MENA WEEKLY MONITOR MARCH 14 - MARCH 20, 2021 ______Economy WEEK 12 p.2 S&P SEES LONG-LASTING ADVERSE EFFECTS FROM THE 2020 SHOCK ON GCC BANKING SECTORS A new report by Standard & Poor’s on GCC banks was issued this week. S&P sees long-lasting adverse effects from the 2020 shock on GCC economies and banking sectors. CONTACTS
Treasury & Capital Markets Also in this issue p.3 Inflation in Saudi Arabia set to rise again over the next few months, as per Capital Economics Bechara Serhal p.3 UAE economy to post 2.5% growth this year after 5.8% contraction, as per the Central Bank (961-1) 977421 p.4 IPOs likely in GCC education sector as investor interest surges, as per Alpen Capital [email protected] p.4 UAE banks' gross assets increase 3% in January Private Banking
Toufic Aouad Surveys (961-1) 954922 [email protected] p.5 TUNISIA TOPS ARAB MENA COUNTRIES IN FREEDOM IN THE WORLD 2021 INDEX Freedom House, the US-based non-profit research organization, released its latest report titled “Freedom in Corporate Banking the World 2021: Democracy under Siege”, in which Tunisia topped Arab MENA countries and was the only country classified as “Free”. Carol Ayat (961-1) 959675 [email protected] Also in this issue p.6 One in ten UAE workers hasn't had a pay rise in over five years, as per Tiger Recruitment p.6 Islamic Fintech market projected to grow at 21% CAGR to US$ 128 billion by 2025
______Corporate News p.7 SICO BUYS SAUDI-BASED MUSCAT CAPITAL IN US$ 14.4 MILLION SHARE SWAP Sico, one of the leading regional asset managers, brokers and investment banks based in Bahrain, announced that it completed the transaction to acquire a majority stake amounting to 72.7% in the Saudi-based Muscat Capital, an exclusively owned subsidiary of Bank Muscat after obtaining all relevant approvals. RESEARCH Also in this issue Marwan Barakat p.7 SABB and Alawwal Bank complete merger (961-1) 977409 [email protected] p.7 Aldar offers to buy 51% stake in top Egyptian developer SODIC p.7 Bahri seals time charter deal with Dubai shipper UACC Salma Saad Baba p.8 DP World JV completes first 10,000 container moves at Dubai port (961-1) 977346 p.8 Dubai's Grubtech secures US$ 3.4 million pre-series a funding [email protected] p.8 Egis takes over top Kuwait engineering consultancy p.8 DEWA commissions 400/132 kV substation at Maktoum Solar Park Farah Nahlawi (961-1) 959747 [email protected] ______Markets In Brief Zeina Labban p.9 SHY PRICE DECLINES IN REGIONAL EQUITIES, TWO-WAY FLOWS IN BOND MARKETS (961-1) 952426 MENA equity markets registered shy price retreats this week, as reflected by a 0.3% decline in the S&P Pan [email protected] Arab Composite index, mainly pressured by falling oil prices on concerns over sustained drops in global oil demand and due to some unfavorable company-specific factors. The heavyweight Saudi Tadawul and the Michele Sakha Egyptian Exchange topped the losers’ list this week, while the UAE equity markets and the Qatar Exchange (961-1) 977102 posted price gains. In parallel, regional bond markets saw mixed price movements. Some regional papers [email protected] traced a downward trajectory, mainly tracking US Treasuries move, while some others registered price gains, on concerns that stalled vaccination efforts in some parts of the world would deter a global economic recovery. MENAMENA MARKETS: MARKETS: WEEK WEEK OF OCTOBER OF MARCH 11 14 - OCTOBER- MARCH 20, 17, 2021 2020 Stock market weekly trend Bond market weekly trend Weekly stock price performance -0.3% Weekly Z-spread based bond index -1.7% ⬇ ⬆ Stock market year-to-date trend Bond market year-to-date trend YTD stock price performance +8.0% YTD Z-spread based bond index -0.5% ⬆ ⬆ Week 12 March 14 - March 20, 2021 1 Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected] MARCH 14 - MARCH 20, 2021 WEEK 12
ECONOMY ______S&P SEES LONG-LASTING ADVERSE EFFECTS FROM THE 2020 SHOCK ON GCC BANKING SECTORS
A new report by Standard & Poor’s on GCC banks was issued this week. S&P sees long-lasting adverse effects from the 2020 shock on GCC economies and banking sectors. Saudi and Qatar's banking sectors will be less impacted than those in the United Arab Emirates (UAE), Oman, and Bahrain, while in Kuwait the story will depend on the evolution of the fiscal impasse.
