efg - regional monthly - april 8 2010

8/9/2019 EFG - Regional Monthly - April 8 2010

1/23

regional monthlyMarch Issue

08 april 2010

1

All MENA markets ended March on a positive note compared to February except for Palestine, which ended

down 4.2% M-o-M. Dubai was the top performer, strengthening 15.7% following the Dubai Governmentsannouncement regarding its proposed strategy for restructuring Dubai World and one of its keysubsidiaries, Nakheel. Qatars performance was also solid, adding 8.6%.

The Saudi Arabian market was once again the top market in terms of liquidity, trading an average dailyvalue of USD816 million throughout March. The MSCI Arabia Index underperformed the MSCI EmergingMarkets Index, rising 6.1% versus 8% during the month.

egyptUrban consumer inflation decelerated in February for the first time since August 2009, in line with ourview that inflation will decelerate to an average of 9% Y-o-Y in 2010. We expect interest rates toremain stable in 2010, in light of the still fragile economic recovery and falling inflation.

The government presented its draft budget to the Cabinet in March, targeting a reduction of the deficitto 7.9% of GDP in FY2010/11, from an expected 8.4% in the current FY2009/10. Revenue is budgeted togrow 8.6% Y-o-Y, broadly in line with our estimate as higher economic growth will result in a pickup intax revenue. The deficit will be primarily financed through domestic sources, although the Public DebtManagement unit at the Ministry of Finance has said that it plans to issue a USD1 billion Eurobondtowards mid-2010. We believe this move primarily aims to diversify the government's sources of debtfinancing.

gccOn 25 March 2010 the Dubai Government announced a debt restructuring proposal for Dubai World andNakheel, which was substantially better than that expected by the market. In particular, the proposedmeasures aim to protect the principal amount of the loans, albeit with extended maturities in somecases. The proposals will now be discussed with creditors and the restructuring process is expected to

take several months to implement.

While a number of issues still have to be ironed out, we believe that the proposal is positive from aneconomic perspective, with substantially lower systemic risks and a marked improvement in the visibilityof the process. We believe that the reduction of uncertainty and speculation will be central to supportingmarket sentiment towards Dubai.

Our forecasts already incorporate a gradual improvement in sentiment throughout 2010, following anagreement with creditors on the restructuring of the debt and increased visibility. We therefore maintainour UAE forecasts, and expect positive real non-hydrocarbon growth of 2.2% and overall real GDPgrowth of 2.5% in 2010.

List of EFG Hermes Research Publications for March 2010 and one month before.

i. mena markets 02

ii. economics 11

iii. research log19

kindly refer to theimportant disclosures anddisclaimers on back page


2/23

regional monthly08 april 2010

2kindly refer to theimportant disclosures anddisclaimers on back page

march issue

i. mena markets

mena markets overview

All MENA markets ended March on a positive note compared to February except for Palestine, which ended down 4.2% M-o-M. Dubai wasthe top performer, strengthening 15.7% following the Dubai Governments announcement regarding its proposed strategy for restructuringDubai World and one of its key subsidiaries, Nakheel. Qatars performance was solid, adding 8.6%. The Saudi Arabian market was once againthe top market in terms of liquidity, trading an average daily value of USD816 million throughout March. The MSCI Arabia Indexunderperformed the MSCI Emerging Markets Index, rising 6.1% versus 8% by the end of March.

In Egypt Orascom Telecom (OT) reported a 4Q2009 net loss of USD46 million. Banglalink, OT's Bangladeshi subsidiary, raised USD102 millionin senior secured bonds in March, denominated in local currency. The bonds will pay a coupon of 13.5%, payable semi-annually, and are due in2014. The Administrative Court, which was due to rule regarding OT's appeal against the Egyptian Financial Supervisory Authority's (EFSA)decision to accept France Telecom's (FT) tender offer for Mobinil, decided to postpone the hearing session until 10 April 2010. This is the thirdtime that the hearing has been postponed, after the State Commissioners' Authority supported the decision to stop the tender offer on 13January 2010. OT declined 5.4% to EGP5.65, while Mobinil added 1.2% to EGP214.00.

Orascom Construction Industries (OCI) announced that it had reached an agreement with Royal DSM N.V., the global life sciences andmaterial sciences company headquartered in the Netherlands, to buy DSM Agro and DSM Melamine for EUR310 million on a cash and debt-free basis with effect from 1 January 2010. The intended sale is expected to be completed in 2Q2010, once regulatory and customaryapprovals and notifications have been finalised. Additionally, OCI's 4Q2009 net income dropped 12% Q-o-Q but increased 38% Y-o-Y toUSD105.8 million. OCI jumped 11.9% to EGP264.30.

In the UAE Tabreed, which posted a net loss of AED1,118 million in FY2009, will receive a USD354 million bailout from Abu Dhabi.Mubadala, Abu Dhabis state investment arm, holds a 16.7% stake in Tabreed and will offer the company bridge financing to cover its needsduring its 2010 recapitalisation programme. Tabreed eased 21% to AED0.49. The Dubai Financial Services Authority (DFSA) fined Damasfounders and majority shareholders, Tawhid, Tawfiq and Tamjid Abdullah, USD3.72 million, in addition to ruling that the brothers repayUSD99.4 million and the value of 1.9 million grams of gold that were withdrawn from Damas for personal use. The DFSA also banned the

brothers from holding a directorship with any Dubai International Financial Centre company for ten years. The founders were ordered toappoint a new board of directors and auditors by 1 April 2010. Damas inched up 2.9% to USD0.18.

In Kuwait the National Bank of Kuwait (NBK) has obtained approval from the Central Bank to increase its stake in Kuwaits Islamic lender,Boubyan Bank, to 60%. The approval is valid for three months, effective from 22 March 2010. NBK currently has a 40% stake in BoubyanBank, which it bought in 2009. NBK added 3.1% to KWD1.20 while Boubyan Bank jumped 19.5% to KWD0.52.

In Oman the Central Bank of Oman raised the total Capital Adequacy Ratio (CAR) requirement for all commercial banks to 12% from 10%.The requirement will become effective from 31 December 2010. Bank Muscat lost 14.5% to OMR0.85, the National Bank of Oman dropped2.1% to OMR0.32, and Bank Sohar shed 2.1% to OMR0.23. Bank Dhofar however, jumped 9.2% to OMR0.77.

In QatarIndustries Qatar announced its 4Q2009 results, with its net income declining 10% Q-o-Q to QAR1.1 billion. FY2009 net incomefell 33% Y-o-Y to QAR 4.9 billion. Industries Qatar moved up 5.8% to QAR115.30.

one month performance of mena and em markets ytd performance of mena and em markets

Source: MSCI website, Reuters Source: MSCI website, Reuters

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

H

ungary

Tur key

Dubai

T

hailand

In

dones ia

Poland

Sout hAfric a

Mexi c o

Rus s i a

Korea

I ndia

Qat ar

M

alays ia

M

SCIEM

Ab

uDhabi

I s r ael

Br azi l

Tai wan

M

SCIAM

Saudi

Chi na

Philippines

L

ebanon

Per u

Colombi a

M

or oc c o

Czec h

Republic

Kuwait

Bahr ai n

J ordan

Egypt

Tuni s i a

Oman

Chile

-6%

-3%

0%

3%

6%

9%

12%

15%

Thailand

H

ungary

MSCIAM

Saudi

Egypt

Colombia

I ndones ia

I s r ael

Tuni s ia

M

al ays ia

M

exi c o

Kuwai t

Qat ar

Rus s ia

M

oroc c o

B

ahr ain

AbuDhabi

Oman

I ndia

Poland

Sout

hAfric a

Tur key

Phi lippi nes

Lebanon

Kor ea

Dubai

MSCIEM

Per u

Chile

Czec h

Republic

Br azi l

J ordan

China

Taiwan


3/23



march issue

mena and emerging markets

performance of msci arabian markets vs em & world indices average daily turnoverIn USD million, unless otherwise stated

Source: MSCI website Source: Official websites, EFG Hermes

12m performance of gcc markets 12m performance of north africa & levant marketsIndices are rebased to 100 Indices are rebased to 100

Source: Reuters Source: Reuters

2010e p/e valuations, regional vs em and developed 2010e p/b valuations, regional vs em and developedTimes, unless otherwise stated Times, unless otherwise stated

Source: Bloomberg, EFG Hermes Source: Bloomberg, EFG Hermes

MSCI EM MSCI World MSCI AM

Saudi

Egypt

Kuwait

Dubai

Qatar

Lebanon

AbuDhabi

Jordan

Morocco

Oman

Tunisia

Bahrain0

80

160

240

320

400

3M Avg Turnover 1M Avg Turnover

50

60

70

80

90

100

110

120

130

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

816

777

120

178

78

44

43

15 2

1

2

181

152

139

52

3 3

265

73

6

266

95

57

13

5

OmanSaudi

Bahrain

Kuwait

Dubai

Qatar

Abu Dhabi

Egypt Lebanon Tunisia Jordan Morocco

60

85

110

135

160

185

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

60

85

110

135

160

185

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Japan

US

Europe

India

China

Brazil

MSCIEM

Russia

US

Japan

Europe

India

China

Brazil

MSCIEM

Russia

4.0

0

5

10

15

20

25

30

35

40

45

Morocco

Saudi

Qatar

Lebanon

Egypt

Oman

AbuDhabi

Kuwait

Dubai

Morocco

Qatar

Saudi

Oman

Egypt

AbuDhabi

Kuwait

Lebanon

Dubai


4/23



march issue

mena markets in charts

north africa and levant

Egypt: Value Traded & 6m Performance (0%) Egypt: Best Performers, 1m & YTD Egypt: Worst Performers, 1m & YTD

Source: Reuters, Official website Source: Reuters, EFG Hermes Source: Reuters, EFG Hermes

Morocco: Value Traded & 6m Performance (6%) Morocco: Best Performes, 1m & YTD Morocco: Worst Performers, 1m & YTD

Stocks with avg. daily value traded>USD0.1 million


Jordan: Value Traded & 6m Performance (-6%) Jordan: Best Performers, 1 m & YTD Jordan: Worst Performers, 1 m & YTD

Stocks with avg. daily value traded>USD0.1 million


Volume HFI(USD mn)

