CGI Gulf Insights of the Week Mar 05 2018 (223)

ByCGI Gulf Insights of the Week
Monday, 05 March 2018
Published inMarch 2018

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update

Saudi Arabia

Risk Indicator - DB3c
Risk Level - Slight

Ratings Trend - Deteriorating

Saudi Arabia’s oil reserves, which have allowed it to build up huge financial buffers, will support short-term government spending. Longer-term growth will be driven by government reforms under its Vision 2030, which aims to reduce its dependence on oil export revenues and boost the private sector.

Market Overview

OPEC chief expects 2018 oil market balance
OPEC chief Suhail al-Mazrouei said on February 27, 2018, that he expects the global oil market to be balanced this year, as producers continue to trim production following a 2014 market crash."I am optimistic that this year, we will achieve a market balance" between supply and demand, Mazrouei, also the energy minister of the United Arab Emirates, told the Global Financial Markets Forum in Abu Dhabi.Oil producers from OPEC and non-OPEC countries struck a historic deal in late 2016 to cut output by 1.8 million barrels per day, following a surplus in crude supply that sent prices crashing in 2014. Compliance cut hits 133 percent in January, which Mazrouei said exceeded the percentage required in the deal. The compliance rate was 129 percent in December and 122 percent in November.Oil prices have rebounded to around $70 a barrel as a result of the policy.

Global Banks Push Ahead With Saudi Expansion Plans
Global banks are pushing ahead with growth plans in Saudi Arabia four months after a crackdown on corruption threatened to derail ambitious plans to transform the economy. Lenders including UBS Group AG and Goldman Sachs Group Inc. have been hiring and Citigroup Inc. just won its first local advisory mandate since returning to Saudi Arabia after a 13-year absence. Deutsche Bank AG said it’s expanding in the kingdom as the outlook for bond and stock sales improve. While the speed of the purge and the lack of transparency unsettled markets when it started late last year, the banks appear unfazed after several of the princes and officials who were arrested have since been released. That’s good news for Crown Prince Mohammed bin Salman, who’s trying to solidify his grip on power without alienating the international investors he needs to transform the economy into a financial powerhouse and away from oil.

Italy's SACE says evaluating nearly $5bn of UAE projects
SACE, Italy’s export credit agency which supports Italian trade and investment worldwide, announced on February 28, 2018, that it has seen its exposure in the Middle East almost triple since opening its offices in Dubai. It said growth is expected to continue in the region as it is currently evaluating new projects in the MENA region worth €12 billion ($14.7 billion) – nearly $5 billion of which is dedicated to the UAE. Its portfolio at the start of 2016 stood at €4.4 billion, but now exceeds €12 billion, across a number of key sectors including chemicals and petrochemicals, oil & gas, infrastructure, construction, and consumer goods, it said in a statement.SACE has been involved in a number of significant investments during this period, the most significant of which include a €1 billion credit facility to assist the development of Dubai South, ahead of Expo 2020 and a $300 million loan for the supply contracts for the completion of the first phase of the upcoming Meydan One Mall in Dubai.

Deutsche Bank on a hiring spree in Saudi Arabia, UAE
Deutsche Bank is expanding in Saudi Arabia and the United Arab Emirates as the lender expects sovereign bond sales and initial public offerings to drive deals this year.The Frankfurt-based bank plans to hire in Dubai and Abu Dhabi to cover sovereigns and large corporates, Jamal Al Kishi, Chief Executive Officer for the Middle East and Africa, said in an interview in Dubai. It’s also built its team in Saudi Arabia to about 90 people on expectations that the nation’s stock exchange may be upgraded to emerging market status by two major index providers this year. “We are definitely more positive on the outlook for deals this year across sovereign bond sales, equity capital markets and privatizations,” Al Kishi said. “We also expect to see a lot of private sector companies tapping markets for both equity and debt.”Deutsche Bank’s expansion plans for the Middle East come as the lender is said to have started cutting at least 250 jobs globally at its corporate and investment bank to keep a lid on expenses amid a sustained slide in the securities unit.

Dubai's credit risk falls to lowest level in more than a decade
The cost of ensuring Dubai’s bonds against default has fallen below 100 basis points for the first time in more than a decade. That’s a milestone for the emirate that couldn’t repay billions of dollars of debt about 10 years ago after spending exorbitant amounts on acquisitions and construction projects. Dubai’s credit default swaps were at almost 1,000 basis points in 2009, according to CMA prices compiled by Bloomberg.But the days when Dubai made headlines because of its debt are over. And so, like other emerging-market peers, the securities have benefited from demand for yield, even though Dubai’s still burdened by borrowings that are bigger than its entire economy.

Commodity Tracker

Business Events this Week In UAE

Dubai Lynx 2018

Souk Madinat Jumeirah

11 March 2018 To 14 March 2018

Business Updates

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