S&P expects muted lending growth in all GCC countries except Qatar and Saudi Arabia. In Saudi, mortgage lending continues to expand due to the authorities’ objective of increasing home ownership, while in Qatar government projects are boosting growth. Demand from corporates will likely improve only slightly, with some deferred 2020 capital expenditure and debt refinancing potentially occurring this year.
S&P expects a deterioration of asset quality across the board, with nonperforming loans increasing. This will not be helped by the lifting of regulatory forbearance measures, although S&P expects it to be progressive. S&P thinks that the measures implemented by most central banks in the region are supportive of liquidity but do not remove or reduce credit risk from the balance sheet of banks (yet).
With respect to assets quality, S&P says that Stage 2 loans have increased slightly because regulators asked banks not to reclassify loans unless there are evident viability issues. A significant number of loans were classified as Group 1 and 2 in the UAE, which means that some migration may happen in the next 12 months.
Regarding profitability, some banks will post losses in 2021. Banks suffered a triple shock to profitability in 2020 from lower lending growth, lower-for-longer interest rates, and higher cost of risk. Cost of risk will remain elevated following a jump of 60% in 2020 as banks set aside provisions in preparation for more stress.
GCC banks' capitalization will continue to support their creditworthiness in 2021 as per S&P. Banks stepped up Additional Tier 1 issuances (both conventional and Islamic) in 2020 to benefit from supportive market conditions and this should continue in 2021.
S&P sees funding as a relative strength for most GCC banking systems. Qatar is an exception, where the banking system still carries significant net external debt. About one-quarter of banks' assets are in liquid forms.
THE TOP 45 GCC BANKS’ PROFITABILITY TOOK A HIT
ROA (left scale) Cost of risk (left scale) Margin (left scale) Cost/income (right scale) 0 41
2 40
2 0
1
1 0
0
0 0 2014 2015 2016 2017 2018 2019 2020
ROA: Return on assets. Source: S&P Global Market Intelligence.
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Finally, a second wave of mergers and acquisitions (M&A) could begin when the full impact of the weaker operating environment on banks becomes visible. The first wave of M&A was driven by shareholders' desire to reorganize their assets, including the upcoming merger between The National Commercial Bank and Samba Financial Group. The second wave will be more opportunistic and spurred by economic rationale. The operating environment might push some banks to find a stronger shareholder or join forces with peers to enhance their resilience. This might involve consolidation across the different GCC countries or the different emirates in the UAE, for example. However, it would require more aggressive moves by management than seen previously as per S&P.
______INFLATION IN SAUDI ARABIA SET TO RISE AGAIN OVER THE NEXT FEW MONTHS, AS PER CAPITAL ECONOMICS
Inflation in Saudi Arabia was at 5.2% in February, the lowest since the Kingdom increased VAT in July to 15% to tide over the coronavirus crises and low oil prices.
However, inflation in the Kingdom is likely to rise again in the next few months, according to London- based Capital Economics.
While it is likely to rise again over the next few months, Capital Economics expects it to fall sharply to 1.5%-2.0% from July as the effects of last year’s VAT hike drop out of the annual price comparison, Capital Economics said in a report.
The breakdown of the data showed that food inflation continued to ease.
After peaking at 14.3% year-on-year in July, food inflation has steadily dropped back and stood at 11.2% year-on-year in February. There was also a sharp decline in housing and utilities inflation last month as rents declined at an even faster pace.
However, transport inflation went up as Aramco raised local fuel prices due to higher oil prices. There were also increases in recreation and culture inflation and restaurant and hotels inflation.
Capital Economics expects the headline rate to rise over the next few months largely due to the unfavorable base effects created by last year’s collapse in oil prices. But the headline rate will drop sharply from July as the effects of last year’s VAT hike drop out of the annual price comparison.
As the Kingdom slashed its oil output and COVID-19 took a toll on businesses, Saudi's economy contracted by 3.9% in Q4 2020 compared to the same period in 2019. Since January 2017, the world's largest oil exporter has been curbing output to support oil prices.
According to data from Saudi's General Authority for Statistics, the oil sector contracted by 8.5% and the non-oil sector declined by 0.8% from the same period of 2019.
______UAE ECONOMY TO POST 2.5% GROWTH THIS YEAR AFTER 5.8% CONTRACTION, AS PER THE CENTRAL BANK
The United Arab Emirates economy shrank by 5.8% last year but is expected to post a 2.5% growth this year, the UAE Central Bank said in a report.
The Coronavirus crisis last year had a severe impact on the Gulf state, due to the twin shock of low oil prices and the impact on vital non-oil economic sectors such as tourism.
Real non-hydrocarbon gross domestic product declined by 5.7% last year, according to Central Bank estimates.
