Financial experts warned banks in Qatar and the GCC about the impact of the US financial crises and the possibility of it hitting the GCC specially with expected slow down in real estate investments
Do you think this will have a big impact on Qatar's economy?
You have a pretty good grip on investments yourself. There is not much that you and I would argue about. Only your liking for Gold is a bit questionable to me ;)
Some excellent points there, I think there are as many Bulls as Bears when it comes to the Dollar. Max Keiser who I have been a big fan of since he first appeared on Al Jazeera English a year ago. He is a definite Dollar Bear, now so far his more extreme predictions have not yet come to pass, infact the dollar has strengthened, mainly due to everyone else being in the same boat as they are ie up sh#t creek without a paddle.
Now it's difficult to predict, I would probably say that the dollar will revert back to values seen about a year ago once things settle down in the World markets. Right now I think so much is not known about who owes who and how exactly this will all pan out that the dollar actually seems safe. Certainly if falls in Japan and other emerging markets are anything to go by then you can see why the dollar is holding up right now.
The point about is captial investment is spot on, this recent run of high Oil prices has encouraged Oil companies to invest in higher cost drilling and exploration as it becme cost effective at these high rates. One of the reasons that Oil Company stocks have slid this past month is that they are now exposed to expensive drilling and exploration projects. Some of which would probably only be economical at 70-80 dollars a barrel.
On another note, Dubai now has debt in excess of it's GDP. Hence Moody's downgrade on their debt.
Qatar is not in the same boat,they have not been quite so profligate, luckily for all of us who are here.
All my projectons are short to mid term. I don't see the World economy going tilt within the next couple of years.
In long term, perhaps the US will suffer. Or, it may not.
A factor that has not been considred here yet is that Global Economy is evolving faster then people can theorise about it. Therefore, current projections are all short to mid terms because no one knows what will happen in long term.
Value based currency may not be a valid concept 50 years from now. How will the system work then? I don't know. But it is a distinct possibility that a single country/economy/currency will become dominant and all others will be assimilated.
I am a huge fan of science fiction and most of the literature in past three decades has projected a Global Corporation running the World in future :)
I can almost imagine Bill Gates being introduced as President of the United States of the World Inc. in 2031 ~lol~
The current Gas Production capacity is built from capital raised on future gas production by way of licensing rather then a loan.
The concession holder needs to produce x-amount of gas for y number of years to re-coup investment based on their projections of Gas price. In this duration, they will share revenue with the Government.
Typically these projections are hugely under-estimated to reduce the risk and incrase long term profits.
I don't see any scenario in the current situation where world wide demand for Natural Gas will reduce rather than increase. Therefore, we can expect the price to continue to climb due to demand and supply law.
When the price goes up, so does the profit for the investor: The Oil/Gas company. This increases the motivation to invest.
Having said that, perhaps the Oil price and Investment graph may lose it's steepness for a while but in long term, business continues.
Longer the slowdown in capital investment, higher the price of Gas due to the fact that demand will contiue to increase while production will not. This will inrease the pressure to invest.
The risk to GCC countries comes from Bank failures in US. They have huge amounts of money invested there. But that is all Earned Capital which is Not invested here and is not contributing to local economy in any direct way.
Another risk is short term liquidity due to credit crunch. But this is not a huge problem. I am guessing that with rise in interst rates, there will be investors and bankers who will bet on the Petro-revenue.
Current or future production/revenue, which is the base measure of their economic performance, is not at risk at all.
Therefre we can conclude that Qatar economy is sound.
The problem Rock is that they are printing money from thin air.... The private bank that runs the American Gov't named the Federal Reserve is selling SOMETHING for NOTHING!
No fiat monetary system has survived for very long and the dollar is a sinking ship...
“Paper money eventually returns to its intrinsic value - zero.” (Voltaire, 1694-1778 )
&feature=PlayList&p=E6FBFAECA72B813A&index=22
Check out this link by my favorite economist... Max Keiser
They call it the American dream because you have to be asleep to see it... --George Carlin
consider the fact US is the largest producer of grain crops. (source http://www.reuters.com/article/inDepthNews/idUSPAT50124520080805) and within the top three ranking for other food and fruit crops. This constitutes majority of US Exports. Prices of these commodities are tracked in US Dollar all over the World.
When US Dollar becomes more expensive, it does NOT reduce the price of the commodity in International market. It increases the price in local markets in other countries.
Another factor, as I said before, is that US Dollar is the settlement currency for all International Trade. There are plenty of buyers for US Dollar in the market at any given time. Therefore it's value is supported by more then the state of US economy.
So from investment perspective, if you view US Dollar as the base, and value of all other currencies as moveable, then being in US Dollar keeps buying power of your capital intact to some extent.
Therefore, any currency linked to US dollar is going to ride out the credit storm. There may be momentary liquidity problems in middle east but in short to mid term, GCC countries will be alright barring major economic blunders by panicky governments.
I think small investors and third world countries will suffer the most. The cost of borrowing (interest rates) will go up significanly and so will the cost of living. This will impact growth of business and investment particularly in developing World from mid to long term.
In US, the credit crunch will be over soon. They are pumping money into the system and will devise a new Interbank Guarantee's mechanism to limit small investor and depositor exposure. Nothing has been said yet but it's the logical thinkg to do.
The prudent people will have moved their savings out of harms way, i.e. out of North American Banks, and will hitch a ride on the biggest piece of floatable mass around; US Dollar.
DOHA • Qatar's real gross domestic product (GDP) growth is expected to taper off next year from the present 14.5 percent to 9.5 percent, according to the 'GCC Quarterly' report just issued by Merrill Lynch (ML). ML has cut its economic growth forecast for Qatar keeping in mind the current global financial crisis. Qatar lacks a large domestic market to cushion the deterioration in the external environment. "Still we expect double-digit growth thanks to increasing Liquefied Natural Gas (LNG) production. We cut our 2008 and 2009 GDP growth forecasts to 14.5 percent from 14.8 percent and 9.5 percent from 12.6 percent,” the report
Real GDP is the inflation-adjusted measure reflecting the value of all goods and services produced in a given year. Real GDP takes into account changes in price levels and provides a more accurate figure of a country's growth than nominal GDP. Inflation is also expected to come down from the estimated 15.6 percent to a still-high 14.5 percent in 2009. With the present global economic downturn, ML said: "Qatar's expensive and capital-intensive growth strategy will also take a hit, in our view. It is true Qataris are planning to double LNG production by 2011 but the global economy is flirting with recession.
Investment projects have had the best track record of completion so far in the region, but the credit crunch is likely to bring Qatar's over-40 percent investment-to-GDP ratio down."
The report said GCC states have saved 70 percent of their oil windfall over the last five years for rainy days. "It is torrentially down-pouring these days. The lowest breakeven oil price that would bring 2009 budgets into balance is $55 per barrel for Qatar."
This means Qatar can maintain its current level of budget spending even if the oil price was to fall to $55 a barrel.
Oil is currently ruling in the $90 per barrel range. Break even prices are low for now but are likely to increase going forward.
In other words: Qatar has spent spent spent and if the Oil price falls any further they are going to have to reign in some of their spending.
Doubling the gas output is a GOAL, producing more Gas is actually turning out to be more difficult and costly than thought.
One set of figures I would like to see is the actual profit on each barrel of Oil or tonne/therm ? LNG.
These projects particularly the Gas projects are VERY expensive to set up, it would be interesting to know of they are breaking even yet. I wonder how long it will be till the first major infrastructure project is cancelled.
I expect Losail to suddenly go slow, will they now build the Aluminium smelter they were planning ? Will they ever really build the causeway ? Really interesting times.
One of the more interesting threads I've read on QL. Thanks avid. If a lot of what you say comes true over the coming years then Qatar's in for heck of a reality check.
Here, the longer I have been here the easy it is to see through it all. Another example was a recent loan made from Commercial Bank to the Al Fardan Group so they could build the St. Regis Hotel. The loan was arranged at preferential rates and was trumpeted in the local paper.
They failed to mention that Al Fardan Group actually own Commercial Bank so they arranged a loan to themselves at a low rate, and now the Government has jumped in and said don't worry about the loan we will recapitalize you so the risky loans you have made don't matter.
I wonder if the story I heard once that the Emit sometimes rights off people's loans is true. Perhaps it's the old fable,
You owe the bank 100 pound its YOUR problem.
You owe the bank 100 million pounds it's THEIR problem
Thank you, aviduser, for your valuable and valued contributions. You have given us an intelligent and succinct summary of the economic news and your latest posting confirms my own fears for the Gulf. It's a house of cards, isn't it.
Well people after a couple of days of complete denial the Government of Qatar has been forced to inject liquidity into the local banking system, pretty much as I predicted.
The following story came in via google news:
Doha - Amid the global financial crisis Qatar Investment Authority announced Monday that it is buying between 10 and 20 per cent of the capital of Qatar's native banks listed on the stock market, reported the Qatar-based al-Jazeera TV channel. The decision came to enhance confidence in the Qatari stock market, noting that it will buy the banks shares at Sunday's closing price.
The announcement came at a meeting attended by the Prime Minister of Qatar, Sheikh Hamad bin Jassem al-Thani, representatives of the banks listed on the Doha Securities Market and the Deputy Governor of the Central Bank.
The Qatar investment institution seeks to pump liquidity into Qatari banks to enable them to finance development projects.
Qatar's stock market on Sunday made the highest loss among the Gulf stock markets with a loss of more than 7 percent.
So there you have it, after denials and assertions to the contrary the Government has been forced to inject money into the system.
This is a basic admission that the banks have run out of money, they have been lending too much money for too long to too many people. Reality was bound to catch up with the Country sooner or later.
Much of the Gulf is consumed by hubris, for example Qatar is building an airport as big as Hong Kong's. Now tell me does Doha look or feel like Hong Kong, does it even feel like the average provincial UK City, yet it is to have a massive 10 BILLION dollar Airport. Losing 890 Million a year on an Airline seems like a good idea in the good times.
