POLICY CUES | Page 14 Fed offi cials diverge on rate cut need

Sunday, May 5, 2019 Sha’baan 30, 1440 AH

CABLE-SPORTS POWERHOUSE : Page 16 GULF TIMES Sinclair Group to buy Disney’s 21 Fox BUSINESS networks for $9.6bn Qatar’s realty sector seen staying ‘buyer-friendly’ Kempinski hotels appoint Raghu Menon as new over next quarters of 2019 cluster general

By Pratap John favour tenants. Falling Average Daily Rates manager Business Editor (ADRs) have given rise to occupancy in all ho- tel categories. Industrial storage rents in the industrial sector decreased marginally, the Marsa Malaz Kempinski, The Pearl – Doha atar’s real estate may remain a “buyer- report said. & Kempinski Residences & Suites have friendly market” over the next quar- ValuStrat’s general manager (Qatar) Pawel announced the appointment of Raghu Menon Qters of 2019 as “existing and upcoming Banach said, “Prices and rents continue to (pictured) as the new cluster general manager. supply this year will entail further softening fall, however, the rate of adjustment is slower, An Australian national and veteran hotelier, of prices”, a new report has shown. indicating they have reached a more repre- Raghu has over 20 years of experience in the The fi rst quarter 2019 review issued by sentative level in several areas of Qatar. Com- hospitality industry. He acquired his people leading regional consulting fi rm ValuStrat petitive prices can partially explain the jump management skills in his various food and reports the continuation of an overall correc- in transaction volume by 20% annually this beverage roles within the Ritz-Carlton and JW tion phase where prices have become “more quarter. Marriott hotels and took his expertise to run the competitive”. Residential capital values and “Existing and upcoming supply in 2019 operation as general manager with Ritz-Carlton, rents weakened and offi ce rents continued to will entail further softening of prices, ensur- starting in Shenzhen, China in 2012, Bengaluru, ing Qatar remains a buyer-friendly market India in 2014, DIFC Dubai in 2017 and St Regis over the next quarters of 2019. In a bid to Doha in 2018. Hotel sector sees 27,474 rooms in Q1 entice tenants and buyers, a range of attrac- Raghu has a wealth of hospitality operation Qatar’s hotel sector saw the first quarter of tive incentives were off ered by landlords. experience with extensive global leadership 2019 ending with 27,474 hotel rooms with the Furthermore, the recent law amendment of and knowledge of luxury brands. He has unveiling of Mandarin Oriental (Mushiereb), expanding freehold ownership in residential demonstrated commitment to the highest Dana Al Sadd (Al Sadd), VIP hotel (Umm Ghu- and commercial sectors have provided further standards of service excellence and successful wailina) and Dusit Doha (West Bay), ValuStrat incentives to foreign owners to have outright development of many five-star hotels. As a said. property ownership in Qatar.” respected and caring leader, Raghu’s invaluable Visitor arrivals recorded at 376,000 until Qatar’s ValuStrat Price Index (VPI) for resi- insight will ensure the continued success of The February 2019 were up by 8% year-on-year. As dential capital values is a 100-point valua- Pearl island landmark and West Bay’s tallest hotel operators reduced room rates to attract tion-based index with its base set in Q1, 2016, residence tower, a company statement said. more guests, the Average Daily Rate (ADR) stood at 73.4 