Global Emerging Markets Equity UAE Real Estate abc

Global Research

October data signals a turning point Our proprietary survey points to price softness of 4% in Dubai and 5% in Abu Dhabi. Despite

market tightness, Abu Dhabi prices appear to be down due to its heavy off-plan weighting.

Dubai’s advertised villa prices fell by 19% m-o-m in October after several banks reduced

mortgage LTVs (loan to value) in August and September. We could see a protracted

weakness should lending practices remain in place for a while, making average down-

payments 125% higher m-o-m (USD220,000).

Rental yields expanded last month on the back of lower asset prices and a seemingly tight

supply market. Month-on-month implied gross yields increased from 4.7% to 6.3%.

However, rental demand is likely to remain robust as we sense potential buyers are

deferring their plans until there is better visibility in the credit markets.

We continue to believe that Abu Dhabi, particularly Aldar (ALDR.AD, Overweight (V)),

is likely to offer the best shelter for investors, while providing good appreciation potential.

As we mentioned in our last update (UAE Real Estate Sector Update, 14 October 2008),

we expect the market in Abu Dhabi to remain tight near term as pent-up demand alone is

more than enough to meet supply coming on to the market in the next two years. We

prefer Aldar because of its strong ties with the Abu Dhabi government, which we believe

is likely to provide support in case of need. We also think Aldar’s strong liquidity position

should provide a buffer against financing risk near term. Additionally, we like its

centrally-located land bank, which we think is likely always to be in demand.

Majed Azzam* Analyst HSBC Bank Middle East Limited +971 4 4236933 majed.azzam@hsbc.com

Ankur Khetawat* Analyst HSBC Bank Middle East Limited +971 4 4236930 ankur.khetawat@hsbc.com

David Lepper* Analyst HSBC Bank Middle East Limited +971 4 4236932 david.lepper@hsbc.com

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to NYSE and/or NASD regulations

Issuer of report: HSBC Bank Middle East Ltd

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it

Property Ladder

UAE monthly secondary market survey

October secondary prices show first signs of weakness: Dubai and Abu Dhabi down 4% and 5%, respectively

Rental yields expanding for first time since Q1 2008

Abu Dhabi, particularly Aldar, likely to provide best shelter

12 November 2008

Secondary prices (USD/sq m) and change (%) Secondary market listings breakdown (units)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jul-08 Aug-08 Sep-08 Oct-08-10%

-5%

0%

5%

10%

15%

20%

Dubai Abu Dhabi

3% 4%

17%

5%

-4%-5%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Sep-08 Oct-08

Off -plan listings Ready list ings Lease list ings

14% 3%

24%35%

62% 62%

Source: HSBC, Better Homes Source: HSBC, Better Homes

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Dubai prices: we believe October’s m-o-m 19%

decline in advertised villa prices has to do more

with affordability than anything else, especially in

light of lower mortgage LTVs (in most instances

these do not exceed 75%). The average villa price

of USD2.6m in September would now require a

minimum down-payment of USD650,000.

Supporting our view is the apparent strong growth

in off-plan villa prices, given the easy instalment

plans. Average apartment asking prices in Dubai

were flat m-o-m, despite the majority of

development prices being down. We think this is

due to a rise in the weighting of high-end projects.

As our survey captures asking prices and not

transactional prices, the numbers appear to be

highly volatile. Nonetheless, given the large

sample size (4,000 listings), we believe the data

reflects the general trend.

Dubai rental yields: yield expansion reflects the

market tightness. Also, as shown in the bottom-

right chart above, the shortage of stock has been

further exacerbated by a clear shift from holding

to selling, as investors try to exit the market. This

trend in part reflects risk aversion in the current

period of uncertainty, especially since rental

regulation in Dubai favours tenants (rental caps,

anti-eviction laws, etc), making tenanted units less

attractive. Additionally, new government

regulations prohibiting the sharing of villas by

more than one family are likely to add to pent-up

demand, particularly for smaller units. On the

other hand, the change in visa requirements for

relatives, whereby proof of either ownership or

tenancy of a two-bedroom residence is required,

should increase demand for larger units.