Lets face it's not just a liquidity crisis that Qatar suffers from it's a CREDIBILITY crisis.
I will be interested to see if the local papers report that the EMIR has had to bail out his friends banks. Oh dear oh dear.
it is everywhere in the middle east, especially UAE and Qatar. here we can find it!!
the oil dollars pumped in the middle east economies were converted into skycrapper and all sorts of construction that we see now.
if the western economies collapses, no more big costumers to buy middle eastern oil...even china and india will cease flourishing as the costumers who buys their product and services collapses to bankruptcy!
what we are seeing now, the first domino falling from US now going to europe will eventually lead it's way down here.
its just like a ticking time bomb waiting its time to blow up...
and all the oils drawn up will turn into wastes as the equivalent dollars that feed the construction that once boomed shall fall into ruins without being used.. like the tower of babel repeating once again it's history.
nature has its own way of punishing greediness among us all!!
From the Gulf Times today, they are reporting a survey about worker satisfaction in the region and wages they print the following:
The battle for talent has not only meant pay increases but changes in working practices, Gulftalent.com noted. "In a major new trend, 2008 has seen a large number of companies with six-day working weeks, including many in the construction and retail sectors, switch to shorter five-day weeks in an effort to improve staff retention." The survey showed 23 percent of GCC-based professionals would like to relocate to Qatar, with the figure being 66 percent for the UAE. Qatar came last among all the countries when it came to those willing to remain here at 32 percent , compared to a whopping 77 percent for the UAE.
Er if people want to leave Qatar how is the economy going to survive and flourish in the years ahead.
The problem is Qatar has picked up a bad reputation for low pay high rent sky high inflation and NOTHING to do. You simply cannot attract or retain people with that sort of background.
Qatar has done little to improve the life of expats here and in the main they make it harder not easier to live here.
Gold was down today but hang on it'll be up to 1000 soon
It is the base currency for much of the world. All import settlements are done in USD. There are too many economies hooked to it. Mehinks, the 'Dollar in free fall' theory is bunk.
China is holing huge amounts of USD Notes. They are hedging bets by buying up North American Assets piece by piece.
It is logical to assume that the buying activities will gain momentum to snap up firesale properties and distressed Industry particularly lumber and minning sector. This and other factors will continue to prop up the USD.
Next year, Euro might rise against the USD but everybody else will either go down or stay pegged. Right now Euro is going down. I think this will continue for another 6 months or so primarily due to US control of World Oil markets and Bank failures in US notwithstanding.
Consequently, the GCC currencies will also go up providing a counter argument to unpegging from USD.
Oil prices are in free fall because of 'slight reduction' of demand in US and surplus availability from Iraqi oil fields which are now back online and pumping. However, come winter, the surplus can be quickly soaked up.
As such betting on falling Oil prices or GCC currencies losing value does not sound valid to me.
I am betting that in short to mid term QAR will be good currency to be in whether they un-hitch from USD or not.
I'm loving this credit crunch, for years the USD was worthless against the Euro and Pound. Could you tell me, who is your Daddy know? The US DOLLAR!!! lol
"It does me no injury for my neighbor to say there are twenty gods or no God. It neither picks my pocket nor breaks my leg."
Vegas, dollar going up is very bad for US. It makes american goods and american companies more expensive in comparation with european and asian ones...
For US to recover, dollar must go down, maybe it is bad for americans in short term, but you have to look forward...
you are relying on dollar collapse (pulling behing QAR).
I cannot tell you from pound POV but from EUR, Im not sure that this is going to happen... US cannot low the rates much more (where are they now? 1,75%?), but in Europe it is possible (they are around 4,5%, isnt it? and they are willing to low in order to get a lower euribor).
Low of the rates = more euro cash in the market = rise of the dollar, down for the EUR.
Rise of the dollar = rise of the QAR...
I dont want to have a loan on QAR with QAR rising and my salary in Euros, honestly...
If the Rial say for me hit 4 to the Pound from the present 6.2 then I would think about doing it myself. You would then send the money home wait a few months for the rial to recover and then send the money back paying off the loan and keeping 2 rials on the pound.
for example do 100,000 Rials right now gets you 16,112.04 Pound. 1 RIAL=6.21
Now 100,000 Rials at 4 to the pound = 25,000 Pound.
A difference of 9,000 Pound.
Wait till the Rial recovers and bingo you would probably make about 5,000 after all fees etc.
It's risky I am almost tempted to sell my cars right now to become cash rich again for such a moment.
The bank will only lend you up to 70% of you Salary, taking into account, other loans etc.
It's risky I grant you but if the rial really did freefall it could actually be worth a punt.
Right now with Oil in free fall the Rial could devalue quite sharply, Or as I have mentioned the Dollar could collapse right now it's holding up.
Hi aviduser, a simple yeh or ney will suffice - here is the scenario:
If the QR : ZAR exchange rate reaches 1:3, take a personal loan from a local bank to settle mortgage at home, and spend the next 2 years working it off . Is there a downside to borrowing local money for purpose mentioned during these financially volatile times? Thanks
Vote is rather proving my point about the fundamentals of this economy not being under pinned by demand.
Oil hit 80 dollars today, expect to see unfinished projects litter the Gulf, Dubai to implode and Abu Dhabi to bail them out. Expect central bank intervention shortly. As seen in Dubai already, Global recession is really gonna hurt here. If you own here or Dubai it's now too late to sell, hang on to it and hope you can rent it.
Published: October 8 2008 18:24 | Last updated: October 8 2008 18:24
Until recently, received wisdom held that ample government revenues in the Gulf would filter down into the regional banking sector and protect local houses from global woes.
But, since August, a homegrown liquidity crisis has hit regional financial institutions.
Banks are facing an acute cash shortage as lending earlier this year failed to be matched by lasting deposit-building, according to analysts. International lending froze after the collapse of Lehman Brothers last month and domestic capital is dwindling outside the government sector, sending funding costs soaring.
The banking and finance sub-indices of the Abu Dhabi, Bahrain, Kuwait, Oman and Qatar bourses have all slumped more than their parent indices this year, according to Zawya, a data provider. In Saudi Arabia and Dubai, bank indices have fared better than the parent exchanges but have still shed 24.3 and 31.4 per cent respectively.
Real estate and construction stocks are falling due to concerns that banks can no longer finance developments, while bank shares are diving over worries about overexposure to real estate. “It’s a vicious circle,” says Tammam El Barbir, an analyst at Morgan Stanley.
The Dubai Financial Market’s real estate and construction sub-index has slumped 37.3 per cent this year, as investors fear the bellwether emirate may be hit by a real estate crash.
Shares in Emaar, a Dubai government-controlled developer, have fallen by more than 60 per cent this year, wiping Dh56.4bn ($15.3bn) off its market capitalisation.
“Investors are now pricing in a real estate crash, that the banking sector is in trouble and that Dubai will default,” says Mohieddine Kronfol, managing director of Algebra Capital.
Regional authorities are also starting to fret. Kuwait has eased some of the tensions in its money markets by cutting rates, lending an undisclosed amount to banks and attempting to prop up its equity market.
The United Arab Emirates central bank has offered Dh50bn of additional liquidity. However, the three-month Emirates interbank rate has risen by more than 100 basis points since the move, according to Shuaa Capital.
Given the strains in the capital markets, “governments need to put more money into the system”, says Mr Barbir.
No one doubts they can do it – combined, the region’s current account and fiscal surpluses are in excess of 20 per cent of gross domestic product, and net foreign assets are more than $1,000bn, notes Standard Chartered Bank.
That money may soon return to more familiar shores.
YOU may have thought that if anywhere would be insulated from the financial chaos, it would be Dubai, the ritzy commercial capital of the oil-rich Gulf. Not so. Events across the world are causing pain there too, even though much of the emirate’s cash has not made its way to the banks; it is held by ruling families and in their sovereign wealth funds.
Dubai’s oil revenues are small. Sheikh Muhammad bin Rashid al-Maktoum, the energetic ruler of the second largest emirate of the seven that make up the United Arab Emirates (UAE), has chosen to diversify, especially into real estate, as his way forward. Investors in Dubai property have done well in recent years, enjoying returns of roughly 80% since early last year.
Two factors have underpinned prices. The first is negative real (ie, below-inflation) interest rates, which track those in the United States. Borrowers can apply to banks and still borrow very cheaply. And since some think the official inflation rate seriously underestimates price increases in Dubai, there is a big incentive to borrow from banks and invest somewhere else.
The second factor is the continuing influx of workers into the emirate. Less than a fifth of Dubai’s 1.5m people are local. Many of the immigrants are building workers from South Asia who are provided with accommodation during their stay, but not in the smart apartment blocks that Dubai developers favour.
Bad timing
Then, over the summer, Morgan Stanley issued a note which said that Dubai property prices would fall by 10% by 2010. Quite simply, there may not be enough demand for the wave of new property coming onto the market. To a society used to easy returns, this was a shock. The report coincided with a withdrawal of deposits and investments from the UAE by speculative investors who had previously been betting that local currencies would shoot up as Gulf states let go of their dollar pegs to deal with double-digit inflation. But things did not work out like that. The dollar strengthened, so the bet failed and speculative flows went home. As a result, there was less cash sloshing around in the Gulf.
It was the wrong time, then, for a slew of corruption allegations. Since April, investigations have centred on Dubai Islamic Bank, an institution with a history of problems, and on various mortgage lenders and developers. Those investigated include a minister of state and two Britons. Sheikh Muhammad made a rare public announcement recently to say that the public prosecutor would not tolerate “illegal profits”. The investigations are thought to be continuing; no charges have been made.
At this week’s Cityscape real-estate conference, the emirate’s pushy public-relations people were busy pretending nothing was amiss. Nakheel, a state-backed developer, said it would build another tower block that would be the tallest building in the world, even higher than today’s tallest, the Burj Dubai. Another developer heralded a spectacular new development called Jumeirah Gardens, at an estimated cost of 350 billion dirhams ($95 billion).
