Aayan Leasing and Investment - MOCI to Press Forward with Shareholders' Meeting

Muhammad Sha'baan at AlQabas reports that the Ministry of Commerce and Industry is determined to push forward with the shareholders' general meeting it has called and which will take place in early August.  At that meeting the MOIC will deliver its report to shareholders on the Company's financial condition as well as violations of various laws and regulations committed by the Company - including the delay in releasing financial statements, holding the required shareholder's annual meeting along with other unspecified violations.

As per the article, the MOCI does not intend to tell the shareholders what to do but expects that they will in light of its report take action.  It will also refer certain violations to the Public Prosecutor for investigation.

The Company has apparently tried to get the MOCI to let it set the agenda for the meeting.  The MOIC has refused and has noted that the shareholders' meeting it has called will take place prior to any OGM that the Company may call. 

Apologists for the Company have reportedly argued that the Company was unable to secure the Central Bank of Kuwait's approval of its financials until just recently and so it shouldn't be held accountable for the delay in financials.  Further as financials are a condition precedent to an OGM, neither should it  be blamed for the failure to hold the OGM.   Critics have retorted that the Company delayed in providing certain information to the Central Bank and is therefore, after all, culpable.

Kuwaiti Listed Companies – Who’s on the Boards?

Augustus Pugin Senior and Thomas Rowlandson - Public Domain

In a recent article, Eissa Abdul Salaam at AlQabas published a study on the board seats held by various Kuwaiti families. Here's the more important link to the detailed results.  

The study considers families with 5 or more board seats on listed companies.  It also notes the legal and regulatory requirements to be eligible to be a director as well as restrictions.

At first blush, this report might be considered a way of getting an insight into economic influence in the country, though one has to recall that owners often have a corps of dedicated retainers known in local parlance as رجال النعم who serve in a variety of functions, including as board members. As well, one would expect that certain prominent families, especially those with a particularly noble and regal presence, might be asked to adorn the board of this or that company as happens in the "developed" West.

In any case there is some utility to the report. It gives a snapshot of the prominent families. And perhaps to a limited extent a relative ranking of wealth.

Here's a quick summary.  Note:  I'm using the numbers in the details not the article.  Below is only a partial list.  Those families with  14 seats and above.  As noted above, the AlQabas list extends to  five seats and above - giving a grand total of  583 seats.

Family	# Seats
AlSabah	42
Cadet Branches	37
AlGhanem	30
AlKhorafi	23
AlOsaimi	19
AlBahar	19
Behbehani	19
AlMutairi	18
AlShaya	16
AlWazzan	15
AlKhalid	15
AlHomaidi	15
AlMarzouk	14

Cadet Branches are identified as Sultan, Bin Eissa, AlBadr, AlMutawa by AlQabas.

AlQabas also provides a breakdown of the number of directors, though again it seems there is a difference in totals. The article refers to 192 listed companies. Excluding Non Kuwaitis and parallel market stocks, I believe 198 companies are listed on the KSE. Unless I've done the maths wrong, the total companies accounted for are 186.

 

# Directors	# Companies	Total Directors
4	4	16
5	74	370
6	14	84
7	65	455
8	10	80
9	16	144
10	3	30
TOTAL	186	1179

 

Aabar: UAE Securities and Commodities Authority Orders AED1.95 Tender Price

The UAE SCA ordered IPIC to raise its tender price to AED1.95 per share based on the average of the past six months' trading.

It also set the Offer Period from 20 July through 5 August with payment to all tendering shareholders no later than 10 August 2010.

I must confess that I hadn't expected the SCA to upset the original price.  And for the small percentage I assigned to that event, certainly not as dramatic an increase in price as this.  The SCA may show only one eye in its logo, but it apparently has keen sight and a strong will - even when faced with "important" parties on the other end.   Hopefully, a trend that will continue.

Aabar Takeover - The Wall St WTF "Take"

Ken has a good post on Aabar's take-over offer over at his blog.  Worth a read.

The Investment Dar - Restructuring Plan Does Not Incorporate New Central Bank Regulations - So What?

You've probably seen the articles (Gulf Daily News, AlWatan, and AlQabas) saying that TID, its creditors, Morgan Stanley and Credit Suisse met 6 July to discuss the draft restructuring plan and to discuss the fact that the plan does not incorporate the new Central Bank guidelines for investment companies.

Much is made of the fact that the Central Bank guidelines must be completely implemented by June 2012.