points. Countrywide residential Commenting on his new appointment, Raghu declined 6% y-o-y for the first two months of capital values declined by 18.3% compared to stated, “I am delighted to have been granted 2019, a result of which led to hotel occupancy the same quarter two years ago, down 9.9% The fi rst quarter 2019 review issued by leading regional consulting fi rm ValuStrat this opportunity to become the new Cluster increasing to 67% from 60% last year, and year-on-year (y-o-y) and 2.2% (quarter-on- reports the continuation of an overall correction phase in Qatar’s real estate General Manager of Kempinski hotels in Qatar. there was a 3% annual rise in occupancy for quarter). sector as prices have become “more competitive” I have long admired Marsa Malaz Kempinski’s hotel apartment to 76%. The average capital value of a residential stunning facilities and Kempinski Residences & Qatar’s organised retail stock remained at unit stood at QR8,186 per sq m, ValuStrat 2018 carried over to Q1 2019, ValuStrat said. y-o-y leading to a gross yield of 6%. Over- Suites’ long-standing reputation as Doha’s top 1.8mn sq m gross leasable area (GLA) by the noted. Citywide residential asking rents declined all gross yields increased to 5%. This trend serviced hotel apartments, and I look forward end of Q1, 2019. An estimated 185,000sq m More specifi cally, apartments were 10.3% over the past 12 months and 2% since is expected to prevail throughout 2019,” said to working with the team to enhance this GLA from four shopping centres are in pipeline QR11,934 per sq m and villas stood at QR6,320 the fourth quarter of 2018. Anum Hasan, senior market research analyst reputation and to continue to provide guests for 2019. per sq m. Compared to the previous quarter, Secondary apartment and villa locations at ValuStrat. with memorable experiences and uphold the Average occupancy across malls was estimat- apartment capital values softened by 0.8%, such as Al Wakrah, Al Khor, Muraikh, Old Air- Residential supply reached 293,000 units traditions of which Kempinski is proud of.” ed at 80%. However, the performance of older whereas villa values fell 2.5%. port, Al Gharrafa and Umm Salal Mohammad as of Q1 2019 with the delivery of 3,000 apart- Kempinski is a luxury hospitality brand that and newly completed shopping malls might Villas in West Bay Lagoon, Al Waab, Fer- experienced annual rental falls of up to 10%. ments and villas in The Pearl, Lusail, Abu Sid- has travelled the world in search of the most come under pressure due to upcoming retail eej Soudan, Ain Khalid Abu Hamour, Duhail “Capital values of villas in Ain Khaled de- ra, Al Wukair, Baaya, Al Hilal and Sakhama. fascinating destinations without ever forgetting supply. Additionally, average rents in Doha and Muaither and Al Kharaitiyat experienced clined 6% quarterly; however, its rental val- Projected completion for the remaining the finest traditions of its European heritage, street retail remained stable at QR200 per sq quarterly declines up to 10%. ues dipped 1% causing gross yields to elevate quarters of 2019 has been adjusted to 10,000 with luxury holiday resorts, business and Spa m, the regional consulting firm said. In the residential rental market, the down- to 3.8%. In Zig Zag Tower, capital values and units, 67% of which is planned for Lusail and hotels around the world. ward pressure on rents witnessed throughout rents declined by 4% and 0.6% respectively The Pearl, ValuStrat said.