Summary comments

HSBC secondary market watch (USD/sq m) ─ Dubai

Apartments Jul-08 Aug-08 Price Δ Sep-08 Price Δ Oct-08 Price Δ

International City 2,680 2,782 4% 3,216 16% 3,034 -6% Dubai Land 3,726 3,694 -1% 3,967 7% 4,198 6% Dubai Investment Park 3,451 3,967 15% 3,779 -5% 3,844 2% Down Town Jebel Ali 4,067 3,879 -5% 4,028 4% 6,591 64% Jumeirah Lake Towers 4,160 4,248 2% 4,970 17% 4,864 -2% Greens 5,046 5,151 2% 6,559 27% 5,993 -9% Business Bay 5,612 5,679 1% 6,438 13% 6,453 0% Dubai Marina 5,788 6,066 5% 6,345 5% 6,239 -2% The Palm Jumeirah 6,515 7,095 9% 7,819 10% 10,352 32% DIFC 8,617 8,866 3% 9,561 8% 6,720 -30% Burj Dubai Downtown 10,301 10,341 0% 12,894 25% 6,591 -49% Weighted average 5,238 5,395 3% 6,266 16% 6,255 0% Villas Jumeirah Village 2,650 2,727 3% 3,477 28% 3,527 1% Dubai Investment Park 3,290 3,348 2% 3,688 10% 3,606 -2% Dubai Land 3,718 3,782 2% 5,386 42% 4,427 -18% Emirates Living 4,825 4,970 3% 6,230 25% 5,380 -14% Arabian Ranches 4,547 4,565 0% 6,078 33% 4,964 -18% The Palm Jebel Ali 6,175 6,521 6% 6,435 -1% 7,626 19% The Palm Jumeirah 8,980 9,124 2% 11,474 26% 11,474 0% Weighted average 4,558 4,604 1% 5,690 24% 4,598 -19% Total weighted average 5,136 5,274 3% 6,180 17% 5,925 -4%

Source: HSBC research, Better Homes

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Abu Dhabi prices: according to our survey,

overall advertised prices in Abu Dhabi were down

5% m-o-m, as they were in Dubai. We believe this

is a reflection of the market’s heavy off-plan

weighting. While apartments were down 6%

m-o-m, villas (only 14% of listings) were up 4%,

probably due to their scarcity. Nonetheless, the

only development that is ready, Raha Gardens,

was down 2% m-o-m. We believe, similar to

Dubai, this is because of the lower LTVs and thus

affordability. However, it could also be related to

the development’s liquidity as it is only open to

local investors. Out of total listings of 150 villas

in Abu Dhabi, there are only 5 for Raha Gardens.

UAE mortgage tracker: between September and

October, mortgage rates have risen on average by

c100bp, while LTVs for apartments have fallen

from an average of 85% to 60% and for villas

from 85% to 75%. As shown in the table overleaf,

although asking prices in Dubai are down 4%

m-o-m, the average down-payment increased

from USD98,000 to USD220,000 (125% m-o-m).

However, the average monthly mortgage payment

is down from USD7,100 to USD5,750 (-20%

m-o-m). The average monthly rental payment is

up from USD3,600 to USD4,500 (25% m-o-m),

which means it now covers c80% of the mortgage

payment once the initial down-payment is done.

In a recent Bloomberg news report (9 November

2008), in light of current market conditions Emaar

confirmed it is restructuring its instalment plans on a

case-by-case basis to facilitate payment. The key

take-away is that the overall collection plan appears

likely to remain unchanged for now but could

become more flexible. Also, we believe Emaar

perceives that this is not a widespread issue. As such,

at this stage we do not expect to see any significant

risk to the company’s cash flows.

HSBC UAE mortgage tracker

_____________ September 08 _______________ _____________ October 08________________ Rate Apts LTV Villas LTV Rate Apts LTV Villas LTV

ADCB 7.75% 90% 90% 8.75% 80% 80% Lloyds 8.50% 90% 80% 8.50% 50% 80% HSBC 7.00% 85% 85% 7.00% 60% 70% Amlak 7.75% 90% 90% 9.75% 80% 80% Tamweel 7.90% 85% 85% 8.40% 75% 75%

Source: HSBC Research

HSBC secondary market watch (USD/sq m) ─ Abu Dhabi

Apartments Jul-08 Aug-08 Price Δ Sep-08 Price Δ Oct-08 Price Δ

Al Reef 2,715 3,026 11% 3,723 23% 3,545 -5% Al Ghadeer 4,838 5,263 9% 5,591 6% 5,735 3% Al Raha Beach 6,069 6,180 2% 7,207 17% 6,040 -16% Al Reem Island 6,304 6,550 4% 6,614 1% 6,515 -2% Weighted average 6,156 6,373 4% 6,706 5% 6,331 -6% Villas Hydra Village 2,439 2,351 -4% 2,510 7% 2,548 2% Al Reef 2,668 2,926 10% 3,231 10% 3,257 1% Al Raha Gardens 4,694 4,216 -10% 4,369 4% 4,282 -2% Al Ghadeer 4,398 4,975 13% 5,107 3% 5,392 6% Weighted average 3,577 3,760 5% 3,909 4% 4,047 4% Total weighted average 5,793 6,005 4% 6,313 5% 6,010 -5%

Source: HSBC Research, Better Homes

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Methodology: to calculate the weighted average we use the weights in the far-left column, which are based on the number of listings relative to the total. As such, the weighted

average is skewed by developments with the highest weighting. However, given the large sample size (4,000 listings), we believe the data is a good reflection of the supply

available in the market.

