mena weekly monitor (20) 15-05-2020
TRANSCRIPT
1Week 20 May 10 - May 16, 2020
MAY 10 - MAY 16, 2020
WEEK 20
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MENA MARKETS: WEEK OF MAY 10 - MAY 16, 2020
The MENA WEEKLY MONITOR
Economy___________________________________________________________________________p.2 FITCH EXPECTS SIGNIFICANT GCC NON-OIL ECONOMIC CONTRACTION IN 2020In a recently released note, Fitch Ratings said that the OPEC+ agreement to cut oil output and the additional
production cuts announced by KSA, UAE and Kuwait will push GCC countries’ budgets even deeper into
deficit amid the collapse in oil prices.
Also in this issuep.3 Weakening KSA support to banks leads Moody’s to set “negative” outlook for 10 out of 11
banks rated
p.4 Oman to reduce the budgets of ministries and government units
p.4 COVID-19 impact on Egypt trade and tourism to be severe, says EIU
Surveys___________________________________________________________________________p.5 ABU DHABI TOPS MIDDLE EAST CITIES IN OCCUPANCY RATES IN FIRST QUARTER OF 2020, AS PER EYEY issued its latest Hotel Benchmark Survey on the Middle East for the first three months of 2020 (four and
five star hotels), according to which occupancy rates decreased in all fourteen cities within the region.
Also in this issuep.6 Pandemic is cratering businesses in Gulf States, creating the need for short-term liquidity, as
per Invesco
p.6 Dubai clocks 1,824 property sales deals amid COVID-19 lockdown, as per Property Finder
Corporate News___________________________________________________________________________p.7 ACCIONA AND RTCC WIN US$ 500 MILLION SAUDI DESALINATION PLANT CONTRACTAcciona said it secured a US$ 500 million contract from Saline Water Conversion Corporation (SWCC) to
build its fourth desalination plant in Saudi Arabia.
Also in this issuep.7 DEWA signs power purchase deal for MBR solar park Phase V
p.8 SirajPower seals two key residential partnerships in Dubai
p.8 ADNOC and ADPower issue tender for sub-sea power transmission network
p.8 Dubai firm in deal to acquire Lithuania bank
Markets In Brief___________________________________________________________________________p.9 TWO-WAY FLOWS IN REGIONAL EQUITIES, BOND PRICES ON THE RISEMENA equity markets saw mixed price movements this week. The Saudi Tadawul and the Egyptian
Exchange bounced back mainly supported by some favorable market-specific and company-specific
factors, while the Qatar Exchange and the UAE equity posted price falls on lower global oil demand
estimates and due to some unfavorable financial results. In parallel, activity in MENA bond markets
remained mostly tilted to the upside this week, mainly tracking US Treasuries move amid escalating US-
China tensions and after the US Federal Reserve warned of a prolonged US economic recession resulting
from the coronavirus outbreak, while new bond issues continued to see the light in the region.
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ECONOMY______________________________________________________________________________FITCH EXPECTS SIGNIFICANT GCC NON-OIL ECONOMIC CONTRACTION IN 2020
In a recently released note on GCC sovereigns, Fitch Ratings said that the OPEC+ agreement to cut oil
output and the additional production cuts announced by Saudi Arabia, the UAE and Kuwait will push
GCC countries’ budgets even deeper into deficit amid the collapse in oil prices. Oil production cuts will
also contribute to a stark contraction in overall economic output, along with an unprecedented recession
in non-oil economies in the GCC.
In the higher-rated GCC sovereigns, large wealth funds and Central Bank reserves and manageable
government debt levels will stave off pressure on external funding and on exchange rate pegs, as per the
Fitch note. In lower-rated Oman (BB/Negative) and Bahrain (BB-/Stable), (further) support from the rest
of the GCC may be necessary, said Fitch. Erosion of fiscal and external positions has been a factor in past
rating downgrades in the GCC, particularly for Saudi Arabia (A/Stable), Bahrain and Oman. It remains a
negative rating sensitivity for all GCC sovereigns, according to Fitch.