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______IPOS LIKELY IN GCC EDUCATION SECTOR AS INVESTOR INTEREST SURGES, AS PER ALPEN CAPITAL
As the education sector continues to emerge from COVID-19, education asset valuations are “more realistic” and mergers and acquisitions (M&A), will thrive as the sector grows and become more common, said industry experts during the launch of Alpen Capital’s GCC Education Industry Report 2021.
The demographics of the GCC region make it irresistible for education investment - a large proportion of young people with a large expat population reliant on private education.
Education providers are also likely to carry out individual public offerings (IPOs) as interest from investors in the GCC education continues to grow, experts from Alpen Capital said.
Saudi Arabian market is of particular interest. It has allowed 100% foreign direct investment (FDI) in the education sector since 2017 and has huge potential for investment in its pre-school market as the Kingdom’s society continues to undergo change.
The Saudi government targets making women 30% of its country’s workforce by 2030, under its Vision 2030 plans.
The UAE and Bahrain also allow 100% foreign investment in education, while Qatar allows 49% foreign investment, and the webinar hears that the private school sector was particularly important in the UAE - the one country where the number of private schools has continued to increase while the number of government schools has fallen.
Public private partnership (PPP) was the standard, now it’s becoming the preferred model to deliver from the government point of view, as per the same source.
______UAE BANKS' GROSS ASSETS INCREASE BY 3% IN JANUARY
The UAE banks' gross assets rose by 3% to AED 3.2 trillion by the end of January 2021, when compared to the same month of 2020.
On a monthly basis, the UAE banks' assets declined by around AED 15.7 billion in January 2021, compared to AED 3.2 trillion in the earlier month, according to the latest data by the Central Bank of the UAE (CBUAE).
In January, the UAE banks' deposits and gross credit increased by 2.7% and 2.4% year-on-year, respectively. Meanwhile, the total banks' reserves at the CBUAE reached AED 305.7 billion in January, down 2.3% year-on-year.
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SURVEYS ______TUNISIA TOPS ARAB MENA COUNTRIES IN FREEDOM IN THE WORLD 2021 INDEX
Freedom House, the US-based non-profit research organization, released its latest report titled “Freedom in the World 2021: Democracy under Siege”, in which Tunisia topped Arab MENA countries and was the only country classified as “Free”. The country had an overall score of 71 and scored 32 on political rights and 39 on civil liberties.
In details, Lebanon came in the second position in the region with a score of 43. Morocco and Kuwait tied in the third position with a score of 37. Mauritania came in after with a score of 35. All four countries were classified as “Partly Free”. At the lower end of the scale, were Somalia, Saudi Arabia, South Sudan and Syria. It is worth noting that all remaining countries in the region were classified as “Not Free”.
According to the report, a number of governments in the Middle East and North Africa took advantage of the pandemic to tamp down protests. In Jordan, emergency laws enacted in response to the pandemic were among those used to detain thousands of teachers who participated in massive strikes and protests led by the Teachers’ Syndicate, which was ultimately dissolved. In light of its blanket ban on protests and the closure of the union, as well as an electoral framework that gave significant advantages to pro-government forces during the year’s elections, Jordan’s status declined from Partly Free to Not Free. Furthermore, the steady collapse of freedom in Egypt continued for the eighth straight year.
ARAB MENA COUNTRIES' FREEDOM IN THE WORLD 2021 SCORES
Total Score Status Algeria 32 Not Free Bahrain 12 Not Free Djibouti 24 Not Free Egypt 18 Not Free Gaza Strip* 11 Not Free Iraq 29 Not Free Jordan 34 Not Free Kuwait 37 Partly Free Lebanon 43 Partly Free Libya 9 Not Free Mauritania 35 Partly Free Morocco 37 Partly Free Oman 23 Not Free Qatar 25 Not Free Saudi Arabia 7 Not Free Somalia 7 Not Free South Sudan 2 Not Free Sudan 17 Not Free Syria 1 Not Free Tunisia 71 Free United Arab Emirates 17 Not Free West Bank* 25 Not Free Yemen 11 Not Free
*Territory not country Sources: Freedom House, Bank Audi's Group Research Department
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______ONE IN TEN UAE WORKERS HASN'T HAD A PAY RISE IN OVER FIVE YEARS, AS PER TIGER RECRUITMENT
Many companies in the UAE have withheld salary increases over the past few years and cut back on company benefits during the coronavirus pandemic, according to a recent report by Tiger Recruitment. Among the 200 professionals polled by Tiger Recruitment recently, one in ten professionals said they haven’t had a pay hike in more than five years. About a quarter (25%) also reported experiencing a pay cut in 2020 amid the financial uncertainty brought about by the COVID-19 outbreak. The human resources specialist firm cited these findings in its report, as it highlighted the importance of offering attractive compensation and benefits in staff retention.
