation in their currencies….
Kuwait’s Commercial Bank wants to go Islamic March 4, 2008
Posted by mylastresort in analysis.Tags: analysis, Banks, Central Bank of Kuwait, Cham Bank, Commercial Bank of Kuwait, investment, Islamic, Jamal al-Mutawa, kuwait, Kuwait International Bank, news, Reuters, speculation, Stock Market
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(Reuters) – The Commercial Bank of Kuwait was awaiting approval from the central bank to transform into an Islamic lender, a newspaper reported on Tuesday. “CBK has made a request to the central bank to transform all its activities to comply with Islamic law after the central bank gave conventional banks the chance to transform within a limited period,” al-Qabas newspaper quoted Chief Executive Jamal al-Mutawa as saying, paraphrasing his remarks. “The presence of one or two other banking units that operate in line with sharia will not harm the market at all,” Mutawa said. CBK said on Sunday it could raise its stake in Syrian Islamic lender Cham Bank to up to 30 percent from 10 percent.
(Reporting by Rania el-Gamal, Editing by Inal Ersan)
Although it seems as though the decision will be imminent this process will take years upon years for it to be concluded. Kuwait International Bank (KIB) has been awaiting approval since the millennium. The Central Bank has given the banks the right to apply to become Islamic banks and since then the banking sector has flocked to apply to get the ‘approval.’ Awaiting the approval does not nessesarily mean that the banks will transform into Islamic institutions. Once the approval has been granted it will be decided upon based on the markets needs at that time. Expected Central Bank approval will be between 5 to 10 years, if at all. This is all due to the demand of Sharia Compliant banking and the immense growth they are generating when compared to conventional banks.