Fitch now expects most GCC sovereigns to post fiscal deficits of 15%-25% of GDP in 2020, with only
Qatar’s deficit staying in the single digits at 8% of GDP. This assumes an average Brent oil price of US$
35/bbl and full compliance of the GCC with the OPEC+ deal to limit production, resulting in significant
declines in oil output. Fitch also assumes that the additional cuts recently announced by Saudi Arabia,
Abu Dhabi and Kuwait last until the end of the year. A further US$ 10/bbl decline in average prices would
increase deficits by 4%-6% of GDP (Kuwait being an outlier with an impact of 9% of GDP). A 5% cut to oil
production would widen fiscal deficits by 1%-2% of GDP (less in Bahrain and Qatar), as per Fitch estimates.
All GCC countries have announced economic stimulus packages. These amount to nearly 30% of GDP
in Bahrain and Oman, more than 10% of GDP in Kuwait, Qatar and the UAE, and more than 7% of GDP
in Saudi Arabia. They consist largely of monetary and off-budget measures such as loan repayment
holidays to businesses. Fitch estimates that the budgetary effect of stimulus will be smaller (at around
5% of GDP in Saudi Arabia and 1%-2% of GDP elsewhere), mostly relating to suspension and deferral of
government fees and taxes, accelerated payments to contractors, increased health spending and salary
support to the private sector.
NON-OIL GROWTH
Source: Fitch Ratings
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Fitch expects the governments with the weakest balance sheets to press ahead with spending cuts
sufficient to outweigh the direct fiscal effect of stimulus measures. This will exacerbate the recession
in the non-oil economy, stemming from measures to contain the coronavirus outbreak. Fitch forecasts
a non-oil sector recession ranging from a decline of 1% in Kuwait to 5% in Oman, adding that this is
unprecedented in the recent history of most GCC States and heightens social stability risks.
Fitch expects significant non-oil economic contraction in 2020, which is unprecedented in the GCC.
Growth stayed positive even during the global financial crisis of 2008-2009 (except in Kuwait) and the oil
price crash of 2015-2016. Oman is likely to see the deepest contraction, reflecting pre-existing economic
weakness and sharp fiscal consolidation. Rebound in non-oil activity in 2021 should allow governments
to restore some non-oil revenue and could offer more scope for fiscal consolidation, as per Fitch.
Wider fiscal deficits will lead to higher debt and drawdowns of fiscal reserves. In 2020, Fitch expects the
GCC funding mix to shift in favor of drawdowns from fiscal reserves. Fitch expects the GCC to issue around
US$ 48 billion in foreign debt this year (of which US$ 30 billion has already been issued), roughly in line
with last year. This will be accompanied by around US$ 140 billion in drawdowns from fiscal reserves and
wealth funds, compared with only about US$ 10 billion last year.
The reserve drawdown is likely to be led by Kuwait (where the government’s authority to borrow has
expired), Saudi Arabia and Abu Dhabi. Fitch believes that negative financial returns could put further
pressure on the assets of GCC sovereign wealth funds (SWFs) this year, although asset prices have
recovered from their lows in mid-March (which had largely erased 2019 gains).
_____________________________________________________________________________WEAKENING KSA SUPPORT TO BANKS LEADS MOODY’S TO SET “NEGATIVE” OUTLOOK FOR 10 OUT OF 11 BANKS RATED
Moody's affirmed all ratings and assessments of the 11 banks it rates in Saudi Arabia (“A1 negative”). At
the same time, the rating agency changed the outlook on the long-term deposit ratings to “negative”
from “stable” for ten of the banks and maintained the “negative” outlook on the long-term deposits of
one bank.
The rating action follows Moody's decision to change the outlook to “negative” from “stable” on the
Saudi Arabian government's “A1” rating
Moody's decision to affirm the ratings of all 11 banks reflects the rating agency's view that the current
ratings continue to reflect the resilience in their financial performance underpinned by strong capital
buffers, favorable funding profiles and ample liquidity buffers. Rationales for the individual banks are
provided later in this press release, as per the rating agency.
Moody's decision to change the outlook to “negative” from “stable” on ten of the banks long-term
deposit ratings captures the potential weakening capacity of the government of Saudi Arabia to provide
support in case of need, as implied by the negative outlook on the A1 government issuer rating.