As you'll recall (and if you do not, look here and here), these impose certain rather strictly drafted ratios:

1. Leverage of 2:1 (Total Liabilities to Equity)
2. 10% Liquid Assets Ratio
3. A cap on foreign borrowing - 50% of total equity.

Frankly, this seems much ado about nothing.

Barring a miraculous recovery of asset values, there are two ways that TID can get in compliance with the ratios.

1. Its shareholders agree to fund a massive increase in capital.
2. Its creditors, particularly the foreign ones, forgive debt.  Other options would be defeasance.  Or equity conversions.

Hard to imagine rational investors throwing good money after bad (subscribing for new equity) for the sake of complying with some regulation.

Impossible to imagine creditors forgiving debt - especially the "Islamic" ones even in light of the clear guidance in 2:280.  

Defeasance would require sufficient assets in the "trust" to provide a comfort margin.  Given the quality of TID's "core assets", one would expect a very large margin.   That would leave other creditors high and dry.  As well, the hook into the Company by not defeasing provides at least additional theoretical source of repayment. 

Converting secured debt into equity doesn't seem like a particularly appealing prospect unless the conversion could be into an instrument that was called "equity" but was actually the equivalent of secured debt.

There's no real motive for a shareholder or creditor to take any of these actions.  Both realize that the Central Bank's options are limited.  It's not going to place TID into Administration (at least not beyond what the restructuring is already doing) for the sake of  enforcing a regulation.

More likely than not the Central Bank of Kuwait will have to give TID a special exemption from the new rules - an extension beyond the 30 June 2012 "deadline".   Just as it is likely to have to give Global such a pass.

Markaz Kuwait: Massive Losses in Kuwait Investment Firm Sector

The fine folks at Markaz have issued a report on the Central Bank of Kuwait's proposed new regulations for the Kuwaiti "Investment" Firm Sector.

Markaz is generally supportive of the CBK's actions.

The "headline" story here (and sadly not a surprising one) can be summed up in this quote:

The sector lost over USD 2 bn in 2009 following a monstrous loss of upwards of USD 3 bn in 2008, and continues to post an aggregate loss of over USD 100 mn in 1Q10 (an annual run rate of USD 400 mn). The losses are tied to impaired assets which companies have been writing-off in an attempt to restore some health to their balance sheets. Liquidity and over-leverage have also been an issue for the sector, whose assets are often comprised of difficult to value and illiquid investments which are then pledged as collateral against further borrowings. These issues were not bothersome during the boom periods; however, when the global financial crisis hit, it exposed the sector’s vulnerabilities resulting in a massive destruction of wealth.

The report has three main parts:

1. A discussion of the ratios.  This is well worth a close read.
2. The CBK's analysis of compliance. (Discussed below)
3. Markaz's own analysis from a sample of 32 companies.

I'll let you read Markaz's discussion of the ratios - not much for me to add.

As to the CBK's analysis,  of the 100 firms in the sector:

1. 94 meet at least one of the new criteria.
2. 82 at least two of the new criteria.
3. 49 all three of the criteria.

Markaz has done a bit of data gathering and number crunching to come up with a ratio compliance test for 32 firms in the sector for the first two new ratios:  total leverage and liquidity (the latter what Markaz calls the "Acid Ratio").  It's not possible to calculate the third ratio (foreign debt exposure) given the woefully inadequate disclosure of foreign borrowings.

The detailed results of Markaz's analysis are in Appendix 2.  On an aggregate basis, of the 32 firms in their sample.

1. 75% met the Leverage Ratio.
2. 44% the Acid Test (Liquidity Ratio)
3. 34% both ratios.

One point I would like to highlight is their focus on fair value reserves.

The problem arises in the valuation method used in this segment which can be vague at best and completely misrepresentative of “actual” value in the worst case. By misrepresenting the fair value of Assets Available for Sale, a company can inflate its Fair Value Reserve (and therefore Equity figure) by booking Unrealized Gains, which would produce a lower leverage ratio." 

Earlier post on this topic here.

Central Bank of UAE Preparing Provisioning Guidelines for UAE Banks for Dubai World Exposure

Quoting Reuters, Emirates Business 24-7 says that the CBUAE has advised banks not to take specific provisions against their Dubai World exposure pending the CB's release of guidelines on provisioning.

As discussed in February, the CBUAE is in the process of revising its general guidelines for loan classification and provisioning.   

No doubt they will want to do a bit of "fine tuning" regarding guidance for Dubai World.