HSBC secondary market data

___________________________________Dubai Sep 08 __________________________________ _______________________________________ Dubai Oct 08 _______________________________________Apartment

% of Total

Av. Unit price USD

Av. Price USD/sq m

Av. Apt. size/sq m

Down-pmt USD

Monthly pmt USD

Av. Monthly rental USD

Av. Rent USD/sq m

Rental yield

% of Total

Av. Unit price USD

Av. Price USD/sq m

Av. Apt. size/sq m

Down-pmt USD

Monthly pmt USD

Av. Monthly rental USD

Av. Rent USD/sq m

Rental yield

m-o-m price ∆

Dubai Investment Park 11% 238,158 3,779 63 23,816 1,727 1,878 358 9.5% 5% 335,077 3,844 87 83,769 2,181 2,918 402 10.5% 2% Impz 3% 316,727 4,662 68 31,673 2,296 - - - 4% 222,074 4,184 53 55,518 1,445 - - - -10% Downtown Jebel Ali 3% 333,978 4,028 83 33,398 2,421 - - - 4% 1,181,324 6,591 179 295,331 7,689 - - - 64% International City 3% 343,869 3,216 107 34,387 2,493 - - - 3% 240,702 3,034 79 60,176 1,567 - - - -6% Jumeirah Village 6% 358,469 3,477 103 35,847 2,599 - - - 7% 258,455 3,545 73 64,614 1,682 - - - 2% Dubailand 13% 1,391,546 14,558 96 139,155 2,749 - - - 16% 1,188,035 15,408 77 297,009 2,107 - - - 6% Dubai Silicon Oasis 3% 476,310 3,345 142 47,631 3,453 - - - 2% 367,807 3,205 115 91,952 2,394 - - - -4% Jumeirah Lake Towers 12% 522,883 4,970 105 52,288 3,791 3,496 399 8.0% 6% 535,217 4,864 110 133,804 3,484 3,387 369 7.6% -2% The Greens 1% 576,307 6,559 88 57,631 4,178 3,542 484 7.4% 1% 580,953 5,993 97 145,238 3,781 3,695 457 7.6% -9% Emirates Living 3% 727,078 6,304 115 72,708 5,272 3,833 399 6.3% 3% 757,959 6,022 126 189,490 4,933 5,012 478 7.9% -4% Dubai Marina 15% 762,622 6,345 120 76,262 5,529 3,965 396 6.2% 19% 744,382 6,239 119 186,096 4,845 3,585 361 5.8% -2% DIFC 1% 1,014,375 9,561 106 101,438 7,355 - - - 2% 889,040 6,720 132 222,260 5,786 - - - -30% Culture Village 1% 1,128,325 6,377 177 112,832 8,181 - - - 2% 788,401 8,086 98 197,100 5,131 - - - 27% Business Bay 4% 1,323,853 6,438 206 132,385 9,598 - - - 5% 823,349 6,453 128 205,837 5,359 - - - 0% Downtown Burj Dubai 16% 1,330,508 12,894 103 133,051 9,647 3,529 410 3.2% 18% 1,037,840 10,464 99 259,460 6,755 3,659 443 4.2% -19% Palm Jumeirah 4% 1,508,397 7,819 193 150,840 10,936 5,467 340 4.3% 3% 2,386,647 10,352 231 596,662 15,534 7,717 402 3.9% 32% Weighted average 705,171 6,266 113 70,517 5,113 2,860 388 5.2% 694,180 6,255 105 173,545 4,518 3,906 513 6.8% 0% Villas Dubai Marina 3% 841,941 6,884 122 84,194 6,104 - - - 1% 841,962 7,242 116 210,490 5,480 2,358 243 3.4% 5% Jumeirah Village 8% 892,837 3,477 257 89,284 6,473 - - - 7% 1,008,481 3,527 286 252,120 6,564 - - - 1% Al Furjan 14% 1,504,725 4,439 339 150,472 10,910 - - - 9% 1,575,936 4,005 393 393,984 10,257 - - - -10% Dubai Investment Park 7% 1,630,622 3,688 442 163,062 11,823 7,902 214 5.8% 8% 1,630,319 3,606 452 407,580 10,611 8,080 214 5.9% -2% Jumeirah Park 6% 1,630,629 4,990 327 163,063 11,823 - - - 7% 1,495,217 4,873 307 373,804 9,732 - - - -2% Jumeirah Golf Estates 1% 2,132,999 5,550 384 213,300 15,465 - - - 3% 3,813,484 6,664 572 953,371 24,821 - - - 20% Dubailand 31% 2,299,033 5,386 427 229,903 16,669 - - - 24% 1,575,272 4,427 356 393,818 10,253 - - - -18% Arabian Ranches 8% 2,710,654 6,078 446 271,065 19,653 9,371 252 4.1% 10% 1,372,547 4,964 277 343,137 8,933 5,810 252 5.1% -18% Emirates Living 11% 3,082,441 6,230 495 308,244 22,349 13,545 329 5.3% 16% 1,677,957 5,380 312 419,489 10,921 7,925 305 5.7% -14% Palm Jebel Ali 3% 3,405,558 6,435 529 340,556 24,691 - - - 4% 3,142,205 7,626 412 785,551 20,452 - - - 19% Palm Jumeirah 8% 7,756,279 11,474 676 775,628 56,236 14,038 249 2.2% 3% 5,405,395 9,854 549 1,351,349 35,182 11,794 258 2.6% -14% Weighted average 0% 2,556,169 5,690 421 255,617 18,533 11,346 279 4.0% 0% 1,641,551 4,554 329 410,388 10,684 7,860 264 5.1% -20% Total weighted average 981,237 6,180 159 98,116 7,114 3,624 381 4.7% 883,086 5,916 150 220,913 5,751 4,499 423 6.3% -4%