With the pandemic impacting just about everyone, and workers are no exception, the focus should not shift away from staff benefits, as they play a crucial role in talent attraction and retention, according to the recruitment specialist. While offering competitive benefits can encourage the best candidates on the market to choose to work for a particular company, they also play an important role in lifting the morale and motivation of current employees, the report said. It is worth noting that when it comes to dealing with the challenges posed by the outbreak, not all companies are the same. In some businesses, the report noted, the pandemic has prompted employers to offer extra benefits to help their staff survive the pandemic. Some companies have offered housing, school and flight allowances to their employees throughout the challenging period. Other positive examples include a daily allowance for workers to order food to their homes, in place of an on-site canteen or team lunch, and flexibility around holiday allowance, with some companies offering unlimited holiday, while others allow workers to roll their leave over to the next year.
Furthermore, some businesses have also increased their staff bonuses, offering over six months’ salary in the form of a yearly bonus, despite any financial uncertainty they may face. However, the agency has also seen some employers in the private sector choosing to cap benefits in response to the financial challenges brought on by the COVID-19 pandemic, the report said. It’s essential that business leaders recognize the important part that benefits play in long-term staff retention. If they chose to take this step and cut benefits during this crucial time, they may be risking the longevity of workers’ tenure.
______ISLAMIC FINTECH MARKET PROJECTED TO GROW AT 21% CAGR TO US$ 128 BILLION BY 2025
The Islamic Fintech market size within the Organization of Islamic Cooperation (OIC) countries was US$ 49 billion in 2020 and is projected to grow at 21% CAGR to US$ 128 billion by 2025, according to a new report by Islamic economy consultancy Dinar Standard and investment firm Elipses. While this is a higher growth projection compared to conventional fin-tech market, forecasted to grow at 15% CAGR for the same period, in terms of volume it represents only 0.7% of global fin-tech transaction volume, the Global Islamic Fintech Report 2021 produced by Islamic economy consultancy Dinar Standard and investment firm Elipses noted. The top five OIC markets by transaction volume for Islamic fin-tech are Saudi Arabia, UAE, Malaysia, Turkey and Kuwait, indicating a strong dominance by MENAT region countries. Collectively, the top five markets account for 75%of the OIC Islamic fin-tech market size, the report said.
US-based Islamic fintech start-up Wahed, backed by Saudi Aramco, acquiring British digital banking app Niyah was one of the most newsworthy stories of Islamic fin-tech in 2020. The global Islamic fin-tech market also witnessed a number of innovative use cases that heralded a maturing of the market.The report revealed the Global Islamic Fintech (GIFT) Index, which represents countries that are most conducive to the growth of Islamic fin-tech market and ecosystem in their jurisdictions. The index comprises an overall ranking of 64 OIC and non-OIC countries. Malaysia, Saudi Arabia and the UAE lead the Index. Within the set of 64 countries, nine out of the top ten (90%) countries are OIC, Muslim majority countries; the exception is the UK, which has a thriving Islamic Fintech ecosystem. According to the report, the index applied a total of 32 indicators across five different categories for each country. These five categories are: Talent; Regulation; Infrastructure; Islamic Fintech Market & Ecosystem and Capital.
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CORPORATE NEWS ______SICO BUYS SAUDI-BASED MUSCAT CAPITAL IN US$ 14.4 MILLION SHARE SWAP
Sico, one of the leading regional asset managers, brokers and investment banks based in Bahrain, announced that it completed the transaction to acquire a majority stake amounting to 72.7% in the Saudi-based Muscat Capital, an exclusively owned subsidiary of Bank Muscat after obtaining all relevant approvals.
The acquisition took place by a share swap valued at US$ 14.4 million, with 38.5 million of Sico’s treasury shares swapped for a majority stake amounting to 4.7 million shares out of Muscat Capital’s 6 million total outstanding shares, as per Sico. As a result of the transaction, Sico now owns 72.7% of Muscat Capital while Bank Muscat owns a 9% stake in the Bahraini wholesale bank.
Bank Muscat is one of the leading financial institutions based in the Sultanate of Oman and operates under a banking license issued by the Central Bank of Oman. Its subsidiary, Muscat Capital, is a full-service capital market institution established in 2009 operating in Saudi Arabia and licensed by the Saudi Arabian Capital Market Authority.
______SABB AND ALAWWAL BANK COMPLETE MERGER
SABB and Alawwal bank completed their merger, with all products and services combined for all customers. Despite being the first time a merger of this scale and complexity was attempted in the Kingdom, in addition to the challenges of the pandemic, the integration of both banks was completed on time.
______ALDAR OFFERS TO BUY 51% STAKE IN TOP EGYPTIAN DEVELOPER SODIC
Aldar Properties, one of the leading UAE developers, submitted a preliminary non-binding offer for a majority stake in Egyptian real estate group Sixth of October for Development and Investment Company (SODIC).