0

100

200

300

400

500

450

500

550

600

650

700

30-S

ep

22-O

ct

12-N

ov

07-D

ec

28-D

ec

19-Jan

10-F

eb

03-M

ar

24-M

ar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

GB Auto 35.99 30.9% 0.6 Media Prod. City 6.12 -13.6% 1.1

Lecico Egypt 21.93 21.0% 0.2 Telecom Egypt 17.03 -12.7% 6.3

Housing & Dev. Bank 24.80 18.6% 0.2 Upper Egypt Contr 1.34 -12.4% 2.2

Sidi Kerir 14.60 14.8% 1.5 Delta Sugar 19.38 -10.2% 0.1

Naeem 0.47 14.6% 0.4 Alex Spin 1.43 -10.1% 0.4

GB Auto 35.99 46.8% 0.4 Pioneers Holding 4.62 -26.9% 4.0

Sinai Cement 56.65 40.7% 1.1 Cairo Housing 5.95 -22.8% 1.7

Sidi Kerir 14.60 39.7% 1.5 Ascom 17.00 -21.7% 0.6

Lecico Egypt 21.93 33.4% 0.2 Upper Egypt Contr 1.34 -13.2% 2.5

Al Ezz Dekheila 982.00 32.7% 0.8 Mobinil 214.00 -11.2% 2.7

Volume MASI(USD mn)

0

40

80

120

160

200

9,800

10,100

10,400

10,700

11,000

11,300

30-Sep

21-Oct

12-Nov

04-Dec

28-Dec

20-Jan

10-Feb

03-Mar

24-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

CGI 1,949 18.1% 1.1 SNEP 376.00 -19.7% 0.2

Comp. Min. de Touissit 1,450 10.7% 0.2 HPS 755.00 -13.0% 0.1

Aluminium du Maroc 1,355 10.2% 0.1 CIH 347.50 -6.8% 0.3

Holcim Maroc 2,121 8.2% 1.1 CDM 785.00 -4.3% 0.1BMCI 970.00 8.0% 0.3 Groupe ONA 1,325 -4.0% 1.9

Comp. Min. de Touissit 1,450 56.1% 0.4 SNEP 376.00 -12.6% 0.1

Maroc Leasing 480.00 33.3% 0.2 Brasseries Maroc 3,008 -11.5% 0.2

Soc. Mtal. d'Imiter 1,101 32.7% 0.6 BMCE Bank 251.00 -5.3% 1.0

Managem 306.10 27.5% 0.4 Ciments du Maroc 1,810 -3.4% 0.3

Matel PC Market 468.00 27.2% 0.1

Volume AMMAN(USD mn)

0

30

60

90

120

150

2,300

2,500

2,400

2,600

2,700

2,800

30-Sep

21-Oct

11-Nov

07-Dec

28-Dec

19-Jan

09-Feb

02-Mar

23-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Akary for Industries 2.14 143.2% 0.1 Al-Qaria Food 0.81 -31.9% 0.2

Specialized Inv. Jordanian 4.95 60.7% 0.4 Specialized Inv. 2.58 -19.4% 1.2

United Arab Investors 0.74 57.4% 4.6 Middle East Div. Inv. 8.00 -19.1% 0.3

Arab Real Estate Dev. 0.50 47.1% 1.9 Falcon Invest. & Fin. 2.12 -15.9% 0.4

Darwish Al-Khalili & Sons 0.61 38.6% 0.6 Amwal Invest 0.96 -12.7% 1.0

United Arab Investors 0.74 72.1% 2.2 Middle East Complex 0.73 -52.3% 1.5

Taameer 0.75 59.6% 4.2 Al-Qaria Food 0.81 -50.3% 0.2

Sura for Dev. & Inv. 0.80 33.3% 0.1 Specialized Inv. 2.58 -37.5% 1.4

Specialized Inv. Jordanian 4.95 26.9% 0.3 Middle East Div. Inv. 8.00 -30.3% 0.3

Real Estate Dev. 0.52 20.9% 0.3 Tanjamout Co. 0.69 -25.0% 0.5


5/23



march issue

Lebanon: Value Traded & 6m Performance (10%) Lebanon: Best Performers, 1m & YTD Lebanon: Worst Performers, 1m & YTD


Tunisia: Value Traded & 6m Performance (15%) Tunisia: Best Performers, 1m & YTD Tunisia: Worst Performers, 1m & YTD


gcc

Saudi: Value Traded & 6m Performance (8%) Saudi: Best Performers, 1m & YTD Saudi: Worst Performers, 1m & YTD


Volume BLOM

(USD mn)

0

4

8

12

16

20

1,400

1,450

1,500

1,550

1,600

1,650

30-Sep

21-Oct

11-Nov

04-Dec

29-Dec

22-Jan

15-Feb

09-Mar

31-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Byblos Bank Priority 2.35 11.9% 0.1 Bank of Beirut 18.60 -0.8% 0.0

BLC Bank 1.66 10.7% 0.0

Byblos Bank 2.31 10.5% 0.6

BLOM 99.85 5.7% 0.3

BEMO Bank 4.52 5.1% 0.1

Byblos Bank Priority 2.35 11.9% 0.1 BEMO Bank 4.52 -7.8% 0.0

BLOM 99.85 11.2% 1.0 Solidere A 22.72 -5.3% 2.8

Byblos Bank 2.31 10.5% 1.7 Solidere B 22.80 -4.1% 1.3

Banque Audi 88.00 6.1% 1.5 Bank of Beirut 18.60 -0.8% 0.0

Banque Audi GDR 93.00 4.5% 2.9 HOLCIM (Cim Lib) 12.47 -0.4% 0.1

Volume TUN(USD mn)

0

4

8

12

16

20

3,600

3,850

4,100

4,350

4,600

4,850

30-Se

p

21-Oct

11-No

v

03-De

c

25-De

c

18-Ja

n

08-Fe

b

02-Mar

23-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

SIMPAR 71.08 73.5% 0.2 STIP 2.95 -14.0% 0.0

Attijari Leasing 34.38 19.0% 0.0 Magasin General 120.99 -8.0% 0.0

ESSOUKNA 7.28 13.6% 0.1 Sotuver 88.00 -7.6% 0.0

UBCI 60.86 11.7% 0.0 Electrostar 8.89 -7.2% 0.0

Tunisie Lait 5.20 8.1% 0.0 SOTETEL 16.74 -5.3% 0.0

SIMPAR 71.08 90.1% 0.1 Soc. Chimique Alkimia 4.00 -89.0% 0.0Attijari Leasing 34.38 45.0% 0.0 SOPAT 17.11 -20.8% 0.1

El Wifak Leasing 18.18 34.2% 0.1 Sotuver 88.00 -11.1% 0.0

ESSOUKNA 7.28 33.6% 0.0 Adwya 7.55 -10.5% 0.1

STIP 2.95 30.5% 0.0 Magasin General 120.99 -6.2% 0.1

Volume TASI(USD mn)

0

600

1,200

1,800

2,400

5,900

6,100

6,300

6,500

6,700

6,900

30-

Sep

21-Oc

t

11-Nov

09-Dec

30-

Dec

20-

Jan

10-

Fe

b

03-Mar

24-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Medgulf 30.90 18.4% 5.8 Kingdom Holding 9.35 -16.5% 11.3

Food Products Co. 21.15 17.8% 3.2 UCA 36.80 -12.2% 8.9

Amiantit 24.45 13.5% 4.0 34.30 -11.1% 1.4Al-Rajhi Bank 85.50 13.2% 34.0 Cement Yanbu 46.80 -9.6% 2.5

Maaden 19.00 13.1% 30.8 SAICO 52.25 -8.3% 2.4

Kingdom Holding 9.35 98.9% 30.4 Weqaya Takaful 27.20 -45.3% 7.1

Cement Saudi 73.00 27.0% 3.4 SAICO 52.25 -25.4% 4.0

Medgulf 30.90 26.1% 4.0 SABB Takaful 27.10 -19.3% 2.9

SAFCO 146.75 21.3% 7.7 FIPCO 34.90 -16.3% 2.5

NCCI 87.00 21.3% 6.5 ACE Arabia Coop. Ins. 46.60 -15.3% 2.1

Al-Jouf Agriculture


6/23



march issue

Kuwait: Value Traded & 6m Performance (-4%) Kuwait: Best Performers, 1m & YTD Kuwait: Worst Performers, 1m & YTD

Stocks with avg daily value traded>USD1 millionSource: Reuters, Official website Source: Reuters, EFG Hermes Source: Reuters, EFG Hermes

Abu Dhabi: Value Traded & 6m Performance (-7%) Abu Dhabi: Best Performers, 1m & YTD Abu Dhabi: Worst Performers, 1m & YTD

Stocks with avg daily value traded>USD1 million


Dubai: Value Traded & 6m Performance (-16%) Dubai: Best Performers, 1m & YTD Dubai: Worst Performers, 1m & YTD

Stocks with avg daily value traded>USD1 million


(USD mn)

0

Volume KSE

200

400

600

800

1,000

6,300

6,700

7,100

7,500

7,900

8,300

30-Sep

21-Oct

11-Nov

07-Dec

29-Dec

20-Jan

10-Feb

08-Mar

29-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

National Cleaning 0.280 52.2% 4.7 Aref Investment Group 0.094 -11.3% 1.0

Hayat Comm. Co. 0.335 48.2% 1.6 Al-Madina for Fin. & Inv. 0.065 -9.7% 1.3

Mubarrad Transport 0.154 42.6% 4.2 AL SAFWA 0.056 -9.7% 1.9

PIPE 0.335 35.1% 5.1 Hits Telecom Holding 0.096 -9.4% 4.6

Kuwait & Gulf Link 0.335 21.8% 11.1 JEEZAN 0.059 -9.2% 1.8

Kuwait & Gulf Link 0.335 132.6% 6.6 SOKOUK 0.043 -15.7% 1.1

Mubarrad Transport 0.154 116.9% 2.0 Mena Holding 0.290 -14.7% 4.0

National Cleaning 0.280 115.4% 2.6 Aref Investment Group 0.094 -14.5% 1.0

PIPE 0.335 86.1% 2.3 Al-Madina for Fin. & Inv. 0.065 -13.3% 1.3

Portland Cement 1.340 69.6% 3.4 National Ranges 0.034 -12.8% 1.2

Volume ADI(USD mn)

2,250

2,500

2,750

3,000

3,250

3,500

0

50

100

150

200

250

30-Sep

21-Oct

11-Nov

08-Dec

29-Dec

19-Jan

09-Feb

02-Mar

23-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT

(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT

(USD mn)Etisalat Aldar Properties

First Gulf Bank RAK Properties

Dana Gas

Waha Capital

Aldar Properties 4.61 29.5% 19.0

AD Commercial Bank 2.07 26.2% 1.1

Sorouh 2.48 22.8% 9.2

Natl Bank of AD 12.00 21.7% 1.1

Aabar 2.34 9.3% 2.1

12.50 13.6% 2.7 4.61 -7.4% 15.3

18.00 12.1% 2.2 0.89 -5.3% 4.0

Aabar 2.34 3.1% 2.6 0.55 -5.2% 1.4

Sorouh 2.48 0.2% 6.2 0.90 -4.3% 1.2

Volume DFMGI

(USD mn)

0

200

400

600

800

1,000

1,000

1,300

1,600

1,900

2,200

2,500

30-Sep

21-Oct

11-Nov

08-Dec

29-Dec

19-Jan

09-Feb

02-Mar

23-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Emaar 4.00 34.2% 76.1 Tabreed 0.49 -21.0% 2.2