Central Bank Regulation - John Lipsky

John Lipsky, First Deputy Managing Director at the IMF, delivered a speech on deficiencies in central bank regulation prior to the recent crisis plus some prescriptions for correcting shortcomings in Moscow last Friday. "The Road Ahead for Central Banks: Meeting New Challenges to Financial Stability".

He identifies a central failing which might be described as simple minded credulity.

Prior to the crisis, for instance, supervisors relied excessively on financial firms’ own risk analysis and internal controls. In broad terms, they relied heavily on the self-disciplining qualities of markets. In other words, supervisors were insufficiently intrusive and skeptical.

What could possibly go wrong with allowing firms to police themselves?  Not just allowing them to judge when they had "broken" a prudential limit, but allowing them to measure whether they had broken it or not.  And, we hear yet again about the self disciplining qualities of markets - which is the regulators' equivalent of the implicit guarantee. 

In fact if you read the speech carefully, you'll see that this failing is the root cause of most of the other shortcomings he identifies. 

IIF Report Criticizes Central Bank of Kuwait Re Investment Companies

AlQabas has a summary of a recent Institute of International Finance ("IIF") Research Note on the Kuwait financial sector - June 1 "Financial Sector Strains are Easing". 

Much of the analysis is familiar.  Banks have been hurt by the slowdown in commercial real estate, the weakness in the Kuwait Stock Market, the problems of Kuwaiti investment companies.  Banks are expected to have another weak year in 2010 as the need for provisions continues.  The IIF also noted the unevenness in the banking sector with some banks having relatively low levels of distressed loans 2% and some much higher at 30%.  IIF is rather sanguine on the banking sector's prospects. 

What is the most interesting "bit" is reflected in the headline that AlQabas used.  "Report issued by IIF:  Central Bank of Kuwait issued licenses to investment companies but left them without strong supervision/regulation".  And this probably explains in part the recent new tougher regulations the CBK issued.

English text of the IIF report here - though you need to be a member with a password to access.

Central Bank of Kuwait - New Regulations on Investment Companies

AlQabas published a summary of key elements in a recent Central Bank of Kuwait general circular to investment companies subject to its supervision.

Here are the main points.

The new regulations were approved by the CBK's Board of Directors on 8 June 2010.  More details to be advised later. 
 

They apply to both parent and affiliate/subsidiary investment companies.  And on a consolidated basis.

Three key ratios are at the heart of the new regulations.

1. Leverage Ratio:  Total Liabilities to Equity may not exceed 2:1.  Liabilities are "all" liabilities except for general and specific provisions.   This definition appears to include accounts payable, other liabilities, etc.  Not just debt to financial institutions or bondholders.  Total Equity excludes Treasury Stock and losses.  What's not clear is the treatment of  "fair value" and similar reserves. representing unrealized profits.  Those familiar with "history" in the area know that a lot of financial firms got in trouble by borrowing against "fair values" which later reversed.  And in some cases may never have existed in the first place.  Declaring profits against these fair values, paying bonuses and dividends against them, etc.  So the treatment of this element in equity is key.  Probably a limit on the amount of fair value that can be included in "Equity" is one solution.  What I'm thinking of is something similar to Basel II's treatment of the components of equity - Tier 1, Tier 2, and Tier 3.  Otherwise, "clever" bankers may discover  or manufacture hidden value in their balance sheets and thus undo the constraint. 
2. "Quick" Ratio:   Liquid assets equal to 10% of Total Liabilities must be held.  Liquid assets are those than can be liquidated within a month and are composed of cash and deposits with the Central Bank and other financial institutions; Kuwait Treasury Bonds and similar Government paper including Central Bank of Kuwait paper;  other sovereign debt rated BBB or above.  Ratings must be from S&P, Moody's, or Fitch.
3. Maximum Foreign Debt Ratio:  No more than 50% of Equity as defined above.  Foreign debt appears to be defined by location of the creditor (credit from "non residents") not the currency in which the debt is denominated.   At a leverage ratio of 2:1 then only 25% of debt can be to non residents.

The new regulations and ratios apply as of 30 June 2010.  If a firm is not in compliance, it must make efforts to improve its compliance with the final date to meet all the requirements no later than 30 June 2012.
  

Saudi Arabia Capital Markets Authority Levies SAR7.3 Million Penalty Against Saudi Telecom Ex Director

The Saudi CMA announced today that a final judgment had been made in the case of Mr. Saleh Bin Mohammed Bin Saleh AlHajaaj.  He had been accused of insider trading in shares of Saudi Telecom on 19 and 20 December 2004.

