2000 words count

Article Summary

Name: __________________ _____________________ Date _______10/19/10___________

Article Name: __________Wall Street in the Desert? _________ Number: ___13__

(1) Briefly state the main idea of this article:

During a quiet month of Ramadan across the Middle East, many investors are not so quiet about transactions going on between Borse Dubai, NASDAQ, the Swedish Exchange OMX Group and the London Stock Exchange. The 6.5 billion dollar deal would result in NASDAQ taking over the Swedish Exchange OMX Group, Borse Dubai holding a 20% stake in NASDAQ and the U.S. exchange owning a third of Borse Dubai subsidiary. These efforts have been the main focus of Soud Ba’alawy, an executive chairman of Dubai Group, a big investment arm of the emirate’s ruler, Mohammed bin Rashid al Maktoum. As negotiations of deals come closer to completion, so too does Dubai’s and al Maktoum’s ambitions of becoming the regional money hub in the Middle East. Al Maktoum has created a large portfolio that include several non-energy industries such as shipping, high tech, real estate and now with these transactions, banking and a trading hub in Dubai. Many people in Dubai have realized the importance of relying on other investments besides oil and gas to fuel their economy. This is why al Maktoum is pushing for a financial hub in order to support their economy without sole dependence on one resource. Many banks foreign to the Dubai region are realizing the opportunity and setting up shop in the Middle East. Other economies in the Middle East are also beginning to realize this, as Qatar’s financial regulator also put in a bid for a piece of the London Stock Exchange and OMX. On May 25, when NASDAQ offered $3.7 billion for OMX, Borse Dubai countered with a $4 billion offer for the Swedish Exchange. Both parties saw acquiring the exchange as ways to expand into new markets.

(2) List three important facts that the author uses to support the main idea:

1. In explaining the transaction, the author describes that “The series of transactions would result in NASDAQ Stock Market Inc. taking over the Swedish group, Borse Dubai holding a 20% stake in NASDAQ, and the U.S. exchange owning a third of a Borse Dubai subsidiary. On September 26 the deal took a step closer to completion as investors owning 47% of OMX shares indicated their support. In a related transaction Borse Dubai will take over a 28% stake NASDAQ holdings in the London Stock Exchange.” These facts outline how rapidly the global economy is changing and how new leaders are emerging. Dubai realizes that it cannot count solely on gas and oil and are beginning to get its feet wet in different markets around the world. I think it is very smart to diversify risk like they are doing, however, I didn’t expect them getting into foreign markets so suddenly or abruptly. I think that we are going to expect to see a lot more of these types of transactions going into the future.

2. “The Qataris were interested in NASDAQ’s stake in the LSE, and industry insiders say they were furious when Borse Dubai and NASDAQ got together. Qatar quickly responded by purchasing 20% of the LSE and 10% of OMX. Qatar officials declined to comment, but their bid for OMX forced Borse Dubai to raise its offer by some $700 million.” This section goes to show how competitive popular markets like the LSE, OMX and NASDAQ have become. Emerging nations that are close to become globalized financial influences are beginning to get involved with a variety of different markets around the world. I think that it is important for emerging nations to establish themselves in these strong exchanges in order to grow wealth in their own economies. This is why some economies have invested $40 billion in some cases to get connected into these exchanges.

3. Recognizing opportunity outside its own economy, Dubai states “If we develop a strong financial market, it will change the region,” Ba’alawy says. To make that happen, Sheikh Mohammed has assembled a team of top finance talent. Now, Ba’alawy has 130 people in five countries scouting for investments around the world.” Dubai has quickly become one of the richest economies in the world due to the oil and gas industry. The economy is booming due to the abundance of the natural resource, yet it has recognized other opportunities. I think that Dubai wants to become a global economic leader, yet for now it has to invest in other successful markets in order to improve its own.

(3) What information or ideas in this article are also discussed in the text or other readings you have done. Briefly discuss what you have learned from these articles and how they contribute to your understanding of the assigned article. (You must include two additional sources, excluding any articles from the text) :

In looking at outside sources, I found information that outlines the deal made by NASDAQ to acquire OMX with Borse Dubai that was not in the original Article 13 Wall Street in the Desert. The article lays to rest the national security concerns that were brought up in Article 13. Along with a 20% stake in NASDAQ Stock Market Inc, Borse Dubai will also receive two seats in a 16 seat board committee for the combined NASDAQ-OMX. With only two seats in the board committee, Borse Dubai will have a voice in the group, yet the concerns of a Middle-eastern influence on committee members voting decisions will be laid to rest as the new members only make up 5% of the groups voting rights. Some Senate members, like U.S. Sen. Charles E. Schumer, are still not so east about a such a high middle east influence in the NASDAQ, which caused him to send a letter to the Treasury Department seeking a review of the deal. Similar state-owned companies have been subject to further review, and new law has been passed requiring an additional 45 day review period for investments by foreign state owned companies. I think that it is important to protect national security and to take whatever necessary steps we have to in order to protect ourselves, without breaking basic human rights. I think it is good that questions are being raised about this investment and that people are taking a greater look into it. I do however think that it is important for not only other countries to invest globally, but for the U.S. to invest globally and allow others into our exchanges. Acquiring OMX is a great opportunity for the United States to dip into different markets and not to be solely dependent on our own economy. (MSNBC)