The markets have been less impressed. So far this year, shares in the Dubai Financial Market have lost 48% of their value. Emaar, a high-profile developer, fell from a high of 15.7 dirhams to 5.5 on October 9th. In another sign that not all is well, the Dubai authorities merged two Islamic mortgage lenders, Amlak Finance and Tamweel; the latter is one of the firms involved in the investigation. Some of the more sober developers, Tamweel included, have stopped the widespread practice of “flipping”—paying only a percentage of the purchase price of a property and selling it on before instalment payments begin.
Dubai is not going to go bust. The state controls the larger property developers and can alter supply and demand by releasing land when and how it wants. Average percentage yields from rented properties are still in the high single digits, so demand persists. Business people are still likely to come to the Gulf. But expect more mergers along the lines of Amlak and Tamweel. Some smaller developers may go bust. The huge profits of the past will dip.
The ructions may also strain relations between Dubai and Abu Dhabi, which still has the biggest money bags because it has most of the oil—and may no longer be willing to sit back and let Sheikh Muhammad and his men make all the running. Sheikh Muhammad seems to get on well with Sheikh Khalifa bin Zayed al-Nahyan, Abu Dhabi’s ruler. But financial arrangements between the two emirates are opaque. Sheikh Muhammad may need to be more deferential to his fellow ruler.
aviduser, thank you for your insight.. i found it very sensible and particularly interesting your comments on local banks..
a word of caution however.. the markets are crumbling down fast but i would not rush into any alternative investment at present: this is a wild storm and NOBODY knows what will happen, not even the so called pundits...
not long ago "experts" were talking of oil rising to 200 US$ and we all know what is happening now.. two weeks ago i heard economists reassuring this crisis is not as severe as 1929, one week ago they said it was as bad as '29, today many say is the worst ever!!!
i'm no expert but my feel is that nobody has a clue here.. better wait for the dust to settle before making the next moves, just common sense
The Gulf’s banks are now experiencing their own liquidity crunch as credit growth has outstripped deposits and financing from international banks has dried up. Analysts say this could lead to delays in some of the numerous projects planned for the region and a slowing of growth rates, even though the long-term economic fundamentals for the region remain positive.
A key area of concern surrounds the property market in Dubai, seen as a bellwether for the region. Property prices in the emirate have soared about 40 per cent this year.
As I said the banks will now start offering high interest rates to savers IBQ has started who will be next ?
As you mentioned in your post, it is recommended to purchase SPDR Gold Trust (ETF). Can you please advise how to purchase these while being here in doha. Is it through a bank or through internet????
I notice something similar in Jordan some time ago.
Jordanians were very angry against iraqui, because during and after Gulf War they arrived Amman looking for safety with big wallets plenty of dollars... and they made every single price to rise...
Overall they were very angry because of the schools. Iraquis took the best schools for their children and public schools were absolutely crowded...
It is not exactly "buy the citizenship" but "buy the safe"
Dangerous, eu. What happened in Spain, respectively in Mallorca also shows the insane way of "investment". There are hundreds of apartments empty, just sitting there and waiting for the real estate prices to rise. They fell 20 % this year.
Ive just read in newspaper something very surprising for me.
It was an article about the situation in Pakistan - UN has rated Islamabad in the same level than Kabul and Mogadisciu - very dangerous.
And it looks like the high class (new rich ppl) of Islamabad is buying properties in Dubai, Qatar and Singapur not for the propierties, but for the Resident Permit, as it is starting to be very difficult for them to get US and Europe Visa...
:-/
Suppose they are marginal and they are not going to refloat the RE market, but it is a surprise for me. I didnt think in these customers... paying for the relative security of the GCC... paying for the "citizenship" (well, at least the RP).
As long the China and India keep signing the mining contracts (mmm Uranium), we shouldn't see "as large" fluctuations as with the other stocks....of course providing the demand is there.
Please dont embarrass moi! I love tight leather shorts, tight tank tops and tight boots but rather mainly on women - unlike MD !!!!! Yippee, Yippeee, its Bombay gin for me!
As you said, Flan, the vast resources of Australia are the point. Including Uranium, by the way. So commodities might be a wise choice, too. Silver? (Has much more industrial meaning than gold). And the fluctuations are milder.
agree MD, a casino would be cool!!!! and without being biased towards Aust, buying the AUD isn't a bad thing right now....i usually wait for uptrends though (the arse fell out of it today).
It has already hit the GCC guys, we have already witnessed large declines on the DSM over the last few weeks and the Qatar property market is at risk of overheating as well as being overvalued given the current market conditions.
As such there remains completed housing developments where the vacancy rates remain high and therefore is at risk of deteriorating rental yields over the coming year. We are already seeing rental incomes plateau and in some cases falling.
As a benchmark given the current crisis, unfortunately what I once thought was a very sound/safe economy given its vast resources (yes Australia) has tumbled heavily recently. As an example the Aussie Dollar fell from its 25-year high of around 98 US cents in July, to around 71 cents today.
Having said this, there is no better place in the world I'd rather be right now than right here in Doha (or GCC).
In any recession, there will always be good buying opportunites whether it be here or in your home country. As someone once told me, people will always DRINK, SMOKE or GAMBLE during a recession!!!
I haven't posted in such a long time I forgot I had added her to my signature, it only appears as code in my post's till I actually submit it and I forgot what it was for. They were great though :)
Calls at the moment to bring Iceland into the EU. The Dollar is finished, Euros will be the place to be, right now it's a little low as we have seen a couple of big banks collapse in Europe, the difference is that it's a couple of banks, the FED currently has a list of over 100 banks in the USA that are ready to go bust.
Once the dollar collapses the GCC will be forced to re-peg. As I mention this will come after much procrastination, the problem they will be faced with is that even if the price of oil hovers around 85 dollars a barrel if the exchange rate falls to 3 dollars to the pound or .25 euro cent to the dollar they are really gonna struggle to finance anything at all here or invest anywhere abroad.
Saudi pulling out of the Dollar will exacerbate the fall this was the reason they resisted pressure this year, the question is how long they will be able to hold out under a full scale dollar collapse.
Qatar will be hit by massive inflation, I can already see the Country making panic moves and over inflating wages or "hand outs" We could see an inflation spiral here, the country has already shown it's woefully unable to control both growth and inflation. A Country like China for example is growing at a pace of 11.4% last year their inflation rate is 7.1 %
Our growth rate is 13.8 % but with inflation of over 14%, again this is due to the fundamentals of the country being all wrong along with totally uneven distribution of wealth. The growth versus inflation is unsustainable.
One tip
If you see any local bank suddenly offer 10% interest on your savings PANIC.
It means they are desperate for liquidity to bolster the balance sheet and make their report look good for Moody's, Commercial bank tried this last year with 7%.
Once you have some decent savings transfer them abroad, use someone like HSBC offshore. Transfer once every 3 or months to avoid too many charges.
Don't keep your money here, if a bank fails us ex-pats will be last in the queue for ay compensation. Of course I am not saying the banks will collapse here but offshore is the safe option, just type HSBC offshore into Google for all the info you will need.
You don't have to deal with HSBC here, at all, remember the HSBC here is in name ONLY.
An inflation spiral could cripple the value of the Rial, that isn't such a bad thing but my advice is keep large sums abroad.
I know this sounds gloomy but honestly if I wrote last year that by the end of 2008 there would be no investment banks left in the USA you would have laughed, look what happened.
If you care for an opinion, abu, I think Germany is embedded very deeply in the EU. That's why it cannot be looked at isolated. If France fails, or Iceland, that will affect the Euro. I would opt for a currency further off like Australian Dollar or SA Rand.
SPDR Gold Trust (ETF) listed on the NY:SE It's a fund that tracks gold, Gold is presently about 835 dollars the SPDR fund is presently 82.59. As the price of Gold goes up the ETF price goes up. The two are tied together, this way you can get into Gold without having to own a safe :)
The fundamental of gold is good, the current credit crisis means that the FED in the USA will soon be printing trillions of dollars, whether this causes a Weimar Republic inflationary spiral remains to be seen but it WILL devalue the Dollar, and when this happens gold will be a good place to be.
I don't hate anyone I probably fundamentally disagree with some of your principles thats all, life is too short to hate any one.
If I were to advise anything I would probably say GOLD. It will hit 1000 dollars again by spring.
The idea of pass the parcel with property is totally correct, I actually wrote then deleted that as my post was quite long.
I have written before on another forum than I think a few years ago the prices on the Pearl and Zig Zag along with many Dubai projects were deliberately under priced, the units were then released onto the market and almost immediately sold bringing quite good returns (Diamond Girl has done this) Now news of these returns hit the market and made great for great PR. Remember if you were a cash buyer you only needed a small down payment to secure a property, cash rich local buyers could purchase whole floors for very preferential rates, then sell them for profits legitimate profits. That profit was good for them but ensured great PR for the Pearl and others and ensured the demand, for them it was a win win.
The stories of the returns was passed on so demand was created for these properties, second hand users also saw a profit when they sold and so on. The problem is the fundamentals, there just isn't the demand for the properties as HOMES, not investments. So if you are unfortunate enough to end up with a property at completion. You are the won stuck with the parcel, now what do you do ?
Once the projects are completed the supply of flats will be massive, but they are high end flats, with rent projected from 3,000 Dollars a month.
Does that seem realistic, for a 1 bed flat. Now we keep hearing that rents are going up and people can't find a decent place to live, but ask your self this, Why are the rents high and where is the demand coming from.
Now here is a paragraph that is on no way meant to demean or be derogatory, I am not trying to provoke, read it and see if you get what I mean:
I was in Villagio the other day, it was heaving, packed out with locals, Indians, Philippinos and Arabs from every where, out of the vast crowds I hardly saw a western face. Now I don't know the exacts figures but from what I gather from this forum, the aforementioned nationalities do not seem to be pulling in very big money, many packages posted on this site are woefully low, now of course there will be exceptions pulling the big bucks but according to this site unless you are European or American the money just isn't there.