The offer for a minimum of 51% of the outstanding share capital of SODIC is subject to due diligence, applicable regulatory approvals and other conditions. It will be implemented by a consortium controlled and majority owned by Aldar.
Following the outcome of the due diligence process, the Aldar-led consortium intends to make a mandatory tender offer in accordance with applicable laws and regulations.
______BAHRI SEALS TIME CHARTER DEAL WITH DUBAI SHIPPER UACC
Saudi-based Bahri, one of the leaders in logistics and transportation, announced that its business unit, Bahri Chemicals signed a long-term time charter agreement with United Arab Chemical Carriers Limited (UACC), an international shipping company headquartered in Dubai.
As part of the deal, nine IMO2 MR (medium range) chemical tankers will join Bahri Chemicals’ fleet from April onwards, bringing the total number of vessels of the same class that it operates to 31.
Bahri Chemicals has ten advanced, eco-design, wide-beam IMO2 MR tankers under construction at Hyundai Mipo Dockyard in South Korea with delivery scheduled for 2022, as per Bahri CEO.
Bahri Chemicals currently owns a fleet of 23 chemical tankers, including 22 IMO2 MRs and one IMO2 LR (long range), as well as five product tankers providing maritime transportation to a global customer base across chemicals, clean petroleum product, and vegetable oils industries.
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______DP WORLD JV COMPLETES FIRST 10,000 CONTAINER MOVES AT DUBAI PORT
DP World, the Dubai-based enabler of worldwide smart end-to-end supply chain logistics, announced that BoxBay - its joint venture with the German industrial engineering specialist SMS group - completed the first 10,000 container moves in its high bay store system at Jabel Ali port in Dubai. The milestone demonstrates the disruptive technology concept works and makes possible dramatic changes to the way containers are handled in ports around the world.
DP World said traditionally these containers are stacked one on top of the other in rows meaning many containers have to be moved to access containers lower down in the stacks. The system is designed to run automatically and enables any container to be accessed individually without moving any other, it stated.
BoxBay is designed to be fully electrified and can be powered by solar panels on its roof, said the Dubai group. Construction of the test facility with 792 container slots was completed in July 2020 in Terminal 4 of Jabel Ali Port in Dubai, said the statement from DP World.
BoxBay is a patented automated container handling system that stores containers up to 11 stories high in steel racks. It delivers more than three times the capacity of a conventional yard, so the footprint of terminals can be reduced by up to 70 %.
______DUBAI'S GRUBTECH SECURES US$ 3.4 MILLION PRE-SERIES A FUNDING
Dubai-based Grubtech, a software as a service (SaaS) platform for cloud kitchens and delivery-centric restaurants, secured US$ 3.4 million pre–Series A funding. This follows the US$ 2 million it raised in seed funding last year. Investors are large regional family businesses, a U.S.-based venture capital firm as well as reputable angel investors, the company said in a statement.
______EGIS TAKES OVER TOP KUWAIT ENGINEERING CONSULTANCY
In 2015, Egis purchased 51% of the shares in Projacs International, thus becoming a major shareholder. Since then, Egis and Projacs worked on aligning the business strategies in the Middle Eastern market and enlarging their geographical expansion, said a statement from Egis. With this acquisition of a strategic stake in the Kuwaiti engineering group, Egis' ownership rose to 95.45%. According to Egis, the acquisition allows both companies to unify the offerings to the clients through well-established network of local offices with a global experience.
Egis is French multinational company group in the construction engineering and mobility services sectors whose global service range encompasses infrastructure consulting, engineering and operation. It is 75 % owned by Caisse des Dépôts, while the remaining 25% stake is held by partner executives and employees.
Projacs International was founded in 1984 in Kuwait. Projacs is one of the largest Pan-Arab project and construction management company with offices in all the Middle Eastern countries.
______DEWA COMMISSIONS 400/132 KV SUBSTATION AT MAKTOUM SOLAR PARK
Dubai Electricity and Water Authority (DEWA) said it commissioned a new 400/132 kV substation at the Mohammed bin Rashid Al Maktoum Solar Park. It has a conversion capacity of 2020 megavolt-amperes (MVA) with 223 km of 400kV overhead lines to connect with Dewa’s network. Inaugurating the 400/132 kV Shams substation is part of DEWA’s efforts to raise the capacity of the power transmission network and increase the share of clean energy in Dubai’s energy mix. This achieves the objectives of the Dubai clean energy strategy 2050 to provide 75% of Dubai’s total power capacity from clean energy sources by 2050, stated Dewa Managing Director & CEO.