The judgment consists of the following:

1. Payment to the CMA of the SAR7,249,365 representing the profits on his trading those two days from information he obtained as a member of the Board.
2. Payment of SAR100,000 in fines.
3. A three year ban from working for any company traded on the Saudi Stock Exchange (Tadawwul).

Dr. AlHashel to the New Capital Markets Authority. Sh. Mishal to the Central Bank?

Both AlQabas and AlWatan report that Central Bank of Kuwait Deputy Governor, Dr. Mohammed Y. AlHashel has agreed to take up the post of the head of the newly formed CMA.

AlQabas reports that Shaykh Mishal AlJabir AlAhmad Al Sabah has been chosen to replace him as Deputy Governor at the Central Bank.  Shaykh Mishal is currently Assistant Undersecretary at the Ministry of Commerce and Industry where he is also head of the Office of Investment of Foreign Capital.

Dr. Mohammed is described as both an academic and a banker.  More importantly he is seen as active and decisive - two things that are required for the position.

Kuwait Stock Exchange Suspends Trading in 8 Additional Companies

If you've read other press accounts, you may be wondering why I am saying the KSE has suspended 8 companies when others say 22.  That's because 14 of the number have been suspended for some time now due to failure to provide earlier financial statements.  And those companies are indicated by ( موقوفة ) after their names in the official KSE announcement below.

The new companies include:

1. Global Investment House
2. The International Investor
3. Industrial and Financial Investments
4. KMEFIC
5. Aref Investment Group
6. Kuwait Finance and Investment Company (KFIC)
7. AlQurain Holding
8. Wethaq Takaful Insurance Company (Wethaq)

Seven of the above companies are from the investment company sector at the KSE.  Wethaq is from the insurance company sector.

What's surprising in the above list is the presence of GIH and KMEFIC.  KMEFIC is owned by the AlAhli United Bank Group.  Presumably, a lot of these companies will clear their financials in fairly short order.

[8:58:29]  ِ.وقف التداول باسهم شركات اعتبارا من اليوم ‏
يعلن سوق الكويت للاوراق المالية بانه تم وقف التداول باسهم (22) شركة ‏
وهى الشركات التالية:‏
الشركة الاهلية القابضة (اهلية) (موقوفة) ‏
شركة المستثمر الدولي (مستثمر د) ‏
شركة بيت الاوراق المالية (البيت) (موقوفة) ‏
شركة الاستثمارات الصناعية (ا صناعية) ‏
شركة الكويت والشرق الاوسط للاستثمار (كميفك) ‏
شركة المجموعة الدولية للاستثمار (المجموعة د) (موقوفة) ‏
شركة مجموعة عارف الاستثمارية (عارف) ‏
شركة الدار للاستثمار (الدار) (موقوفة) ‏
شركة اعيان للاجارة والاستثمار (اعيان) (موقوفة) ‏
شركة بيت الاستثمار العالمي (جلوبل) ‏
الشركة الخليجية الدولية للاستثمار (غلف انفست) (موقوفة) ‏
الشركة الكويتية للتمويل والاستثمار (كفيك) ‏
الشركة الدولية للاجارة والاستثمار (د للاجارة) (موقوفة)‏
شركة القرين القابضة (قرين قابضة) ‏
شركة وثاق للتامين التكافلي (وثاق) ‏
شركة لؤلؤة الكويت العقارية (لؤلؤة) (موقوفة)‏
شركة مجموعة المستثمرون القابضة (المستثمرون)(موقوفة) ‏
شركة المشروعات الكبرى العقارية (جراند)(موقوفة) ‏
شركة الصفاة العالمية القابضة (صفاة عالمي) (موقوفة)‏
شركة فيلا مودا لايف ستايل(فيلا مودا) (موقوفة)‏
شركة الشبكة القابضة (الشبكة )(موقوفة)‏
الشركة الكويتية للخدمات الطبية(عيادة ك) ‏
اعتبارا من اليوم الاحد الموافق 16-05-2010 ،وذلك لعدم تقديم البيانات ‏
المالية المرحلية للفترة المنتهية فى 31-03-2010 ،فى الموعد المحدد .‏

Kuwait Stock Exchange Warns 74 Companies of Potential Suspension

You may read elsewhere today the KSE issued warnings to 88 companies that if they don't provide their 31 March 2010 financials to the KSE by 8:30 AM on 16 May (Sunday), they will be suspended from trading.  