Note: for September monthly mortgage payments we assume 10% down-payment, 7.5% mortgage rate, and a 20-year tenure. For October monthly mortgage payments we assume 25% down-payment, 8.5% mortgage rate, and a 20-year tenure Source: HSBC Research, Better Homes

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Real estate comparables

_______ PE (x)_________ ________ P/BV _________ _ 2008-10e CAGR (%) __ ______ RoE (%)________ Companies Ticker RIC

Latest Rating Country Price(Local)

Market Cap(USDm) 2008e 2009e 2010e 2008e 2009e 2010e

P/NAV2009e EBITDA Sales EPS

2009e Div Yield (%) 2008e 2009e 2010e

Emaar Properties PJSC EMAR.DU Overweight (V) UAE 4.93 8,182 4.4 3.1 2.9 0.7 0.6 0.5 0.3 22.3 24.6 23.4 6.5 17.5 21.5 19.1 Aldar Properties ALDR.AD Overweight (V) UAE 5.38 3,771 4.1 3.5 3.1 0.7 0.7 0.6 0.2 38.7 43.3 15.2 4.8 26.7 23.1 21.7 Sorouh Real Estate SOR.AD Overweight (V) UAE 3.87 2,634 6.0 5.5 3.9 1.7 1.4 1.1 0.2 31.3 105.7 23.4 4.2 31.6 27.2 30.3 TMG TMGH.CA Overweight (V) Egypt 3.87 1,499 5.9 2.7 0.8 0.4 0.3 0.2 0.2 189.6 213.7 164.8 - 6.2 12.4 31.3 SODIC OCDI.CA Overweight Egypt 64.14 345 11.3 7.6 3.0 1.0 0.9 0.7 0.3 96.8 127.6 92.6 - 9.2 12.2 25.9 DLF Ltd DLF.NS Underweight (V) India 280.60 10,707 6.1 6.2 7.5 2.4 1.8 1.5 0.5 (5.4) (2.6) (9.9) 1.6 67.2 33.4 21.7 Unitech Ltd UNTE.BO Neutral (V) India 50.85 1,932 5.0 7.0 7.3 2.3 1.6 0.9 0.4 (4.1) (8.7) (17.6) 0.8 59.4 27.3 16.1 Indiabulls Real Estate INRL.BO Overweight (V) India 157.35 835 9.9 37.1 19.9 0.8 0.8 0.8 0.4 (17.1) 20.7 (29.6) 2.5 12.8 2.4 4.2 Housing Development & Inf HDIL.BO Neutral (V) India 117.15 738 1.8 2.8 2.7 0.7 0.7 0.6 0.3 0.0 4.7 (0.2) 3.0 64.3 27.6 22.5 Hirco HRCO.L Overweight India 1.20 147 5.0 1.4 1.3 0.2 0.2 0.1 0.1 1.0 2.0 1.0 - 3.8 12.9 11.8 Agile Property 3383.HK NR China 2.95 1,666 1.8 4.8 3.0 0.8 0.7 0.6 NA 30.7 33.9 (23.1) 13.2 50.1 14.3 19.4 China Resources Land 1109.HK NR China 8.23 5,596 19.6 11.6 8.4 1.2 1.1 1.0 NA 65.9 69.5 52.8 1.3 6.3 8.6 11.8 China Overseas Land & Invt 0688.HK NR China 9.40 10,189 13.6 10.4 8.2 2.3 2.0 1.7 NA 18.8 27.8 29.1 1.6 17.9 20.3 21.4 Country Garden 2007.HK NR China 1.24 2,850 4.4 4.3 3.8 0.8 0.7 0.6 NA 3.2 16.5 8.6 8.1 22.0 20.0 20.8 Shui On Land 0272.HK NR China 1.80 1,026 2.9 4.1 3.5 0.4 0.4 0.3 NA 43.2 40.5 (9.1) 8.3 14.1 9.2 9.6 Hang Lung Properties Ltd. 0101.HK NR Hong Kong 17.44 9,317 15.6 12.5 12.5 1.1 1.0 1.0 NA 15.0 15.2 11.4 3.8 6.3 7.8 8.6 Henderson Land Developers 0012.HK NR Hong Kong 30.00 8,476 12.3 11.8 11.1 0.5 0.5 0.5 NA 12.5 (2.6) 5.6 3.6 4.6 4.8 3.3 Sun Hung Kai Props 0016.HK NR Hong Kong 69.00 22,830 14.5 12.9 12.9 0.8 0.7 0.7 NA 7.3 6.2 5.9 3.7 5.4 6.1 6.1 Sino Land Company Ltd 0083.HK Overweight (V) Hong Kong 6.97 4,501 10.2 4.7 7.6 0.6 0.5 0.5 NA 8.9 18.1 15.9 7.2 5.5 10.5 6.1 Soho China Limited 0410.HK Overweight (V) Hong Kong 2.61 1,858 13.4 1.7 2.7 0.9 0.7 0.6 NA 103.9 83.4 122.5 4.9 4.9 32.8 16.5 GlobeTrade Centre GTCE.WA Overweight (V) Poland 15.20 1,164 7.5 1.9 1.0 3.0 2.2 1.4 NA 123.1 122.9 171.6 - 11.5 35.9 46.1 Echo Investment SA EPRS.WA Neutral (V) Poland 2.25 327 (8.2) 3.9 3.6 0.7 0.6 0.5 NA NA 29.8 NA - (7.9) 15.8 14.8