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CAPITAL MARKETS ______EQUITY MARKETS: SHY WEEKLY PRICE RETREATS IN MENA EQUITIES, MAINLY PRESSURED BY SAUDI TADAWUL
MENA equity markets registered shy price retreats this week, as reflected by a 0.3% decline in the S&P Pan Arab Composite index, mainly pressured by falling oil prices on concerns over sustained drops in global oil demand and due to some unfavorable company-specific factors. The heavyweight Saudi Tadawul and the Egyptian Exchange topped the losers’ list this week, while the UAE equity markets and the Qatar Exchange posted price gains.
The heavyweight Saudi Tadawul, whose market capitalisation represents circa 76.5% of total regional market capitalisation, registered a 1.4% decrease in prices week-on-week, mainly weighed down by falling Brent prices (-6.8%) to reach US$ 64.53 per barrel after a US government report showed that domestic oil supplies rose for the fourth consecutive week and the International Energy Agency said that global supplies are plentiful, while a stronger US dollar reduced the appeal of commodities priced in the currency, and stalled vaccination efforts in some parts of the world casted uncertainty over the speed of an economic recovery and a full rebound in global oil demand.
A closer look at individual stocks shows that, Saudi Aramco shares, whose market capitalization represents circa 75.3% of the total Saudi market capitalization, posted price drops of 2.0% week-on-week to close at SR 35.20. SABIC’s share price retreated by 0.4% to SR 109.40. Petrochem’s share price shed 2.3% to SR 37.75. Yansab’s share price plunged by 3.6% to SR 66.30. Advanced Petrochemical Company’s share price decreased by 2.6% to SR 67.50. Also, NCB’s share price shed 3.1% to SR 50.20. Al Rajhi Bank’s share price plunged by 5.7% to SR 91.80. Samba’s share price dropped by 2.7% to SR 36.20.
The Egyptian Exchange posted a 2.4% drop in prices week-on-week, mainly dragged by some unfavorable company-specific factors. Eastern Tobacco’s share price plummeted by 12.9% to LE 12.17. Egypt’s Industrial Development Authority launched a new bidding booklet for companies to apply for a new tobacco production license, for both regular and e-cigarettes, bringing an end to a decades-old monopoly by government-controlled tobacco product manufacturer Eastern Company. The deadline for bids is on April 4, 2021 and the auction would be held on June 6, 2021. EFG Hermes’ share price fell by 1.7% to LE 14.37. EFG Hermes reported 2020 net profits of LE 1.31 billion versus net profits of LE 1.38 billion in 2019. Heliopolis
EQUITY MARKETS INDICATORS (MARCH 14 - MARCH 20, 2021)
Price week-on- Year-to- Trading week-on- Volume Market Capi- Turnover Market P/E* P/BV* Index week Date Value week Traded talization ratio
Lebanon 76.67 7.2% 20.7% 11.4 108.8% 0.6 8,664.0 6.8% - 0.58 Jordan 291.9 -0.1% 2.1% 41.6 4.0% 24.5 19,117.9 11.3% 17.2 1.33 Egypt 270.5 -2.4% 1.0% 254.2 -22.4% 2,047.1 45,345.6 29.2% 9.6 1.66 Saudi Arabia 422.2 -1.4% 10.7% 14,274.4 -9.6% 2,069.3 2,494,402.8 29.8% 28.1 6.34 Qatar 174.8 0.9% -1.3% 594.6 -5.0% 963.4 161,526.6 19.1% 15.7 1.87 UAE 114.6 1.6% 11.3% 1,360.7 17.3% 1,058.8 315,574.7 22.4% 16.0 1.97 Oman 194.3 2.3% 3.4% 17.4 21.2% 44.4 16,122.9 5.6% 11.1 0.88 Bahrain 137.4 -0.6% -3.1% 7.5 -70.2% 13.5 22,343.4 1.8% 14.5 0.52 Kuwait 111.8 2.0% 6.8% 564.0 46.1% 778.5 102,460.5 28.6% 22.8 1.70 Morocco 284.0 0.6% 0.4% 70.5 70.6% 2.2 65,674.7 5.6% 23.0 2.86 Tunisia 67.2 -0.4% -3.4% 7.6 -1.4% 5.5 8,307.6 4.7% 15.3 2.82 Arabian Markets 830.7 -0.3% 8.0% 17,203.9 -6.6% 7,007.7 3,259,540.7 27.4% 25.5 5.29 Values in US$ million; volumes in millions * Market cap-weighted averages
Sources: S&P, Bloomberg, Bank Audi's Group Research Department
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Housing’s share price closed 2.3% lower at LE 4.99.3 Heliopolis Housing reported a net loss of LE 75 million during the first half of FY 2021 versus net profits of LE 351 million a year earlier.