Dubai Financial Market 1.90 31.0% 28.0Arabtec 2.71 24.9% 33.0

Dubai Islamic Bank 2.72 19.8% 7.9

Islamic Arab Ins. 0.93 16.2% 1.7

Aramex 1.90 21.0% 1.5 Tabreed 0.49 -39.5% 1.3

Dubai Islamic Bank 2.72 17.2% 4.9 Union Properties 0.51 -25.0% 2.0

Drake & Scull 0.97 7.8% 3.8 Deyaar 0.49 -15.5% 1.7

Air Arabia 0.98 6.5% 3.9 Gulf Finance House 0.92 -14.0% 1.3

Emaar 4.00 3.6% 53.5 DU 2.87 -1.4% 1.3


7/23



march issue

Qatar: Value Traded & 6m Performance (1%) Qatar: Best Performers, 1m & YTD Qatar: Worst Performers, 1m & YTD

Stocks with avg daily value traded>USD1 millionSource: Reuters, Official website Source: Reuters, EFG Hermes Source: Reuters, EFG Hermes

Oman: Value Traded & 6m Performance (2%) Oman: Best Performers, 1m & YTD Oman: Best Performers, 1m & YTD

Stocks with avg daily value traded>USD0.1 million


Bahrain: Value Traded & 6m Performance (0%) Bahrain: Best Performers, 1m & YTD Bahrain: Best Performers, 1m & YTD


Volume DSM20(USD mn)

0

50

100

150

200

250

6,000

6,400

6,800

7,200

7,600

8,000

30-Sep

21-Oc

t

11-Nov

07-Dec

29-Dec

19-

Jan

09-Feb

02-Mar

24-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Close

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Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Qatar Shipping Co. 39.20 21.0% 4.8 Qatar Intl. Isl. Bank 46.20 -5.1% 3.6

WOQOD 192.00 19.0% 1.2 MAWASHI 17.90 -4.3% 2.0

Comm. Bank of Qatar 73.90 15.1% 8.5 Qtel (QA) 149.80 -3.2% 2.3

Qatar Natl Bank 135.20 14.6% 6.1 First Financial 21.80 -1.4% 1.1

Qatar Navigation 72.80 13.7% 1.5

Al Khaliji Comm. Bank 18.30 29.8% 1.0 NAKILAT 22.80 -5.0% 3.9

Qatar Real Estate Co. 33.00 22.7% 3.7 Barwa Real Estate. 32.10 -2.7% 5.6

Qatar Shipping Co. 39.20 20.6% 2.5 Gulf Holding Company 16.00 -0.6% 1.4

Comm. Bank of Qatar 73.90 19.6% 7.1 Vodafone Qatar 8.35 -0.6% 1.7

Qatar National Bank 135.20 17.9% 4.5

Volume MSM30(USD mn)

0

20

40

60

80

100

5,750

6,000

6,250

6,500

6,750

7,000

30-Sep

21-Oct

11-Nov

09-Dec

31-Dec

21-Jan

11-Feb

04-Mar

25-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

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Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

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Chg

Chg

ADVT(USD mn)

ADVT(USD mn)

Al Jazeera Steel 0.36 17.0% 0.4 Bank Muscat 0.85 -14.5% 1.8

Bank Dhofar 0.77 9.2% 0.2 Oman Intl Dev. & Inv. 0.43 -11.3% 0.1

Dhofar Intl Dev. & Inv. Co. 0.44 4.8% 0.1 Natl Aluminium Pro. Co. 0.52 -10.7% 1.0

Oman Inv. & Fin. Co. 0.32 3.6% 0.3 Interior Hotels Co. 3.79 -10.0% 0.2

Gulf Investment Service 0.12 3.5% 0.2 Raysut Cement Co 1.60 -8.1% 0.4

Bank Dhofar 0.77 15.8% 0.5 VOLTAMP Energy 0.52 -16.3% 0.1

Al Jazeera Steel 0.36 13.0% 0.3 Al Anwar Holding 0.22 -16.1% 0.7

Ahli Bank - Oman 0.25 12.9% 0.2 Global Financial Inv. 0.10 -14.3% 0.6

Oman Intl Bank 0.32 8.1% 0.2 Oman Intl Dev. & Inv. 0.43 -13.9% 0.1

Dhofar Intl Dev.& Inv. Co. 0.44 7.9% 0.1 Galfar Eng. & Cont. 0.47 -11.2% 0.7

Volume BAX(USD mn)

1,400

1,450

1,500

1,550

1,600

1,650

0

2

4

6

8

10

30-Sep

21-Oct

11-Nov

07-Dec

05-Jan

26-Jan

16-Feb

10-Mar

31-Mar

Highest Perf. / Mth

Highest Perf. / YTD

Lowest Perf. / Mth

Lowest Perf. / YTD

Close

Close

Chg

Chg

ADVT(USD 000)

ADVT(USD 000)

Close

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Chg

Chg

ADVT(USD 000)

ADVT(USD 000)

Ahli United Bank 0.68 15.3% 107.1 Arab Ins Group (BH) 0.55 -15.4% 12.1

Al Ahlia Insurance Co. 0.38 8.6% 0.2 Gen Trdg & Food 0.26 -8.5% 0.8

United Gulf Inv. Corp. 0.14 7.7% 31.6 Nass Corp. 0.25 -6.8% 69.2

Bahrain Duty Free 0.76 6.3% 11.9 Bah Natl Holding 0.45 -5.5% 1.0

Khaleeji Comm. Bank 0.11 1.8% 26.4 Bah Mar & Merc 0.60 -5.1% 46.2

Ahli United Bank 0.68 56.3% 87.9 Ithmaar Bank 0.19 -21.8% 43.2

Bahrain Duty Free 0.76 22.8% 16.6 Esterad Investment Co. 0.27 -10.0% 19.3

Bahrain & Kuwait Ins. Co. 0.67 20.0% 103.9 Bah Flour Mills Co. 0.40 -10.0% 0.8

Bah Ship. Rep. & Engine. 1.78 16.6% 0.0 Arab Banking Corp 0.74 -9.7% 0.4

Al Ahlia Insurance Co. 0.38 13.9% 1.2 Gulf Finance House 0.26 -7.1% 208.5


8/23



march issue

investor flows

mena stock exchanges: foreign investor net buying (weekly) global emerging & regional markets net fund flows (weekly)In USD million, unless otherwise stated In USD million, unless otherwise stated

Calculations based on regional dedicated funds

Source: Stock Exchanges and EFG Hermes Source: EPFR

equity fund flows (mthly) global emerging market funds: assets under mgmt. (mthly)In USD billion, unless otherwise stated In USD billion, unless otherwise stated

Calculations based on all countries and regional funds Calculations based on regional dedicated funds

Source: EPFR Source: EPFR

global emerging market funds: cash allocation (mthly) global emerging market funds: me & africa allocation (mthly)In USD billion, unless otherwise stated In USD billion, unless otherwise stated

Data excludes Israel and Turkey

Source: EPFR Source: EPFR

02-Sep

16-Sep

30-Sep

14-Oct

28-Oct

11-Nov

25-Nov

09-Dec

23-Dec

06-Jan

20-Jan

03-Feb

17-Feb

03-Mar

17-Mar

31-Mar

(60)

(30)

0

30

60

90

120

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000Africa Mid East & AfricaMiddle East

EMEA GEM(RHS)

(150)

(100)

(50)

0

50

100

150

200

250

01-Oct

15-Oct

29-Oct

12-Nov

26-Nov

10-Dec

24-Dec

07-Jan

21-Jan

04-Feb

18-Feb

04-Mar

18-Mar

01-Apr

Egypt Abu Dhabi Dubai Qatar Oman

Total Emerging Markets Fund FlowsTotal Developed Markets Fund FlowsTotal Equity Fund Flows as % of AuM (RHS)

Dec-09(60)

(40)

(20)

0

20

40

-9%

-6%

-3%

0%

3%

6%

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

0

1

2

3

4

5

6

7

0

100

200

300

400

500Africa EMEA Middle East & AfricaMiddle East GEM (RHS)

Jan-10

Feb-10

Dec-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Jan-10

Feb-10

0

1

2

3

4

5

1.4%

1.9%

2.4%

2.9%

3.4%

3.9%

4.4%Cash Cash as % of AuM (RHS)

0

3

6

9

12

15

7.0%

7.4%

7.8%

8.2%

8.6%

9.0%Africa & Middle East Africa & Middle East % of AuM (RHS)

Dec-09

Feb-0

9

Mar-09

Apr-09

May-09

Jun-0

9

Jul-0

9

Aug-09

Sep-0

9

Oct-09

Nov-09

Jan-1

0

Feb-1

0

Dec-09

Feb-0

9

Mar-09

Apr-09

May-09

Jun-0

9

Jul-0

9

Aug-09

Sep-0

9

Oct-09

Nov-09

Jan-1

0

Feb-1

0


9/23


10/23



march issue

gcc

*In local currency, unless otherwise stated**Adjusted FV for rights issue***Adjusted FV for rights issue and bonus shareSource: Reuters, EFG Hermes estimates