Now I saw perhaps a few dozen, Western Faces, and assuming they really do get paid the big money, would they choose to live in a pokey 2 bed flat for 3,000 Dollars a month no matter how good the view. It's all about the fundamentals.
Dubai is in serious trouble but no one wants to admit it, much like the banking sector last year, everyone knew there was a big problem looming but didn't want to admit it.
Dubai is the same, they have relied on "if you build it they will come" which is great when everyone has money to travel and Jet fuel is cheap but not such a great philosophy when no one has any cash and jet fuel is expensive. Witness the figures reported this week even in Qatar ! that Middle East carrier passenger numbers are down 5% year on year, expect this to keep falling.
Adding to Dubai's problems have been the steady stream of negative P.R. stories and you have a recipe for declining visitor numbers and falling revenues. With hotels already too expensive there I expect the fall to be precipitous. Figures this Summer showed occupancy in Dubai and Qatar 71% at present bed numbers, now double or quadruple (in the case of Dubai) the number of beds and what will the occupancy levels then be ?
When you buy shares you are warned "past performance is not an indicator of future gains"
Qatar and Dubai have based their entire economy on the basis that their past growth will continue, but there are no fundamentals to support it. Just because your economy is growing by 10 % year does not mean it can continue at 10% a year. Qatar is supposed to be the Richest country in the World but does Doha feel like Geneva.
Distribution of wealth is not something it seems the Country is keen on, without this the Country will never and can NEVER grow organically like other Countries can and will.
Witness the growth of the middle class in China, where is the expanding middle class here ? The Qatari's don't count as they are middle class by being Qatari, if you know what I mean.
So at the end of this long rambling post, I say this, yes I am still alive, no I don't hate anyone. I am working hence delays in posting.
Pay attention to the fundamentals, the information is all around us, even the local papers report the the figures, they just remove the context to cover the facts.
Oh I used to own a flat in the Zig Zag, I sold about 6 weeks ago for a profit, I doubled my investment, but the question is could I have done the same today, I wager not. :(
If you own right now in the region, put the place up for sale, see if you get any interest, perhaps I can be proved wrong.
lots of people in the gulf holding properties will now be very worried especially in the UAE. Its like a game of pass the parcel except the one holding the parcel is the one who loses.
Advise for the common schmo? Sit tight, hold onto your cash and try and pick when its time to invest again. When that is though who knows but if you get it right or nearly right you could make some good returns over the next 5 years.
Not posted on here in ages as I prefer to live in my happy place.
Anyway economics is a subject I know.
The credit crunch will affect the economies in this region with varying degrees. It does seem counter intuitive to think that with so much Oil and Gas that these countries could be effected but they will.
For one thing, these Countries sit on a load of Oil and Gas, but it can't be pumped all at once, so countries like Qatar issue bonds against the value of the Gas in the the ground, these bonds were traded on the World markets and as we have all seen credit has dried up meaning there are no takers for the bonds.
In Dubai the cost of insuring Govt Debt doubled this month, this means that Dubai will have trouble selling their bonds on the market as they are now seen as too risky.
You will find that many of the spectacular projects announced will quietly disappear as the money or bonds to finance them will evaporate.
Back in Qatar I saw the first sign of a tightness in the housing market, the recently released Imperial towers on the Pearl are now being offered with a 5% deposit and a fixed 3.99% interest rate for 3 years. This is the first time an offer such as this has been made in this market and indicates that they are having trouble shifting the units. Now Qatar is tiny in comparison to Dubai but it's clear that Qatar is losing the battle to attract companies and inward investment. This means that many of the flats being built will remain empty at current prices. All of a sudden a 300,000 pound flat in the desert doesn't seem like such a sound investment.
Dubai is in an even more precarious position, much of their property has been brought by speculators, hoping to see a rise in prices and many have been rewarded with huge returns. The problem now is that people are realising that the ones who end up with the property are the one to lose out.
Often the standard of the property is low (as we all see here) service charges are sky high and maintenance is poor. This information is filtering through the market, there are already signs that many owners are in difficulty.
There is also the spectre of the collapsing dollar, this will happen, the bailout this wk has fatally weakened the dollar, the peg will have to go, BUT, expect the it to go AFTER a lot of damage has been done, the GCC will not just pull the plug they will procrastinate as inflation spirals. Mark my words. And all the while that happens the real value of the Oil will fall. Saudi is in trouble here as dropping the peg will only exasperate the fall of the dollar, a downward spiral.
So with less money floating about the GCC will suffer, obviously petro dollars will of course help and the rich will continue to be rich, the problems though of poor governance and lack of any of transparency will mean that the GCC will be woefully unable to deal with the problems, witness the presently high inflation and the total inability of the Country to deal with it.
are you going to man? Forget about Megamart and got to FFC, they got the 30 eggs of Al-Wataniya eggs [Emirates] fro 18 Q.R and their chicken + eggs taste the best ...
Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment. (Gautama Buddha)
Yes, brit, they already do that. For fuel, for example. I think it was a Gulf Times article in the "business" sector which gave the figures I'm referring to.
I read about this lately, brit. The ability to import what is needed in Saudi is good for 8 months. With a falling oil price it will be reduced to six months. Some Gulf countries are able to import for the next 8 weeks (if the oil price declines). It's not really how much money they have gathered in the meantime, because the money doesn't go where it should go. There is a judgment on how long a country can afford to import the goods it needs.
Dubai will have the real issues not here. They have so many units coming on stream there will be a knock on on prices unless the government intervenes to prop up the market and prices. (Which is likely)
In Qatar the govt can underwrite the whole economy by throwing petrodollars around. It could do that for at least two years without any ill effect. Lack of supply in housing will still keep prices where they are now, but I have noticed a flattening out especially in the higher end market.
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You have a pretty good grip on investments yourself. There is not much that you and I would argue about. Only your liking for Gold is a bit questionable to me ;)
Some excellent points there, I think there are as many Bulls as Bears when it comes to the Dollar. Max Keiser who I have been a big fan of since he first appeared on Al Jazeera English a year ago. He is a definite Dollar Bear, now so far his more extreme predictions have not yet come to pass, infact the dollar has strengthened, mainly due to everyone else being in the same boat as they are ie up sh#t creek without a paddle.
Now it's difficult to predict, I would probably say that the dollar will revert back to values seen about a year ago once things settle down in the World markets. Right now I think so much is not known about who owes who and how exactly this will all pan out that the dollar actually seems safe. Certainly if falls in Japan and other emerging markets are anything to go by then you can see why the dollar is holding up right now.
The point about is captial investment is spot on, this recent run of high Oil prices has encouraged Oil companies to invest in higher cost drilling and exploration as it becme cost effective at these high rates. One of the reasons that Oil Company stocks have slid this past month is that they are now exposed to expensive drilling and exploration projects. Some of which would probably only be economical at 70-80 dollars a barrel.
On another note, Dubai now has debt in excess of it's GDP. Hence Moody's downgrade on their debt.
Qatar is not in the same boat,they have not been quite so profligate, luckily for all of us who are here.
All my projectons are short to mid term. I don't see the World economy going tilt within the next couple of years.
In long term, perhaps the US will suffer. Or, it may not.
A factor that has not been considred here yet is that Global Economy is evolving faster then people can theorise about it. Therefore, current projections are all short to mid terms because no one knows what will happen in long term.
Value based currency may not be a valid concept 50 years from now. How will the system work then? I don't know. But it is a distinct possibility that a single country/economy/currency will become dominant and all others will be assimilated.
I am a huge fan of science fiction and most of the literature in past three decades has projected a Global Corporation running the World in future :)
I can almost imagine Bill Gates being introduced as President of the United States of the World Inc. in 2031 ~lol~
The current Gas Production capacity is built from capital raised on future gas production by way of licensing rather then a loan.
The concession holder needs to produce x-amount of gas for y number of years to re-coup investment based on their projections of Gas price. In this duration, they will share revenue with the Government.
Typically these projections are hugely under-estimated to reduce the risk and incrase long term profits.
I don't see any scenario in the current situation where world wide demand for Natural Gas will reduce rather than increase. Therefore, we can expect the price to continue to climb due to demand and supply law.
When the price goes up, so does the profit for the investor: The Oil/Gas company. This increases the motivation to invest.
Having said that, perhaps the Oil price and Investment graph may lose it's steepness for a while but in long term, business continues.
Longer the slowdown in capital investment, higher the price of Gas due to the fact that demand will contiue to increase while production will not. This will inrease the pressure to invest.
The risk to GCC countries comes from Bank failures in US. They have huge amounts of money invested there. But that is all Earned Capital which is Not invested here and is not contributing to local economy in any direct way.
Another risk is short term liquidity due to credit crunch. But this is not a huge problem. I am guessing that with rise in interst rates, there will be investors and bankers who will bet on the Petro-revenue.
Current or future production/revenue, which is the base measure of their economic performance, is not at risk at all.
Therefre we can conclude that Qatar economy is sound.
The problem Rock is that they are printing money from thin air.... The private bank that runs the American Gov't named the Federal Reserve is selling SOMETHING for NOTHING!
No fiat monetary system has survived for very long and the dollar is a sinking ship...
“Paper money eventually returns to its intrinsic value - zero.” (Voltaire, 1694-1778 )
&feature=PlayList&p=E6FBFAECA72B813A&index=22
Check out this link by my favorite economist... Max Keiser
They call it the American dream because you have to be asleep to see it... --George Carlin
consider the fact US is the largest producer of grain crops. (source http://www.reuters.com/article/inDepthNews/idUSPAT50124520080805) and within the top three ranking for other food and fruit crops. This constitutes majority of US Exports. Prices of these commodities are tracked in US Dollar all over the World.
When US Dollar becomes more expensive, it does NOT reduce the price of the commodity in International market. It increases the price in local markets in other countries.
