CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 21 January 2019
  • Published inJanuary 2019
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Country Risk Update - Oman

Risk Indicator - DB4c
Risk Level - Moderate
Ratings Trend - Stable

Dun & Bradstreet upgrades Oman's country risk rating on the back of the improved outlook for oil prices and production (and consequently for oil revenues). The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm. The government is targeting high-end tourism as an area for growth.
Market Overview
Saudi Arabia To Build Oil Refinery In South Africa As Part Of Its $10B Investment Plan
Saudi Arabia is planning to build an oil refinery and petrochemical plant in South Africa as it targets to invest close to $10 billion within the country, according to its energy minister Khalid Al Falih. The refinery will ease the need for refined product imports while the location and the capacity for the refinery are yet to be decided, officials added. Saudi Aramco and South Africa’s Central Energy Fund will conduct a joint study regarding the proposal. Saudi Arabia, which is a dominant player in South Africa’s energy sector, was in talks with its earlier president, Jacob Zuma, to build a refinery in the country. However, the project did not proceed as the location provided was unattractive. The world’s largest oil producer pledged to invest close to $10 billion, mainly into South Africa’s troubled energy sector to help build refineries and petrochemical complexes. The move also comes as its current president Cyril Ramaphosa is trying to attract foreign investments worth $100 billion to the country. Saudi Arabia’s oil firm Saudi Aramco is also contemplating using South Africa’s oil storage facilities in Saldanha Bay, while Riyadh-based ACWA Power is looking at options to invest in the country’s renewable energy sector. Falih also confirmed that Saudi is looking to invest in South Africa’s state-owned defense company Denel.
India's SBI raises $1.25bn from overseas bonds
India’s largest bank, State Bank of India, has raised $1.25 billion US dollar-denominated dual-tranche bond issued on 19th January 2019, at a coupon rate of 4 percent and above, a move many analysts see as a proxy attempt by the government to check another round of fall in the Rupee. A significant fall in the Rupee’s exchange rate, a politically sensitive issue in India, can add ammunition to the opposition’s attacks on Prime Minister Narendra Modi’s BJP party in the upcoming general elections in April and May. With crude prices starting climbing up again to cross $60 per barrel last week, the Indian currency has started witnessing another downward trend in valuations.  The announcement early this week by India’s central bank, the Reserve  Bank of India (RBI) on ‘New External Commercial Borrowing Framework’ under which it reduced the ECB maturity tenor, increased borrowing limits and removed qualification restrictions for companies wanting to borrow funds from abroad is also seen as a move in sync with the measures to keep the rupee value under check. SBI’s dual tranche $1.25 billion bond issue carries a coupon rate of 4 percent for $400 million due in 2022 and 4.37 percent for $850 million, which will be due for repayment in 2024, considered high in the prevailing market conditions by financial market players.
Saudi Arabia to hire HSBC banker to lead $11bn privatization plans
Saudi Arabia hired HSBC Holdings Plc banker Rayyan Nagadi to set up a privatization unit at the ministry of finance as the kingdom forges ahead with plans to sell state assets, people familiar with the matter said. Nagadi, previously head of project and export finance at HSBC Saudi Arabia, will advise the ministry on its privatization process and will work closely with the National Center for Privatisation, the people said, asking not to be identified as the information hasn’t been made public. HSBC declined to comment, while the ministry of finance didn’t respond to requests for comment. Saudi Arabia set up the National Centre for Privatisation in 2017 and hopes to generate about $11 billion by 2020 through the sale of stakes in utilities, soccer clubs, flour mills, and medical facilities. Privatization is key to the country’s efforts to wean the economy off oil, but so far have been dogged by delays - most notably the IPO of oil giant Aramco. Nagadi is among a growing number of bankers taking on government roles as OPEC’s top producer seeks to reboot its economy. Minister of Economy and Planning Mohammad Al Tuwaijri was previously chief executive officer of HSBC in the Middle East and North Africa until 2016.
Saudi bonds to join JPMorgan index in $119bn Gulf addition
Saudi Arabia and four other Gulf nations will join JPMorgan Chase & Co’s emerging-market bond indexes this month, potentially paving the way for billions of dollars in inflows into the securities. The debt from the world’s biggest oil-exporting nation along with Qatar, the United Arab Emirates, Bahrain, and Kuwait will represent about 11.8 percent of the EMBI Global Diversified Index and 12 percent of the EMBI Global beginning January 31, according to JPMorgan. The indexes will track notes from 15 eligible issuers with a face value of about $119 billion.  "This provides more technical support to bond issuance for sovereigns in the region," said Shamaila Khan, the director of emerging-market debt at AllianceBernstein in New York. The risk-return profiles in Saudi Arabia, Qatar, the UAE, and Bahrain look attractive, she said. JPMorgan said Saudi Arabia’s approximate weight in the EMBIGD index is 3.3 percent, followed by 2.8 percent for Qatar, 2.6 percent for the UAE, 2.3 percent for Bahrain and 0.7 percent for Kuwait. These figures are subject to change depending on bond sales in the coming two weeks. The Gulf nations’ bonds will be added in phases over nine months. 
Kuwait To Invest $20 Billion To Modernize Its Civil Aviation Sector
Kuwait could soon be spending expansively to ramp up its civil aviation sector, according to a senior official. The Gulf country is planning to spend $20 billion over the next 10 years to modernize its civil aviation sector, President of the Directorate General of Civil Aviation, Sheikh Salman Sabah Al- Salem Al-Humoud 
Al-Sabah said at the Global Aviation Summit in Mumbai. He added that Kuwait has also opened a new passenger terminal, which has the capacity to accommodate close to 4.5 million passengers, to cope with the increasing air traffic and improve the passengers’ experience. Kuwait is also building a third runway and is planning a second terminal that has a capacity of 25 million passengers, Al Sabah explained. According to data released by BNC Network, aviation projects worth $50 billion were underway in the Gulf. Out of that, $12 billion is earmarked for a new airport in Kuwait and $4.6 billion set aside for the ongoing passenger terminal expansion. Both are due for completion by 2022, the report showed.
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