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December 2009

News Letter - 2nd December 2009

The recent announcement that Dubai World is looking to restructure part of its $80 billion debt will have done little to calm the nerves of an already jittery investment community. However we at Carmania believe that much of this has been blown out of proportion by the media hype surrounding our region, and the lack of transparency surrounding regional government accounting. In reality the impact is minimal from a longer term perspective: world markets have already recovered from this hit although gulf markets are still reeling: Dubai dropped 5.61% on Tuesday 1st, with real estate companies being the hardest hit. So what does this mean for us in the maritime sector? There are good opportunities for investment in the sector at the moment, even though we are currently at a low point in the economic cycle. It is important not to lose sight of the key factor that it is a cycle and therefore by definition can and will recover. With property prices at a 50% discount to their peak in Q4 2008, new investors can benefit from market reductions in overheads and location costs, and the current climate could provide ideal opportunities for those companies whose products and services offer business efficiencies and cost savings over the medium to long term.

Shipping will recover and will do so on the back of a resurgence in global trade, once the global economy recovers sufficiently. Even if the worst case reports about Dubai were to be correct (which they aren't!) this would not really affect the maritime sector. As far as we can work out the entire Dubai World group (or indeed the government of Dubai for that matter) has no shipping companies in its portfolio. It is also worth reiterating at this juncture that Dubai is just one of seven states that make up the UAE and therefore we continue to believe that the climate provides excellent opportunities to benefit the far-sighted investor.