Moody's continues to incorporate a high/very high probability of government support for the ratings
of Saudi banks driven by their government shareholdings, importance in the domestic banking and
payment system and the track record of pre-emptive government support.
A secondary driver for the negative outlook is the weakening operating environment on the back of
lower oil prices, reduced government spending and spread of coronavirus which, if prolonged, could
lead Moody's to revise downwards its assessment of the operating environment, through a lower macro
profile from its current level of “moderate+”.
Moody's expects that the Saudi government's spending cuts, announced in the 2020 budget, will weigh
on the non-oil sector of the country's economy (forecast contraction of -4% for 2020 compared to 3.3%
growth in 2019), where the banks do most of their business.
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At the same time, travel restrictions aimed at stemming the spread of the coronavirus are disrupting
the tourism industry and particularly religious pilgrimages to Mecca and Medina. Moody's regards the
coronavirus outbreak as a social risk under its environmental, social and governance (ESG) framework,
given the substantial implications for public health and safety.
_____________________________________________________________________________OMAN TO REDUCE THE BUDGETS OF MINISTRIES AND GOVERNMENT UNITS
Oman’s Ministry of Finance announced plans to reduce the budgets of ministries and government units
to address the adverse impacts of the oil price slump alongside the impact of the Coronavirus (COVID-19)
pandemic on public finances and overall economy.
The Sultanate plans to carry out an additional 5% cut on budgets allocated for all civil, military and
security government units through fiscal year 2020.
It also plans to negotiate with owners of real estate properties leased by the government for a discount
of at least 10% of the existing rent of each leased property.
Lastly, Oman’s announced its plans to suspend all unnecessary ceremonies and activities, like annual
celebrations and inaugural ceremonies.
______________________________________________________________________________COVID-19 IMPACT ON EGYPT TRADE AND TOURISM TO BE SEVERE, SAYS EIU
Although Egypt’s growth in the first half of 2019/20 was robust, averaging more than 5.6% year on year,
the impact of the coronavirus on trade and tourism flows and on domestic economic activity will be
severe in 2019/20 and the first half of 2020/21, according to the Economist Intelligence Unit (EIU).
The Economist Intelligence Unit expects Egypt’s economic growth to average 1.8% a year in 2019/20-
2020/21, despite government spending being ramped up.
Tourism, which accounts for about 9.5% of employment and 5.5% of GDP, has shut down, and private
consumption growth, exports and investment will suffer the impact of the coronavirus outbreak.
The economy will expand more strongly from 2021/22 as new energy projects gain momentum. Lower
unemployment will boost private consumption, although widespread poverty will remain a constraint
on consumer demand growth, as per the EIU. The government will have to work hard to restore investor
confidence.
The construction and energy sectors will be the main engines of growth in the middle of the forecast
period, said the EIU. The government is pursuing various low-income housing schemes with private
contractors and is building a new capital city east of Cairo, which is almost completed. Capital goods
imports will grow to support infrastructure projects.
Despite weakening international oil prices and faltering domestic demand, concerns over supply, owing
to pandemic restrictions, will push up food prices, which comprise about one-third of the consumer
price basket. Inflation will average 5.2% in 2020. Price growth will dip slightly in 2020 as food import
pressures ease and other prices increase only slowly, as per EIU.
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SURVEYS_____________________________________________________________________________ABU DHABI TOPS MIDDLE EAST CITIES IN OCCUPANCY RATES IN FIRST QUARTER OF 2020, AS PER EY
Ernst & Young issued its latest Hotel Benchmark Survey on the Middle East for the first three months of
2020 (four and five star hotels), according to which occupancy rates decreased in all fourteen cities within
the region.
Occupancy rates decreased in 14 cities considered in the survey with Beirut registering the most
significant decrease of 48.1%. The largest declines after Beirut were seen by Dubai with a fall of 21.3%
and Muscat which saw a decrease of 19.7%.
According to the survey, the cities of Abu Dhabi, Doha and Dubai took over the first three ranks amongst
peers in hotel occupancy, with 77% for Abu Dhabi, 66% for Doha and 65% for Dubai. At the lower end of
the regional scale were Jeddah (46%), Manama (43%) and Beirut (22%).