Sub-SectorMth

Close*FV Rating

1Mth

chng

YTD

chng

Last

Yield

Last

Ex-Div. Date 2009a/e

PER

2010e 2011e

Last

FY

Last

Note

UAEArabtec Construction 3.39 Buy 25% 1% 0% 2-Apr-08 6.55 4.24 4.17 Dec-09 3-Mar-10DEPA LIMITED Construction 0.72 1.18 Buy 31% 36% 5% 2-Apr-09 6.95 6.73 5.47 Dec-09 4-Mar-10AD Islamic Bank Banks 3.12 3.72 Buy 15% 8% 6% 31-Mar-09 78.80 6.83 4.60 Dec-09 29-Dec-09AD Commercial Bank Banks 2.07 1.72 Neu. 26% 33% 0% 9-Apr-09 N/R 9.47 6.11 Dec-09 27-Jan-10Commercial Bank of Dubai Banks 3.15 3.80 Neu. -9% -6% 4% 4-Mar-10 6.97 7.49 5.56 Dec-09 29-Dec-09Dubai Islamic Bank Banks 2.72 2.03 Sell 20% 17% 9% 8-Apr-10 7.68 8.87 8.46 Dec-08 29-Dec-09Emirates NBD Banks 3.08 3.20 Neu. 27% 4% 6% 1-Apr-10 5.12 7.97 5.62 Dec-09 15-Feb-10First Gulf Bank Banks 18.00 18.08 Neu. 7% 12% 2% 9-Mar-10 8.85 9.59 6.41 Dec-09 31-Jan-10Natl Bank of AD** Banks 12.00 13.48 Buy 22% 6% 3% 24-Mar-10 8.55 8.66 6.83 Dec-09 1-Feb-09Deyaar Development Real Estate 0.49 0.70 Neu. 7% -16% 0% N/A 93.75 6.08 6.02 Dec-09 14-Jan-10Emaar Real Estate 4.00 5.86 Buy 34% 4% 0% 27-Mar-08 74.50 3.63 10.15 Dec-09 14-Jan-10Aldar Properties Real Estate 4.61 5.52 Buy 29% -7% 0% 15-Mar-09 16.71 6.87 8.01 Dec-09 17-Feb-10Sorouh Real Estate 2.48 5.15 Buy 23% 0% 0% 27-Mar-09 12.84 4.45 6.10 Dec-09 25-Mar-10Union Properties Real Estate 0.51 0.60 Neu. 9% -25% 0% N/R 2.62 1.84 Dec-09 14-Jan-10du Integrated Operators 2.87 3.80 Buy 2% -1% 0% 43.46 23.54 13.21 Dec-09 8-Nov-09Etisalat Integrated Operators 12.50 14.46 Buy 5% 14% 4% 1-Apr-10 11.18 11.50 11.26 Dec-09 31-Mar-09Air Arabia Transport & Shipping 0.98 1.20 Buy 0% 7% 10% 31-Mar-10 10.11 10.98 10.08 Dec-09 3-Dec-09Aramex Transport & Shipping 1.90 1.79 Neu. 10% 21% 0% 13.72 12.87 12.82 Dec-09 24-Mar-10Gulf Navigation Transport & Shipping 0.60 0.43 Sell -5% 2% 5% 11-Mar-10 37.41 21.01 15.29 Dec-09 24-Feb-10DP World Transport & Shipping 0.52 0.56 Buy 34% 23% 2% 30-Mar-10 28.93 24.22 19.68 Dec-09 25-Mar-10Dana Gas Utilities 0.89 1.66 Buy 7% -5% 0% 60.68 8.03 4.60 Dec-09 11-Jan-10Tabreed Utilities 0.49 0.38 Sell -21% -40% 0% N/R 8.66 5.68 Dec-09 17-Mar-10

SaudiSABIC Chemicals 99.50 105.00 Buy 12% 21% 2% 12-Apr-09 32.90 15.78 11.96 Dec-09 17-Dec-09SAFCO Chemicals 146.75 164.00 Buy 4% 21% 8% 21-Mar-10 20.33 13.29 12.69 Dec-09 11-Feb-10YANSAB Chemicals 38.90 42.00 Buy 5% 16% 0% N/R 19.45 10.66 Dec-09 17-Dec-09Jarir Marketing Co. Retail 145.25 162.54 Buy 6% 9% 5% 15-Feb-10 15.54 14.04 12.09 Dec-09 3-Feb-10Al Bilad Bank Banks 21.25 15.50 Sell 3% 2% 0% N/R 43.67 30.94 Dec-09 10-Dec-09Al Jazira Bank Banks 19.15 21.00 Neu. 6% 0% 3% 20-Apr-09 N/R 10.88 8.87 Dec-09 10-Dec-09Al-Rajhi Bank Banks 85.50 74.70 Neu. 13% 20% 3% 28-Feb-10 19.92 18.24 15.76 Dec-09 19-Oct-09Arab National Bank Banks 45.70 55.80 Buy 4% 8% 2% 22-Mar-10 14.70 10.65 9.17 Dec-09 20-Oct-09

Banque Saudi Fransi Banks 47.00 53.30 Buy -1% 15% 3% 8-Mar-10 13.76 11.65 9.69 Dec-09 12-Oct-09Riyad Bank Banks 30.50 34.00 Buy 6% 13% 4% 2-Mar-10 15.53 11.91 9.37 Dec-09 20-Oct-09SAIB Banks 18.90 21.50 Buy 4% 5% 0% 17.42 8.99 7.60 Dec-09 25-Oct-09Samba Financial Group Banks 59.00 72.10 Buy 1% 17% 3% 20-Feb-10 12.04 10.22 8.82 Dec-09 19-Oct-09Saudi British Bank Banks 48.20 54.00 Neu. 1% 11% 2% 21-Jul-09 19.88 13.01 10.72 Dec-09 25-Feb-10Saudi Hollandi Bank Banks 33.40 38.60 Buy 1% 11% 0% 25-Mar-09 N/R 11.65 9.61 Dec-09 23-Mar-10Savola Consumer Staples 35.70 39.39 Buy 2% 18% 3% 24-Oct-09 18.76 15.07 15.55 Dec-09 31-Jan-10National Shipping Company Transport & Shipping 20.30 15.00 Sell 9% 14% 5% 4-Apr-10 17.32 13.04 10.01 Dec-09 20-Jan-10Saudi Electricity Company Utilities 12.55 12.50 Neu. 3% 12% 6% 6-Apr-10 44.71 40.82 35.89 Dec-09 2-Feb-10Dar Al Arkan Real Estate 14.15 19.15 Buy 4% 1% 0% 20-Apr-08 7.20 6.57 5.54 Dec-09 21-Jan-10AKARIA Real Estate 25.90 33.50 Buy 4% 0% 4% 11-Apr-09 26.59 20.97 19.44 Dec-08 14-Jan-10Saudi Telecom Company Integrated Operators 47.50 66.58 Buy 7% 8% 6% 31-Oct-09 8.74 10.43 9.87 Dec-09 4-Mar-10Etihad Etisalat Mobile Operators 50.25 67.58 Buy 9% 16% 2% 20-Mar-10 11.67 10.01 9.38 Dec-09 4-Mar-10Zain KSA Mobile Operators 9.75 9.18 Neu. -2% -4% 0% N/R N/R N/R Dec-09 4-Mar-10

KuwaitThe Sultan Center Retail 0.20 U/R U/R -2% -5% 0% 11.15 8.21 6.35 Dec-08 9-Sep-09Burgan Bank Banks 0.38 0.63 Buy 1% 10% 0% 25-Mar-08 61.45 7.29 4.88 Dec-09 19-Nov-09Commercial Bank of Kuwait Banks 0.94 0.77 Sell 1% 1% 0% 15-Mar-09 N/R 25.61 12.68 Dec-09 16-Nov-09

Kuwait Finance House** Banks 1.12 1.29 Neu. 1% 9% 2% 9-Mar-10 23.49 17.09 11.67 Dec-09 21-Feb-09National Bank of Kuwait*** Banks 1.20 1.15 Neu. 3% 18% 4% 8-Mar-10 14.81 14.06 12.34 Dec-09 2-Feb-10Jazeera Airways Co. Transport & Shipping 0.20 0.14 Sell -6% 5% 0% N/R 14.27 23.19 Dec-09 13-Dec-09Zain Group Mobile Operators 1.36 1.48 Neu. 6% 33% 4% 31-Mar-09 26.88 11.50 10.05 Dec-09 31-Mar-10

OmanBank Dhofar** Banks 0.77 0.48 Sell 9% 16% 2% 29-Mar-10 21.88 21.14 17.30 Dec-08 6-Oct-09Bank Muscat Banks 0.85 1.04 Buy -15% 3% 2% 21-Mar-10 12.36 10.25 8.55 Dec-09 21-Mar-10Bank Sohar Banks 0.23 0.20 Neu. -2% 2% 0% 28.67 19.85 11.98 Dec-09 6-Oct-09National Bank of Oman Banks 0.32 0.41 Buy -2% 0% 5% 29-Mar-10 13.24 8.84 7.50 Dec-09 20-Oct-09

QatarCommercial Bank of Qatar Banks 73.90 113.50 Buy 15% 20% 5% 10-Feb-10 11.00 9.56 7.68 Dec-09 27-Jan-10Qatar Islamic Bank Banks 80.30 108.80 Buy 7% 3% 7% 24-Feb-10 13.01 12.42 10.53 Dec-09 8-Feb-10Qatar National Bank Banks 135.20 130.26 Neu. 15% 18% 3% 9-Feb-10 12.60 11.41 11.82 Dec-09 17-Jan-10NAKILAT Gas Distribution 22.80 38.60 Buy 5% -5% 2% 14-Apr-10 21.46 14.56 12.31 Dec-09 29-Mar-10Qatar National Navigation Co. Transport & Shipping 72.80 74.50 Buy 14% 13% 5% 15-Mar-10 11.10 10.59 10.00 Dec-09 22-Mar-10Qatar Shipping Co. Transport & Shipping 39.20 33.90 Sell 21% 21% 10% 11-Apr-10 8.19 19.53 16.79 Dec-09 22-Mar-10Qatar Electricity & Water Utilities 103.20 138.70 Buy 2% 3% 5% 2-Mar-10 11.20 8.38 7.46 Dec-09 17-Feb-10

Industries Qatar Chemicals 115.30 140.00 Buy 6% 1% 4% 21-Apr-09 17.09 13.98 10.27 Dec-09 22-Oct-09

2.71


11/23



ii. economics

egypt

inflation falls in februaryUrban consumer inflation decelerated in February for the first time since August 2009, to 12.8% Y-o-Y from 13.6% Y-o-Y in January. Theoutturn was slightly higher than our expectation of 12.4% Y-o-Y, but lower than consensus estimates of 13.3% Y-o-Y. While food prices rose1.1% M-o-M, due to a broad-based increase in food products, butane gas prices fell 9.9% M-o-M, contributing to the deceleration in Y-o-Yinflation. Februarys outturn is in line with our view that inflation will decelerate to an average of 9% Y-o-Y in 2010, from 11.8% Y-o-Y in 2009,in the absence of major food supply shocks, low demand pressures as economic recovery remains fragile, and a favourable external inflationaryenvironment. In addition, we do not expect the government to reduce energy subsidies for consumers, given the vulnerable economic conditionsat both global and domestic levels and in light of the Parliamentary elections this year and the Presidential elections next year.

