China central bank in $6bn currency swap deal with Qatar

Gulf Daily News Tuesday, 4th November 2014
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China central bank in $6bn currency swap deal with Qatar
DUBAI: China’s central bank has
signed a 35 billion yuan ($5.7bn) currency swap deal with its Qatari counterpart, in a step towards expanding use of
the Chinese yuan in a region long dominated by the US dollar.
The deal is expected to allow the
two central banks to swap currencies
if needed to ease trade and investment.
Qatari investment institutions will now
also get the right to invest up to 30bn
yuan in mainland Chinese securities,
including stocks, bonds and bills, the
People’s Bank of China said in a statement yesterday.
The investment scheme, known
as the Renminbi Qualified Foreign
Institutional Investor, was created in
2011 to let financial investors place
some of their yuan holdings in China.
The UAE signed a three-year currency swap arrangement with China in
2012 that was similar in size to Qatar’s.
Bankers say they believe there has been
little if any use of it in practice, but it is
a step towards long-term change.
Beijing has been promoting its currency to international investors, aiming
eventually to turn the “redback” into a
global reserve currency in line with the
country’s rising political and economic
power.
Gulf countries have lagged many
other parts of Asia in using the yuan
because their energy exports to China
are mainly denominated in dollars and
most of their currencies are pegged to
the dollar.
HSBC estimated last year that while
10 per cent of China’s international
trade was conducted in yuan, the share
was under 4pc for Chinese trade with
the UAE.
The huge foreign reserves of the Gulf
states are mostly kept in dollars.
However, economists believe there is
room for that pattern to shift slowly in
coming years as Gulf states gradually
orient a greater share of their trade
towards Asia.
Qatar, which has some $43bn in net
foreign currency reserves and an estimated $170bn in its sovereign wealth
fund, is the biggest supplier of liquefied
natural gas to China.
Saudi regulator probing
Mobily earnings revision
DUBAI: Saudi Arabia’s market regulator has begun an investigation to
determine whether Mobily violated
bourse rules, it said yesterday, after
the company restated 18 months of
earnings and reported a 71 per cent
drop in third-quarter net profit.
Mobily had been expected to report
its third-quarter earnings last week, but
asked for its shares to be suspended on
Thursday, seeking more time to review
unspecified “significant matters” in its
financial statements.
“The regulator has started investigations to determine any violations by
the company towards the bourse rules,”
a statement from the Capital Market
Authority (CMA) said.
Yesterday, Mobily reported a shock
profit drop as well as re-stating its
earnings, cutting its 2013 profit by 740
million riyals ($197.3m) and profit for
the first-half of 2014 by 688m riyals due
to what it said were accounting errors.
Trading in Mobily’s shares will
resume today, the CMA statement
added.
Meanwhile, Saudi Arabia is due in a
few months to open its stock market to
direct foreign investment.
A survey of a dozen international
fund managers early this year found
Saudi Arabia ranked highest among the
five main Middle Eastern exchanges for
full and accurate disclosure of corporate
information, and second highest for
enforcement of rules against illicit trade.
“This may be a temporary glitch as
$1.8bn provision
hits HSBC profit
LONDON: HSBC’s profits
fell short of expectations in the
third quarter after the bank set
aside $1.8 billion for misconduct settlements and compensation for customers, including
a potential fine for rigging currency markets.
The provision and a jump in
HSBC’s everyday compliance
costs show the impact of regulators’ increasing efforts to
clamp down on bad behaviour
in the global banking industry
that contributed to the financial
crisis.
HSBC said yesterday it had
spent $700 million more this
year on compliance and risk
than a year ago, and that level
of expense looked set to stay,
meaning it would miss one of
its main cost targets.
“The cost base of a global
bank like ourselves is higher
than it was before, because ... it
includes a significantly higher
compliance and regulatory cost
than historically the banks had
invested in,” chief executive
Stuart Gulliver said.
“It reflects the fact that
standards, foreign policy, etc,
all evolve in a world that is a
lot less certain than it was 10,
15 years ago.”
HSBC’s third-quarter underlying earnings fell 12 per cent
from a year ago to $4.4bn, after
operating expenses jumped
15pc on the year. That included a $378m provision for the
forex investigation, $589m to
compensate British customers
who were mis-sold insurance
products and a $550m settlement in the US for mis-selling
mortgage-backed securities.
Gulliver said the bank was
likely to miss a target set out 18
months ago to get costs down to
about 55pc of revenues by 2016.
He said it was more likely to be
in the high 50s or near 60pc. It
was 62.5pc so far this year.
The bank also said it had
been summoned to appear
before French magistrates over
whether its Swiss private bank
had helped French citizens to
evade tax, and could face a
criminal investigation.
HSBC said its forex investigation provision covered
“detailed” talks with Britain’s
financial regulator about
alleged manipulation in the
$5.3 trillion-a-day forex market. The talks were in relation
to systems and controls in one
part of its spot forex business in
London, it said.
Mobily has actively engaged analysts
and the investor community in the past,”
said Asim Bukhtiar, head of research at
Riyad Capital.
