Archive for June, 2008

Ending dollar peg won’t solve Gulf inflation: Paulson (Reuters)

Sunday, June 1st, 2008 | Finance News

ABU DHABI (Reuters) -
Treasury Secretary Henry Paulson said
on Sunday leaders of Gulf oil producing states had told him
that abandoning their currency pegs to the dollar will not
solve their inflation problems.

Paulson, two-thirds of the way through a four-day trip to
Saudi Arabia, Qatar and the United Arab Emirates, said leaders
in the region have "quite an awareness that the peg does not
influence inflation to a significant degree.

"They recognize that inflation is the overriding issue ...
Ending the peg is not the solution to the inflation problem."

However Paulson said he could not rule out any moves by
Gulf states to abandon the peg, reiterating his view that
currency policy decisions were sovereign matters.

Five of the six Gulf oil producers -- except for Kuwait --
peg their currencies to the dollar, which means that they must
match U.S. Federal Reserve interest rate cuts even as their
economies surge on record high oil prices.

Some in the region argue that this and the dollar's decline
in recent months is fuelling inflation, which might be better
controlled by pegging to a basket of currencies.

An economic adviser to Qatar's ruler has said the Gulf
state needs to drop its peg to the dollar because its economy
is surging while the U.S. economy is slowing, London-based MEED
reported on late on Friday.

"We have to delink," MEED quoted Ibrahim al-Ibrahim as
saying. "It does not make sense to stay linked to a currency
that is declining while our economy is growing ... at a time
when our currency should be going up, it is going down."

At 13.74 percent, Qatar's inflation was the highest
recorded among Arab countries in the Gulf last year.

But Paulson, in talks with officials including Saudi
Arabia's King Abdullah
, Qatar's prime minister and finance
ministers from the two states, said earlier in Doha he has yet
to hear a leader blame the peg as the chief cause of inflation.


Instead, Paulson said, officials in the region cited high
prices for food, construction materials such as cement and
other key commodities were the primary sources of inflation.

He said they cited Kuwait as a country which is still
struggling with high inflation despite its abandonment of a
dollar peg last year.

Oil producers in the Gulf region have a long term goal to
achieve monetary union and more countries abandoning dollar
pegs could hamper those efforts.

Paulson also repeated his view that a strong dollar was in
the United States' interest and that the greenback's value
would ultimately reflect strong longer-term economic

Paulson also said he believed rapidly growing sovereign
wealth funds were mainly seeking returns on their investment
rather than pursuing political goals on behalf of their

But he said adoption of "best practice" guidelines by the
government-run funds would help allay protectionist fears.

"We're not picking on sovereign wealth funds," Paulson
said, noting best practices under development by the
International Monetary Fund were "a good way to inoculate
ourselves against protectionist sentiment around the world."

The most important of these guidelines would be those for
governance on how investment decisions are made, and who makes
them. Independence in this area will help identify sovereign
wealth funds as "investment pools being driven by economic and
commercial objectives."

Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani is
chairman of the Qatar Investment Authority, which manages about
$60 billion of assets, according to Standard Chartered Plc.

Abu Dhabi, along with Singapore, has already signed up to a
U.S. Treasury-devised set of best practice guidelines.

Paulson also said he has received indications of interest
for investments from the Gulf region in a new clean technology
fund supported by the United States, Britain and Japan.

The multibillion dollar fund aims to subsidize projects in
developing economies such as power plants using the lowest
carbon-emissions producing technologies commercially available.
It would achieve this by bridging the cost gap between new
technologies and older, cheaper technology that is dirtier.

(Editing by David Holmes)


Buyout firm KSL amid Esporta bidders: reports (Reuters)

Sunday, June 1st, 2008 | Finance News

LONDON (Reuters) -
Investment firm KSL Capital Partners is
one of half a dozen suitors to have submitted initial offers
for British fitness club chain Esporta last week, the Sunday
Times reported.

Esporta is estimated to be worth about 200 million pounds
($394 million), with property valued at a further 250 million,
the paper said.

Esporta's parent companies went into administration in
August as rising interest rates lifted the cost of their 330
million pounds of debt.

One source familiar with the situation said in December
Duke Street Capital, which sold Esporta to property tycoon
Simon Halabi in 2006 for 500 million pounds, was considering
buying back the chain.

David Lloyd Leisure Group and LA Fitness are also seen as
possible buyers, the paper said.

(Reporting by Clara Ferreira-Marques; Editing by David


Dubai’s DAE in talks on $2.5 bln aircraft order (Reuters)

Sunday, June 1st, 2008 | Finance News

DUBAI (Reuters) -
State-controlled Dubai Aerospace
Enterprise (DAE) said it was in talks to buy 50 aircraft worth
a total of about $2.5 billion to expand its leasing business.

DAE, which last year ordered up to $13.5 billion of
aircraft from Airbus (EAD.PA), is looking to buy single- and
twin-aisle planes over the next 18 months, including Boeing Co
(BA.N) 777s and Airbus A330s, Bob Genise, Chief Executive
of DAE Capital, told Reuters on Sunday.

DAE Capital is DAE's aircraft leasing unit.

"Despite the rise in jet fuel prices, there are pockets of
strong performance," Genise said by telephone. DAE Capital
could buy some of the aircraft from airlines and lease them
back, he said.

Last year, DAE bought $1.5 billion of aircraft from Dubai
state-owned Emirates (EMAIR.UL) and GE Commercial Aviation
Services (GECAS), a unit of GE (GE.N). It paid $1 billion for
20 planes from GECAS and $500 million for eight A330s from

Genise declined to be more specific about which companies
with which he is in talks.

(Reporting by James Cordahi; Editing by Kim Coghill)