Furthermore, a total of 11 cities reported decreases in the average room rate, registering 31.3% in the
case of Beirut. The most significant downward movements after Beirut were posted by Abu Dhabi
(-19.9%) and Kuwait City (-14.0%). Only three cities reported increases in average room rate namely
Makkah (+14.1%), Riyadh (+2.5%) and Doha (+1.2%).
Dubai, Riyadh and Jeddah reported the highest average room rates of US$ 234, US$ 169 and US$ 162
respectively. At the lower end were Makkah, Cairo-City and Abu Dhabi with US$ 109 for Makkah, US$ 107
for Cairo-City and Abu Dhabi with US$ 96.
In this context, the rooms’ yield decreased in all cities in the survey. The most significant decreases were
seen in Beirut, Muscat and Dubai with -78.6% for Beirut and -35.0% for Dubai and Muscat. Dubai (US$
152), Riyadh (US$ 105) and Ras Al Khaimah (US$ 94) had the highest rooms’ yields, while those of Makkah
(US$ 61), Manama (US$ 59) and Beirut (US$ 28) were the lowest.
It is worth noting that in Abu Dhabi, the temporary closure of major tourism attractions, theme parks
and cultural destinations along with the postponement or cancellation of major entertainment events,
and the suspension of international and domestic flights in response to the ongoing pandemic have
heavily impacted the sector performance. The ongoing lockdown and a hard-hit economy engender a
longer road to recovery for the hotel sector. Although the Emirate is expected to gradually start lifting
some movement restrictions, the travel industry is not expected to see any immediate benefits. As part
of its stimulus package, the UAE government has suspended the levying of tourism and municipality
fees and is providing rebates on rentals for the tourism and entertainment sectors.
_____________________________________________________________________________PANDEMIC IS CRATERING BUSINESSES IN GULF STATES, CREATING THE NEED FOR SHORT-TERM LIQUIDITY, AS PER INVESCO
It's a rough ride for the Gulf states. The pandemic is cratering businesses and people are losing their
jobs, creating the need for short-term liquidity. The Central Banks are rolling out one relief measure after
another to mitigate the damage.
According to global asset management firm Invesco such liquidity injections, however, do not have an
automatic inflationary effect.
The driver of inflation is money in the hands of the public, not money in the books of the Central Bank,
as per the same source.
Actions of the central banks during the global financial crisis only stabilized broad money growth, with
subsequent inflation remaining below 2% year-on-year in most developed economies, as per Invesco.
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Historically when Central Banks played this "lender of last resort" role in a market panic, they were able
to create the additional funds needed to calm the panic, and after the panic had subsided, they would
gradually withdraw the excess cash or deposits from the banking system, as per the same source.
Excess funds were gradually drained from the banking system after the panic subsided and before
inflation could take hold.
Regarding the current situation, the plunge in oil prices along with fallout in the various industries that
drive GCC economies will likely result in disinflation for most of 2020 and 2021.
For the Gulf states the steep fall in the price of oil and the collapse of tourism and international business
travel inevitably mean that disinflation or even deflation will likely prevail in the short-term, as per the
same source.
On inflation, countries with fixed exchange rates tend to have a broadly similar profile of inflation to
those whose currencies they are pegged to.
Thus, the general profile of inflation in those Gulf states pegged to the US dollar (Saudi, Muscat & UAE)
follows inflation in the US in broad outline.
However, there are some significant deviations due to administered price changes (for petrol or utilities)
in individual countries from time to time. It is also true that the composition of the price indices varies
from country to country, again introducing some degree of divergence, as per Invesco.
Separately, "expansionary monetary policies" only lead to inflation if the policy results in rapid growth of
the broad quantity of money (e.g. M2 or M3). Lowering interest rates to zero alone does not guarantee
rapid growth of money.
According to Invesco, expanding the Fed's balance sheet does not guarantee rapid growth of M2 or M3,
and therefore may not result in inflation. This is what happened with quantitative easing in 2009-2019
after the great financial crisis. As a result, US inflation over that period remained below the 2% target
most of the time, as per the same source.