In looking at other articles, I saw different opinions and information on the topic. Many of the American news articles that I was reading did not state facts that this article did. In this article, the author explained that the deal actually included more than the 20% stake in the NASDAQ exchange that was acquired by Borse Dubai. The deal according to this article actually included around 28% in the NASDAQ exchange, however, due to U.S. laws Borse Dubai was only allowed the 20% stake in the company and t he remaining 8% would be put in a trust for Borse Dubai. Even though Borse Dubai will not gain control of the full amount of the trade that was made, all parties agree that the deal will be very profitable for all parties involved. I think that the trade is great for all parties involved. Nothing I read before this article suggested that Borse Dubai was only allowed 20% and not the full 28% due to U.S. laws, however, Borse Dubai must have seen this opportunity to invest in the U.S. and London markets as outweighing the 8% that was put in a trust. I think that it is important that U.S. laws have domestic protection in mind, but I think that all parties were gaining something from this deal and that Borse Dubai should not have been shorted this percent of their deal. I think that since the U.S. is such a large market it takes advantage of these smaller markets, but these smaller markets are not always going to be so much smaller than the United States. (The Peninsula Qatar)

(4) List any examples of bias or faulty reasoning that you think exists in the article. (Faulty reasoning or bias may be that the author did not use a variety of sources to compile the argument, they did not base the argument on current or applied theories, or the author did not provide relevant support for their work and it is based on opinion) :

I don’t think that the article showed a lot of bias or faulty reasoning and the author did a good job at taking a neutral stance on the subject. The facts that were presented were not misleading in any way and explained exactly what the values were. It is clear that the global economy is growing and including more and more countries and this article showed one example about how an economy in the Middle East is trying to tap into these markets. The article doesn’t try to persuade the reader to think in a certain way or take a position along with the author, yet it states the facts of what has happened in the past between certain parties, inviting the reader to interpret the information however he/she chooses to. I do think that the side article titled Why No Outrage from Washington written by Eamon Javers and Dawn Kopecki does show some bias.

The side article states that a deal that would give Borse Dubai a 20% stake in the U.S. stock exchange would pose some kind of national security risk on the American people. They called out lawmakers for not taking a stronger stand on the issue as “most lawmakers took a wait and see attitude” on the issue. The author questions why there wasn’t more outrage from Washington like when the Dubai Ports World tried to purchase U.S. ports in 2006. I think there is a clear difference in concerns of national security risks between investing in the NASDAQ and selling ports to a Dubai based companies. I don’t see how a national security risk could come from opening up an exchange to some of the wealthiest people in the world from Dubai, which makes me believe the article is misleading. The author also calls out Dubai for having links to the September 11th hijacking incident in New York City. I think these claims are over the top and don’t have much substance to them.

(5) List any new terms/concepts that were discussed in the article and write a short definition:

1. Ramadan – ninth month in the Islamic calendar, Islamic month of fasting, prayer

2. Borse Dubai – the holding company for Dubai Financial Market and NASDAQ Dubai

3. Bourses – the place where dealers of a particular asset gather to buy or sell; a stock market.

4. Flap – roll; move in a wavy pattern or with a rising and falling motion

5. Bolster – support and strengthen, brace, reinforce, secure or support

(6) Answer the associated article questions (See blackboard for list of articles and article questions.

· What is the primary difference in Dubai’s financial industry and that of Qatar?

Dubai’s financial industry is different than that of Qatar because Qatar’s financial industry is largely focused on the local market. It will get a boost from recent additions in the London Stock Exchange, however, it is not as much of a global industry as Dubai has become. Dubai has banks from nearly everywhere around the world set up in its financial district looking for work on mergers, acquisitions, Islamic finance, and lending for projects like luxury hotels and oil refineries. There are an abundance of these types of investment bankers in Dubai, however, Qatar has not seen as many of these bankers migrate to their country like Dubai has.

· Explain how Dubai and the UAE prepared for their deal with NASDAQ and why they did so.

In preparing for the deal with NASDAQ, Sheikh Mohammed assembled a team of top finance talent with experience in dealing in markets that NASDAQ deals with. Recruiting talent from Citigroup, OMX and investment bankers from San Francisco, the team is well diversified and situated in several different countries around the world searching for investment opportunities. Dubai also began to merge local exchanges with the Dubai International Financial Exchange in order adopt a British-style regulated bourse and to attract international investors. After the merge, companies trading on Borse Dubai were required to cut deals that would boost the emirate’s profile in global finance in order to transform the local exchange into a global moneymaker.