Let's look a bit closer as this is less "scary" than it would seem from the headline..

1. Since 14 companies are already suspended for failure to provide earlier financials, the warning theoretically could result in the suspension of an additional 74.  Hence, my use of the number 74 in this post. 
2. Many of these companies will likely provide financials in time - particularly those companies that have scheduled board meetings to discuss their financials.  This is just the warning stage.  
3. In fact if you read the remainder of the KSE announcements today, you'll notice that day 51 board meetings are scheduled to take place today to discuss financials and 6 on Saturday.

As per the announcement, the "cohort" is divided into two groups:

1. Those that haven't provided their financials and have NOT set a date for a Board meeting to discuss their financials.  This group comprises some 34 companies of whom 14 are already suspended for failure to provide earlier financials.  Suspended companies have  (موقوفة)  (= suspended) after their names.
2. Those that haven't provided financials but HAVE set a date for a Board meeting to discuss.

Normally, I'd provide the names in English but 88 is a rather long list.  And, many of these are likely to provide financials by the deadline.   Let's see what happens on Sunday.

[8:4:17]  ِ.ايضاح بخصوص الشركات التي لم تقدم البيانات المالية في الموعد المحدد
يعلن سوق الكويت للأوراق المالية واستنادا الى قرار لجنة السوق بجلستها
رقم 97/4، والذي يلزم كافة الشركات والصناديق المدرجة في السوق بتقديم
البيانات المالية المرحلية في موعد أقصاه 45 يوما من تاريخ انتهاء الفترة،
فان الشركات التي لم تقدم البيانات المالية المرحلية للربع الاول المنتهي ‏
في 31-03-2010 كما يلي :‏
ِ1-شركات لم تقدم بياناتها المالية ولم تحدد موعد اجتماع مجلس الادارة و
عددها (34) شركة على النحو التالي: ‏
الشركة الاهلية القابضة (اهلية) (موقوفة) ‏
شركة المستثمر الدولي (مستثمر د) ‏
شركة بيت الاوراق المالية (البيت)(موقوفة) ‏
شركة الاستثمارات الصناعية (ا صناعية) ‏
الشركة الدولية للتمويل (د للتمويل ) ‏
شركة الكويت والشرق الاوسط للاستثمار المالي (كميفك) ‏
شركة المجموعة الدولية للاستثمار (المجموعة د) (موقوفة) ‏
شركة عارف الاستثمارية (عارف) ‏
شركة الدار للاستثمار (الدار) (موقوفة) ‏
شركة الامان للاستثمار (الامان) ‏
شركة اعيان للاجارة والاستثمار (اعيان) (موقوفة) ‏
شركة بيان للاستثمار (بيان) ‏
شركة بيت الاستثمار العالمي (جلوبل) ‏
الشركة الخليجية الدولية للاستثمار(غلفت انفست) (موقوفة) ‏
الشركة الكويتية للتمويل والاستثمار (كفيك) ‏
الشركة الدولية للاجارة والاستثمار (د للاجارة) (موقوفة)‏
شركة تمويل الاسكان (اسكان) ‏
شركة المدار للتمويل والاستثمار (مدار) ‏
شركة الصفاة للاستثمار (الصفاة) ‏
شركة القرين القابضة (قرين قابضة) ‏
شركة المدينة للتمويل والاستثمار (المدينة للتمويل) ‏
شركة نور للاستثمار المالي (نور) ‏
الشركة الكويتية البحرينية للصيرفة الدولية (صيرفة) ‏
الشركة الكويتية الصينية الاستثمارية (الصينية) ‏
شركة المسار للاجارة والاستثمار (المسار) ‏
شركة وثاق للتامين التكافلي (وثاق)‏
شركة لؤلؤة الكويت العقارية (لؤلؤة) (موقوفة)‏
شركة مجموعة المستثمرون القابضة (المستثمرون)(موقوفة) ‏
شركة المشروعات الكبرى العقارية (جراند)(موقوفة) ‏
شركة الصفاة العالمية القابضة (صفاة عالمي) (موقوفة)‏
