CGI Gulf Insights of the Week (176)

ByCGI Gulf Insights of the Week
Monday, 22 April 2019
Published inApril 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Kuwait

Risk Indicator - DB3d
Risk Level - Slight

Ratings Trend - Stable

The first month of oil cuts saw strong compliance, contributing to a partial revival in oil prices that boosts the outlook for Kuwait. Business opportunities should increase as the government targets a more diverse economy with its national development plan. A pending resolution of the Divided Zone dispute with Saudi Arabia will boost oil production capacity.

Market Overview

Emirates, SpiceJet sign codeshare deal
Emirates Airline announced on 22 April 2019, it has signed a deal to enter into a codeshare agreement with SpiceJet, the Indian carrier that has grown for its low-cost model. The deal comes India’s Jet Airways, which was once one of the top airlines in the country, suspends all its flights due to a cash crisis that has reopened discussions about the challenges of operating in the Indian market. Analysts say that the rise of low-cost carriers such as SpiceJet in a market with price-conscious passengers presented a challenge to Jet’s very model as more people opt for cheaper fares. For Emirates, the codeshare with SpiceJet will provide it with an additional 67 weekly connections between Dubai and six of what it described as “fast-growing destinations in India.” These include Amritsar, Jaipur, Pune, Mangalore, Madurai, and Calicut. The deal is still subject to necessary government approvals, Emirates said.

Top ADCB executives appointed to lead Al Hilal Bank
Senior executives at Abu Dhabi Commercial Bank (ADCB) were appointed to top leadership positions at Al Hilal Bank, as it prepares to be acquired by ADCB. Alaa Eraiqat, group chief executive officer of ADCB, was announced on 21 April 2019, as the new chairman of Al Hilal Bank, while Amr Al Menhali, head of Islamic banking at ADCB, was announced as the private bank’s new chief executive officer, The appointments come just 10 days before the three-way bank transaction in Abu Dhabi, which will see ADCB merge with Union National Bank and then acquire Al Hilal. The three banks are set to merge on May 1. A statement from Al Hilal on 21 April 2019, said the bank “will continue to operate as a separate entity within the ADCB Group, providing high quality Shariah-compliant retail banking products and services under its own brand.” Sources understand, however, that integration between ADCB and Al Hilal’s workforce has already started, with ADCB’s corporate communications team sending out the announcement on the new leadership. The new CEO, Al Menhali, is an Emirati who has been serving in ADCB’s Islamic banking unit since 2010, and who also serves on the board of a number of financial institutions as well as the UAE Banks Federation. As for new chairman Eraiqat, Al Hilal said the board of directors under his leadership will focus on “driving the next stage of Al Hilal Bank’s growth through a culture of strong risk management and disciplined corporate governance.” The bank also announced on 21 April 2019, it has set out a new road map to transform into a digital-focused retail bank, with plans to invest “significantly” in technology. The new CEO will be leading this digital change, which involves the launch of a new mobile banking app.

Record rally on Dow index may see a bump up
The record-breaking rally in the Dow index may witness a bump-up this week. About 155 companies including Facebook, Amazon, Coca-Cola, contributing to around $9 trillion in market capitalization and 35 percent of the index, are expected to announce their first-quarter results. “The focus again shifts back to US earnings season and the low-profit estimates means that probability of disappointment is lower. This could mean the bull market in equities is likely to continue,” Vijay Valecha, Chief Market Analyst, Century Financial said. Data from Refinitiv show that 77 S&P 500 companies have reported with 77 percent topping expectations, compared to 65 percent beat rate since 1994. However, analysts fear an earning recession in the coming quarters. They have downgraded expectations to a 2 percent growth in earnings in the second quarter from 9.2 percent in October last year. The Dow Jones Industrial Average has continued its gaining momentum. The Dow index gained 1.59 percent last week to hit a high of 26,602.42, just 400 points away from the peak of 26,951.81. The S&P 500 index is also 32 points lower than the peak of 2,940.91. The Dow index has gained 13.86 percent so far in the year, while the S&P 500 index has accumulated 15.88 percent in gains since January 1. Oil may continue to stay in a range. Last week, Brent crude traded slightly lower at $71.95 per barrel even as oil explorers curtailed activity in US fields for the first time this month. West Texas Intermediate rose 0.38 percent to be at $64. WTI has gained 15 percent in the past three months.

Dubai targets 3.8% GDP growth in Expo 2020 year
Dubai is targeting inflation-adjusted growth of 2.1 percent this year and followed up by 3.8 percent in the next, on the back of Expo 2020 activities and improved foreign investment inflows. In fact, for next year, the government forecasts foreign investments to touch Dh50 billion from a 15-20 percent gain over this year. The inflow was Dh38.5 billion in 2018. Growth is then expected to ease to 2.8 percent in 2021, a natural outcome following the one-off spike the economy will get through the better part of 2020. The emirate’s economy grew 1.9 percent last year. These are based on forecasts put together by Dubai’s Department of Economic Development, one of the key policy-making entities within the government. In a first-quarter update, the numbers are starting to look promising, according to DED statistics.“Economic momentum has picked up at the beginning of this year with a surge in new business licenses,” it said in a statement. “During the first three months, 6,709 new business licenses have been issued, a 29 percent increase over the same period of 2018.” The DED reckons that the Expo 2020 spin-offs are already being felt by the economy — between 2013-21, construction and delivery of the event site could contribute Dh38 billion “with direct benefits to the construction, business, and financial services, transport, storage and communication sectors”.

Abu Dhabi index revisits 2006 high
The Abu Dhabi index extended gains on 21 April 2019, to revisit its highest level in 13 years due to continued investment flows in banking stocks. The Abu Dhabi Securities Exchange general index hit a high of 5,361.85, the highest level since 2006, before closing 1.03 percent higher at 5,346.30. The index has gained 6 percent in the past six sessions, and the gauge has gained 11 percent in the past one month. Analysts say traders are expecting the benchmark to breach its all-time high of 5,831 hit in November 2005. First Abu Dhabi Bank (FAB) extended gains to hit its highest level in a year and was the most active stock in trade. FAB rose 1.36 percent to be at Dh16.38 and contributed 25 percent of the total traded value of Dh114 million. “First Abu Dhabi Bank is controlling the index, pushing it higher by the day. However as positive as the bank’s story is, if peers don’t catch up faster, the stock will look more and more expensive by the day resulting in a potential correction,” Issam Kassabieh, Senior Financial Analyst at Menacorp said. Other banking stocks such as Union National Bank, Abu Dhabi Commercial Bank also gained. UNB closed 2.32 percent higher at Dh5.73, while ADCB closed 1.77 percent higher at Dh9.79. “Traders are advised to hold the buy positions in ADCB and the stock may target Dh13.20/16 in the long term,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said. In other stocks, Aldar Properties closed 2.14 percent higher at Dh1.91.

Commodity Tracker

Business Events this Week In UAE

Arabian Travel Market

@ Dubai International Convention and Exhibition Centre

Date: 28 April To 01 May 2019

Business Updates

D&B Business Valuation
D&B Business Valuation Study is a neutral, third party and comprehensive assessment of the prospects of the business entity. As a part of the business assessment process, a comprehensive business valuation report is submitted that cover issues related to nuances of the business. The business valuation report helps investors, banks and financial institutions validate their own research findings and make a more informed decision. The neutral assessment and the analysis conducted on different dimensions also assist the users of the report to understand better the risks inherent and can formulate strategies to mitigate the same.

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