Another factor, as I said before, is that US Dollar is the settlement currency for all International Trade. There are plenty of buyers for US Dollar in the market at any given time. Therefore it's value is supported by more then the state of US economy.
So from investment perspective, if you view US Dollar as the base, and value of all other currencies as moveable, then being in US Dollar keeps buying power of your capital intact to some extent.
Therefore, any currency linked to US dollar is going to ride out the credit storm. There may be momentary liquidity problems in middle east but in short to mid term, GCC countries will be alright barring major economic blunders by panicky governments.
I think small investors and third world countries will suffer the most. The cost of borrowing (interest rates) will go up significanly and so will the cost of living. This will impact growth of business and investment particularly in developing World from mid to long term.
In US, the credit crunch will be over soon. They are pumping money into the system and will devise a new Interbank Guarantee's mechanism to limit small investor and depositor exposure. Nothing has been said yet but it's the logical thinkg to do.
The prudent people will have moved their savings out of harms way, i.e. out of North American Banks, and will hitch a ride on the biggest piece of floatable mass around; US Dollar.
I am no economist and am open to be proved wrong.
DOHA • Qatar's real gross domestic product (GDP) growth is expected to taper off next year from the present 14.5 percent to 9.5 percent, according to the 'GCC Quarterly' report just issued by Merrill Lynch (ML). ML has cut its economic growth forecast for Qatar keeping in mind the current global financial crisis. Qatar lacks a large domestic market to cushion the deterioration in the external environment. "Still we expect double-digit growth thanks to increasing Liquefied Natural Gas (LNG) production. We cut our 2008 and 2009 GDP growth forecasts to 14.5 percent from 14.8 percent and 9.5 percent from 12.6 percent,” the report
Real GDP is the inflation-adjusted measure reflecting the value of all goods and services produced in a given year. Real GDP takes into account changes in price levels and provides a more accurate figure of a country's growth than nominal GDP. Inflation is also expected to come down from the estimated 15.6 percent to a still-high 14.5 percent in 2009. With the present global economic downturn, ML said: "Qatar's expensive and capital-intensive growth strategy will also take a hit, in our view. It is true Qataris are planning to double LNG production by 2011 but the global economy is flirting with recession.
Investment projects have had the best track record of completion so far in the region, but the credit crunch is likely to bring Qatar's over-40 percent investment-to-GDP ratio down."
The report said GCC states have saved 70 percent of their oil windfall over the last five years for rainy days. "It is torrentially down-pouring these days. The lowest breakeven oil price that would bring 2009 budgets into balance is $55 per barrel for Qatar."
This means Qatar can maintain its current level of budget spending even if the oil price was to fall to $55 a barrel.
Oil is currently ruling in the $90 per barrel range. Break even prices are low for now but are likely to increase going forward.
In other words: Qatar has spent spent spent and if the Oil price falls any further they are going to have to reign in some of their spending.
Doubling the gas output is a GOAL, producing more Gas is actually turning out to be more difficult and costly than thought.
One set of figures I would like to see is the actual profit on each barrel of Oil or tonne/therm ? LNG.
These projects particularly the Gas projects are VERY expensive to set up, it would be interesting to know of they are breaking even yet. I wonder how long it will be till the first major infrastructure project is cancelled.
I expect Losail to suddenly go slow, will they now build the Aluminium smelter they were planning ? Will they ever really build the causeway ? Really interesting times.
One of the more interesting threads I've read on QL. Thanks avid. If a lot of what you say comes true over the coming years then Qatar's in for heck of a reality check.
Here, the longer I have been here the easy it is to see through it all. Another example was a recent loan made from Commercial Bank to the Al Fardan Group so they could build the St. Regis Hotel. The loan was arranged at preferential rates and was trumpeted in the local paper.
They failed to mention that Al Fardan Group actually own Commercial Bank so they arranged a loan to themselves at a low rate, and now the Government has jumped in and said don't worry about the loan we will recapitalize you so the risky loans you have made don't matter.
I wonder if the story I heard once that the Emit sometimes rights off people's loans is true. Perhaps it's the old fable,
You owe the bank 100 pound its YOUR problem.
You owe the bank 100 million pounds it's THEIR problem
You can't teach experience...
Thank you, aviduser, for your valuable and valued contributions. You have given us an intelligent and succinct summary of the economic news and your latest posting confirms my own fears for the Gulf. It's a house of cards, isn't it.
Mandi
Well people after a couple of days of complete denial the Government of Qatar has been forced to inject liquidity into the local banking system, pretty much as I predicted.
The following story came in via google news:
Doha - Amid the global financial crisis Qatar Investment Authority announced Monday that it is buying between 10 and 20 per cent of the capital of Qatar's native banks listed on the stock market, reported the Qatar-based al-Jazeera TV channel. The decision came to enhance confidence in the Qatari stock market, noting that it will buy the banks shares at Sunday's closing price.
The announcement came at a meeting attended by the Prime Minister of Qatar, Sheikh Hamad bin Jassem al-Thani, representatives of the banks listed on the Doha Securities Market and the Deputy Governor of the Central Bank.
The Qatar investment institution seeks to pump liquidity into Qatari banks to enable them to finance development projects.
Qatar's stock market on Sunday made the highest loss among the Gulf stock markets with a loss of more than 7 percent.
So there you have it, after denials and assertions to the contrary the Government has been forced to inject money into the system.
This is a basic admission that the banks have run out of money, they have been lending too much money for too long to too many people. Reality was bound to catch up with the Country sooner or later.
Much of the Gulf is consumed by hubris, for example Qatar is building an airport as big as Hong Kong's. Now tell me does Doha look or feel like Hong Kong, does it even feel like the average provincial UK City, yet it is to have a massive 10 BILLION dollar Airport. Losing 890 Million a year on an Airline seems like a good idea in the good times.
Lets face it's not just a liquidity crisis that Qatar suffers from it's a CREDIBILITY crisis.
I will be interested to see if the local papers report that the EMIR has had to bail out his friends banks. Oh dear oh dear.
^^LiVE LiFE!^^
it is everywhere in the middle east, especially UAE and Qatar. here we can find it!!
the oil dollars pumped in the middle east economies were converted into skycrapper and all sorts of construction that we see now.
if the western economies collapses, no more big costumers to buy middle eastern oil...even china and india will cease flourishing as the costumers who buys their product and services collapses to bankruptcy!
what we are seeing now, the first domino falling from US now going to europe will eventually lead it's way down here.
its just like a ticking time bomb waiting its time to blow up...
and all the oils drawn up will turn into wastes as the equivalent dollars that feed the construction that once boomed shall fall into ruins without being used.. like the tower of babel repeating once again it's history.
nature has its own way of punishing greediness among us all!!
and that's a sad fact...
From the Gulf Times today, they are reporting a survey about worker satisfaction in the region and wages they print the following:
The battle for talent has not only meant pay increases but changes in working practices, Gulftalent.com noted. "In a major new trend, 2008 has seen a large number of companies with six-day working weeks, including many in the construction and retail sectors, switch to shorter five-day weeks in an effort to improve staff retention." The survey showed 23 percent of GCC-based professionals would like to relocate to Qatar, with the figure being 66 percent for the UAE. Qatar came last among all the countries when it came to those willing to remain here at 32 percent , compared to a whopping 77 percent for the UAE.
Er if people want to leave Qatar how is the economy going to survive and flourish in the years ahead.
The problem is Qatar has picked up a bad reputation for low pay high rent sky high inflation and NOTHING to do. You simply cannot attract or retain people with that sort of background.
Qatar has done little to improve the life of expats here and in the main they make it harder not easier to live here.
Gold was down today but hang on it'll be up to 1000 soon
RP, dont be silly...
when dollar was cheap for euros, we bought from Europe computers, cameras, etc... via ebay.
US made a nice bussiness with dollar low. All plants working and shops selling all stock...
Now if dollar goes up, what do you think is going to happen?
War looking for peace,
is like fornication looking for virginity.
It is the base currency for much of the world. All import settlements are done in USD. There are too many economies hooked to it. Mehinks, the 'Dollar in free fall' theory is bunk.
China is holing huge amounts of USD Notes. They are hedging bets by buying up North American Assets piece by piece.
It is logical to assume that the buying activities will gain momentum to snap up firesale properties and distressed Industry particularly lumber and minning sector. This and other factors will continue to prop up the USD.
Next year, Euro might rise against the USD but everybody else will either go down or stay pegged. Right now Euro is going down. I think this will continue for another 6 months or so primarily due to US control of World Oil markets and Bank failures in US notwithstanding.
Consequently, the GCC currencies will also go up providing a counter argument to unpegging from USD.
Oil prices are in free fall because of 'slight reduction' of demand in US and surplus availability from Iraqi oil fields which are now back online and pumping. However, come winter, the surplus can be quickly soaked up.
As such betting on falling Oil prices or GCC currencies losing value does not sound valid to me.
I am betting that in short to mid term QAR will be good currency to be in whether they un-hitch from USD or not.
just my 2 cents :)
The Gold spot
The silver spot
Live rates at 2008.10.11 17:37:22 UTC
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Live rates at 2008.10.11 17:38:22 UTC
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Who is your daddy?
"It does me no injury for my neighbor to say there are twenty gods or no God. It neither picks my pocket nor breaks my leg."
Thanks for all the useful information :)
------------------------------------------------------------
"Every adult of sound mind, should be able to choose to do whatever they want, as long as they cause no harm to others".
I'm loving this credit crunch, for years the USD was worthless against the Euro and Pound. Could you tell me, who is your Daddy know? The US DOLLAR!!! lol
"It does me no injury for my neighbor to say there are twenty gods or no God. It neither picks my pocket nor breaks my leg."
— Tho
Vegas, dollar going up is very bad for US. It makes american goods and american companies more expensive in comparation with european and asian ones...
For US to recover, dollar must go down, maybe it is bad for americans in short term, but you have to look forward...