الشركة الوطنية للميادين (ميادين) ‏
شركة فيلا مودا لايف ستايل(فيلا مودا) (موقوفة)‏
شركة الشبكة القابضة (الشبكة )(موقوفة)‏
الشركة الكويتية للخدمات الطبية (عيادة ك) ‏
ِ2- شركات لم تقدم البيانات المالية وحددت موعد اجتماع مجلس الادارة وعددها ‏
ِ(54) شركة على النحو التالي: ‏
الشركة الوطنية العقارية (وطنية) ‏
الشركة الكويتية العقارية القابضة (العقارية) ‏
شركة الامتيازات الخليجية القابضة (امتيازات) ‏
شركة ايفا للفنادق والمنتجعات (ايفا فنادق) ‏
شركة الارجان العالمية العقارية (ارجان) ‏
شركة الانظمة الالية (الانظمة) ‏
شركة مركز سلطان للمواد الغذائية (م سلطان) ‏
شركة هيومن سوفت القابضة (هيومن سوفت) ‏
شركة طيران الجزيرة (الجزيرة) ‏
شركة مجمعات الاسواق التجارية الكويتية (اسواق) ‏
شركة اكتتاب القابضة (اكتتاب) ‏
شركة كويت انفست القابضة (كوين انفست) ‏
الشركة  الدولية للمنتجعات (منتجعات) ‏
شركة حيات للاتصالات (حيات كوم) ‏
الشركة الكويتية للاغذية (اغذية) ‏
شركة المعدات القابضة (المعدات)‏
الشركة العالمية للمدن العقارية (المدن ) ‏
الشركة العربية العقارية (ع عقارية) ‏
شركة داماك الكويتية القابضة (داماك كويت) ‏
شركة الاتصالات المتنقلة (زين) ‏
الشركة الكويتية السورية القابضة (السورية) ‏
شركة فلكس ريزورتس للمنتجعات والعقارات (فلكس) ‏
شركة الصفاة للطاقة القابضة (صفاة طاقة) ‏
بنك الاثمار (الاثمار) ‏
الشركة الاولى لتسويق الوقود (اولى وقود) ‏
شركة عيادة الميدان لخدمات طب الاسنان (الميدان) ‏
الشركة الكويتية للمسالخ (مسالخ ك) ‏
شركة المجموعة المتحدة للصناعات الغذائية (الغذائية) ‏
شركة الخطوط الوطنية الكويتية (خطوط وطنية) ‏
شركة النخيل للانتاج الزراعي (النخيل) ‏
شركة مجموعة الخصوصية القابضة (الخصوصية) ‏
شركة التمدين العقارية (تمدين ع) ‏
الشركة الكويتية لصناعة مواد التغليف (التغليف) ‏
شركة الديرة القابضة (الديرة) ‏
شركو مجموعة السلام القابضة (السلام) ‏
شركة جيزان القابضة (جيزان) ‏
شركة صكوك القابضة (صكوك) ‏
شركة نفائس القابضة (نفائس) ‏
شركة مبرد للنقل(مبرد) ‏
شركة ابيار للتطوير العقاري (ابيار) ‏
شركة مشاعر القابضة (مشاعر) ‏
شركة الصفاة تك القابضة(صافتك) ‏
شركة الشامل الدولية القابضة (الشامل) ‏
شركة المعادن والصناعات التحويلية (معادن) ‏
شركة صفوان للتجارة والمقاولات (صفوان) ‏
شركة الصناعات الهندسية الثقيلة وبناء السفن (السفن) ‏
شركة اعيان العقارية (اعيان ع) ‏
شركة مشرف للتجارة والمقاولات (مشرف) ‏
شركة المقاولات والخدمات البحرية (بحرية) ‏
شركة المخازن العمومية (اجيليتي) ‏
شركة منا القابضة (منا قابضة) ‏
شركة هيتس تيلكوم القابضة (هيتس تيلكوم)‏
شركة المجموعة المشتركة للمقاولات (مشتركة) ‏
شركة مجموعة عربي القابضة(عربي قابضة) ‏
وعليه فانه سوف يتم ايقاف اسهم تلك الشركات عن التداول فى حال عدم تقديم ‏
البيانات المالية المذكورة فى الموعد النهائي المحدد فى الساعة 8:30 من صباح
يوم الاحد الموافق 16-05-2010 .‏

Kuwait Stock Exchange - Enhanced Supervision 10 Companies Under Investigation

Copyright Fg2

If we believe the report from AlQabas, the KSE may have to replace the  above carving which I understand currently is right over the entrance to its Supervision Section.  

According to the article, the Supervision Department has its "eyes open wide today" as compared to earlier periods when apparently its eyes were a bit more shaded from the light.  One certainly hopes that the process of adjusting to the light was gradual.  Otherwise serious ocular damage may have been caused.

