CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 06 January 2020
  • Published inJanuary 2020
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Country Risk Update 
United Arab Emirates

Risk Indicator  - DB3b
Risk Level        - Slight 

Ratings Trend  - Deteriorating

The UAE continues to strengthen its position as a regional safe-haven and business hub. Access to global markets from Dubai will be among the best in the world. Regional tensions around Iran are set to disrupt supply chains and investment flows into the medium term. Government policy favors local firms and can change arbitrarily and without warning.

Market Overview
Dubai sets aside $540m reserve to boost Expo 2020
Dubai government has announced a special reserve of three percent of total expected expenditures in 2020 to support the objective of making Expo 2020 Dubai the world's greatest show. The reserve of nearly AED2 billion ($544 million), a first for Dubai, is in accordance with the principle of preparing for the Expo 2020, a statement said. The announcement came as Dubai ruler, Sheikh Mohammed bin Rashid Al Maktoum, also Vice President and Prime Minister of the UAE, approved a three-year budget cycle for the Government of Dubai for the 2020-2022 period. The three-year budget cycle, which forecasts total spending of AEED196 billion, meets the aspirations of Dubai’s future, and confirms its determination to continue raising people's happiness and stimulating entrepreneurship, the statement said. It added that the plan highlights the Government of Dubai’s keenness to provide the highest levels of economic stability and stimulus to the emirate's business sectors. "It also gives a clear picture of the government's economic goals in the next three years, which supports the medium-term planning of the economic sectors and provides a clearer view of the private sector," the statement said.
Uber completes $3.1bn deal for Dubai's Careem
Uber on Friday 03, Jan 2020 confirmed the official close of its acquisition of Dubai-based car-hailing app Careem for $3.1 billion. Careem Networks has now become a wholly-owned subsidiary of Uber, preserving its brand, a statement said, adding that Careem co-founder and CEO Mudassir Sheikha will continue to lead the Careem business. Sheikha will report to a board made up of three representatives from Uber and two representatives from Careem, the statement said.  It added that Careem and Uber will operate their respective regional services and independent brands. With the closing of the deal, Uber said it has acquired Careem’s mobility, delivery, and payments businesses across the greater Middle East region, with major markets including Egypt, Jordan, Saudi Arabia, and the UAE. The regulatory approval process in Pakistan, Qatar, and Morocco is ongoing and the transaction will not close in these territories until approvals from the legal authorities responsible are obtained. Both companies said they believe the completed acquisition will provide an opportunity to expand the variety and reliability of services offered through their applications. They added that for drivers and captains, the companies believe an increase in trip growth and improved services could provide better economic opportunities as well as more predictable earnings through greater use of drivers’ time on the road.
Abu Dhabi-linked firm completes deal for Charlton Athletic FC
Charlton Athletic on Thursday, 02 January 2020 confirmed that the purchase of the club by East Street Investments has been completed. Tahnoon Nimer and Jonathan Heller, the chairman, and chief executive of Abu Dhabi Business Development, have joined Charlton as directors. Abu Dhabi Business Development is the private office of Sheikh Saeed Bin Tahoon Al Nahyan, a member of the Abu Dhabi royal family. Nimer is the majority shareholder in East Street Investments through his Abu Dhabi-based corporation, Panorama Magic General Contracting. The deal ends Roland Duchatelet's reign at Charlton. Duchatelet took control of the club in 2014 but much of his tenure was defined by friction with supporters. Duchatelet said in a statement: "It was vital for the long-term health of Charlton Athletic that this deal was completed at the very start of the January transfer window. New club chairman Matt Southall, who has been working between the UK and the Middle East advising on international mergers and acquisitions, said: “This is a great opportunity for ESI and we are thankful to Roland Duchatelet and his team for giving us the chance to build on such strong foundations.
UAE banks offer $13.7bn financing to the retail sector
The UAE’s banking system increased the total value of financial support provided to the retail sector during the first nine months of 2019, according to statistics issued by the Central Bank of the UAE. By the end of September, the value of financing to retail companies reached AED50.4 billion ($13.7 billion), up by 5.4 percent or AED2.6 billion compared to the end of December 2018. The activity witnessed by the sector is in line with figures recently published by the National Economic Registry, which showed that the number of licenses issued in 2019 exceeded 40,000, state news agency WAM reported.  It added that financing the retail sector accounts for around 32 percent of the total received by the country’s commercial sector from January to September 2019, totaling AED157 billion. Statistics from the Central Bank of the UAE also showed that financing provided to the retail sector saw its highest surge in the third quarter.
Gulf borrowers pivot from loans with $100bn bond record
Gulf borrowers raised more than $100 billion in bond placements this year, a record amount that marked a shift from the more private funding route offered by loans. Saudi Aramco and Qatar were the biggest issuers, while Egypt, Oman, and Saudi Arabia also tapped international bond markets. Syndicated loans dropped 39% this year as sovereigns and companies sold notes in dollars and euros - a significant development for borrowers that have traditionally avoided airing their finances in public.  Issuers seized on low borrowing costs as central banks globally cut rates to counter the economic threat of the US-China trade war, while international investors were lured to the Gulf’s comparatively high yields. Bond sales in the six-nation Gulf Cooperation Council climbed 28% to the equivalent of $100.9 billion. In contrast, syndicated loans slumped as governments across the region delayed state projects, reducing demand for the long-term loans typically used to finance them. The average yield on Gulf government dollar debt dropped more than 50 basis points from the end of December to a record low of 3.978% this month, according to JPMorgan Chase & Co. indexes. Spreads are 173 basis points over U.S. Treasuries, the lowest since 2014.

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