CGI Gulf Insights (117)

ByDnB UAE
Sunday, 07 June 2020
Published inJune 2020

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Saudi Arabia

Risk Indicator - DB3c
Risk Level - Slight

Ratings Trend - Deteriorating

Saudi Arabia’s oil reserves, which have allowed it to build up huge financial buffers, will support short-term government spending. Longer-term growth will be driven by government reforms under its Vision 2 aims to reduce dependence on oil export revenues and boost the private sector.

Market Overview

Hike in UAE fuel prices for May 2019
The cost of filling up at the petrol pumps across the UAE is to rise considerably in May. The fuel price committee has announced an increase of more than 10 percent for motorists using Super 98 and Special 95. This follows on from a 9 percent rise at the beginning of April. Here's the breakdown of the prices per litre: • Super 98: up 25 fils to Dh2.48 (11.21 per cent) • Special 95: up 23 fils to Dh2.34 (10.9 per cent) • Diesel: up 4 fils to Dh2.53 (1.6 per cent) Fuel prices in the UAE were liberalized in August 2015, so they now move with the market. Oil prices have surged this year by about 33 percent and were at a six-month high last week after the United States announced it won’t renew exemptions allowing China and some other buyers to keep importing Iranian crude. Brent crude was down 25 cents at $71.90 a barrel this morning after losing 3 percent on 26 April 2019, while West Texas Intermediate fell 31 cents to $62.99 a barrel, having lost 2.9 percent on 26 April 2019.

IMF projects 2.8 percent GDP growth for UAE in 2019
The International Monetary Fund (IMF) has revised the UAE’s economic growth outlook downwards from the October 2018 forecasts. For 2019, the IMF’s Regional Economic Outlook has projected 2.8 percent real GDP growth compared to the earlier forecast of 3.6 percent. According to the latest IMF projections, the UAE economy grew by 1.7 percent against the October forecast of 2.9 percent in 2018. The economy is projected to grow 3.3 percent in 2020 supported by a strong 4 percent non-oil growth projected for that year. “Expo 2020–related spending in Dubai and Abu Dhabi’s fiscal stimulus is expected to support near-term growth in the UAE,” said Jihad Azour, the IMF’s Mideast and Central Asia department director. GDP growth in GCC countries is expected to improve slightly to 2.1 percent in 2019, up from 2 percent in 2018. The IMF observed that headwinds from tighter domestic financial and monetary conditions act as a drag on non-oil growth in some countries. Increases in policy interest rates in the GCC, in line with US Federal Reserve monetary policy normalization, and declines in real estate (Qatar, UAE ) and equity (Dubai, Oman) prices have led to tighter domestic financial conditions, restraining the non-oil activity.

UAE’s United Arab Bank cuts 150 jobs — sources
United Arab Bank made about 150 staff redundant last week as part of cost-cutting and efficiency measures, three sources told Reuters. The bank said in a statement it had completed an assessment of its human resources requirements that concluded it had “excess capacity”, without giving details. “Letting go of talent is never an easy decision,” it said. Banks in the United Arab Emirates have cut thousands of jobs in recent years due to a slowing economy and consolidation in the banking sector. The job cuts at Abu Dhabi-listed UAB have hit mostly junior and middle-level staff and some senior positions, the sources said, declining to be named citing confidentiality. Last month UAB appointed a new chief executive, Ahmad Mohammad Abu Eideh, who assumed office on March 10. The Sharjah government is weighing a merger between Bank of Sharjah, Invest Bank, and UAB, sources told last year.

Dubai real estate shares decline
Real estate shares such as Emaar Properties, Damac, Emaar Malls, Union Properties on Dubai bourse fell in trade on 28 April 2019 after gaining last week. Emaar Properties closed 1.04 percent higher at Dh4.75. Emaar Malls closed 1.16 percent lower at Dh1.71. Union Properties closed 0.99 percent lower at Dh0.399. Damac Properties closed 1.56 percent lower at Dh1.26. The Dubai Financial Market general index closed 0.42 percent lower at 2,775.74. “Most of the stocks witnessed profit taking, as the index tested the 2,835-2,850 resistance zone. Further profit taking if seen shall find support at 2778/2760 level,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said in a note. Dubai Islamic Bank closed less than half a percent higher at Dh5.25, DP World was one of the top gainers in trade. DP World closed 3.78 percent at $19.20. Traded volume fell to 82 million shares, 41 percent lower compared to the 30-day average volume of Dh137 million. In other stocks, Dubai Investments closed 5.44 percent lower at Dh1.39. Amlak Properties closed 1.98 percent lower at Dh0.347. Early buying in banking shares on the Abu Dhabi Securities Exchange (ADX) fizzled out at the end of the trading session. ADIB, ADCB, FAB almost closed flat with intra-day buying.

Arabian Centres to raise $836m in the biggest IPO
Saudi Arabian mall operator Arabian Centres Co could raise up to $836 million at the top end of the price range for its initial public offering (IPO), the sale prospectus showed on 28 April,2019. The IPO would be the country’s biggest since Saudi lender National Commercial Bank raised $6 billion in 2014, according to Refintiv data. Arabian Centres plan to sell 95 million shares at 26 riyals to 33 riyals per share, the document showed, implying a market capitalization of between 12.4 billion riyals and 15.7 billion riyals ($3.3 billion and $4.2 billion) on the listing. Owned by Fawaz Alhokair Group, the offering will be the first in the kingdom under Rule 144a, which allows the sale of securities primarily to qualified institutional buyers in the United States. It will also be the first major Saudi IPO this year as the kingdom tries to move past the international fallout following last year’s murder of journalist Jamal Khashoggi. Riyadh has been encouraging more family-owned companies to list in a bid to deepen its capital markets as part of reforms aimed at reducing reliance on oil revenue. The kingdom also wants to boost local entertainment and attract foreign visitors, at a time when subsidy cuts and new taxes have eaten into household budgets. Arabian Centres owns 19 malls, making it the leading owner and operator of shopping malls in Saudi Arabia by total gross leasable area as at Dec. 31 2018, the prospectus said. Gross proceeds from the sale of new shares would be used for debt repayment, the document said. The deal comprises 65 million existing shares being sold by the current shareholders and 30 million new shares, with a listing scheduled for late May.

Commodity Tracker

Business Events this Week In UAE

Arabian Travel Market

@ Dubai International Convention and Exhibition Centre

Date: 29 April To 01 May 2019

Business Updates

D&B Business Valuation
D&B Business Valuation Study is a neutral, third party and comprehensive assessment of the prospects of the business entity. As a part of the business assessment process, a comprehensive business valuation report is submitted that cover issues related to nuances of the business. The business valuation report helps investors, banks and financial institutions validate their own research findings and make a more informed decision. The neutral assessment and the analysis conducted on different dimensions also assist the users of the report to understand better the risks inherent and can formulate strategies to mitigate the same.

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