______________________________________________________________________________DUBAI CLOCKS 1,824 PROPERTY SALES DEALS AMID COVID-19 LOCKDOWN, AS PER PROPERTY FINDER
Despite the Dubai real estate market having to deal with a full lockdown, innovative tools like Live
Viewings and Virtual Tours aided in the successful closing of a total of 1,824 transactions worth over AED
3.6 billion (US$ 985.4 million) in April, according to UAE-based real estate portal Property Finder.
This brings the year-to-date total to 12,254 sales transactions worth AED 24.15 billion, it stated.
Off-plan accounted for 72% of all transactions and was dominated by Villanova and Dubai Creek Harbour
for villa/townhouses and apartments respectively.
Top off-plan sales locations were The Lagoons in Dubai Creek Harbour (123 transactions), Jumeirah
Village Circle (112), Villanova (110), Umm Suqeim (105) and Business Bay (97), said the Emirati portal citing
figures from Data Finder, its real estate insights and data platform.
According to the report, the volume of transactions for the secondary market were considerably lower
than the off-plan market however Dubai Marina (40) and Palm Jumeirah (39) dominated as always
followed by Mudon (31), Downtown Dubai (26) and Dubai Hills Estate (21).
The top communities for apartment sales were: Jumeirah Village Circle (125); Dubai Creek Harbour (123);
Umm Suqeim (105); Downtown Dubai (92) and Jumeirah Beach Residence (86).
The top communities for villa/townhouses sales were: Villanova (118), Serena (36), Dubai South (26),
Jumeirah (18) and Arabian Ranches (12).
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CORPORATE NEWS_____________________________________________________________________________ACCIONA AND RTCC WIN US$ 500 MILLION SAUDI DESALINATION PLANT CONTRACT
Acciona, a supplier of sustainable infrastructure solutions and renewable energy projects, said it
secured a US$ 500 million contract from Saline Water Conversion Corporation (SWCC) to build its fourth
desalination plant in Saudi Arabia.
The Al Khobar 2 desalination plant, being built in partnership with Al Rashid Trading and Contracting
Company (RTCC), will be equipped with reverse osmosis (RO) technology.
To be developed in Al Khobar on the east coast of Saudi Arabia, the plant will boast a daily capacity of
more than 600,000 cubic meters. It will cater to the needs of three million people in the area.
With this turnkey contract, Acciona consolidates its presence in the water treatment sector in Saudi
Arabia, a country in which it currently has three projects under way.
Spanish conglomerate Acciona develops and manages sustainable infrastructure solutions, particularly
in renewable energy projects. Its range of services covers the entire value chain of design, construction,
operation and maintenance.
Last year, a € 750 million (US$ 813 million) contract was awarded to the company for the financing, design,
construction, operation and maintenance (for 25 years) of the Shuqaiq3 desalination plant. Located in
the south-west of the country on the Red Sea coast, it is expected to be completed next year. The plant
will have a treatment capacity of 450,000 cubic meters per day to provide a service to a population
equivalent of two million. It will also be equipped with a photovoltaic plant to reduce internal energy
consumption, said the statement from Acciona.
In July 2018, a contract was also awarded for around € 200 million to build and commission the Al Khobar
1 desalination plant. It is located close to the Al Khobar 2 plant.
The company has also designed and built the Al Jubail RO4 seawater desalination plant in the east of the
country for the utility Marafiq. With a capacity of 100,000 cubic meters per day, it serves both the city
and the nearby industrial complex.
_____________________________________________________________________________DEWA SIGNS POWER PURCHASE DEAL FOR MBR SOLAR PARK PHASE V
Dubai Electricity and Water Authority (DEWA) signed a 25-year power purchase agreement (PPA) for the
fifth phase of the Mohammed bin Rashid Al Maktoum Solar Park with a capacity of 900 MW, supporting
its efforts to achieve the Dubai Clean Energy Strategy 2050 to provide 75% of Dubai’s total power output
from clean energy by 2050.
This phase will use photovoltaic solar panels and will be commissioned in stages starting from the third
quarter of 2021, said a statement from DEWA.
On completion, it will become the largest single-site solar park in the world, based on an independent
power producer (IPP) model with a planned capacity of 5,000 MW in 2030, as per a statement.
In November last year, DEWA had announced the consortium led by Acwa Power and Gulf Investment
Corporation as the preferred bidder to build and operate the fifth phase of the solar park.