In contrast, the UAE equity markets posted a 1.6% increase in prices week-on-week, mainly supported by some favorable market-specific and company-specific factors. The Central Bank of the UAE said that the domestic economic activity continued to recover during the fourth quarter of 2020 and is forecast to pick- up in 2021 and 2022, and signaled that the overall liquidity of the UAE banking system has returned to pre- Coronavirus levels. Also, Dubai’s government announced plans to increase tourism and hotel capacity by 134% over the next two decades. Emirates NBD’s share price closed 1.3% higher at AED 11.80. Dubai Islamic Bank’s share price increased by 1.9% to AED 4.80. Amlak Finance’s share price surged by 4.2% to AED 0.224. Emaar Properties’ share price rose by 1.7% to AED 3.65.
In Abu Dhabi, First Abu Dhabi Bank’s share price went up by 2.5% over the week to AED 14.70. ADIB’s share price surged by 3.2% to AED 4.89. Etisalat’s share price closed 1.8% higher at AED 20.90. Etisalat’s Annual General Meeting approved the Board of Directors’ recommendation to pay a record high 2020 dividends of AED 1.20 per share, including a one-time special dividend of 40 fils per share, and approved raising the foreign ownership limit to 49%.
The Qatar Exchange registered a 0.9% rise in prices week-on-week, mainly supported by some favorable company-specific factors. Mannai Corporation’s share price jumped by 9.9% to QR 3.33. Mannai Corporation announced 2020 net profits of QR 14 million versus a net loss of QR 81 million in 2019. The company’s Board of Directors recommended the distribution of dividends at a rate of QR 1 per share for the year 2020. Vodafone Qatar’s share price surged by 6.1% to QR 1.68. Retail investors showed a decent appetite for Vodafone Qatar’s stock following recent strong earnings results. The firm had previously announced a 29% year-on-year increase in its 2020 net profits to reach QR 185 million. Ooredoo’s share price increased by 3.1% to QR 6.99. Analysts see a progression toward a merger between Indosat, Ooredoo’s Indonesian unit, and CK Hutchison’s PT Hutchison 3.
______FIXED INCOME MARKETS: MIXED PRICE MOVEMENTS IN MENA BOND MARKETS THIS WEEK
MENA fixed income markets saw mixed price movements this week. Some regional papers traced a downward trajectory, mainly tracking US Treasuries move after the US Federal Reserve declined to extend a pandemic-era rule that has relaxed the amount of capital banks had to maintain against Treasuries and other holdings, while indicating that the Central Bank would allow inflation to heat up as the job market recovers. Some other regional papers registered price gains, on concerns that stalled vaccination efforts in some parts of the world would deter a global economic recovery.
In the Qatari credit space, sovereigns maturing in 2030 registered price declines of 0.38 pt week-on- week. Ooredoo’26 closed down by 0.19 pt. Amongst financials, prices of QNB’25 declined by 0.12 pt. QIB’24 saw no price change. Standard and Poor’s affirmed its “A-/A-2” long-term and short-term issuer credit ratings on Qatar Islamic Bank, with a “stable” outlook. The “stable” outlook reflects S&P’s view that QIB's business and financial profiles would remain broadly stable over the next 12-24 months despite the pressure on its operating environment and S&P’s expectation that the bank's asset-quality indicators would weaken slightly. Regarding plans for new issues, Doha Bank hired Barclays, Deutsche Bank, JP Morgan Chase, Mizuho Securities, MUFG, QNB Capital and Credit Suisse as lead managers for the sale of a benchmark US dollar-denominated five-year senior unsecured bond.
In the Saudi credit space, sovereigns maturing in 2026 and 2030 posted price gains of 0.25 pt and 0.50 pt respectively this week. Saudi Aramco’25 closed down by 0.07 pt. STC’29 was down by 0.97 pt. Prices of SABIC’28 decreased by 0.15 pt. SECO’24 posted price retreats of 0.08 pt. Regarding new issues, Saudi Arabia raised SR 7.7 billion from the sale of a dual-tranche Sukuk offering. The first tranche of SR 2.7 matures in 2028, while the second tranche of SR 5.0 billion matures in 2031.
Week 12 March 14 - March 20, 2021 10 MARCH 14 - MARCH 20, 2021 WEEK 12
In the Bahraini credit space, sovereigns maturing in 2026 posted price rises of 0.25 pt, while sovereigns maturing in 2031 registered price contractions of 0.56 pt week-on-week. Prices of NOGA’2027 retreated by 0.44 pt.
In the Omani credit space, sovereigns maturing in 2026 and 2029 posted price gains of 0.69 pt and 0.63 pt respectively week-on-week. Prices of Omantel’28 rose by 0.63 pt.
