CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 15 July 2019
  • Published inJuly 2019
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Country Risk Update - Kuwait

Risk Indicator  -  DB3d
Risk Level       -  Slight
Ratings Trend -  Deteriorating

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. The risk of insecurity, including sectarian tensions between Kuwaitis, remains higher than usual in light of regional tensions such as the Saudi-Iranian rivalry.
Market Overview
Abu Dhabi's financial regulator opens up ADGM to local, global digital banks
The Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) is inviting local and global digital banks to set up shop in its International Financial Centre in Abu Dhabi, the FSRA announced on 10 July. In a statement, the FSRA said that moves come in response to regional and international inquiries from interested parties seeking a “conducive ecosystem that fosters opportunities and market development.” The FSRA said it believes that the presence of digital banks in ADGM will add “significant value” to the SME, corporate and wholesale sectors and help further develop the overall financial ecosystem. “This announcement and the guidance comes in response to substantive interest from the industry, and demonstrates ADGM’s track record in advancing innovation and supporting growth while managing risks to promote a strong and sustainable financial ecosystem,” said FSRA CEO Richard Teng. He added that “digital banks can address the needs of many segments that are currently underserved by conventional institutions, such as the credit gap faced by small and medium enterprises.”To apply, the FSRA will require digital banks to have a base capital requirement of $10 million, as well as “robust” governance structures, compliance and risk management policies, IT security measures and certain mandatory senior management appointments.
Shuaa Capital shareholders approve ADFG merger plan
Shuaa Capital on 11 July announced that it had concluded its shareholders’ general meeting to approve the proposed merger with Abu Dhabi Financial Group (ADFG). Shuaa said in a statement that its shareholders voted strongly in favor of the proposed combination, with 100 percent in attendance approving the transaction. Jassim Alseddiqi, CEO of ADFG, said: “We are delighted to have received shareholder approval for this deal and the strong voting in favor of the combination recognizes the compelling strategic rationale behind this deal. "We are bringing together two market leaders, ADFG and Shuaa, to create the leading Asset Management and Investment Banking platform in the region. We believe there is an exciting opportunity to create significant value for all shareholders and I look forward to working with the enlarged team to deliver continued growth.” Under the terms of the transaction, Shuaa will issue 1,470,720,000 new shares to ADFG’s parent company Abu Dhabi Capital Management in return for the entire issued share capital of ADFG, meaning Abu Dhabi Capital Management will own 58 percent of the enlarged entity. The new Shuaa shares will be subject to a 12-month lock-up from the date of admission. The combined entity will remain listed on Dubai Financial Market and is expected to be rebranded as ADFG with work on a full integration plan underway.
Saudi’s Ataa Educational to raise SAR348m in IPO
Saudi’s Ataa Educational will raise SAR348m ($93m) after its initial public offering (IPO) was priced at the top end of its price range, two sources familiar with the deal told Reuters. Riyadh has been encouraging more family-owned companies to list on the domestic stock market, the region’s biggest bourse, in a bid to deepen Saudi Arabia’s capital markets as part of reforms aimed at reducing the kingdom’s reliance on oil revenue. Ataa Educational, which owns and operates national and international schools in Saudi Arabia, will float 12 million shares, representing 30 percent of its SAR400m capital. “The book building closed on 8 July and the IPO was priced at the top end of the range at SAR29,” said one source. “This values the company at $310m, or SAR1.16bn,” he added. The offering was two times oversubscribed by institutional investors. Demand from non-Saudi, GCC, international and qualified foreign investors accounted for more than third of the offering size, the sources said. The Saudi stock market is up 13.8 percent so far this year, one of the best performings in the Middle East, as it entered global emerging market benchmarks. The kingdom is seeing a revival in IPOs, earlier this year Saudi mall operator Arabian Centres raised SAR2.47bn in a share sale.
Dubai’s GEMS to meet banks for $1.65bn refinancing
Dubai-based GEMS Education is meeting banks in London and New York this week to discuss refinancing worth $1.65bn, according to LPC, a fixed-income news service that is part of Refinitiv. GEMS, which owns and operates 49 schools in the UAE and Qatar, said last week that a consortium led by private equity firm CVC Capital Partners has agreed to acquire a 30 percent stake in the company from existing shareholders. The company also said it had launched a refinancing plan which includes loans and bonds, without giving further details. According to LPC, GEMS’ refinancing includes an $850m loan, $500m in secured bonds and euro-denominated bonds worth $300m. Goldman Sachs and Credit Suisse are global coordinators for the financing, while Citi and HSBC are book-runners, LPC reported, without giving a source. GEMS declined to comment when contacted by Reuters on 7 July. With the CVC Consortium deal, it will take on a further 14 private schools in Europe through the acquisition of Britain’s Bellevue Education, GEMS said last week. CVC’s purchase will allow the exit of a consortium led by Fajr Capital Ltd, which includes Tactical Opportunities funds managed by Blackstone Group and Bahrain’s Mumtalakat Holding Co. GEMS recently invested in a portfolio of 14 schools in Saudi Arabia and four schools in Egypt through joint ventures.
Most GCC stock markets bounce back from early losses
Most Gulf markets recovered from earlier losses on 8 July to close higher, with Saudi lifted by financial shares and Kuwait rising for the eighth straight session following MSCI’s decision to include the country in its main emerging markets index. 
The Saudi index gained 0.2 percent with Al Rajhi Bank rising 0.6 percent and Riyad Bank adding 1.7 percent after its board proposed a higher dividend for the first half of the year. The market is up nearly 13 percent so far this year in a rally led by foreign investors. Total ownership of Saudi stocks by foreign investors increased to 7.47 percent by June 30, up from 4.67 percent at the end of December, stock exchange data shows, reflecting increased active and passive fund flows this year. Advanced Petrochemical fell 0.9 percent after it posted an over 24 percent decline in second-quarter profit, which it blamed on a drop in sales volume and product prices. Kuwait’s index closed 0.2 percent higher. The Abu Dhabi index added 0.2 percent with Abu Dhabi Commercial Bank gaining 1.3 percent. However, Bank Of Sharjah plunged 3.9 percent after reporting a 38 percent slump in first-quarter profit. The Dubai index increased 0.3 percent led by a 2.5 percent jump in its largest listed developer Emaar Properties.
Commodity Tracker
Business Events this Week In UAE
Strategic Planning & Goal Setting: Setting Business Goals, Targets & Deliverables
@ Fairmont Hotel, Dubai, UAE

Date: 21 July To 25 July 2019
Business Updates

"Economic challenges for the global economy are rising, and our forecasts for 2019 growth have been revised downwards since the start of the year, as have those of the IMF, the World Bank, and the main central banks. Most regions are now expected to grow more slowly than in 2018, and we have been revising our forecasts down even in regions where we expect growth to increase (e.g. in Latin America, and in the Middle East & North Africa)."- according to the Global Bankruptcy Report 2019 by Dun & Bradstreet's Lead Economist, Markus Kuger.

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