To implement the project, the DEWA had established Shuaa Energy 3 in partnership with the consortium
led by Acwa Power and GIC. The Dubai utility owns 60% of the company, and the consortium owns the
remaining 40%. The project will use the latest solar photovoltaic bifacial technologies, which allows
solar radiation to reach the front and back of the panels, with single-axis tracking to increase generation.
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______________________________________________________________________________SIRAJPOWER SEALS TWO KEY RESIDENTIAL PARTNERSHIPS IN DUBAI
SirajPower, UAE’s distributed solar energy provider, announced two new residential partnerships in
Dubai.
The Emirati group signed a deal with Al Khail Heights by Texture Holding and Mirdif Villa Complex by
Green Coast Real Estate that will result in a total 3 MWp system capacity, and generate 5 GWh of annual
energy production, whilst displacing more than 3,000 tons of carbon dioxide emission per annum.
The partnership is SirajPower’s second important project in the residential sector this year, said the
company in a statement.
______________________________________________________________________________ADNOC AND ADPOWER ISSUE TENDER FOR SUB-SEA POWER TRANSMISSION NETWORK
Abu Dhabi National Oil Company (ADNOC) and Abu Dhabi Power Corporation (ADPower) announced the
issuance of a joint tender for a first-of-its-kind project in the Middle East and North Africa (MENA) region.
The joint tender sets out to develop and operate the region’s first high-voltage, direct current HVDC sub-
sea transmission system that will connect ADNOC’s offshore production facilities to ADPower’s onshore
electricity grid using state-of-the-art technology.
Requests for proposal have been sent to international companies that have the required experience to
partner with ADNOC and ADPower on this important infrastructure project for Abu Dhabi.
The transmission system will comprise two independent sub-sea HVDC transmission links and converter
stations that will connect to ADPower’s onshore electricity grid – operated by its subsidiary, Abu Dhabi
Transmission and Dispatch Company, Transco – and provide a total installed capacity of 3,200 megawatts.
Commercial operation is expected in 2025.
This significant capital project will be funded through a special purpose vehicle jointly owned by ADNOC
(30%), ADPower (30%) and the selected developers and investors (40%). The project is to be executed on
a build, own, operate and transfer (BOOT) basis. The successful bidders, alongside ADNOC and ADPower,
will develop and operate the transmission system, with the full project being returned to ADNOC at the
end of the transmission agreement.
The project is expected to reduce the carbon footprint of ADNOC’s offshore facilities by up to 30% through
ADPower’s efficient onshore power production. It also offers power supply cost optimization potential
for ADNOC’s offshore facilities and will drive operational efficiency and system reliability by replacing
the existing offshore localized gas turbine generators with diverse, more efficient and environmentally
sustainable sources of energy, including renewable and nuclear power.
______________________________________________________________________________DUBAI FIRM IN DEAL TO ACQUIRE LITHUANIA BANK
Growmore Group, a UAE-based global investment and financial services conglomerate, announced that
it has entered into a strategic agreement to fully acquire Medicinos Bankas UAB, a retail bank in Lithuania
with assets of US$ 395 million.
The acquisition will mark the expansion of Growmore's banking sector investments into Europe, backed
by its expertise in financial services including offshore banking and asset management, the company
said.
Ernst & Young and Sorainen were Growmore's financial and legal advisors on the deal, respectively. The
bank's sale process was managed by Deloitte and legal firm TGS Baltic.
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EQUITY MARKETS INDICATORS (MAY 10 TILL MAY 16, 2020)
Sources: S&P, Bloomberg, Bank Audi's Group Research Department
CAPITAL MARKETS____________________________________________________________________________EQUITY MARKETS: MIXED PRICE MOVEMENTS IN REGIONAL EQUITIES
MENA equity markets saw mixed price movements this week, which was reflected by a nil change
in the S&P Pan Arab Composite index. The Saudi Tadawul and the Egyptian Exchange bounced back
mainly supported by some favorable market-specific and company-specific factors, while the Qatar
Exchange and the UAE equity posted price falls on lower global oil demand estimates and due to
some unfavorable financial results.