In the Egyptian credit space, US dollar-denominated sovereigns maturing in 2023, 2025, 2030 and 2040 registered price gains of up to 0.50 pt this week. Prices of Euro-denominated sovereigns maturing in 2026 and 2031 contracted by 0.67 pt and 0.49 pt respectively.
All in all, regional bond markets saw two-way flows this week. Some papers traced a downward trajectory, mainly tracking declines in US Treasuries, with the yield on the benchmark 10-year US Treasury notes reaching a 14-month high after the US Federal Reserve declined extending a rule that has relaxed the supplementary leverage ratio for banks during the pandemic. Some other papers registered weekly price gains on concerns over delays in COVID-19 vaccine rollouts in some parts of the world.
MIDDLE EAST 5Y CDS SPREADS V/S INTL BENCHMARKS Week-on- in basis points 19-Mar-21 12-Mar-21 31-Dec-20 week Year-to-date Abu Dhabi 43 46 38 -3 5 Dubai 98 100 112 -2 -14 Kuwait 46 47 44 -1 2 Qatar 43 46 38 -3 5 Saudi Arabia 63 64 65 -1 -2 Bahrain 200 204 241 -4 -41 Morocco 98 102 112 -4 -14 Egypt 295 302 339 -7 -44 Iraq 578 603 693 -25 -115 Middle East 163 168 187 -5 -24 Emerging Markets 119 127 105 -8 14 Global 149 151 140 -2 9
Sources: Bloomberg, Bank Audi's Group Research Department
Z-SPREAD BASED AUDI MENA BOND INDEX V/S INTERNATIONAL BENCHMARKS
Base Jan 2010 = 100 2 0 240 220 200 1 0 1 0 140 120 100 0 0 40 20 0 Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20 Feb-21
M r Mar
Sources: Bloomberg, Bank Audi's Group Research Department
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SOVEREIGN RATINGS & FX RATES
SOVEREIGN RATINGS Standard & Poor's Moody's Fitch LEVANT Lebanon SD/-/SD C/- RD/-/C Syria NR NR NR Jordan B+/Stable/B B1/Stable BB-/Negative/B Egypt B/Stable/B B2/Stable B+/Stable/B Iraq B-/Stable/B Caa1/Stable B-/Negative/B GULF Saudi Arabia A-/Stable/A-2 A1/Negative A/Negative/F1+ United Arab Emirates AA/Stable/A-1+* Aa2/Stable AA-/Stable/F1+ Qatar AA-/Stable/A-1+ Aa3/Stable AA-/Stable/F1+ Kuwait AA-/Negative/A-1+ A1/Stable AA/Negative/F1+ Bahrain B+/Stable/B B2/Stable B+/Stable/B Oman B+/Stable/B Ba3/Negative BB-/Negative/B Yemen NR NR NR NORTH AFRICA Algeria NR NR NR Morocco BBB-/Negative/A-3 Ba1/Negative BB+/Stable/B Tunisia NR B3/Negative B/Negative/B Libya NR NR NR Sudan NR NR NR NR= Not Rated RWN= Rating Watch Negative RUR= Ratings Under Review * Emirate of Abu Dhabi Ratings
FX RATES (per US$) 12-Mar-21 05-Mar-21 31-Dec-20 Weekly change Year-to-date LEVANT Lebanese Pound (LBP) 1,507.50 1,507.50 1,507.50 0.0% 0.0% Jordanian Dinar (JOD) 0.71 0.71 0.71 0.0% -0.1% Egyptian Pound (EGP) 15.67 15.70 15.75 -0.2% -0.5% Iraqi Dinar (IQD) 1,460.00 1,460.00 1,460.00 0.0% 0.0% GULF Saudi Riyal (SAR) 3.75 3.75 3.75 0.0% 0.1% UAE Dirham (AED) 3.67 3.67 3.67 0.0% 0.0% Qatari Riyal (QAR) 3.71 3.69 3.67 0.3% 1.0% Kuwaiti Dinar (KWD) 0.30 0.30 0.30 0.0% 0.1% Bahraini Dinar (BHD) 0.38 0.38 0.38 0.0% 0.0% Omani Riyal (OMR) 0.39 0.39 0.39 0.0% 0.0% Yemeni Riyal (YER) 250.00 250.00 250.00 0.0% 0.0% NORTH AFRICA Algerian Dinar (DZD) 133.33 133.33 131.58 0.0% 1.3% Moroccan Dirham (MAD) 8.99 8.99 8.91 0.0% 0.9% Tunisian Dinar (TND) 2.75 2.75 2.69 0.0% 2.1% Libyan Dinar (LYD) 4.49 4.50 1.34 -0.1% 235.7% Sudanese Pound (SDG) 378.77 380.00 55.14 -0.3% 587.0%
Sources: Bloomberg, Bank Audi's Group Research Department
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