In any case in the transitional period to the full implementation of the new Capital Markets Law we're told that the KSE is watching daily trading, monitoring activities for negative behavior, and taking appropriate regulatory action until it hands over the control lever (or rudder if you prefer a Kuwaiti appropriate nautical analogy).  Frankly,  precisely the actions you'd expect a stock market regulator to be doing as the normal discharge of its duties -- unless of course you understood how business was (is?) done up North. 

More than 10 companies are reportedly under investigation.  Trading of Board members is being scrutinized.  Files have been referred to the public prosecutor for legal action.  And where legal action is not warranted, the KSE will be dealing with minor infractions at an upcoming meeting of its committee of adjudication.

The article ran with this accompanying picture.

It's not clear to me if this is a "before" or "after" picture with respect to enhanced vigorous monitoring by the KSE.  But from what I know it's highly likely it's an "after" picture.   Supporting that view, you'll notice that the chap is actually at his desk!   And even though this is just a picture, I'm sure like me you can sense the tension as he focuses intently on monitoring the market. 

For those not familiar with the fact, I'd note that as part of the preparation for the implementation of the new law, KSE regulators were sent for a crash training course in a certain well-regulated market in the West.  The position being assumed by the KSE regulator at his desk is known in technical terms as "doing an Alan"  or sometimes "a half Greenspan".

In a separate post, I'll review a recent report by AlJoman Centre for Economic Consultancy - that shows the crying need for regulation.

Damas Elects New Board

As you've probably seen in press reports yesterday, Damas held an Extraordinary General Meeting of shareholders yesterday at which a new board was elected.  Here's the press release on NasdaqDubai with more details

As to the new board, the new members are:

1. Abbas G. Ameeri
2. Abdullah Fadhel Ahmed AlMazrui
3. Anan Fakreddin
4. Ehsan Abbas
5. Ibrahim Belsalih
6. Nicholas G. Hegarty
7. Simon Copleston
8. TN Pratap
9. Tariq L. Ali

The EGM also approved:

1. Dual listing of shares in both US$ and AED.  (Previously, Damas was listed only in US$ on NasdaqDubai).
2. The resignation of the former directors.

As you'll recall the DFSA settlement required a change in the Board along with other measures outlined here.

UAE Banks Seek to Change Liquidity Measure - Not A Smart Idea

This sounds like a bad idea.

The fundamenal business of commercial banks is borrowing short and lending long.

If customers suddenly want their deposits back or if interbank money gets hot, it can cause  a world of trouble for an unprepared bank.

So a safety margin needs to be maintained.  

Trusting bankers to do the sensible and prudent thing has been proven false so many times that it should be clear that regulations are required.  On this issue and many others.   And that many times the regulations  will restrict business to prevent bankers from getting themselves into trouble.

What's even more at issue here is that in aggregate UAE banks are already over lent in comparison to core customer deposits.   

Here's Kamco's report with some statistics.  

Also note the very high compound annual growth rate in loan portfolios - a sign of credit distress to come.  Another reason for prudence on this issue.

Kuwait Stock Exchange Suspends Trading in 15 Additional Companies For Failure to Provide Financials

At 8:48 AM Kuwaiti time the KSE issued the below list of companies whose trading was suspended due to failure to provide financial statements for the period ending 31 December 2009.

While 21 companies appear in the list, 6 of them were previously suspended for failure to provide earlier financial statements.   That means an additional 15 companies have been suspended.

If and when these companies provide the missing financials to the KSE, their trading will be resumed.

In order the companies are:

1. AlAhlia Holding
2. AlBayt/Securities House
3. Industrial and Financial Investments Co.
4. International Investments Group
5. Aref Investment Group
6. The Investment Dar (previously suspended)
7. Aayan Leasing and Investment
8. Gulfinvest International
9. KFIC (Kuwait Company for Financing and Investment)
10. International Leasing and Investment (previously suspended)
11. National Real Estate Co (NREC)
12. Pearl Real Estate (Lu'lu)  (previously suspended)
13. Investors Group 
14. Grand Real Estate  
15. Safat Global (previously suspended)
16. Agility
17. The Sultan Center
18. Saftec
19. Villa Moda (previously suspended)
20. Shabka Holding Company (previously suspended)
21. UFIG (United Food Industries Group)

Using KSE definitions of the main economic sector of activity as per the company's stated purpose, of the suspended companies:

1. 10 are from the Investment Company Sector
2.   5 from the Real Estate Sector.