Source: Bloomberg, Thomson Financial Datastream, HSBC estimates

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Aldar valuation Under our research model, for stocks with a

volatility indicator, the Neutral band is 10

percentage points above and below the hurdle rate

for UAE stocks of 9.5%. This translates to a

Neutral band of -0.5% to 19.5% around the

current share price. Our 12-month target price of

AED16.0 for Aldar implies a potential total return

of 230% from the 10 November closing price of

AED4.85, which is above the Neutral band.

Therefore, we reiterate our Overweight (V) rating

on the stock.

We value real estate companies using a

combination of DCF analysis and land valuation.

Where the company has a final master plan, we

use DCF. Otherwise, we use land valuation only.

Aldar previous DCF and Land valuation (AEDm)

NPV: FCF 70,890 Net Debt/(Cash) 5,911 Equity 64,978 Outstanding Shares (m) 3,662 DCF Value (AED per share) 17.7 Value of YAS Island 14,258 Value on Mina Zayed profit-sharing 13,624 No of shares (m) 3,662 Value of land (AED per share) 7.6 Total value (AED per share) 25.3

Source: HSBC estimates

Aldar current valuation based on project probabilities

AED per share Valuation Probability Current

Projects under development 10.7 80% 8.6 Highly probable projects 4.6 70% 3.2 Future projects 2.4 50% 1.2 Land 7.6 40% 3.0 Total value 25.3 16.0

Source: HSBC estimates

Aldar specific risks Execution risk: The sheer scale of Aldar’s

development will stretch management and

operational capacity, introducing the risk of

delays and/or even project cancellation.

Governance: Aldar is still operating in an

underdeveloped regulatory environment,

where minority interests can be overlooked.

Concentration risk: since all of Aldar’s

projects are in Abu Dhabi, their exposure to

any downturn in the property market there is

very high.

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Disclosure appendix Analyst certification The following analyst(s), who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Majed Azzam and Ankur Khetawat

Important disclosures

Stock ratings and basis for financial analysis HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations. Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below.

This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this website.

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research report. In addition, because research reports contain more complete information concerning the analysts' views, investors should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice.

Rating definitions for long-term investment opportunities

Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis:

For each stock we set a required rate of return calculated from the risk free rate for that stock's domestic, or as appropriate, regional market and the relevant equity risk premium established by our strategy team. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the implied return must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change.

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,

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stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

Prior to this, from 7 June 2005 HSBC applied a ratings structure which ranked the stocks according to their notional target price vs current market price and then categorised (approximately) the top 40% as Overweight, the next 40% as Neutral and the last 20% as Underweight. The performance horizon is 2 years. The notional target price was defined as the mid-point of the analysts' valuation for a stock.