“It might take a couple of quarters
to shake off this mis-step and the company may need to do some damage
control. Foreign investor sentiment may
be affected depending on the root cause
for restatement and emergence of more
details on the quarterly results.”
Mobily, also called Etihad Etisalat,
and 28pc owned by the UAE’s Etisalat,
had reported surging profit after it ended
Saudi Telecom Company’s (STC)
monopoly in 2005.
A record annual profit last year –
now amended to be below that of 2012
– helped Mobily’s shares reach an
eight-year high of 98.25 riyals in May,
but investors became jittery last week
after the company failed to report its
third-quarter earnings.
Its shares fell 8pc in three days to a
16-month low of 79.95 riyals before
the company asked for trading to be
halted.
Analysts polled had on average forecast Mobily, which competes with STC
and Zain Saudi, would make a quarterly
profit of 1.67 billion riyals.
Mobily said the profit drop was
because its third-quarter earnings
in 2013 were boosted by non-recurring wholesale revenue that
was not repeated in the same period of
2014.
Also, depreciation, sales, marketing
and general expenses rose yearon-year.
These included extra provisions of 207m riyals for bad
debts, slow-moving inventory
and goodwill impairments on
its investments.
Mobily restated its 2013 net
profit as 5.94bn riyals, down
from 6.68bn riyals previously,
due to an error in the timing of
booking revenue from a promotional campaign.
This mistake also required
Mobily to restate its net profits
for the first two quarters of
2014.
It raised its first-quarter
profit to 1.61bn riyals from
1.4bn riyals previously, but
“Excuse me, but is this the canteen or office?”
second-quarter profit fell
to 412m riyals from 1.31bn
riyals
“Mobily has given some
indication as what is going on,
but we’re still trying to figure out why the company has
DUBAI: Vodafone Qatar, an affiliate of Vodafone Group, reported a changed its accounting standnarrowing second-quarter loss yesterday, as revenue increased.
ards mid-year, normally any
Vodafone, which ended state-controlled Ooredoo’s domestic changes are flagged up well
monopoly in 2009, made a net loss of 53.5 million riyals ($14.69m) in in advance of the start of the
the three months to September 30, according to Reuters calculations year,” said Bukhtiar.
based on company statements.
Bukhtiar said Mobily had
That compares with a loss of 75m riyals in the prior-year period. hired third-party wholesalers
The operator’s financial year starts on April 1.
to distribute its mobile topQuarterly revenue was 559m riyals, up from 465.25m riyals a year up cards and would book the
ago, according to Reuters calculations.
revenue from these cards on
Vodafone Qatar – 23 per cent owned by parent Vodafone and 22pc delivery to the wholesaler even
by a Qatar government-linked fund – made a loss of 80.96m riyals in though these had not necesthe six months to September 30, according to a company statement sarily yet been bought by cusyesterday. That compares with a loss of 159.88m riyals in the pri- tomers.
or-year period.
The CMA said in July it
In October, Vodafone Qatar said it had agreed to buy Qatar would open the kingdom’s
National Broadband Network, which began rolling out a fibre net- market, the biggest in the Arab
work across all of the country in 2012 and expects to complete con- world, in the first half of 2015,
struction within three years.
sparking a stock surge.
Firm’s loss narrows
Daman plans
Dubai listing
next year
DUBAI: Daman Investments, a
UAE investment management
firm, said yesterday it planned
to list on the Dubai Financial
Market during the first quarter
of 2015 to expand its business
and fund new opportunities at
home and the wider region.
The company is the latest
in the UAE to announce plans
to go public, joining a wave
of firms eyeing a stock market
listing after a long fallow period for flotations.
Dubai-based Daman will sell
new shares equivalent to 55 per
cent of the firm to the public.
Chairman Shehab Gargash
said Daman had a number of
potential plans for the cash,
including launching a fund,
investing in a private equity
venture and upgrading its internal infrastructure.
The price at which shares
would be sold was being discussed with the regulator and
figures on the company’s recent
revenue and profit would be
published once the talks concluded, Gargash said.
Daman – founded in 1998 –
is backed by investors from the
UAE and the wider Gulf region.
Existing shareholders will be
diluted to 45pc, although they
could boost their holdings by
investing in the offering.
Retail-focused investment
firm Marka and Emaar Malls
Group listed within a week of
each other after hugely oversubscribed initial public offerings, while Amanat Holdings’
flotation is already covered by
investor orders ahead of its
closing today.
The listing has been a
long-stated goal of the company, having announced as early
as 2009 that it hoped to go
public on either the Dubai or
Abu Dhabi stock market – at
the time identifying by 2012 as
its target window.
However, like many firms,
Daman’s plans were put
on hold by the steep slump
in regional equity markets
following the global financial
crisis.
Daman sold a 22.7pc stake
to private investors via a
placement of shares in June
2012, which valued the company at 440 million dirhams
($119.8m), although a previous fundraising round had
valued Daman at around double that figure – showing the
impact of the global financial crisis on UAE investment
firms.