CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 14 October 2019
  • Published inOctober 2019
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Country Risk Update - Bahrain

Risk Indicator  - DB5c
Risk Level        - High
Ratings Trend  - Deteriorating

Saudi Arabia's strong support for Bahrain provides a backstop to the economy. A giant oil and gas find off the west coast offers the promise of vast wealth if it proves commercially viable to extract Bahrain was the traditional financial and business services hub for the region, making up for its limited oil by providing a welcoming business environment. 
Market Overview
Russian sovereign wealth fund eyes joint investments with UAE, Saudi Arabia
The Russian Direct Investment Fund (RDIF) believes there is strong potential for joint investments with the UAE and Saudi Arabia, according to CEO Kirill Dmitriev. “We [jointly] invested in some opportunities outside Russia. We see [possible] cooperation in other markets, maybe China, maybe Saudi Arabia,” he told reporters ahead of President Vladimir Putin’s scheduled visit to the UAE on October 15. “It is going to be the next step forward, because a great partnership is being developed generally between Russia, UAE, China, Saudi Arabia, and other partners. Dmitriev added: “We want to invest in technology companies in the Middle East.” Russia has already opened a Russian Centre for Digital Innovators and Information and Communication Technologies in Dubai’s Internet City, its first foray into the regional technology sector. As evidence of the strong “strategic partnership” between Russia and the UAE, Dmitriev pointed to the RDIF’s ties to Mubadala. “We have got a very good relationship with Mubadala, which invested during the past four years in four businesses in Russia that are critical to the growth of the Russian economy,” he said. Last week, the RDIF announced the opening of its first foreign office in Saudi Arabia, which will conduct activities stemming from a number of ongoing agreements and platforms.
UAE Central Bank to issue Major Hazzaa Al Mansouri commemorative coin
The Central Bank of the UAE (CBUAE) will issue a commemorative currency in celebration of Major Hazzaa Al Mansouri, the first UAE national to travel to space.“His launch marked a significant day in our history as a nation,” said Mubarak Rashed Al Mansoori, Governor of CBUAE, who adding the mission “solidifies the UAE’s place in the global front of space exploration”. “We also take the time to remember our Founding Father, the late Sheikh Zayed Bin Sultan Al Nahyan, may his soul rest in peace, and the pivotal role he played in Hazzaa and UAE’s success. For back in the 1980s, fuelled by a strong desire to have the UAE be a key player in space missions, he sat with NASA astronauts and shared with them his vision.” He said Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, shared that vision and spared no costs in building on his father’s goals and driving UAE’s progress. “This initiative from the Central Bank aims to pay tribute to UAE’s visionary leadership and to recognize Major Hazzaa Al Mansouri’s heroic efforts in realizing their ambitions,” he added.
Cash-strapped Lebanon looking to Eurobond buyers to ease the financial strain
All but cut off from international credit markets and facing dollar shortages at home, Lebanon has come up with another workaround to allow the government to borrow money without raiding the central bank’s reserves. Local lenders, already the biggest holders of Lebanon’s sovereign debt, will cash out certificates of deposit, or CDs, at the central bank to buy some of Lebanon’s planned Eurobond issue of up to $3 billion, a person familiar with the matter said. The central bank, known as the Banque du Liban, will subscribe to part of the bond sale, but without directly putting up the money, the person said. The funds from local banks will then go toward repaying some of a $1.5bn bond that matures in November. The operation buys Lebanon time to find fresh sources of funding but also shows how limited the options are becoming for one of the world’s most indebted countries. Attempts to secure financial assistance from Gulf allies have so far come up empty and Lebanon’s finances are becoming ever more precarious as it struggles to attract bank deposits, a key source of funding for the government.
Singapore's Temasek to rule out investment in Aramco IPO
Singapore’s Temasek Holdings Pte has decided against investing in Saudi Aramco’s initial public offering, in part over environmental concerns, according to people familiar with the matter. The world’s most-profitable company first flagged a public share sale in 2016 and is expected to list with a valuation of between $1.1 trillion to $2 trillion later this year. It’s been courting funds globally to act as cornerstone investors, including Temasek, which had a net portfolio value of S$313 billion ($227 billion) as of March 31. But Temasek’s focus on sustainability and environmental, social and governance principles made it more difficult to support Aramco’s share sale, the people said, asking not to be identified because the discussions are private. Temasek has a 2030 goal to reduce the carbon emissions of its portfolio companies by 50%. A Temasek spokesman declined to comment on talks the firm may have had with individual companies or the outcomes of any of those discussions. Temasek has highlighted ESG assessments are a key factor in its decision making, alongside commercial considerations, he said via email. Representatives for Aramco didn’t immediately respond to a request for comment.
UAE Central Bank removes 3% early settlement fee for mortgages
Banks will no longer be able to charge a 3 percent early settlement fee for borrowers who want to exit their mortgage early, under a new directive from the UAE Central Bank. Instead, the fee has been reduced to just 1 percent on the outstanding mortgage amount or AED10,000 – whichever is less. And those who have already paid the 3 percent settlement fee have been instructed they can get a refund from their banks within 30 days. A circular sent out by the UAE Central Bank said: “Early settlement or partial settlement fee for applying to home loans has been reverted to maximum one percent of the outstanding balance or AED10,000, whichever is less. Banks and finance companies that arbitrarily changed the stated terms of the fees in existing customer agreements are required to respect the original terms of the agreement and refund all overcharges for all customers based on their original fee within 30 days of this notice.” Chris Schutrups, managing director, Mortgage Finder, welcomed the decision and said it was a great boost for borrowers, particularly in the current economic climate. He believed the news will encourage borrowers to switch their mortgage to lenders offering better interest rates and will result in an increase in buyout and remortgaging activity. “The news from the Central Bank is positive as it now opens up opportunities for those borrowers who were paying a higher rate of interest on their mortgage to find a better deal and save money.
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