From 15 November 2004 to 7 June 2005, HSBC carried no ratings and concentrated on long-term thematic reports which identified themes and trends in industries, but did not make a conclusion as to the investment action that potential investors should take.

Prior to 15 November 2004, HSBC's ratings system was based upon a two-stage recommendation structure: a combination of the analysts' view on the stock relative to its sector and the sector call relative to the market, together giving a view on the stock relative to the market. The sector call was the responsibility of the strategy team, set in co-operation with the analysts. For other companies, HSBC showed a recommendation relative to the market. The performance horizon was 6-12 months. The target price was the level the stock should have traded at if the market accepted the analysts' view of the stock.

Rating distribution for long-term investment opportunities

As of 11 November 2008, the distribution of all ratings published is as follows: Overweight (Buy) 49% (31% of these provided with Investment Banking Services)

Neutral (Hold) 34% (33% of these provided with Investment Banking Services)

Underweight (Sell) 17% (24% of these provided with Investment Banking Services)

Share price and rating changes for long-term investment opportunities

Aldar Properties (ALDR.AD) Share Price performance AED Vs HSBC rating

history

Source: HSBC

Recommendation & price target history

From To Date

N/A Overweight (V) 29 June 2007 Target Price Value Date

Price 1 14.24 29 June 2007 Price 2 20.30 29 November 2007 Price 3 20.40 18 March 2008 Price 4 18.90 29 April 2008 Price 5 25.30 14 July 2008 Price 6 16.00 14 October 2008

Source: HSBC

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HSBC & Analyst disclosures Disclosure checklist

Company Ticker Recent price Price Date Disclosure

ALDAR PROPERTIES ALDR.AD 4.85 10-Nov-2008 4Source: HSBC

1 HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next

3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this

company. 4 As of 31 October 2008 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 30 September 2008, this company was a client of HSBC or had during the preceding 12 month period been a client

of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 30 September 2008, this company was a client of HSBC or had during the preceding 12 month period been a client

of and/or paid compensation to HSBC in respect of non-investment banking-securities related services. 7 As of 30 September 2008, this company was a client of HSBC or had during the preceding 12 month period been a client

of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as

detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this

company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in

securities in respect of this company Analysts are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

For disclosures in respect of any company, please see the most recently published report on that company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures 1 This report is dated as at 12 November 2008. 2 All market data included in this report are dated as at close 06 November 2008, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its

Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Chinese Wall procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

4 As of 31 October 2008, HSBC beneficially owned 5% or more of a class of common equity securities of the following company(ies) : ALDAR PROPERTIES

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Disclaimer * Legal entities as at 22 August 2007 'UAE' HSBC Bank Middle East Limited, Dubai; 'HK' The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; 'TW' HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Securities (Canada) Inc, Toronto; HSBC Bank, Paris branch; HSBC France; 'DE' HSBC Trinkaus & Burkhardt AG, Dusseldorf; 000 HSBC Bank (RR), Moscow; 'IN' HSBC Securities and Capital Markets (India) Private Limited, Mumbai; 'JP' HSBC Securities (Japan) Limited, Tokyo; 'EG' HSBC Securities Egypt S.A.E., Cairo; 'CN' HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; 'GR' HSBC Pantelakis Securities S.A., Athens; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv, 'US' HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler A.S., Istanbul; HSBC México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC, HSBC Bank Brasil S.A. - Banco Múltiplo, HSBC Bank Australia Limited.

Issuer of report HSBC Bank Middle East Ltd PO Box 4604 Dubai UAE Telephone: +97 14 5077333 Fax: +97 14 3535079 Website: www.research.hsbc.com

In the UAE this document has been approved by HSBC Bank Middle East Ltd (“HBME”) for the information of its customers and those of its affiliates only. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. It is not intended for Private Customers in the UK. If this research is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication has been distributed in Japan by HSBC Securities (Japan) Limited. It may not be further distributed, in whole or in part, for any purpose. In Hong Kong, this document has been distributed by The Hongkong and Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or services mentioned in this document are available to persons in Hong Kong or are necessarily suitable for any particular person or appropriate in accordancewith local law. All inquiries by such recipients must be directed to The Hongkong and Shanghai Banking Corporation Limited. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is exposed. HSBC Bank Middle East Ltd is registered in Jersey, Channel Islands, is authorised and regulated by the Jersey Financial Services Commission and is a member of the Dubai International Financial Exchange. © Copyright. HSBC Bank Middle East Ltd. 2008, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank Middle East Ltd. MICA (P) 258/09/2008

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Multi-asset Global Philip Poole Global Head of Emerging Markets Research +44 20 7991 5641 philip.poole@hsbcib.com

