MARKAZ GCC MAR­KETS RE­PORT Saudi raised $17.5bn in big­gest-ever bond sale

Kuwait Times - - BUSINESS -

Kuwait Fi­nan­cial Cen­tre “Markaz” re­cently re­leased its Monthly Mar­ket Re­search re­port. In this re­port, Markaz ex­am­ines and an­a­lyzes the per­for­mance of eq­uity mar­kets in the MENA re­gion as well as the global eq­uity mar­kets for the month of Oc­to­ber. Markaz re­port stated that MENA bourses had a mixed Oc­to­ber. While Kuwait Weighted in­dex slightly rose by 0.6 per cent, Saudi’s TASI in­dex rose 6.9 per cent, fol­lowed by Egypt (5.5 per cent) and Morocco (5.2 per cent). On the other end of the spec­trum, Oman (4.3 per cent), Dubai (4.1 per cent) and Abu Dhabi (3.9 per cent) in­dices wit­nessed fall. Saudi Ara­bian en­joyed their long­est win­ning streak in more than two years, on the back of in­vestor op­ti­mism and im­prov­ing out­look for the king­dom’s banks. Saudi Ara­bia sold the largest in­ter­na­tional sov­er­eign bond ($17.5bn) in emerg­ing-mar­ket his­tory, which would im­prove liq­uid­ity boost pay­ments to con­trac­tors thereby help im­prove ex­pec­ta­tions re­gard­ing non-per­form­ing loans. Egyp­tian mar­kets were buoyed by the pos­si­bil­ity of a $12bn loan ap­proval from the IMF. Spec­u­la­tion con­tin­ues to mount that the cen­tral bank would de­value the cur­rency, as the black mar­ket and of­fi­cial rate di­verged to a record dis­crep­ancy. The coun­try’s cur­rency had been tum­bling al­most daily on the black mar­ket since Saudi Ara­bia halted petroleum aid to Egypt this month, forc­ing it to spend $500mn for oil prod­ucts on the spot mar­ket.

The re­port added that sell­ing pres­sure cre­ated by For­eign In­sti­tu­tional In­vestors (FIIs) led to the fall in the Mus­cat in­dex, while sharp fall seen in the Dubai in­dex was at­trib­uted to profit book­ing, due to volatil­ity in the in­ter­na­tional com­modi­ties and cur­rency mar­ket. In terms of val­u­a­tion, P/E of Morocco (18x), Qatar (14.3x) and Jor­dan (14.2x) mar­kets were the pre­mium mar­kets in the MENA re­gion, while the mar­kets of Egypt (8.5x), Dubai (8.8x), and Oman (9.3x) were the dis­count mar­kets.

Blue Chips also had a mixed month, with Na­tional Com­mer­cial Bank (Saudi Ara­bia) and Zain (Kuwait) end­ing the month at the top of the pile, gain­ing 33.5% and 16.4%, re­spec­tively. Kuwait Projects lagged be­hind the rest of the blue chips, fall­ing by 10%, de­spite an 8% YoY rise in nine-month net profit. Al­though third quar­ter profit fell by 1.6%, shares of NCB were buoyed by the ex­pected eas­ing of liq­uid­ity, as the king­dom is­sued in­ter­na­tional bonds to tide over ris­ing deficit. The bank cited an 18.7% jump in to­tal op­er­at­ing ex­penses, caused by higher im­pair­ments on fi­nanc­ings and in­vest­ments for the fall in net profit. Zain Kuwait’s num­ber of sub­scribers in­creased to 2.9mn for the nine months to 30 Septem­ber, in a very chal­leng­ing pe­riod that wit­nessed in­tense price com­pe­ti­tion. The com­pany also re­ported a bet­ter than ex­pected 12 per­cent rise in third-quar­ter profit. Qatari tele­com op­er­a­tor Oore­doo re­ported a 51 per­cent fall in third-quar­ter net profit, as the earn­ings con­tin­ued to be af­fected by for­eign ex­change losses and plung­ing earn­ings from Iraq, al­though a strong do­mes­tic per­for­mance has helped mit­i­gate the im­pact. Emaar Prop­er­ties re­ported a 31 per­cent jump in third-quar­ter profit, as ris­ing prop­erty sales over­came the wider real es­tate mar­ket malaise.

Saudi bond is­sue

Saudi Ara­bia raised $17.5bn in the big­gest ever bond sale from an emerg­ing-mar­ket na­tion, as the king­dom sought to shore up fi­nances bat­tered by the slide in oil. The gov­ern­ment sup­pos­edly sold dol­lar-de­nom­i­nated bonds due in five years yield­ing 135 ba­sis points more than sim­i­lar-ma­tu­rity US Trea­suries, 10-year notes at a spread of 165 ba­sis points and 30-year se­cu­ri­ties at 210 ba­sis points. The king­dom raised $5.5 bon in each of the five- and 10-year bonds, and $6.5bn in 30-year debt. In a bid to im­prove for­eign in­vest­ment in cap­i­tal mar­kets and bring the Saudi stock mar­ket into the global in­vest­ing main­stream, the na­tion’s 175 listed com­pa­nies are now re­quired by the Cap­i­tal Mar­kets Au­thor­ity to adopt the In­ter­na­tional Fi­nan­cial Re­port­ing Stan­dards (IFRS) from Jan 2017.

Oil Mar­ket Re­view

Brent crude rose to $53.14 per bar­rel in the month of Oc­to­ber, be­fore fall­ing 9 per­cent and clos­ing the month at $48.3 per bar­rel, as the OPEC deal to re­duce crude out­put faced some ob­sta­cles to­wards the end of the month. OPEC mem­bers Iran and Iraq dis­agreed with the or­ga­ni­za­tion’s data on pro­duc­tion lev­els, and have now re­fused to limit their crude out­put. Iraq, the sec­ond-largest pro­ducer in the car­tel, is re­port­edly ask­ing for ex­emp­tions from any pro­duc­tion lim­its due to dis­rup­tions caused by the in­sur­gency, while other mem­bers, in­clud­ing Iran, Libya and Nige­ria al­ready have ex­emp­tions.

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