War looking for peace,
is like fornication looking for virginity.
If it's bad for US...It's gonna be worse for everyone else...
You can't teach experience...
Profitable certainly. Would I personally do it, probably not although I think I will sell one of my cars to release the cash tied up in it.
Also if you need to run off not having any money tied up in a car is a good thing. I might rent long term :)
Avid, that's quite risky...
you are relying on dollar collapse (pulling behing QAR).
I cannot tell you from pound POV but from EUR, Im not sure that this is going to happen... US cannot low the rates much more (where are they now? 1,75%?), but in Europe it is possible (they are around 4,5%, isnt it? and they are willing to low in order to get a lower euribor).
Low of the rates = more euro cash in the market = rise of the dollar, down for the EUR.
Rise of the dollar = rise of the QAR...
I dont want to have a loan on QAR with QAR rising and my salary in Euros, honestly...
All above IMO.
War looking for peace,
is like fornication looking for virginity.
If the Rial say for me hit 4 to the Pound from the present 6.2 then I would think about doing it myself. You would then send the money home wait a few months for the rial to recover and then send the money back paying off the loan and keeping 2 rials on the pound.
for example do 100,000 Rials right now gets you 16,112.04 Pound. 1 RIAL=6.21
Now 100,000 Rials at 4 to the pound = 25,000 Pound.
A difference of 9,000 Pound.
Wait till the Rial recovers and bingo you would probably make about 5,000 after all fees etc.
It's risky I am almost tempted to sell my cars right now to become cash rich again for such a moment.
The bank will only lend you up to 70% of you Salary, taking into account, other loans etc.
It's risky I grant you but if the rial really did freefall it could actually be worth a punt.
Right now with Oil in free fall the Rial could devalue quite sharply, Or as I have mentioned the Dollar could collapse right now it's holding up.
Hi aviduser, a simple yeh or ney will suffice - here is the scenario:
If the QR : ZAR exchange rate reaches 1:3, take a personal loan from a local bank to settle mortgage at home, and spend the next 2 years working it off . Is there a downside to borrowing local money for purpose mentioned during these financially volatile times? Thanks
Tought times are coming...
War looking for peace,
is like fornication looking for virginity.
Vote is rather proving my point about the fundamentals of this economy not being under pinned by demand.
Oil hit 80 dollars today, expect to see unfinished projects litter the Gulf, Dubai to implode and Abu Dhabi to bail them out. Expect central bank intervention shortly. As seen in Dubai already, Global recession is really gonna hurt here. If you own here or Dubai it's now too late to sell, hang on to it and hope you can rent it.
Where to by these bonds?
Gulf equities in ‘Vicious circle’
By Robin Wigglesworth
Published: October 8 2008 18:24 | Last updated: October 8 2008 18:24
Until recently, received wisdom held that ample government revenues in the Gulf would filter down into the regional banking sector and protect local houses from global woes.
But, since August, a homegrown liquidity crisis has hit regional financial institutions.
Banks are facing an acute cash shortage as lending earlier this year failed to be matched by lasting deposit-building, according to analysts. International lending froze after the collapse of Lehman Brothers last month and domestic capital is dwindling outside the government sector, sending funding costs soaring.
The banking and finance sub-indices of the Abu Dhabi, Bahrain, Kuwait, Oman and Qatar bourses have all slumped more than their parent indices this year, according to Zawya, a data provider. In Saudi Arabia and Dubai, bank indices have fared better than the parent exchanges but have still shed 24.3 and 31.4 per cent respectively.
Real estate and construction stocks are falling due to concerns that banks can no longer finance developments, while bank shares are diving over worries about overexposure to real estate. “It’s a vicious circle,” says Tammam El Barbir, an analyst at Morgan Stanley.
The Dubai Financial Market’s real estate and construction sub-index has slumped 37.3 per cent this year, as investors fear the bellwether emirate may be hit by a real estate crash.
Shares in Emaar, a Dubai government-controlled developer, have fallen by more than 60 per cent this year, wiping Dh56.4bn ($15.3bn) off its market capitalisation.
“Investors are now pricing in a real estate crash, that the banking sector is in trouble and that Dubai will default,” says Mohieddine Kronfol, managing director of Algebra Capital.
Regional authorities are also starting to fret. Kuwait has eased some of the tensions in its money markets by cutting rates, lending an undisclosed amount to banks and attempting to prop up its equity market.
The United Arab Emirates central bank has offered Dh50bn of additional liquidity. However, the three-month Emirates interbank rate has risen by more than 100 basis points since the move, according to Shuaa Capital.
Given the strains in the capital markets, “governments need to put more money into the system”, says Mr Barbir.
No one doubts they can do it – combined, the region’s current account and fiscal surpluses are in excess of 20 per cent of gross domestic product, and net foreign assets are more than $1,000bn, notes Standard Chartered Bank.
That money may soon return to more familiar shores.
Dubai
Not-so-hot property
Oct 9th 2008 | DUBAI
From The Economist print edition
Is Dubai being hit by the turmoil?
YOU may have thought that if anywhere would be insulated from the financial chaos, it would be Dubai, the ritzy commercial capital of the oil-rich Gulf. Not so. Events across the world are causing pain there too, even though much of the emirate’s cash has not made its way to the banks; it is held by ruling families and in their sovereign wealth funds.
Dubai’s oil revenues are small. Sheikh Muhammad bin Rashid al-Maktoum, the energetic ruler of the second largest emirate of the seven that make up the United Arab Emirates (UAE), has chosen to diversify, especially into real estate, as his way forward. Investors in Dubai property have done well in recent years, enjoying returns of roughly 80% since early last year.
Two factors have underpinned prices. The first is negative real (ie, below-inflation) interest rates, which track those in the United States. Borrowers can apply to banks and still borrow very cheaply. And since some think the official inflation rate seriously underestimates price increases in Dubai, there is a big incentive to borrow from banks and invest somewhere else.
The second factor is the continuing influx of workers into the emirate. Less than a fifth of Dubai’s 1.5m people are local. Many of the immigrants are building workers from South Asia who are provided with accommodation during their stay, but not in the smart apartment blocks that Dubai developers favour.
Bad timing
Then, over the summer, Morgan Stanley issued a note which said that Dubai property prices would fall by 10% by 2010. Quite simply, there may not be enough demand for the wave of new property coming onto the market. To a society used to easy returns, this was a shock. The report coincided with a withdrawal of deposits and investments from the UAE by speculative investors who had previously been betting that local currencies would shoot up as Gulf states let go of their dollar pegs to deal with double-digit inflation. But things did not work out like that. The dollar strengthened, so the bet failed and speculative flows went home. As a result, there was less cash sloshing around in the Gulf.
It was the wrong time, then, for a slew of corruption allegations. Since April, investigations have centred on Dubai Islamic Bank, an institution with a history of problems, and on various mortgage lenders and developers. Those investigated include a minister of state and two Britons. Sheikh Muhammad made a rare public announcement recently to say that the public prosecutor would not tolerate “illegal profits”. The investigations are thought to be continuing; no charges have been made.
At this week’s Cityscape real-estate conference, the emirate’s pushy public-relations people were busy pretending nothing was amiss. Nakheel, a state-backed developer, said it would build another tower block that would be the tallest building in the world, even higher than today’s tallest, the Burj Dubai. Another developer heralded a spectacular new development called Jumeirah Gardens, at an estimated cost of 350 billion dirhams ($95 billion).
The markets have been less impressed. So far this year, shares in the Dubai Financial Market have lost 48% of their value. Emaar, a high-profile developer, fell from a high of 15.7 dirhams to 5.5 on October 9th. In another sign that not all is well, the Dubai authorities merged two Islamic mortgage lenders, Amlak Finance and Tamweel; the latter is one of the firms involved in the investigation. Some of the more sober developers, Tamweel included, have stopped the widespread practice of “flipping”—paying only a percentage of the purchase price of a property and selling it on before instalment payments begin.
Dubai is not going to go bust. The state controls the larger property developers and can alter supply and demand by releasing land when and how it wants. Average percentage yields from rented properties are still in the high single digits, so demand persists. Business people are still likely to come to the Gulf. But expect more mergers along the lines of Amlak and Tamweel. Some smaller developers may go bust. The huge profits of the past will dip.
The ructions may also strain relations between Dubai and Abu Dhabi, which still has the biggest money bags because it has most of the oil—and may no longer be willing to sit back and let Sheikh Muhammad and his men make all the running. Sheikh Muhammad seems to get on well with Sheikh Khalifa bin Zayed al-Nahyan, Abu Dhabi’s ruler. But financial arrangements between the two emirates are opaque. Sheikh Muhammad may need to be more deferential to his fellow ruler.
hi,
what do you mean when you say "You don't have to deal with HSBC here, at all, remember the HSBC here is in name ONLY"......
??
aviduser, thank you for your insight.. i found it very sensible and particularly interesting your comments on local banks..
a word of caution however.. the markets are crumbling down fast but i would not rush into any alternative investment at present: this is a wild storm and NOBODY knows what will happen, not even the so called pundits...
not long ago "experts" were talking of oil rising to 200 US$ and we all know what is happening now.. two weeks ago i heard economists reassuring this crisis is not as severe as 1929, one week ago they said it was as bad as '29, today many say is the worst ever!!!
i'm no expert but my feel is that nobody has a clue here.. better wait for the dust to settle before making the next moves, just common sense
**Sic dixit Zarathustra**
@flan, the DSM always is down during this period. (looking at previous trends).
However it is lower than usual.
The world is indeed being carefull. However in Qatar, we're affected because there are too many spenders.
People need to spend less.
__________________________
Mr. Q's Blog - A Qatari's view on Qatar.
aviduser ....always enjoyed your posts....do keep posting.
Your advice to watch out and keep away from "High Interest rate" Banks were worth its weight in gold.
Even if Doha becomes 10 times more populated the "Pearl appartments" will still remain unpopulated as they would be too costly to rent out.