The heavyweight Saudi Tadawul, whose market capitalization represents 78.5% of the total regional
market capitalization, saw a price rebound this week, as reflected by a 1.8% increase in the S&P Saudi
index, mainly on improved sentiment after Saudi Arabia pledged additional oil production cuts in
June 2020 to reach a two-decade low to help drain a global oil glut. Price gains took place despite
news that the Kingdom has adopted a slew of austerity measures to deal with a double blow of
historically low oil price levels and the COVID-19 crisis, and although OPEC has revised down its global
oil demand forecast for the year 2020.
A closer look at individual stocks shows that Saudi Aramco’s shares registered weekly price gains of
1.3% to reach SR 31.40. SABIC’s share price jumped by 7.3% to SR 76.0. Petrochem’s share price surged
by 12.1% to reach SR 22.44. Also, NCB’s share price rose by 0.7% to SR 34.15. SABB’s share price closed
3.5% higher at SR 22.60. Al Rajhi’s share price increased by 0.8% to SR 54.0.
Also, the Egyptian Exchange bounced back this week, as reflected by a 1.4% rise in the S&P BMI Egypt
index, mainly on improved investor sentiment after the IMF approved Egypt’s request for emergency
financial assistance of US$ 2.8 billion to meet the urgent balance of payments’ needs stemming from
the outbreak of the new coronavirus pandemic, and on news that Egypt is in talks with the IMF for
a second bundle of financial support of US$ 5 billion and seeks a further US$ 4 billion from other
sources. Commercial International Bank’s share price went up by 1.4% to LE 64.10. Orange’s share
price jumped by 20.3% to LE 24.88. Eastern Tobacco’s share price surged by 5.0% to LE 12.58. EFG
Hermes’s share climbed by 9.1% to LE 11.08. Juhayna Food Industries’ share price increased by 1.7%
to LE 7.24.
In contrast, the Qatar Exchange posted a 0.7% decline in prices week-on-week, mainly driven by
some unfavorable market-specific and company-specific factors. OPEC slashed its global oil demand
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estimate for the year 2020. Concurrently, all listed companies in the Qatar Exchange posted combined
net profits of QR 8.3 billion during the first quarter of the year 2020, which marks a 20% contraction
relative to the same period of the previous year.
29 out of 47 listed stocks registered price contractions, while 18 stocks posted price gains week-on-
week. Nakilat’s share price plunged by 10.3% to QR 2.365. MSCI deleted Nakilat from MSCI Qatar
Small Cap Index in its Semi-Annual Index Review. Milaha’s share price fell by 3.4% to QR 5.601. Gulf
International Services’ share price shed 11.5% to QR 1.30. As to banking stocks, QNB’s share price
retreated by 0.6% to QR 17.15. Qatar First Bank’s share price dropped by 8.5% to QR 0.931. The bank
announced 2020 first quarter loss of QR 192 million versus net profits of QR 3.2 million a year earlier.
The UAE equity markets registered a 0.8% retreat in prices week-on-week, mainly on lower global oil
demand estimates and due to some unfavorable company-specific factors. In Dubai, Emirates NBD’s
share price shed 1.8% to AED 8.50. Emirates NBD announced a 24% year-on-year drop in its 2020 first
quarter net profits to reach AED 2.1 billion. Dubai Islamic Bank’s share price fell by 2.3% to AED 3.40.
DIB announced an 18% year-on-year decrease in its 2020 net profits to reach AED 1.1 billion. Arabtec
Holding Company’s share price went down by 6.6% to AED 0.624. Emaar Properties’ share price closed
3.3% lower at AED 2.38.
In Abu Dhabi, First Abu Dhabi Bank’s share price declined by 2.3% over the week to AED 11.08. FAB
posted a 22% year-on-year fall in its 2020 net profits to reach AED 2.4 billion. ADIB’s share price went
down by 3.6% to AED 3.26. ADIB announced 2020 first quarter net profits of AED 270 million versus
higher net profits of AED 600 million a year earlier. National Bank of Ras Al Khaimah’s share price shed
2.9% to AED 3.40. International Holdings’ share price decreased by 0.7% to AED 26.06.