Economics Latin America Andre Loes +55 11 3371 8184 andre.a.loes@hsbc.com.br Javier Finkman +54 11 4344 8144 javier.finkman@hsbc.com.ar Ramiro D Blazquez +54 11 4348 5759 ramiro.blazquez@hsbc.com.ar Jonathan Heath +52 55 5721 2176 jonathan.heath@hsbc.com.mx Juan Pedro Trevino-Gutierrez +52 55 5721 2179 juan.trevino@hsbc.com.mx Lorena Dominguez-Torres +52 55 5721 2172 lorena.dominguez@hsbc.com.mx Asia Qu Hongbin +852 2822 2025 hongbinqu@hsbc.com.hk Frederic Neumann +852 2822 4556 fredericneumann@hsbc.com.hk Robert Prior-Wandesforde +65 6239 0840 robert.prior-wandesforde@hsbc.com.sg Christopher Wong +852 2996 6917 christopherwong@hsbc.com.hk Janus Chan +852 2996 6975 januschan@hsbc.com.hk CEMEA Juliet Sampson +44 20 7991 5651 juliet.sampson@hsbcib.com Alexander Morozov +7 49 5721 1577 alexander.morozov@hsbc.com Murat Ulgen +90 21 2366 1625 murat.ulgen@hsbc.com.tr Simon Williams +971 4507 7614 simon.williams@hsbc.com

Credit Dilip Shahani +852 2822 4520 dilipshahani@hsbc.com.hk Becky Liu +852 2822 4392 beckyjliu@hsbc.com.hk Devendran Mahendran +852 2822 4521 devendran@hsbc.com.hk Zhiming Zhang +852 2822 4523 zhimingzhang@hsbc.com.hk Olga Fedatova +44 20 7992 3707 olga.fedotova@hsbcib.com Chavan Bhogaita +971 4507 7695 chavanbhogaita@hsbc.com Keerthi Angammana Credit Strategy +44 20 79915431 keerthisri.angammana@hsbcib.com United Arab Emirates Chavan Bhogaita Head of Credit Research +971 450 77695 chavanbhogaita@hsbc.com

Currency Clyde Wardle +1 212 525 3345 clyde.wardle@us.hsbc.com Richard Yetsenga +852 2996 6565 richard.yetsenga@hsbc.com.hk Daniel Hui +852 2822 4340 danielpyhui@hsbc.com.hk Perry Kojodjojo +852 2996 6568 perrykojodjojo@hsbc.com.hk Marjorie Hernandez +1 212 525 4109 marjorie.hernandez@us.hsbc.com

Fixed Income Pieter Van Der Schaft +852 2822 4277 pietervanderschaft@hsbc.com.hk Virgil Esguerra +852 2822 4665 virgilesguerra@hsbc.com.hk Alejandro Mártinez-Cruz Debt Markets +52 55 5721 2380 alejandro.martinezcr@hsbc.com.mx Hernan M Yellati Debt Markets +1 212 525 6787 hernan.m.yellati@us.hsbc.com

Equity

CEMEA Europe Will Manuel Head of CEMEA Company Research +44 20 7992 3602 will.manuel@hsbcib.com John Lomax Head of Equity Strategy, GEMs +44 20 7992 3712 john.lomax@hsbcib.com Wietse Nijenhuis +44 20 7992 3680 wietse.nijenhuis@hsbcib.com Maciej Baranski +44 20 7991 6782 maciej.baranski@hsbcib.com Anisa Redman +44 20 7991 6822 anisa.redman@hsbcib.com Herve Drouet +44 20 7991 6827 herve.drouet@hsbcib.com Sergey Fedoseev +44 20 7991 6831 sergey.fedoseev@hsbcib.com Veronika Lyssogorskaya +44 20 7992 3684 veronika.lyssogorskaya@hsbcib.com Turkey Cenk Orcan Co-Head of Turkey Equity Research +90 212 376 4614 cenkorcan@hsbc.com.tr Bulent Yurdagul Co-Head of Turkey Equity Research +90 212 376 4612 bulentyurdagul@hsbc.com.tr Levent Bayar +90 212 376 4617 leventbayar@hsbc.com.tr Tamer Sengun +90 212 376 4615 tamersengun@hsbc.com.tr Pinar Ceritoglu +90 212 376 4613 pinarceritoglu@hsbc.com.tr Erol Hullu +90 212 376 4616 erolhullu@hsbc.com.tr Cagan Orsun +90 212 376 46 20 caganorsun@hsbc.com.tr Israel Avshalom Shimei +972 3 710 1197 avshalomshimei@hsbc.com Yonah Weisz +972 3 710 1198 yonahweisz@hsbc.com United Arab Emirates Kunal Bajaj +971 4 507 7458 kunalbajaj@hsbc.com Majed Azzam +971 4 507 7380 majed.a.azzam@hsbc.com Egypt Alia El Mehelmy +202 2529 8438 aliaelmehelmy@hsbc.com Wael Orban +202 2529 8437 waelorban@hsbc.com Ahmed Hafez Saad +202 2529 8436 ahmedhafezsaad@hsbc.com