Maybe this was the reason Dubai issued a new rule -one vila one family so the families will be forced to rent out such costly appartments.
The Gulf’s banks are now experiencing their own liquidity crunch as credit growth has outstripped deposits and financing from international banks has dried up. Analysts say this could lead to delays in some of the numerous projects planned for the region and a slowing of growth rates, even though the long-term economic fundamentals for the region remain positive.
A key area of concern surrounds the property market in Dubai, seen as a bellwether for the region. Property prices in the emirate have soared about 40 per cent this year.
As I said the banks will now start offering high interest rates to savers IBQ has started who will be next ?
I am not sure such things exist here. Search the internet for a broker who will let you trade.
That share was up 1.69 Today the only riser on my list of shares.
As you mentioned in your post, it is recommended to purchase SPDR Gold Trust (ETF). Can you please advise how to purchase these while being here in doha. Is it through a bank or through internet????
Yeah, MD - that's true.
But we have to understand. It was a rise over 5% (some years even two digits) during a nice amount of years... it was too attractive to many ppl...
War looking for peace,
is like fornication looking for virginity.
GC Cowboy, huh... i like it... ;)
I notice something similar in Jordan some time ago.
Jordanians were very angry against iraqui, because during and after Gulf War they arrived Amman looking for safety with big wallets plenty of dollars... and they made every single price to rise...
Overall they were very angry because of the schools. Iraquis took the best schools for their children and public schools were absolutely crowded...
It is not exactly "buy the citizenship" but "buy the safe"
War looking for peace,
is like fornication looking for virginity.
wow,...
Yeah, me too, flan. Live is better now with the QDC open again. Lol.
nice MD, but i prefer live music. can't wait for your next gig!
Dangerous, eu. What happened in Spain, respectively in Mallorca also shows the insane way of "investment". There are hundreds of apartments empty, just sitting there and waiting for the real estate prices to rise. They fell 20 % this year.
i have speakers here at home, MD...so now, i can listen to it... thanks for the link...will click on it now...
sad but true eu61, money can buy "citizenship" these days.
unfortunately with this new money it pushes property prices up......and the cycle begins again.
http://www.showcaseyourmusic.com/RockOn
Here, mj. You have speakers now? Pump up the volume, Babe.
oopps, i forgot to say the magic word... please?
speaking of song, MD... would you mind pasting the link again to one of your song numbers? :)
Ive just read in newspaper something very surprising for me.
It was an article about the situation in Pakistan - UN has rated Islamabad in the same level than Kabul and Mogadisciu - very dangerous.
And it looks like the high class (new rich ppl) of Islamabad is buying properties in Dubai, Qatar and Singapur not for the propierties, but for the Resident Permit, as it is starting to be very difficult for them to get US and Europe Visa...
:-/
Suppose they are marginal and they are not going to refloat the RE market, but it is a surprise for me. I didnt think in these customers... paying for the relative security of the GCC... paying for the "citizenship" (well, at least the RP).
War looking for peace,
is like fornication looking for virginity.
Ah thanks Alexa.
MD - :P
And "Dirndl", Alexa.
I guess Alexa expressed what I tried to say, much better, of course.
hmm, MD in leather shorts, singing...worth a try.. ;)
Not anymore when they know who is behind it, flan.
huh!!!?? i thought eveybody liked my avatar?
I can see you are clever, flan, despite your "looks". Did anybody ever tell you that the expression in your face is "stupid"?
oh ok,.... :P
No, no, my grand father wore these things.
MD, I'll take you in as my adopted Aussie.
As long the China and India keep signing the mining contracts (mmm Uranium), we shouldn't see "as large" fluctuations as with the other stocks....of course providing the demand is there.
lol MD, is that one of your pics by any chance... :P
lol marhabtain... too much gin now... :P
He means this kind of Bavarian dress, mj.
Please dont embarrass moi! I love tight leather shorts, tight tank tops and tight boots but rather mainly on women - unlike MD !!!!! Yippee, Yippeee, its Bombay gin for me!
who's into leather shorts, marhabtain? :P
Be carefull - he's into leather shorts etc etc etc! Yippee, Yippeee, its Bombay gin for me!
As you said, Flan, the vast resources of Australia are the point. Including Uranium, by the way. So commodities might be a wise choice, too. Silver? (Has much more industrial meaning than gold). And the fluctuations are milder.
Gold
Silver
we'll have to wait and see
lol MD... no thanks..
Well, then you can bring them in, mjamille, pretending you're a couple.
agree MD, a casino would be cool!!!! and without being biased towards Aust, buying the AUD isn't a bad thing right now....i usually wait for uptrends though (the arse fell out of it today).
still not over the 'bachelor' fever i see... :P
Let's open a casino, Flanostu. You can scare "unwanted bachelors" away.
And they shop at Walmart...
And eat at Mcdonalds...
LOL sad but true...
You can't teach experience...
If the aussie Dollar is low now, then it's the right time to buy it!
It has already hit the GCC guys, we have already witnessed large declines on the DSM over the last few weeks and the Qatar property market is at risk of overheating as well as being overvalued given the current market conditions.
As such there remains completed housing developments where the vacancy rates remain high and therefore is at risk of deteriorating rental yields over the coming year. We are already seeing rental incomes plateau and in some cases falling.
As a benchmark given the current crisis, unfortunately what I once thought was a very sound/safe economy given its vast resources (yes Australia) has tumbled heavily recently. As an example the Aussie Dollar fell from its 25-year high of around 98 US cents in July, to around 71 cents today.
Having said this, there is no better place in the world I'd rather be right now than right here in Doha (or GCC).
In any recession, there will always be good buying opportunites whether it be here or in your home country. As someone once told me, people will always DRINK, SMOKE or GAMBLE during a recession!!!
The problem with Europe, vegas, they are not one like the US. They have a hard time to work together. But I said before, go for Australian currency.
Honestly Im starting to be a little worried about my money abroad...
10% to be scared you said?
Thanks to god Im poor and my savings account level dont go over the guaranteed level
(lolz)
War looking for peace,
is like fornication looking for virginity.
Europe must be worse off than the US....
You can't teach experience...
Avid very valuable post. Thank you.
War looking for peace,
is like fornication looking for virginity.
Aviduser, very valuable information - thanks !!!
...in the meantime out there in the markets it's getting furiously ugly... OMG the DJ under 10000!!
**Sic dixit Zarathustra**
aaahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
just eat another pie
A cult of green archers!! ;)
it's one who graduated from De La Salle University... :P
Whats a Lasallite??????????????????just eat another pie
lol janey..... thanks.. nice to meet a fellow Lasallite here in QL...
MySpace Graphics & MySpace Layouts
Ooooooooooh! Brilliant!! Mj, I've been here longer and your QL points are waaaaaaay past the roof! ;) Swell! Good job my fellow Lasallite!
Yes...................can we have her back please..........please, please, please
just eat another pie
so now you know where she went, pieman... :P
I haven't posted in such a long time I forgot I had added her to my signature, it only appears as code in my post's till I actually submit it and I forgot what it was for. They were great though :)
lol, where..... :P
the dancing maddona with the big boobies
just eat another pie
Calls at the moment to bring Iceland into the EU. The Dollar is finished, Euros will be the place to be, right now it's a little low as we have seen a couple of big banks collapse in Europe, the difference is that it's a couple of banks, the FED currently has a list of over 100 banks in the USA that are ready to go bust.
Once the dollar collapses the GCC will be forced to re-peg. As I mention this will come after much procrastination, the problem they will be faced with is that even if the price of oil hovers around 85 dollars a barrel if the exchange rate falls to 3 dollars to the pound or .25 euro cent to the dollar they are really gonna struggle to finance anything at all here or invest anywhere abroad.
Saudi pulling out of the Dollar will exacerbate the fall this was the reason they resisted pressure this year, the question is how long they will be able to hold out under a full scale dollar collapse.
Qatar will be hit by massive inflation, I can already see the Country making panic moves and over inflating wages or "hand outs" We could see an inflation spiral here, the country has already shown it's woefully unable to control both growth and inflation. A Country like China for example is growing at a pace of 11.4% last year their inflation rate is 7.1 %
Our growth rate is 13.8 % but with inflation of over 14%, again this is due to the fundamentals of the country being all wrong along with totally uneven distribution of wealth. The growth versus inflation is unsustainable.
One tip
If you see any local bank suddenly offer 10% interest on your savings PANIC.
It means they are desperate for liquidity to bolster the balance sheet and make their report look good for Moody's, Commercial bank tried this last year with 7%.
Once you have some decent savings transfer them abroad, use someone like HSBC offshore. Transfer once every 3 or months to avoid too many charges.
Don't keep your money here, if a bank fails us ex-pats will be last in the queue for ay compensation. Of course I am not saying the banks will collapse here but offshore is the safe option, just type HSBC offshore into Google for all the info you will need.
You don't have to deal with HSBC here, at all, remember the HSBC here is in name ONLY.
An inflation spiral could cripple the value of the Rial, that isn't such a bad thing but my advice is keep large sums abroad.
I know this sounds gloomy but honestly if I wrote last year that by the end of 2008 there would be no investment banks left in the USA you would have laughed, look what happened.
Three words vital here: HEDGE YOUR BETS :)
who?
I swear she was there
just eat another pie
who's she?
WOW, I pressed post comment button and she was gone!!!!!!
just eat another pie
Does'nt seem to be any liquidity problems just above me, or is she heading for a soft landing
just eat another pie
If you care for an opinion, abu, I think Germany is embedded very deeply in the EU. That's why it cannot be looked at isolated. If France fails, or Iceland, that will affect the Euro. I would opt for a currency further off like Australian Dollar or SA Rand.