The main upside risk to our inflation forecast is rising commodity prices, in particular food prices, as they constitute around 45% of theconsumer basket and Egypt relies heavily on imports to feed its population. Although renewed speculation about the government resumingits programme of phasing out energy subsidies (natural gas and electricity) to non-energy intensive industrial users in June 2010 has erupted,we expect this to have little impact on the CPI. Firstly, energy represents only a small proportion of the non-energy intensive industries costbase (with the exception of ceramics) and any subsidy reduction is therefore unlikely to have a major impact on end-product prices.Secondly, the composition of the CPI is heavily skewed towards food prices, which remain the main determinant of inflation levels. Finally,consumer products are only weakly reflected in the consumer index. For example, in 2009 major auto and white goods manufacturersreduced their product prices, but this was not reflected in the consumer basket.

fragile recovery and falling inflation point to stable interest rates in 2010With headline inflation falling and core inflation expected to remain within the Central Bank of Egypt's assumed comfort zone of 6-8%, weexpect stable interest rates in 2010. Growth, although accelerating, remains fragile and driven by the government's successive stimuluspackages and a rebound in tourism. Private investment remains at a nascent stage of recovery, and is yet to contribute positively to growth in1H2010. In addition, 2009s successive rate cuts (375bps on the lending rate and 325bps on the deposit rate) only had a limited impact oncredit growth. From late 2008 onwards private corporate credit growth decelerated sharply, and then contracted over the past six months.

government targets a budget deficit of 7.9% of gdp in fy2010/11The government presented its draft budget to the Cabinet in March, targeting a reduction of the deficit to 7.9% of GDP in FY2010/11, froma budgeted 8.4% in the current FY2009/10, according to official figures. The projected FY2010/11 deficit is higher than our forecast of 7.0%of GDP, primarily due to the governments higher spending expectations and our forecast of a narrower deficit of 8.1% of GDP inFY2009/10e. The very limited figures in the public domain show that the government expects expenditure to expand around 8.4% Y-o-Y toEGP389 billion, compared to our estimate of EGP374 billion. The difference mainly arises from the government's higher spending onsubsidies (a rise of EGP13.5 billion) and, to a lesser degree, on wages (a rise of EGP2.7 billion). The figures indicate that the government willlower its investment spending as it scales down fiscal support, on the expectation that private investment will pickup. Revenue is budgetedto grow 8.6% Y-o-Y, to EGP281 billion, which is broadly in line with our estimate of EGP284 billion as higher economic growth will result ina pickup in tax revenue.

Parliament will start its discussion of the draft budget following the approval of the Cabinet, which is expected towards the end of April2010. We await more details regarding the budget before updating our forecasts.

Although the banking sector enjoys ample liquidity to finance the deficit, the Public Debt Management unit at the Ministry of Finance hasrecently announced plans to finance part of the deficit (around EGP5.5 billion) via a Eurobond issuance in mid-2010. We believe this moveprimarily aims to diversify the government's sources of debt financing. We also believe the timing of the issuance seeks to benefit fromlower interest rates on emerging market debt, which is currently benefiting from increased appetite from global investors.

Mohamed Abu Basha

march issue


12/23



march issue

EGP Movements

Egypt Macroeconomic Indicators

Short Term Interest Rates Growth in Credit Y-o-Y

EGP/EURO (RHS)EGP/USD (LHS)

0

2

4

6

810

12

14

% %Government, RHSHouseholds, RHSM2d Growth, RHSPrivate Business Sector, LHS

(10)

0

10

20

30

40

50

60

5.25

5.35

5.45

5.55

5.65

5.75

6.5

7.0

7.5

8.0

8.5

9.0

(2)

(4)

% 91-Day T-bill RateON DepositON Lending

0

2

4

6

8

10

12

14

16

Jan-08

Feb-08

Apr-08

May-08

Jul-08

Sep-08

Oct-08

Dec-08

Jan-09

Mar-09

May-09

Jun-09

Aug-09

Sep-09

Nov-09

Jan-10

Feb-10

Jan-08

Mar-08

May-08

Aug-08

Oct-08

Dec-08

Mar-09

May-09

Jul-09

Sep-09

Dec-09

Feb-10

Mar-10

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Jan-08

Weighted Growth NDAWeighted Growth NFAY-o-Y Growth of M2

Petroleum BalanceNon-Petroleum BalanceSuez CanalTourismRemittancesCurrent Account Balance

(40)

(30)(20)

(10)

0

10

20

30

(USD bn)

% CPIPPI

%

Core Inflation

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

(20)

(10)

0

10

20

30

40

Jan-

07

Mar-

07

May-0

7

Ju

l-07

Sep-

07

Nov-0

7

Jan-

08

Mar-

08

May-0

8

Ju

l-08

Sep-

08

Nov-0

8

Jan-

09

Mar-

09

May-0

9

Ju

l-09

Sep-

09

Nov-0

9

Jan-

10

Fe

b-

10 (10)

(5)

0

5

10

15

20

25

Fe

b-

08

Apr-

08

Jun-

08

Au

g-0

8

Oc

t-08

Dec-0

8

Fe

b-

09

Apr-

09

Jun-

09

Au

g-0

9

Oc

t-09

Dec-0

9

Fe

b-

10

Jan-0

8

Monetary Survey (Y-o-Y growth)Main External Receipts (12 month rolling sum) Inflation (Y-o-Y growth)

Source: CBE, Ministry of Finance, and EFG Hermes estimates

inflation and policy ratesUrban consumer inflation decelerated in February for the first time since August 2009, to 12.8% Y-o-Y from 13.6% Y-o-Y in January. Foodprices rose 1.1% M-o-M due to variable increases in some food items, while butane gas prices fell 9.9% M-o-M, contributing to Februarysdeceleration in Y-o-Y inflation. The outturn supports our view that inflation will decelerate to an average of 9% Y-o-Y in 2010, from 11.8%Y-o-Y in 2009, in the absence of major food supply shocks, low demand pressures as the economy remains fragile, and a favourable externalinflationary environment. We therefore believe interest rates are likely to remain stable in 2010.

credit and money supplyBroad money growth accelerated to 9.5% Y-o-Y in February from a12M trailing average of 8.3% Y-o-Y. Lending to the public sector remainsthe most important source of money growth, rising 25% Y-o-Y in February. Meanwhile, private sector credit contracted 0.3% Y-o-Y in

February, but rose 0.6% M-o-M for the second consecutive month. The recovery in household credit continues to outpace credit to businesses.We expect public sector borrowing to remain a strong driver of liquidity growth in 2010. Net foreign assets are again becoming an increasinglyimportant contributor to liquidity, rising 9.5% Y-o-Y and 3.6% M-o-M in February. We believe this is largely thanks to strong flows into T-bills.

Source: Bloomberg, Central Bank

Source: Central Bank, CAPMAS

FY07/08 FY08/09 FY09/10e FY10/11e Latest DateEgyptNominal GDP (USD bn)

Real GDP Growth Rate, %

CPI Inflation, Annual Average %

CPI Inflation, FY-end %

O/N Deposit Rate, FY-end %

Trade Balance (USD bn)

Suez Canal Revenues (USD bn)

Tourism Revenues (USD bn)

Current Account Balance, % of GDP

Fiscal Balance, % of GDP

Net Domestic Debt, % of GDP

External Debt, % of GDP

Y-o-Y Growth in Broad Money, %

Y-o-Y Growth in Private Sector Credit, %

162.5 188.7 217.7 250.5 - -

7.2 4.7 4.9 5.3 5.1 4Q09

11.7 16.5 11.3 7.7 - -

20.2 10.0 8.9 9.0 12.8 Feb-10

10.5 9.0 8.3 8.8 8.3 Mar-10

(23.4) (25.2) (24.3) (28.6) (4.7) 4Q09

5.2 4.7 4.5 5.2 0.3 Feb-10

10.8 10.5 11.3 12.7 2.8 4Q09

0.5 (2.3) (2.4) (3.0) 0.1 4Q09

(6.8) (6.9) (8.1) (7.0) - -

53.5 54.1 55.4 56.6 - -

19.4 16.7 14.9 13.1 - -

15.7 8.4 13.3 15.6 9.5 Feb-10

12.6 5.1 3.0 10.0 (0.3) Feb-10


13/23



jordanEconomic growth accelerated in 4Q2009 for the first time since 4Q2008, as we expected, benefiting from higher external demand. However,the extent of the acceleration (2.9% Y-o-Y from 2.1% in 3Q2009) was disappointing, and meant that FY2009 growth of 2.8% missed ourforecast of 3.3%. We had been expecting more rapid manufacturing growth (which slowed in 4Q2009) to drive growth higher.

Growth in 4Q2009 was mainly driven by solid activity in transport and communications, construction, and government services. Lowermining (mainly potash and phosphates) continued to weigh on growth, shaving around 0.8pp from overall growth. The strong rebound in theconstruction sector was mainly due to strong private sector activity, with the government cutting capital spending in 4Q2009 to control thewidening budget deficit. We expect this strong construction sector performance to continue, albeit at a slower rate, as real estate demandpicks up in 2010. In addition, the latest increase in steel prices, improvement in credit conditions, and pickup in external demand will all helpto sustain this positive performance.

Despite the slightly disappointing 4Q2009, we maintain our 2010 growth forecast of 3.5%. We expect the improvement in external demand,signs of which are already being seen (tourism arrivals were up 20% Y-o-Y and tourism revenue surged 35% Y-o-Y in 2M2010), tocontribute to accelerating growth. The GCCs expansionary fiscal policies will support growth in exports, remittances and foreign investment.We also expect the new income tax law, which has slashed personal and corporate income taxes, to boost consumption. The improvementin the external environment will help to restore lost confidence, enabling banks to resume lending and support investment, albeit from verylow levels. In addition the recently formed committee that studies the credit needs of large companies seems to be making progress, withnews of an expected agreement with real estate developer, Tameer, and home appliance retailer, Middle East Complex. The main downsiderisk to any recovery in growth remains the government's tight fiscal balances, which could lead to higher taxes or a reduction in subsidies.

Source: Central Bank of Jordan, IMF, and EFG Hermes estimates

lebanonIn March Lebanon successfully issued the first of two Eurobonds planned for this year. The USD1.2 billion, 10-year bond carried a 6.375%coupon and is part of the government's plan to refinance USD3.4 billion of maturing debt in 2010. The governor of the Central Bank statedthat as the government has been able to finance itself in LBP with declining interest rates he expects only limited Eurobond issuances to financethe budget deficit in 2010. The second Eurobond issuance is planned for November 2010.

The 2010 March issuance attracted about three times the offering, reflecting strong demand for Lebanese debt triggered by the country's strongeconomic performance as well as a growing demand for emerging market debt in general. Better economic conditions in emerging markets,compared to developed economies, have increased appetite for emerging market debt. With interest rates being low at a global level, rateshave fallen substantially, encouraging more countries to tap the international market. Last year, Lebanon managed to secure the lowest loan

rate in its history with the issuance of two tranches of Eurobonds, with a coupon of 5.875% on its 5-year tranche and 7% on its 15-yeartranche. Lebanon's case is particularly interesting since local banks and the central bank hold the majority (c60%) of the country's foreign debt.

Lebanon's buoyant economic activity, underpinned by resumed political stability, has also caused Fitch to upgrade Lebanon's long-term foreignand local currency debt to B from B- on 31 March 2010. The rating agency cited the government's ability to substantially lower its public debtto 148% of GDP in 2009 (from 180% in 2006), rising FX reserves, and macroeconomic stability, as the main reasons behind its decision toupgrade its rating. We remain positive on Lebanons growth outlook, with ongoing political stability maintaining positive capital inflows in2010, albeit lower than 2009's record levels. We expect growth of 4% in 2010, with risks being mainly to the upside.

