CGI Gulf Insights of the Week (165)

ByCGI Gulf Insights of the Week
Monday, 22 July 2019
Published inJuly 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - United Arab Emirates

Risk Indicator - DB3b
Risk Level - Slight

Ratings Trend - Stable

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

Omani plastics packaging manufacturer OCTAL secures $625m in loans
Omani plastics packaging manufacturer OCTAL has secured $625m in banking facilities, it said on 16 July, after pulling last year a planned $300m debut bond. The company continues to look at the bond market for future funding requirements should market conditions be favorable, its finance chief said. OCTAL, which makes thermoplastic sheets and resin for use in packaged goods, will use part of the bank financing to refinance some of its existing debt and to fund expansion. The facilities include a $225m syndicated term loan and $400m in working capital. “This deal allows us to increase our production by almost 100,000 tonnes of the sheet,” chief financial officer Scott Ewen said in an interview, from the current production of around 250,000 tonnes. OCTAL last year hired Citi, Credit Suisse, HSBC, and Standard Chartered to arrange a $300m bond issue, its debut in the international debt markets. The debt sale, however, was pulled in October, at a time of choppy conditions across emerging markets. “If the bond market becomes more attractive, it’s something we will still look at in terms of the next phase of expansion for OCTAL … if the next CapEx lends itself to being funded by a bond,” said Ewen. “We’re still watching that market and seeing what pricing is out there,” he said. “At the current sort of risk factors that we would be exposed to, we think it’s still too expensive.”

Abu Dhabi shares surge on FAB’s strong earnings
Abu Dhabi stocks leaped 4 percent on 18 July, their biggest intra-day gain in nearly four months, led higher by the United Arab Emirates’ largest lender First Abu Dhabi Bank (FAB) which surged 6.5 percent on strong second-quarter earnings. Similarly, shares in Dubai bank Emirates NBD rose 3.5 percent thanks to positive quarterly results, leading gains on the Dubai index which was up 1.7 percent. On 17 July FAB reported a 5 percent increase in net profit in the second quarter from a year earlier, while Emirates NBD said an 80 percent surge in second-quarter net profit to Dhs4.74bn was partly driven by an asset sale and foreign exchange gains. The results reinforced signs that top banks in the UAE are managing to withstand strains from a sluggish economy and a property downturn in Dubai. Saudi Arabia’s main index slid 0.1 percent after rising for eight straight sessions EFG Hermes forecast profit for the kingdom’s financial sector would grow 7.6 percent in the second quarter. Banque Saudi Fransi lost 1.2 percent and Saudi Telecom was down 0.5 percent.

European financial major makes Gulf debut with Dubai deal
Woodbrook Group Holdings Ltd, one of Europe’s largest international firms of financial consultants, on 18 July confirmed it has established its first base in the Middle East with the acquisition of Mondial (Dubai). Mondial is one of Dubai's oldest established financial planning and wealth management companies and is regulated by the UAE Securities and Commodities Authority. Mondial chief executive Sean Kelleher, who has been with the company since 1989 and will remain on as CEO of the expanded entity, said the acquisition marks “an exciting new era” for the company. Kelleher said: “This is an extremely positive development for Mondial and our clients. Joining the Woodbrook Group strengthens our financial backbone, in turn enabling us to improve our range of client-driven services. “Woodbrook and Mondial are closely aligned culturally, particularly in the area of compliance. Mondial has a highly transparent regime and Woodbrook, coming from a European MiFID environment with strong compliance, further fortifies our regulatory compliance strategy.” Woodbrook’s CEO Michael Doherty said the addition of Mondial has greatly strengthened the group’s investment capabilities.

Emirates Islamic inks deal to join $27m SME financing scheme
Emirates Islamic has become the first Islamic bank to sign an agreement with Emirates Development Bank (EDB) to be part of its AED100 million ($27 million) Credit Guarantee Scheme. EDB’s Credit Guarantee Scheme supports the goals of the National Agenda under UAE Vision 2021, focused on boosting the GDP contribution of SMEs to 70 percent by 2021. The initiative offers financing of up to AED2 million to startups through EDB’s partner banks, wherein EDB guarantees up to 85 percent of the finance amount. The scheme also offers up to AED5 million financing to existing SMEs, with EDB guaranteeing up to 70 percent of the finance amount. Emirates Islamic said the new agreement reinforces its commitment towards supporting the SME sector, which represents more than 94 percent of the total number of companies operating in the UAE and employs over 86 percent of the private sector workforce. Faisal Al Bastaki, CEO of EDB, added: “The SME sector is a major driver to the growth of the national economy and will boost the UAE’s global competitiveness. As part of our ongoing strategy, we are committed to developing banking solutions that will enable SMEs to effectively contribute to increasing the non-oil GDP and advancing economic diversification.”

Dubai’s Deyaar says two districts in Midtown project to be handed over this year
Dubai developer Deyaar is close to completing two districts within its Midtown development, it announced on 21 July. Afnan, which features seven buildings is now over 96 percent complete, while Dania, which includes six buildings is now 87 percent complete. Both will be ready to be handed over later this year, a statement said. Afnan was launched in 2015 as the first phase of the 5.5 million sq ft Midtown development in Dubai Production City. The district will include 659 apartment units comprising 132 studios, 374 one-bedroom, 143 two-bedroom, and 10 three-bedroom apartments. It was originally due for completion by September 2018. The Dania district, launched in 2016, includes 579 apartment units with 131 studios, 295 one-bedroom apartments, 143 two-bedroom apartments, and 10 three-bedroom apartments. The overall Midtown development comprises 26 buildings across six districts, that will share a single-level podium covering retail, parking and essential services. The developer also said that work is progressing on its 18-story residential building, Bella Rose, which includes 478 units featuring studios, one and two-bedroom apartments located in Dubai Science Park. Bella Rose will include a pool, gym, resident and visitor parking, retail stores and landscaped gardens. The residential tower is currently 28 percent complete.

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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