CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 20 May 2019
  • Published inMay 2019
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Country Risk Update 
United Arab Emirates

Risk Indicator  -  DB3b
Risk Level       -  Slight
Ratings Trend -  Stable

Growth outperforms expectations in Abu Dhabi and Dubai but remains weak; furthermore lower for longer oil prices will undermine growth prospects. The UAE continues to strengthen its position as a regional safe-haven and business hub.
Market Overview
Etihad Credit Insurance, ADCB partner to help UAE businesses access digital and innovative solutions
Etihad Credit Insurance has signed a Memorandum of Understanding with Abu Dhabi Commercial Bank, ADCB, to offer efficient customer service and innovative solutions that will help public institutions and local businesses raise their business profile. According to a statement on 19 May 2019, the alliance, which focuses on encouraging and boosting UAE businesses by offering them wide profile of trade credit solutions and tools, will also support ECI’s mandate to support UAE’s non-oil diversification programme as well as the sustainable development of the country. Under the MoU, both the said institutions agreed to collaborate on offering a comprehensive range of trade credit insurance solutions, export and project financing, Letters of Confirmation, informative workshops, SME funding, and exchange of keen market intelligence to highlight the risk associated in international trade activities. The MoU was signed between Massimo Falcioni, CEO of Etihad Credit Insurance and Colin Fraser, Head-Wholesale Banking Group of ADCB, in the presence of senior officials from both the organisations.
UAE, Saudi oil ministers say crude supplies are plentiful
Oil ministers from Saudi Arabia and the UAE said on 19 May 2019, said that global supplies of crude were plentiful and indicated that production cuts would remain in place to help rebalance oil markets. Saudi Arabia’s energy minister Khalid Al Falih and the UAE energy minister Suhail Al Mazroui made the comments while speaking to reporters during the ministerial meeting of Opec and non-Opec producers in Jeddah, Saudi Arabia. “Overall the market is in a delicate situation,” Al Falih said, recommending reducing oil inventories to boost oil markets. He also said the Organisation of the Petroleum Exporting Countries (Opec) would have more data at its next meeting in late June to help it reach the best decision on output. In similar comments, Al Mazroui said that relaxing supply cuts was not “the right decision” and UAE does not want to see an increase in inventories that could lead to prices collapsing. On the other hand, Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year. Opec producers and its allies including Russia are cutting production by about 1.2 million barrels per day to bring down oil inventories and support oil prices. The deal which came into effect earlier this year will continue till the end of June. Al Falih also said the attacks on Saudi energy assets had put security of oil supply at risk but not affected his country’s output. He called on Saudi Arabia’s partners to condemn the attacks. Two major attacks took place on Saudi Arabia’s oil tankers as well as on pipeline pump stations in the last week, causing oil prices to spike on supply concerns.
Opec, allies reaffirm commitment to balanced oil markets
Opec and its allies on 19 May 2019, reaffirmed their commitment to achieving a balanced market and working towards oil market stability on a sustainable basis with solid fundamentals. A statement issued by the Organisation of the Petroleum Exporting Countries (Opec) after the conclusion of the Joint Ministerial Monitoring Committee (JMMC) meeting in Jeddah said the average conformity for the production cut agreement also known as the Declaration of Cooperation reached 120 percent since January 2019. Opec and its allies including Russia are cutting output by 1.2 million barrels per day since January 1 in order to reduce global oil inventories for a rebalancing of oil markets. Opec also noted that critical uncertainties remain for oil markets including ongoing trade negotiations, monetary policy developments, and geopolitical challenges. “The JMMC requested that the Joint Technical Committee and the Opec Secretariat continue to monitor and analyze oil market developments and, particularly, oil inventory projections in the coming weeks with a view to the next JMMC meeting making a recommendation to the Opec Conference and Opec and non-Opec Ministerial Meeting, which are scheduled to meet in June 2019, regarding appropriate actions on the part of participating countries for the second half of 2019,” Opec statement added. Earlier, Saudi Arabia’s oil minister Khalid Al Falih hinted about the continuation of the production cut agreement and said oil inventories still remain high with plentiful supplies.
No respite for Dubai index as key indicator breached
The Dubai index tumbled 2 percent on 19 May 2019, extending fall for another session, led by selling in heavyweights such as Emaar Properties and Dubai Islamic Bank. The Dubai index fell 2.16 percent to end at 2,519.43. The index has shed 6.7 percent after it breached the 50-day moving average of 2,702, a key technical indicator. “The DFM broke major technical supports last week and today has turned negative since the beginning of the year,” Vrajesh Bhandari, senior portfolio manager at Al Mal Capital, said. The Dubai index shaved off gains registered earlier in the year, and the index is now in negative on a year to date basis. Emaar Properties closed 3.05 percent lower at Dh4.13, while Dubai Islamic Bank closed 1.61 percent lower at Dh4.90. “Sentiment around the small-cap speculative stocks in UAE is very poor,” Bhandari added. Gulf Finance House closed 6.58 percent lower at Dh0.795. “We revise our buy rating on GFH to accumulate with a revised target price of Dh0.95 (from Dh1.25). We believe the company’s strategy to target treasury income will not aid in achieving incremental profitability,” First Abu Dhabi Bank Securities said in a note. Arabtec closed 10 percent lower at Dh1.44. Emaar Malls closed 2.22 percent lower at Dh1.76. Emaar Development closed 2 percent higher at Dh2.21. Total traded volume rose to 200 million shares compared to a 30-day average of 140 million shares. The Abu Dhabi Securities Exchange general index closed 0.29 percent higher at 4,732.96. First Abu Dhabi Bank closed at Dh13.80, up 0.73 percent. Etisalat closed 1.04 percent lower at Dh15.5. Abu Dhabi Commercial Bank closed at Dh8.43, down 3.10 percent. The Tadawul reversed early gains and was lower. The Tadawul index was 1 percent lower at 8,512.81, after rising as much as 8,693. 
Gulf Navigation loses Dh11 million in the first quarter, sees profits slip
Gulf Navigation Holding, the Dubai-based maritime and shipping company, has said it made a loss of Dh11 million in the first quarter of 2019, despite increasing its revenues. During the first three months of 2019, the company achieved operating revenue of Dh45 million, compared to Dh37.7 million during the same period of 2018, a year-on-year increase of 19 percent. However, Gulf Navigation reported net losses of Dh11 million in the first quarter, compared to profits of Dh5 million during the same period last year. During the quarter, the company’s petrochemical tanker Gulf Deffi entered the dry dock for mandatory special survey work, resulting in 50 days of off-hire for this vessel during the first quarter. Gulf Navigation also incurred increased depreciation and finance costs on account of the acquisition of livestock carriers in the fourth quarter of 2018, which the company said impacted its net profit. “The board of Gulf Navigation is reviewing all strategic growth options to return the company to profitability,” said Saeed Mubarak Al Hajeri, Gulf Navigation’s chairman. “Our immediate focus is to complete the necessary vessel dry-docks and achieve debt refinancing to align Gulf Navigation’s capital structure to its operations,” he said.
Commodity Tracker
Business Events this Week In UAE
Ramadan 2019
Date: 06 May To 05 June 2019
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