Though it's a reasonably good assumption that the problems at the other companies - save Agility - are probably largely related to securities or real estate investments.

[8:48:12]  ِ.وقف التداول باسهم شركات اعتبارا من اليوم ‏
يعلن سوق الكويت للاوراق المالية انه قد تم وقف التداول باسهم 21 شركة ‏
وهى الشركات التالية :‏
الشركة الاهلية القابضة (اهلية) ‏
شركة بيت الاوراق المالية (البيت)‏
شركة الاستثمارات الصناعية (ا صناعية) ‏
المجموعة الدولية للاستثمار(المجموعة د) ‏
شركة مجموعة عارف الاستثمارية ‏(عارف)‏
شركة الدار للاستثمار (الدار)(موقوفة) ‏
شركة اعيان للاجارة والاستثمار (اعيان) ‏
الشركة الخليجية الدولية للاستثمار (غلف انفست) ‏
الشركة الكويتية للتمويل والاستثمار (كفيك)‏
الشركة الدولية للاجارة والاستثمار(د للاجارة) (موقوفة) ‏
الشركة الوطنية العقارية (وطنية) ‏
شركة لؤلؤة الكويت العقارية (لؤلؤة) (موقوفة) ‏
شركة مجموعة المستثمرون القابضة (المستثمرون)‏
شركة المشروعات الكبرى العقارية (جراند)‏
شركة الصفاة العالمية القابضة ‏(صفاة عالمي)(موقوفة) ‏
شركة المخازن العمومية (اجيليتي) ‏
شركة مركز سلطان للمواد الغذائية (م سلطان) ‏
شركة الصفاة تك القابضة (صافتك)‏
شركة فيلا مودا لايف ستايل (فيلا مودا) (موقوفة) ‏
شركة الشبكة القابضة (الشبكة)(موقوفة  ) ‏
شركة المجموعة المتحدة للصناعات الغذائية (الغذائية) ‏
اعتبارا من اليوم الخميس الموافق 01-04-2010 ،وذلك لعدم تقديم ‏
البيانات المالية السنوية للسنة المالية المنتهية فى 31-12-2009 ،فى ‏
الموعد المحدد لذلك.‏

Manifest Absurdity: To Each His Own Dire Threat: Flag Burning or Sorcery

Copyright Sean McGrath from Quispamsis, NB, Canada

Creative Commons Attribution 2.0 Generic license.

Bahrain has made its choice between two clear and manifest dangers to its way of life.  And, if I may venture an opinion, it seems to me that the Legislature has clearly chosen "wisely".

No doubt after careful weighing of the relative dangers to Bahrain, the legislature gave this issue the high priority they thought it deserved.    Next session perhaps they can begin the process for a constitutional amendment on flag burning.  One never knows if a witch or wizard might burn a national flag.

Since Bahrain long ago adopted the concept of a single regulator for its financial sector, I guess the Central Bank of Bahrain will be in charge of policing the banks where as far as I can tell the majority of sorcery on the Island takes place.  

There are quite some wizards who are capable of  turning lead into gold as they create impressive financial statements and flashy press releases from thin air.  Eye of newt, blood of a bat,  an honest man's tear, a dash of balderdash and one might just conjure up a proven business model.  There is also a highly effective potion that causes the appearance of demonstrable confidence of one's bankers and clients, in one's business plan and future though I'm keeping that secret for now as I don't want to find myself on the wrong end of this law.  I will, however, risk disclosing one key ingredient - two "non core" assets.    

How will the CBB enforce the new law?

Will it be a series of additions to existing Modules in the CBB's quite excellent Rulebook?  A specific penalty for sorcery added to Module PD ("Public Disclosure").  Another for Module BC (Business Conduct).  And so on.

Or an entirely new Module WS (Witchcraft and Sorcery)?

Just for the official record in the Kingdom, I ask this question because I'm not (definitely not) a wizard and so cannot predict the future.  Nor do I own a crystal ball.

57% of Listed Companies in Kuwait Have Yet to Report 2009 Results

AlQabas quotes "Direct Information" that 57% of KSE listed Kuwaiti companies have not yet reported their 2009 results.  There are nine remaining days before the deadline for reporting is reached.

89 companies have reported so far with KD402.85 million in net income verses KD467.7 million in 2008.

It's probably a fair guess that the non reporting companies are not holding back "good news".  So this is probably a good indication of the level of corporate distress in the country.