Source: Banque du Liban, IMF, and EFG Hermes estimates

march issue

2008 2009e 2011e Latest Date Y-o-Y Growth in Credit to Private Sector

Jordan

Jan-05 Jan-06 Jan-07

0%

10%

20%

30%

40%

Jan-08

Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance (excl. Grants), % of GDPFiscal Balance, % of GDPGross Domestic Debt, % of GDPExternal Debt, % of GDP

Y-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %

2010e

Jan-09-10%

- -

- ---

- -

21.2 21.8 23.6 25.97.9 2.8 3.5 5.2 2.9 4Q09

14.0 (0.6) 4.7 4.9 4.8 Feb-10(11.3) (6.3) (8.2) (9.4) (0.9) 4Q09

(2.2) (9.1) (5.8) (4.8)38.2 46.9 48.6 49.024.2 23.9 23.9 22.9

17.3 9.3 10.7 10.1 8.6 Feb-1013.9 1.3 7.0 14.0 2.2 Feb-10 Jan-10


Lebanon

Jan-05 Jan-06 Jan-07 Jan-08

Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, average %Trade Balance, % of GDPBalance of Payments (USD bn)

Fiscal Balance, % of GDPGross Domestic Debt, % of GDPExternal Debt, % of GDPY-o-Y Growth in Broad Money, %Y-o-Y Growth in Bank Private Sector Credit, %

0%

5%

10%

15%

20%

25%

2010e

Jan-09

- ---

- ---

- -

28.8 31.4 33.7 36.47.0 6.0 4.0 4.0

10.0 3.0 3.5 4.0 2.9 Feb-10(44.0) (40.5) (41.2) (41.4) (2.6) Feb-10

12.0 24.8 11.7 4.9 0.8 Feb-10

(10.1) (9.4) (9.9) (9.2)89.9 92.4 90.4 90.673.4 68.2 63.7 60.414.8 19.5 9.1 8.1 20.7 Feb-1018.6 15.2 12.0 15.0 19.3 Feb-10 Jan-10


14/23



algeriaAlgerias trade balance improved markedly in 2M2010, with the surplus rising to USD2.6 billion from USD.047 billion in 2M2009. This waslargely due to the sharp Y-o-Y increase in oil prices, although imports fell 4% Y-o-Y, possibly due to both lower food imports after a good 2009harvest and administrative controls imposed on imports in 2009. However, the recovery in hydrocarbon export revenue was disappointing giventhe 71% Y-o-Y rise in average oil prices in 2M2010. We believe this was largely due to the relative weakness in gas prices over the past year,with the discount between spot prices for natural gas, of which Algeria is a major exporter, and those for oil widening sharply.

Relative gas price weakness explains Algerias recent efforts to persaude global gas producers to keep spot gas prices high, but we think thatit will be difficult to achieve this in 2010, given rising natural gas supply and still uncertain demand. However, we still expect Algeria to showa sharp improvement in its 2010 current account and fiscal balances due to rising oil prices and production, in spite of low gas prices.

The government continues to aggressively deploy its oil windfall, and we estimate that government spending will account for 66% of non-oil GDPin 2010, rising 12.6% Y-o-Y. Quarterly import index data suggest an acceleration in investment spending. This is consistent with the governmentsnew emphasis on reviving public sector industrial production, with the value of industrial equipment imports rising an average of 57% Y-o-Y in2H2009. However, a recently launched anti-corruption campaign, with a scope that includes the national oil company, Sonatrach, may keep

public sector investment below potential this year. Anecdotal evidence suggests that the campaign is already slowing activity in the economy, andwe expect that a difficult regulatory environment will result in actual investment spending once again falling short of target in 2010.

Source: Banque dAlgerie, IMF, and EFG Hermes estimates

moroccoThe Bank al-Maghrib (BaM) held its discount rate steady at 3.25% at its quarterly meeting on 30 March 2010, but it reduced the reserverequirement by 200bps to 6% because of what it described as a liquidity shortfall on the money market. The BaM aggressively cut reserverequirements to 8% from 16.5% between December 2007 and September 2009, although it held the requirement steady at its December 2009meeting. The central bank has provided an average additional MAD17 billion in liquidity (in seven-day advances) to the banking system eachweek since the beginning of 2009. We believe that the reduction in the reserve requirement may give marginal support to credit growth in2010, but with loan-to-deposit ratios high (94% in February) and banks capital ratios close to the BaM-mandated minimum, we still expectprivate sector credit growth to fall slightly to 9% in 2010 from 9.4% in 2009. Loan growth has averaged 1% M-o-M since December 2009.

The BaM statement estimates real GDP growth of 3-4% in 2010, roughly in line with our estimate of 3.2%. We expect agricultural growth will benegative in 2010 after an exceptional 2009, pulling down overall growth, although previous investment in irrigation should mean less volatility inagricultural output than at the beginning of the decade. We believe that the recovery in external demand will be slow, given Moroccos strong tradeties to Southern Europe. The most recent monthly trade data, for January 2010, show nominal import growth outpacing export growth Y-o-Y. Theturnaround in imports is partly due to rising oil prices, but non-oil imports are also rising, up 10% Y-o-Y against an average contraction of 13% Y-o-Y in 2H2009. We think that recovering domestic demand is behind this import growth, particularly as the government stimulus continues in 2010.Public sector investment is set to rise 20% Y-o-Y in 2010, and this will be critical to driving growth in 2010. Previous low fiscal deficits and a lowdebt-to-GDP ratio support our belief that the government can maintain this stimulus into 2011 if necessary. Ratings agency S&P upgradedMoroccos foreign and local currency ratings by one notch in mid-March 2010 to reflect the governments greater ability to borrow.

Source: Bank Al Maghreb, IMF, and EFG Hermes estimates

Mohamed Abu BashaSimon Kitchen

march issue


Algeria

Jan-05 Jan-06 Jan-07 Jan-08

Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDPGross Domestic Debt, % of GDPExternal Debt, % of GDPY-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %

2010e

Jan-090%

10%

20%

30%

40%--

----

--

----

167.3 138.1 166.6 186.62.4 0.2 5.6 6.04.4 5.7 7.0 4.0 5.2 Jan-10

20.4 0.1 4.6 1.88.6 (11.8) (6.4) (5.1)6.8 7.0 5.9 5.43.3 3.3 2.6 2.5

16.0 3.9 12.2 9.9 3.9 Dec-0916.9 15.4 10.0 15.0 15.4 Dec-09 Jan-10

Latest Date Y-o-Y Growth in Credit to Private Sector

Morocco

Jan-05 Jan-06 Jan-070%

10%

20%

30%

40%

Jan-08

Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDPGross Domestic Debt, % of GDPExternal Debt, % of GDPY-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, % Jan-09

2009e 2010e 2011e

- ---

- -

- -

2008

Jan-10

89.1 90.3 94.1 102.65.6 5.2 3.2 4.7 7.8 4Q093.9 1.4 2.0 2.5 0.1 Feb-10

(5.4) (5.6) (6.0) (5.1) (2.0) 3Q090.4 (2.2) (2.1) 0.1

37.3 35.6 36.5 34.419.3 19.2 19.6 18.810.8 6.0 4.4 9.5 4.9 Feb-1022.9 9.4 9.0 13.0 11.8 Feb-10


15/23



dubai: economic implications of the dubai worlds restructuring proposal

creditor friendly proposal announced at end-marchOn 25 March 2010 the Dubai Government announced a debt restructuring proposal for Dubai World and Nakheel, which was substantiallybetter than expected by the market, especially as the measures aim to protect the loans principals, albeit with extended maturities in somecases

1

. The proposals will now be discussed with creditors and the restructuring process is expected to take several months to implement.According to Dubai Worlds Chief Restructuring Officer, the response of creditors has been positive. After initial consultations, newmeasures to improve the deal for some creditors have been leaked to the newswires - the repayment terms differ by type of creditor, withNakheel bondholders receiving the most favourable terms. While a number of issues still have to be ironed out, we believe that the proposalis positive from an economic perspective, with substantially lower systemic risks and markedly improved visibility of the process.

vital to supporting confidence and reducing systemic risksWe believe that one of the most important factors will be the reduction of uncertainty and speculation, which will be central to supportingsentiment. The proposal highlights that policy makers are aware of the extent of the debt and a plan is in place to tackle the issue.Particularly notable in the announcement was the greater level of detail and transparency compared to previous statements. In our forecasts

we had expected to see a gradual improvement in sentiment throughout 2010 after an agreement with creditors on the restructuring of thedebt and increased visibility. This will support private consumption growth, which should also benefit from the pickup in tourism and otherexternal drivers. Based on this assumption, our non-oil GDP growth outlook was stronger than other forecasts (such as the IMF estimates),and we maintain our forecast of positive real non-hydrocarbon growth of 2.2% in 2010, with overall real GDP growth of 2.5% for the UAE.

Importantly, the payment to bondholders (and some of the money owed to trade contractors) is important for reducing systemic risks in theeconomy. A significant portion (up to 80%, according to the IMF) of the Nakheel bonds is held by national banks. The on time repayment ofthe bonds is also likely to have a positive impact on opening up the bond market for Dubais corporates and for the government in themedium term. However, the negotiations going forward will be critical, such as the interest paid to banks and contractors on loans with theextended maturities. A sub-commercial interest rate would act as an effective loss on the loan principal. The government has indicated itcould use payment-in-kind (PIK) notes, where the lender only receives interest at the end of the loan term. While this reduces the cashdemand on the borrower, it will also limit the flow of liquidity beyond the initial payment to banks and contractors.

investments levels still to fall, no changes to our credit growth forecastPositively, press announcements have suggested that Nakheel shortly will receive USD1.5 billion, without the approval of the restructuringproposal. These funds could start being channelled to contractors as soon as early April. This should ease some constraints on working capitaland allow the completion of projects close to delivery. However, overall investment activity will remain limited owing to: 1) liquidityremaining tight for real estate and construction companies (part of the payments will be for work already completed), and 2) Dubai beingclose to the end of its investment programme, with an infrastructure oversupply in a number of areas. Consequently, we continue to forecastthat investment levels in Dubai will continue to fall over the next few years. The restructuring proposal does not change the outlook forhalted Nakheel projects with limited progress. Rather it allows customers the option to transfer money invested in stalled projects to thoseclose to completion or the ability to hold the credit for five years.

We also have not changed our credit growth forecast and do not expect any new lending from banks on the back of this proposal. Webelieve that banks will continue to maintain a relatively risk averse stance to lending to the construction and property sectors with thewidening of the payment maturities. Moreover, with a weaker economic outlook in the medium term, new lending opportunities will remainlimited, which coupled with the banks inability to raise longer duration funding, will also act as a constraint. Additionally, the pricing oninternational bond offerings by UAE-based banks, in our view, is unlikely to improve markedly in the near term as a result of the proposedrestructuring plan. We continue to believe that incremental credit growth in the UAE will largely come from Abu Dhabi.

government resources prioritised towards debt paymentOut of the USD9.5 billion of additional funding for Dubai World and Nakheel earmarked in the restructuring proposal, USD3.8 billion willhave to come from Dubais internal resources. This will result in a retrenchment in spending as government revenues are directed towardsdebt management. Highlighting this , in February Dubai announced that its government departments have to cut spending by 15% in 2010to save AED3.7 billion, with the aim of reducing the emirate's deficit by 2011. We believe that the sale of non-core assets will also berequired to raise the additional funding, although the fact that many of the assets were bought on a highly leveraged basis and abovecurrent prices is an issue.

private consumption growth weaker than wider regionAlthough we expect to see private consumption turning positive in 2010e, a recovery going forward will be weaker than the other GCCcountries. This is partly linked to the heavy exposure to the real estate sector. Ironically, the payments to contractors to finish nearcompleted projects are likely to increase supply and push down property prices further. In addition, a weaker investment and governmentspending environment will also limit the recovery in private spending.