Get into the Gold ETFs try:
SPDR Gold Trust (ETF) listed on the NY:SE It's a fund that tracks gold, Gold is presently about 835 dollars the SPDR fund is presently 82.59. As the price of Gold goes up the ETF price goes up. The two are tied together, this way you can get into Gold without having to own a safe :)
The fundamental of gold is good, the current credit crisis means that the FED in the USA will soon be printing trillions of dollars, whether this causes a Weimar Republic inflationary spiral remains to be seen but it WILL devalue the Dollar, and when this happens gold will be a good place to be.
I don't hate anyone I probably fundamentally disagree with some of your principles thats all, life is too short to hate any one.
If I were to advise anything I would probably say GOLD. It will hit 1000 dollars again by spring.
The idea of pass the parcel with property is totally correct, I actually wrote then deleted that as my post was quite long.
I have written before on another forum than I think a few years ago the prices on the Pearl and Zig Zag along with many Dubai projects were deliberately under priced, the units were then released onto the market and almost immediately sold bringing quite good returns (Diamond Girl has done this) Now news of these returns hit the market and made great for great PR. Remember if you were a cash buyer you only needed a small down payment to secure a property, cash rich local buyers could purchase whole floors for very preferential rates, then sell them for profits legitimate profits. That profit was good for them but ensured great PR for the Pearl and others and ensured the demand, for them it was a win win.
The stories of the returns was passed on so demand was created for these properties, second hand users also saw a profit when they sold and so on. The problem is the fundamentals, there just isn't the demand for the properties as HOMES, not investments. So if you are unfortunate enough to end up with a property at completion. You are the won stuck with the parcel, now what do you do ?
Once the projects are completed the supply of flats will be massive, but they are high end flats, with rent projected from 3,000 Dollars a month.
Does that seem realistic, for a 1 bed flat. Now we keep hearing that rents are going up and people can't find a decent place to live, but ask your self this, Why are the rents high and where is the demand coming from.
Now here is a paragraph that is on no way meant to demean or be derogatory, I am not trying to provoke, read it and see if you get what I mean:
I was in Villagio the other day, it was heaving, packed out with locals, Indians, Philippinos and Arabs from every where, out of the vast crowds I hardly saw a western face. Now I don't know the exacts figures but from what I gather from this forum, the aforementioned nationalities do not seem to be pulling in very big money, many packages posted on this site are woefully low, now of course there will be exceptions pulling the big bucks but according to this site unless you are European or American the money just isn't there.
Now I saw perhaps a few dozen, Western Faces, and assuming they really do get paid the big money, would they choose to live in a pokey 2 bed flat for 3,000 Dollars a month no matter how good the view. It's all about the fundamentals.
Dubai is in serious trouble but no one wants to admit it, much like the banking sector last year, everyone knew there was a big problem looming but didn't want to admit it.
Dubai is the same, they have relied on "if you build it they will come" which is great when everyone has money to travel and Jet fuel is cheap but not such a great philosophy when no one has any cash and jet fuel is expensive. Witness the figures reported this week even in Qatar ! that Middle East carrier passenger numbers are down 5% year on year, expect this to keep falling.
Adding to Dubai's problems have been the steady stream of negative P.R. stories and you have a recipe for declining visitor numbers and falling revenues. With hotels already too expensive there I expect the fall to be precipitous. Figures this Summer showed occupancy in Dubai and Qatar 71% at present bed numbers, now double or quadruple (in the case of Dubai) the number of beds and what will the occupancy levels then be ?
When you buy shares you are warned "past performance is not an indicator of future gains"
Qatar and Dubai have based their entire economy on the basis that their past growth will continue, but there are no fundamentals to support it. Just because your economy is growing by 10 % year does not mean it can continue at 10% a year. Qatar is supposed to be the Richest country in the World but does Doha feel like Geneva.
Distribution of wealth is not something it seems the Country is keen on, without this the Country will never and can NEVER grow organically like other Countries can and will.
Witness the growth of the middle class in China, where is the expanding middle class here ? The Qatari's don't count as they are middle class by being Qatari, if you know what I mean.
So at the end of this long rambling post, I say this, yes I am still alive, no I don't hate anyone. I am working hence delays in posting.
Pay attention to the fundamentals, the information is all around us, even the local papers report the the figures, they just remove the context to cover the facts.
Oh I used to own a flat in the Zig Zag, I sold about 6 weeks ago for a profit, I doubled my investment, but the question is could I have done the same today, I wager not. :(
If you own right now in the region, put the place up for sale, see if you get any interest, perhaps I can be proved wrong.
@avid, I discovered thats a QIB offer not an Imperial Towers offer.
That means it's not the project thats doing it, it's the bank. And the bank with that promotion ends up making more than with a normal promotion lol.
__________________________
Mr. Q's Blog - A Qatari's view on Qatar.
I don't think Oil will affect Qatar seeing as
1) The price of oil where it is just gives Qatar bonus profits, it can succeed if oil is at a much lower price.
2) Qatar is a Gas based economy.
Qatar will feel the pinch, and it'll be to the high inflation and slow down of investment in the region. Simple as that.
@avid, is that promotion direct from engel?
__________________________
Mr. Q's Blog - A Qatari's view on Qatar.
@abu, did you refresh your cache? (press CTRL + F5)
It's odd that it's not working... keep me updated and I'll look into it
__________________________
Mr. Q's Blog - A Qatari's view on Qatar.
hi how r u there alll
My advice is to wait for few months..let the market to reach the rock bottom then enter
no place to hide... i'm afraid it doesn't take an economist to see that this one will punch a big hole in everyone's budget..
and yes, i would not want to be one of those investors who've just bought real estate in Dubai..
**Sic dixit Zarathustra**
Thanks for the clarification and info..Given the current finacial climate, what is the best investment option for a careful and risk averse investor ?
I am a novice at these things.. I think Aviduser can perhaps shed some light..
Now is the time to put your savings in these bonds then :)
lots of people in the gulf holding properties will now be very worried especially in the UAE. Its like a game of pass the parcel except the one holding the parcel is the one who loses.
Advise for the common schmo? Sit tight, hold onto your cash and try and pick when its time to invest again. When that is though who knows but if you get it right or nearly right you could make some good returns over the next 5 years.
Not posted on here in ages as I prefer to live in my happy place.
Anyway economics is a subject I know.
The credit crunch will affect the economies in this region with varying degrees. It does seem counter intuitive to think that with so much Oil and Gas that these countries could be effected but they will.
For one thing, these Countries sit on a load of Oil and Gas, but it can't be pumped all at once, so countries like Qatar issue bonds against the value of the Gas in the the ground, these bonds were traded on the World markets and as we have all seen credit has dried up meaning there are no takers for the bonds.
In Dubai the cost of insuring Govt Debt doubled this month, this means that Dubai will have trouble selling their bonds on the market as they are now seen as too risky.
You will find that many of the spectacular projects announced will quietly disappear as the money or bonds to finance them will evaporate.
Back in Qatar I saw the first sign of a tightness in the housing market, the recently released Imperial towers on the Pearl are now being offered with a 5% deposit and a fixed 3.99% interest rate for 3 years. This is the first time an offer such as this has been made in this market and indicates that they are having trouble shifting the units. Now Qatar is tiny in comparison to Dubai but it's clear that Qatar is losing the battle to attract companies and inward investment. This means that many of the flats being built will remain empty at current prices. All of a sudden a 300,000 pound flat in the desert doesn't seem like such a sound investment.
Dubai is in an even more precarious position, much of their property has been brought by speculators, hoping to see a rise in prices and many have been rewarded with huge returns. The problem now is that people are realising that the ones who end up with the property are the one to lose out.
Often the standard of the property is low (as we all see here) service charges are sky high and maintenance is poor. This information is filtering through the market, there are already signs that many owners are in difficulty.
There is also the spectre of the collapsing dollar, this will happen, the bailout this wk has fatally weakened the dollar, the peg will have to go, BUT, expect the it to go AFTER a lot of damage has been done, the GCC will not just pull the plug they will procrastinate as inflation spirals. Mark my words. And all the while that happens the real value of the Oil will fall. Saudi is in trouble here as dropping the peg will only exasperate the fall of the dollar, a downward spiral.
So with less money floating about the GCC will suffer, obviously petro dollars will of course help and the rich will continue to be rich, the problems though of poor governance and lack of any of transparency will mean that the GCC will be woefully unable to deal with the problems, witness the presently high inflation and the total inability of the Country to deal with it.
Vegas is probably on Omega 3 eggs for nourishing of his .................
are you going to man? Forget about Megamart and got to FFC, they got the 30 eggs of Al-Wataniya eggs [Emirates] fro 18 Q.R and their chicken + eggs taste the best ...
Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment. (Gautama Buddha)
Yes, brit, they already do that. For fuel, for example. I think it was a Gulf Times article in the "business" sector which gave the figures I'm referring to.
The Gulf countries, with Bahrain probabaly being the exception should be able to heavily subsidise essential goods/foodstuffs and ride out the crunch.
Vegas - Better buy a Hen and make her lay eggs for you :)
Ban Spoon Feeding not Me
You can't teach experience...
Deos this mean possible recession hitting the GCC? Will inflation continue?
"The best way to predict the future is to create it".
I read about this lately, brit. The ability to import what is needed in Saudi is good for 8 months. With a falling oil price it will be reduced to six months. Some Gulf countries are able to import for the next 8 weeks (if the oil price declines). It's not really how much money they have gathered in the meantime, because the money doesn't go where it should go. There is a judgment on how long a country can afford to import the goods it needs.
Dubai will have the real issues not here. They have so many units coming on stream there will be a knock on on prices unless the government intervenes to prop up the market and prices. (Which is likely)
In Qatar the govt can underwrite the whole economy by throwing petrodollars around. It could do that for at least two years without any ill effect. Lack of supply in housing will still keep prices where they are now, but I have noticed a flattening out especially in the higher end market.
Saudi budget is based on the oil price being around US$ 30 a barrel. So, they've made enough money in the last three years to last a few lifetimes.
I think the falling oil price will become an issue for the Gulf States.
I'm waiting for Tig's say on this.