GEMs Research Team

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Equity CEMEA (continued) Asia Sanjeev Kaushik India Head of Research +91 22 2268 1271 sanjeevkaushik@hsbc.co.in Real Estate Herald van der Linde +852 2996 6575 heraldvanderlinde@hsbc.com.hk Ashutosh Narkar +91 22 3023 1474 ashutoshnarkar@hsbc.co.in Louisa Fok +852 2996 6629 louisawmfok@hsbc.com.hk Michelle Kwok +852 2996 6918 michellekwok@hsbc.com.hk Alvin Wong +852 2996 6621 alvincmwong@hsbc.com.hk

Banks Todd Dunivant Head of Banks, Asia-Pacific +852 2996 6599 tdunivant@hsbc.com.hk York Pun +852 2822 4396 yorkkypun@hsbc.com.hk Saumya Agarwal +91 22 2268 1235 saumyaagarwal@hsbc.co.in Kathy Park +82 2 3706 8755 kathypark@kr.hsbc.com Shary Wu +852 2996 6585 sharywu@hsbc.com.hk Katherine Lei +852 2996 6926 katherinelllei@hsbc.com.hk Insurance John Russell +852 2822 4321 john.russell@hsbc.com.hk Patricia Cheng +852 2996 6584 patriciacheng@hsbc.com.hk Industrials Sumeet Agrawal +91 22 2268 1243 sumeetagrawal@hsbcib.in Steve Man +852 2822 4395 steveyfman@hsbc.com.hk Sandeep Somani +91 22 2268 1245 sandeepsomani@hsbc.co.in

Sachin Gupta +91 22 2268 1079 sachin1gupta@hsbc.co.in Mark Webb +852 2996 6574 markwebb@hsbc.com.hk Azura Shahrim +852 2996 6976 azurashahrim@hsbc.com.hk Eric Lin +852 2996 6570 ericpklin@hsbc.com.hk Natural Resources Daniel Kang +852 2996 6669 danielkang@hsbc.com.hk Sarah Mak +852 2822 4551 sarahmak@hsbc.com.hk Steven Hong Xing Li +852 2996 6941 stevenhongxingli@hsbc.com.hk Gary Chiu +852 2822 4297 garychiu@hsbc.com.hk

Scully Tsoi +852 2996 6620 scullytsoi@hsbc.com.hk

Chris Chan +852 2996 6619 chris.chan@hsbc.com.hk

Equity Strategy Garry Evans +852 2996 6916 garryevans@hsbc.com.hk Steven Sun +852 2822 4298 stevensun@hsbc.com.hk Leo Li +852 2996 6919 leofli@hsbc.com.hk Jacqueline Tse +852 2996 6602 jacquelinetse@hsbc.com.hk

Consumer Brands Sean Yang +852 2822 4342 seanyang@hsbc.com.hk Percy Panthaki +91 22 2268 1240 percypanthaki@hsbc.co.in Jessie Guo +852 2996 6572 jessieytguo@hsbc.com.hk Summer Wang +852 2822 4337 summerwywang@hsbc.com.hk TMT Steven C Pelayo +852 2822 4391 stevenpelayo@hsbc.com.hk Tse-yong Yao +852 2822 4397 tse-yongyao@hsbc.com.hk Tucker Grinnan +852 2822 4686 tuckergrinnan@hsbc.com.hk Walden Shing +852 2996 6751 waldenshing@hsbc.com.hk Shishir Singh +852 2822 4292 shishirkumarsingh@hsbc.com.hk Rajiv Sharma +91 22 2268 1239 rajivsharma@hsbc.co.in Wanli Wang +8862 8725 6020 wanliwang@hsbc.com.tw Frank Su +8862 8725 6025 frankkssu@hsbc.com.tw Christine Wang +8862 8725 6024 christineccwang@hsbc.com.tw Leo Tsai +8862 8725 6022 leocytsai@hsbc.com.tw Small & Mid-cap Herald van der Linde +852 2996 6575 heraldvanderlinde@hsbc.com.hk

Ken Ho +852 2996 6593 kenho@hsbc.com.hk

Elaine Lam +852 2822 4398 elainehlam@hsbc.com.hk

Parash Jain +852 2996 6717 parashjain@hsbc.com.hk

Sandeep Somani +91 22 2268 1245 sandeepsomani@hsbc.co.in

GEMs Research Team (continued)