Monica MalikMohamed Rahmy

march issue

1 For more details of the proposal, please see the UAE country section on page 16.


16/23


17/23



qatarMonetary data from December show a strong recovery in bank lending; even though in line with our expectation, it remained skewed towards publicsector lending. Overall lending growth has accelerated and reached 26% Y-o-Y in February, up from 10.3% in November. Public sector lending hasbeen growing at double-digit levels (Y-o-Y) since August, but accelerated from December and peaked at a record 122% Y-o-Y in February, as borrowingwas stepped up on greater implementation of the governments investment programme, with funding being ramped up to help finance ongoingprojects. This significant increase also needs to be seen in light of a sharp drop in borrowing over January and February 2009, as the public sectorseverely slowed down its borrowing from the banking sector to ensure ample liquidity was there for private sector lending. With liquidity concerns outof the way, the public sector once again resumed borrowing and net claims on the public sector have turned positive since 2Q2009 peaking at QAR40.3billion in February from QAR9.3 billion in June 2009. Positively, private sector lending accelerated in February to 9.39% Y-o-Y for the first time sinceSeptember 2008. We believe that the deceleration in private sector lending has bottomed out, and we will continue to see credit growth to the privatesector gradually inching up (Y-o-Y) to a forecast level of 15% Y-o-Y by end-2010, mostly directed towards government-linked projects.

The Emir endorsed the FY2010-2011 (April-March) budget last month, which came broadly in line with our expectation and points to anotherexpansionary budget. Spending is slated to grow 25% Y-o-Y to USD32.4 billion over last years budget, with the focus remaining onimplementation of the governments investment programme. We forecast that actual spending will increase by 21.1% Y-o-Y to USD38.4 billioncompared to an estimated increase in spending of around 19.0% in FY2009-2010. We estimate that government spending as a percent of non-oil GDP is the highest in Qatar out of the GCC countries, just above 70%, and thus will provide a strong economic stimulus. Investmentspending constitutes 37% of total planned expenditure, with around USD9.8 billion (30% of total spending) allocated to infrastructure projects.With higher government investment spending, we expect that real non-oil GDP will accelerate to 8.5% in 2010 from 7% in 2009.

*We believe that not all of Qatars gas revenues are reflected in the official budget figures, which our estimates are based on. The actual fiscal position is likely to be

substantially stronger. Note: Fiscal balance is on fiscal year basis (April-March)

Source: Qatar Central Bank, IMF IFS, and EFG Hermes estimates

omanCBO Governor Hamud Bin Sangur Al-Zadjali has indicated last month that Oman plans to raise OMR122 million (USD316.9 million) in twoGovernment Development Bonds (GDB) in 2010. The OMR-denominated GDB issues have over the past two decades been closely linked withfinancing the governments five-year development plans and covering fiscal shortfalls. However, the build-up in fiscal surpluses since 2003 andstrengthening of Omans reserve position has limited the need for new bonds. Between 2004 and 2008, no new issuances were made, andsubsequent issuances (in September 2008 and 2009, along with the planned ones in 2010) are, in our view, largely aimed at refinancingmaturing bonds, while providing local banks (who are the largest subscribers of GDBs) with alternative investment opportunities. With a higheroil price estimate for 2010 (USD80 p/b for Brent crude), we are forecasting that Omans fiscal balance will swing back to a surplus of USD3.3billion (5.3% of 2010 GDP) after posting a small deficit in 2009. This will enable the government to comfortably continue with its spending

plans. We are expecting that overall government expenditure will accelerate 9% Y-o-Y to USD20.6 billion after growing 2% in 2009.

In its first non-liquidity driven support measure since end-2008, the CBO raised the minimum Capital Adequacy Ratio (CAR) requirement forall banks to 12% from 10%, effective end-2010. We expect a very limited macroeconomic impact of this move, as the capitalisation of Omanibanks is already above this level. We therefore regard CBOs latest move as a precautionary regulatory measure that further strengthens banksability to weather any unforeseen deterioration in credit quality and cushions against any stress though unlikely arising from a systemicrisk. Thus, we maintain our 2010e private sector credit growth at 12.2% Y-o-Y.

Source: Central Bank of Oman, IMF IFS, and EFG Hermes estimates

march issue

2008e 2009f 2010f 2011f Latest Date Y-o-Y Growth in Credit to Private Sector

Qatar

0%

20%

40%

60%

80%

100%Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDP*Y-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %Net Claims on the Government (USD bn)Net Foreign Assets in the Banking System (USD bn)

Feb-04 Feb-05 Feb-06 Feb-07Feb-08 Feb-09

100.4 81.1 107.5 121.4 20.7 3Q 200912.7 7.3 17.1 8.2 - -15.1 (4.9) 1.8 2.5 (4.5) Feb-1014.1 11.3 21.3 35.2 - -10.7 1.1 6.5 8.3 - -19.7 16.9 23.0 18.0 35.7 Feb-1045.1 10.8 15.0 21.1 9.4 Feb-10(0.6) 12.9 8.5 (1.3) 12.2 Feb-1013.4 13.0 16.3 19.5 12.2 Feb-10

Feb-10


OmanNominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDPY-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %Net Claims on the Government (USD bn)Net Foreign Assets in the Banking System (USD bn) Jan-09Jan-05 Jan-06

0%

10%

20%

30%

40%

Jan-07 Jan-08

50%

60%59.9 52.1 61.9 68.4 11.9 3Q 200913.0 4.1 4.0 3.9 - -12.3 3.4 5.5 7.0 1.7 Jan-10

9.1 (11.8) (1.6) 1.5 - -13.3 (2.0) 5.3 7.1 - -23.1 4.6 9.3 15.4 4.8 Jan-1044.0 4.9 12.2 16.0 4.8 Jan-10

(6.20) (5.97) (6.70) (7.80) (6.2) Jan-1011.3 11.4 14.3 15.8 12.0 Jan-10 Jan-10


18/23



kuwaitKuwait will realise a substantial fiscal surplus in FY2009-2010 (April-March). According to the latest official data, Kuwait posted apreliminary budget surplus of KWD8.33 billion (USD28.9 billion) in the first 11 months of the fiscal year. Revenues reached KWD 16.0 billion(USD55.5 billion), nearly twice as much as projected for the whole FY2009-2010, but down 24.1% for FY2008-20009. The budget was basedon a conservative oil price of USD35 p/b for Kuwaiti crude. Despite this oil price, the fiscal surplus will widen as a result of substantiallylower government spending. Total spending over the same period was USD26.6 billion (KWD7.68 billion), just 63.4% of the full-year plan.We, however, expect a rise in government spending and thus a lower fiscal surplus at the end of the fiscal year when pledged expenditurenot included so far will be added to the closing statements. The lower expenditure in FY2009-2010 is mostly a result of lower extraordinaryexpenditure such as transfers to state pension funds. Nevertheless, unlike other GCC countries, current and capital spending growth is likelyto have decelerated, especially earlier in the fiscal year. We are forecasting a fiscal surplus of USD26.0 billion, equivalent to 23.6% of 2009GDP. Importantly, we forecast that government spending will pick up in FY2010-2011, which will be central in driving the pickup in non-oilactivity. We believe that this spending will be broad based, with increases in both current and capital expenditure. In February, theparliament approved an USD104 billion development plan for the next four years, starting 1 April. However, high levels of bureaucracy willbe one of the central factors that will limit the implementation of the investment programme.

Meanwhile, the Kuwaiti Information Minister Sheikh Ahmed al-Abdullah al-Sabah, who is also the Oil Minister, survived a no-confidence vote inMarch, after being questioned for allegedly failing to uphold media laws and protect national unity. While the vote was close (22 MPs votedagainst the minister, with 25 of the 49 votes in favour of removing him), it highlights that parliament is narrowly in favour of the government.

*Fiscal balance is on fiscal year basis (Apr.-Mar.)Source: Central Bank of Kuwait, IMF IFS, and EFG Hermes estimates

bahrainBahrain issued a 10-year USD-denominated bond last month. The bond was heavily oversubscribed, leading to an increase in the issue size toUSD1.25 billion from USD1 billion. Similarly, pricing of the bond was tightened to 200 bps over mid-swap rates from an initial guidance of210 bps. Owing to its attractive pricing, offering a higher coupon (5.5%) than the recent 10-year issuance of neighbouring Qatar (5.25%),the bond managed to attract international interest, with over 40% of subscriptions coming from the US, while other European and Asianinvestors also showed strong interest.

While this issue will help create a benchmark yield curve for future corporate and financial institutions USD issuances, more importantly, webelieve that the Bahraini Government is building on improved sentiment levels and investor interest, as evident by the lower borrowingcosts, to diversify its financing sources. Higher borrowing levels will enable the government to expand its planned expenditure and pressahead with projects, which it had previously put on hold or cancelled due to its stretched fiscal position, without having to excessively tapinto its reserves, especially as oil prices are currently at a more comfortable level. Bahrain had already raised the legal upper limit for itsoutstanding fixed income debt to BHD1.9 billion (USD5 billion, or 22% of our 2010 GDP estimate) in end-2009 to allow for this higher

borrowing level. We therefore increased our 2010 growth forecast for government spending (USD5.9 billion) from 2% to 5% Y-o-Y. Webelieve that current spending will continue to dominate overall fiscal expenditure; however, with the availability of more resources, we arelikely to see some funding, albeit limited, trickle down to projects and investment expenditure. With higher oil price levels in 2010, we areforecasting that Bahrains fiscal deficit would narrow to a manageable USD164 million (0.7% of 2010 GDP) from an estimated USD1 billionin 2009 (-5.3% of GDP). We still, however, maintain our real non-oil GDP growth at 2.7%, despite the increase in our forecast fiscalexpenditure, owing to the limited impact government spending has in driving real non-oil GDP.