_____________________________________________________________________________FIXED INCOME MARKETS: MENA BOND MARKETS UP, TRACKING US TREASURIES MOVE
Activity in MENA fixed income markets remained mostly tilted to the upside this week, mainly tracking
US Treasuries move amid escalating US-China tensions and after the US Federal Reserve warned of
a prolonged US economic recession resulting from the coronavirus outbreak, while new bond issues
continued to see the light in the region as issuers seek to shore up liquidity to contain the fallout from
COVID-19 and lower oil prices.
In the Qatari credit space, sovereigns maturing in 2024 and 2029 saw price expansions of 0.13 pt and
0.25 pt respectively week-on-week. Standard & Poor’s affirmed its “AA-/A-1+” long-term and short-
term foreign and local currency sovereign credit ratings on Qatar, with a “stable” outlook. The “stable”
outlook indicates S&P’s view of broadly balanced risks to the ratings. Despite a sharp economic
contraction and low hydrocarbon prices, S&P doesn't expect the government's fiscal and external
stock positions would materially deteriorate beyond its expectations. Amongst financials, Commercial
Bank of Qatar’23 closed up by 0.14 pt. QNB’24 was down by 0.14 pt. QNB raised US$ 1 billion from the
sale of five-year bonds at 225 bps over mid-swaps, 35 bps tighter than the initial price guidance. The
bond sale attracted more than US$ 3.75 billion in orders.
In the Bahraini credit space, sovereigns maturing in 2023, 2025 and 2029 posted price improvements
of 1.35 pt, 2.63 pts and 2.20 pts respectively week-on-week. Prices of NOGA’24 rose by 1.58 pt. Bahrain
raised US$ 2 billion through the sale of a dual-tranche bond. Bahrain sold US$ 1 billion in a 4.5-year
Sukuk at 6.25% versus an initial price guidance of 6.625%-6.75% and US$ 1 billion in 10-year bonds at
7.375% versus an initial price guidance of around 8%. The bond sale received more than US$ 11 billion
in orders.
In the Abu Dhabi credit space, prices of sovereigns maturing in 2024 and 2029 increased by 0.38 pt
and 0.25 pt week-on-week. Prices of Mubadala’24 remained stable. Mubadala raised US$ 4 billion
through the sale of a three-tranche bond. Mubadala sold US$ 1 billion in six-year bonds at 210 basis
points over midswaps, US$ 1 billion in 10-year bonds at 235 bps over midswaps and US$ 2 billion in
30-year Formosa bonds at 3.95%. The three-tranche bond sale attracted orders of US$ 23.5 billion.
11Week 20 May 10 - May 16, 2020
MAY 10 - MAY 16, 2020
WEEK 20
MIDDLE EAST 5Y CDS SPREADS V/S INTL BENCHMARKS
Sources: Bloomberg, Bank Audi's Group Research Department
Z-SPREAD BASED AUDI MENA BOND INDEX V/S INTERNATIONAL BENCHMARKS
Sources: Bloomberg, JP Morgan, Bank Audi's Group Research Department
In the Egyptian credit space, US dollar-denominated sovereigns maturing in 2023, 2025, 2030 and
2040 registered price gains of up to 2.67 pts this week. Prices of Euro-denominated papers maturing
in 2025 and 2030 improved by 2.40 pts and 3.93 pts respectively. Moody's affirmed the long-term
foreign and local currency issuer ratings of the Government of Egypt at “B2” with a “stable” outlook.
The affirmation of the “B2” rating and “stable” outlook reflect Egypt's ongoing credit strengths and
challenges that Moody's does not expect to change materially relative to similarly-rated sovereigns
through the global shock posed by the coronavirus pandemic. While the coronavirus shock exposes
Egypt's credit vulnerabilities, improvements in governance and policy effectiveness in recent years
shore up the sovereign's credit profile resilience to the current shock, as per the credit rating agency.
On the overall, regional bond markets continued to trace an upward trajectory this week, as the US
Federal Reserve’s dire warning on the US economy and the growing tensions between the US and
China spurred demand for safe haven assets.
12Week 20 May 10 - May 16, 2020
MAY 10 - MAY 16, 2020
WEEK 20
SOVEREIGN RATINGS & FX RATES
Sources: Bloomberg, Bank Audi's Group Research Department
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