Source: Central Bank of Bahrain, IMF-IFS, and EFG Hermes estimates

Monica MalikMohamed Rahmy

march issue


Kuwait

0%

10%

20%

30%

40%Nominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDP*Y-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %Net Claims on the Government (USD bn)Net Foreign Assets in the Banking System (USD bn) Feb-06 Feb-07 Feb-08 Feb-09 Feb-10

142.4 110.2 127.8 140.1 - -5.7 (3.8) 3.4 4.1 - -

10.6 4.5 4.0 4.6 - -45.6 26.1 33.8 33.6 - -

7.4 23.6 24.3 25.3 - -15.6 13.4 15.6 19.2 6.7 Feb-1016.7 6.1 8.5 10 5.3 Feb-10(9.7) (11.2) (13.6) (12) (10.5) Feb-1027.6 32.9 37.6 42.6 34.9 Feb-10


BahrainNominal GDP (USD bn)Real GDP Growth Rate, %CPI Inflation, Annual Average %Current Account Balance, % of GDPFiscal Balance, % of GDPY-o-Y Growth in Broad Money, %Y-o-Y Growth in Private Sector Credit, %Net Claims on the Government (USD bn)Net Foreign Assets in the Banking System (USD bn) Nov-09Nov-05 Nov-06 Nov-07 Nov-08

0%10%20%30%40%50%60%

-10%

21.9 20.4 22.3 23.7 - -6.3 1.5 2.2 2.5 - -3.5 2.8 2.9 3.2 1.7 Feb-10

10.3 (1.4) 1.7 2.7 - -6.7 (5.3) (0.7) 0.1 - -

19.7 5.8 12.5 8.6 7.0 Jan-1043.0 (3.1) 5.5 13.0 -3.1% Nov-09(1.7) (0.2) (2.0) (2.8) (0.2) Nov-09

7.3 5.8 8.5 10.3 5.6 Nov-09


19/23



february issue

No. of Issuance Price at

Authors Pages Date Issuance Rating Fair Value (FV)

publications march 2010

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MENA Strategy Note Research Team 11 31-Mar-101Q2010 Earnings Preview

GB Auto Farrag, CFA 20 31-Mar-10 EGP 36.0 Buy EGP 43.0Local Market Recovery Surprises; Upgrade to Buy

Zain Group Ananian 06 31-Mar-10 KWD 1.36 Neu. KWD 1.48Zain Africa Sale: Almost There, Reduce to Neutral Ghobrial

Etisalat Maher 03 31-Mar-10 AED 11.4 Buy AED 14.5Adjusting FV for Bonus Shares Ananian

Maridive and Oil Services (MOS) Riaz 11 31-Mar-10 USD 4.65 Neu. USD 5.04Taking Profits: Downgrading Recommendation to Neutral Hassouna

Ezz Steel Shams El Din 03 31-Mar-10 EGP 20.9 Buy EGP 25.1Iron Ore Pricing:... Guindy

Orascom Construction Industries (OCI) Shams El Din 03 30-Mar-10 EGP 266.0 Neu. EGP 270.0Positive on DSMs Agro / Melamine Deal:...

Qatar Gas Transport (Nakilat) Redwan 05 29-Mar-10 QAR 22.8 Buy QAR 38.6Core business in line, Valuation Attractive, BUY

UAE Strategy Note Iqbal / Malik 03 26-Mar-10Dubai World Restructuring Better Than Expected Ansari / Kapadia

UAE Indices Nessim 03 25-Mar-102Q2010 - Indices Rebalancing Announcement

Egypt Indices Difrawy 03 25-Mar-102Q2010 Egypt Indices Rebalancing Announcement Sadek

Sorouh Real Estate Kapadia 03 25-Mar-10 AED 2.42 Buy AED 5.15Adjusting FV for Stock Dividend Abbas

DP World Redwan 04 25-Mar-10 USD 0.48 Buy USD 0.56Recovery on Track

Ezz Steel Shams El Din 04 24-Mar-10 EGP 19.2 Buy EGP 25.14Q2009 Results: First Glance Comments

Aramex Riaz 12 24-Mar-10 AED 1.88 Neu. AED 1.79Freight Recovery Drives Our Forecast Upgrades;... Hassouna

MENA Focus List Iqbal / Kitchen 04 24-Mar-10Add Ezz Steel, OT, Emaar & Depa Nessim / Difrawy

Saudi Hollandi Bank (SHB) Ansari 05 23-Mar-10 SAR 33.70 Buy SAR 38.60Buy on Normalising Earnings

Orascom Telecom (OT) Ananian 09 23-Mar-10 USD 5.01 / Buy USD 7.72 /Has the Stock Bottomed Out? Maher EGP 5.46 EGP 8.50

iii. research log


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february issue

Qatar Navigation / Qatar Shipping Redwan 03 22-Mar-10Arbitrage Opportunity

Bank Muscat Ansari 04 21-Mar-10 OMR 0.817 Buy OMR 1.040Raising Estimates, ... Varghese

UAE Strategy Note Iqbal 09 21-Mar-10Dubai World: Where Do We Go From Here? Nessim

Orascom Construction Industries (OCI) Shams El Din 04 21-Mar-10 EGP 248.3 Neu. EGP 270.04Q2009: Fertilisers Outperform, Construction Awards Disappoint

TabreedRiaz 10 17-Mar-10 AED 0.48 Sell AED 0.38

Now With a High Risk of Dilution, Reiterate Sell Hassouna

Lecico Baddour, CFA 05 16-Mar-10 EGP 20.0 Buy EGP 26.14Q2009 Results: A Strong End to the Year, Reiterate Buy Kashef

Al Ezz Dekheila Shams El Din 04 16-Mar-10 EGP 816 Buy EGP 1,2034Q2009's Consolidated Results: First Glance Comment Guindy

Orascom Telecom (OT) Ananian 05 14-Mar-10 USD 5.46 / Buy USD 7.72 /4Q2009 Preview: Do Not Expect A Good Quarter EGP 5.85 EGP 8.50

Palm Hills Developments (PHD) Hasman 03 14-Mar-10 EGP 6.3 Buy EGP 7.5Adjusting FV for Rights Issue

Egypt Banking Sector Note Sanchez 38 07-Mar-10

Core Business on Firmer Footing;...

CIB - Upgrading to Buy 03 04-Mar-10 EGP 62.50 Buy EGP 74.26NSGB - Still At a Discount 03 04-Mar-10 EGP 31.50 Buy EGP 42.97CAE - Small Franchise, But Strong Fundementals 04 04-Mar-10 SAR 9.85 Neu. SAR 9.18

MENA Economics Note Malik / Abu Basha 33 04-Mar-10Clear Skies, but Prepared for Rain Rahmy / Kitchen

Saudi Telecom Sector Note Ghobrial 15 04-Mar-102009: Mobile Additions Peak Ananian

Saudi Telecom Company- Margins Still a Consern 04 04-Mar-10 SAR 44.2 Buy SAR 66.6Mobily - Trimming Forecasta; Maintain Buy 03 04-Mar-10 SAR 47.6 Buy SAR 67.6Zain KSA - Lower FV; Balance Sheet Still a Headache 04 04-Mar-10 SAR 9.85 Neu. SAR 9.18

DEPA Limited Kapadia 38 04-Mar-10 USD 0.55 Buy USD 1.18Behind the Curve, Ahead of the Game Abbas

DP World Redwan 38 04-Mar-10 USD0.38 Buy USD0.56Thrown Out with the Bathwater, Initiate with Buy

Al Ezz Dekheila Shams El Din 04 03-Mar-10 EGP841.5 Buy EGP1,203Upgrading Estimates on Higher Price Outlook, ... Guindy

Ezz Steel Shams El Din 10 03-Mar-10 EGP18.8 Buy EGP25.1Steel Prices Set to Rise Further, Upgrading to Buy Guindy

Arabtec Kapadia 04 03-Mar-10 AED2.10 Buy AED3.394Q2009 Results: A Loss, Yet Not a Negative Surprise Abbas

Jordan Economics Note Abu Basha 03 02-Mar-10

Fiscal Risks To Hurt Confidence

Maridive and Oil Services Riaz 05 01-Mar-10 USD4.35 Buy USD5.20Aramco Project to Drive Top Line in 2010 Hassouna




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february issue



publications february 2010

Saudi British Bank (SABB) Ansari 04 25-Feb-10 SAR50.00 Neutral SAR54.00NPLs Rise, Coverage Drops; Lowering Rating to Neutral

Egypt Strategy Note Kitchen 05 25-Feb-10Looking for Entry Points Difrawy

Egypt Economics Note Abu Basha 05 24-Feb-104Q2009 Current Account Unexpectedly in Surplus...

Gulf Navigation Redwan 14 24-Feb-10 AED0.61 Sell AED0.43Macro Outlook Improving but Still Overpriced

Kuwait Finance House (KFH) Sanchez-Cabezudo, CFA 04 21-Feb-10 KWD1.18 Neutral KWD1.394Q2009 Results: Weaker than Expected; Reiterate Neutral Rating

MENA Economics Note Malik 02 21-Feb-10EUR Weakness: Implications for MENA Currencies Kitchen/Abu Basha

UAE Strategy Note Iqbal 09 18-Feb-10Thoughts on the Alleged Offer in Dubai World's ... Nessim

Eastern Company Farrag 05 18-Feb-10 EGP128.0 Buy EGP154.62Q2009/10 Results: Resilient, Despite Higher Finance Costs

Aldar Properties Kapadia 04 17-Feb-10 AED3.87 Buy AED5.524Q2009 Results: Disappointing Quarter but .. Abbas

Sidi Kerir Petrochemicals Company (SIDPEC) Shams El Din 22 17-Feb-10 EGP12.5 Buy EGP15.8Strong Fundamentals and a Cheap Valuation... Youssef

Qatar Electricity and Water Company (QEWC) Riaz 10 17-Feb-10 QAR99.0 Buy QAR138.7Dividends Underpin Fair Value, Reiterate Buy Hassouna

Credit Agricole Egypt Sanchez-Cabezudo, CFA 04 16-Feb-10 EGP10.93 Buy EGP16.654Q2009: Earnings in Line, Loan Growth Better than Expected

Zain Group Ghobrial 03 16-Feb-10 KWD1.08 Buy KWD1.29Out of Africa? Deal Multiples Should be Good News... Ananian

ENBD Ansari 04 15-Feb-10 AED2.55 Neutral AED3.204Q2009 Results

Mobinil Ananian 06 11-Feb-10 EGP221.0 Neutral EGP257.6

4Q2009 - Pressure on Additions... Ghobrial

SAFCO Shams 07 11-Feb-10 SAR137.0 Buy SAR164.0Nitrogen Fertiliser Outlook Strengthens, Upgrading to Buy Guindy

Egypt Economics Abu Basha 02 10-Feb-10Inflation Accelerates in January, Outlook Unchanged

2010 Egypt Research Yearbook Research Team 120 09-Feb-10

MENA Strategy Research Team 10 09-Feb-104Q2009 Earnings Preview: Update

GB Auto Nour Farrag, CFA 08 09-Feb-10 EGP27.5 Neutral EGP30.7Betting on Iraqs Pent-Up Demand, But

efg - regional monthly - april 8 2010

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