Capital flows to EMs rebound in Q1, says QNB

Capital flows to emerging markets (EM) have seen a clear In 2018 global financial conditions tightened and the dollar rebound in the first quarter after suff ering in 2018 due to tight appreciated amidst rising political risks and much weaker global financial conditions and dollar appreciation, QNB has economic performance in the euro area and Asia. said in an economic commentary. Portfolio capital flows to EM fell from an average of more than QNB expects portfolio capital flows to EM to be higher in 2019 $31bn per quarter in 2017 to less than $17bn per quarter in than 2018 as the US Federal reserve has shifted to a neutral 2018. Even China, a key part of the 2017 EM rebound, started stance and investors become less risk averse. to decelerate as domestic policies were less supportive and The Institute of International Finance (IIF) compiles trackers trade jitters with the US dented business and consumer of portfolio capital flows, which cover daily real money flows confidence. into the stocks and bonds of twenty large EMs. The trackers QNB noted that 2019 has already seen a rebound in portfolio are a good indicator for the portfolio flows component of the capital flows to EM to $36bn in the first quarter. However, only off icial balance of payment (BoP) data, which are released a small number of emerging markets have seen a convincing much later. rebound in flows, with Indonesia perhaps the prime example. QBIC ‘s Lean Manufacturing Programme has seen several promising industrial startups and rapidly Historically there have been two main drivers of portfolio Whereas, some large EMs like South Africa, Thailand and growing manufacturing companies take part in practical workshops and developmental sessions capital flows to EM: interest rates and economic growth, QNB Malaysia have seen continued outflows. Elections in Thailand, noted. Higher interest rates and growth in EMs, relative to ad- Turkey, South Africa and India during the first half of 2019 vanced economies, tend to attract capital as EMs off er higher represent political risk for investors. returns to investors. Lower political risk after these elections should support port- Higher relative interest rates naturally attract foreign invest- folio capital flows during the rest of the year. QBIC concludes ‘fi rst wave’ of the ment in interest-bearing assets such as bonds. Whereas, The IIF uses its trackers of portfolio capital flows to inform stronger economic growth has traditionally drawn investors their projections of non-resident capital flows to EM. The IIF to equity investment on prospects of higher future profitabil- expects only a modest pickup of non-resident capital flows to Lean Manufacturing Programme ity, QNB said. EM from $1.14tn in 2018 to $1.26tn in 2019. Since the 2009 global financial crisis, there have been three It argues that years of low interest rates and quantitative notable periods when portfolio capital flows to EMs weakened easing by major central banks have left global investors with a BIC has successfully conclud- national experts and partners, as QBIC their operations and grow into the next or reversed. large share of their portfolios already allocated to EMs, leaving ed the fi rst wave of its newly continues to deliver world-class con- stage of the production cycle. The announced tapering of quantitative easing in May 2013 little room for them to increase their purchases of EM assets, Qformed Lean Manufacturing tent that is relevant to the local market. QBIC general manager Hamad led to tighter financial conditions in EMs. Many EMs have high QNB said. Programme (LMP) at an event held at Within this programme, entrepre- Dashin al-Qahtani said, “QBIC is keen levels of dollar debt. Weaker EM currencies increased the cost “Rather, we expect non-resident capital flows to EMs to pick the Four Seasons Doha. neurs and business owners gained a to position itself as an incubator that of repaying and servicing this debt, forcing EMs to deleverage. up more strongly than the IIF for two main reasons. First, we The programme, which is the fi rst of thorough, hands-on understanding is able to provide unique talent with All these factors dragged on growth. believe that higher growth in EMs than advanced economies its kind in the country, has seen sev- of the holistic manufacturing process the tailored programmes and support In 2015, Chinese policies aimed at reducing the buildup of will allow them to continue to supply investor with assets eral promising industrial startups and through a series of practical sessions required to achieve maximum poten- debt in the shadow banking system threatened to slow GDP off ering attractive risk-adjusted returns. Second, our view on rapidly growing manufacturing com- that are based on the lean methodol- tial in their desired industry. QBIC’s growth too sharply and risked causing a disorderly devalu- global GDP growth is more optimistic than theirs,” QNB said. panies take part in practical workshops ogy. ambition and long-term vision is that ation of the renminbi. In the seven months from July 2015, The US Federal Reserve has become more “dovish”, QNB and developmental sessions. Graduates of the LMP can now the Qatari industrial sector can be en- $70bn flowed out of EMs due to fears of a hard landing in noted. “We are optimistic about a partial US-China trade deal. The LMP is designed to build the ca- transfer their knowledge and skills to hanced and elevated through the Lean China. EM outflows peaked in January 2016 at $16bn as risk off Policy stimulus in China is beginning to bear fruit, which will pacity of companies and startups that empower individuals currently within Manufacturing Programme.” sentiment in global financial markets intensified. have a positive knock-on impact on other EMs. These three are currently manufacturing or aiming the industrial and manufacturing sec- He said, “I would like to express my However, capital flows began to recover in 2017 as China man- factors are driving an improvement in financial market senti- to manufacture products and goods tor, as they pave the way to leading pride and sincere congratulations to aged to sustain growth and fiscal stimulus in the US drove a ment, which will particularly benefit more risky assets like EM in Qatar. Participants in the LMP are change within the sector in Qatar. the fi rst wave participants of the LMP pick up in global GDP growth. debt and equity,” QNB said. trained to develop their ideas alongside Programme graduates leave with the for their solid eff ort and commitment invaluable insights provided by inter- skills and knowledge to effi ciently scale throughout the past 5 weeks.” Gulf Times 2 Sunday, May 5, 2019 BUSINESS Abraaj founder Arif Naqvi gets record $20mn bail in London

Bloomberg London

rif Naqvi, the founder of buy- out fund Abraaj Group, can be Areleased on conditional bail of £15mn ($20mn) after a London judge dismissed prosecutors’ bid to keep him in custody while he fi ghts extradition to the US. Naqvi – who’s caught up in an American fraud probe – was granted bail by Judge Michael Supperstone on Friday. The bond amount is “the larg- est security ever ordered in the UK,” according to Naqvi’s fi lings for Friday’s hearing. During his bail, the 58-year-old must surrender his travel documents, wear an electronic tag and stay in his London home. Naqvi’s bail conditions “eff ectively amount to house arrest,” the judge said. Prosecutors said they feared he may Arif Naqvi, the founder of buyout fund Abraaj Group, speaks during a Bloomberg fl ee to Pakistan rather than face the Television interview in London (file). Naqvi is one of several Abraaj off icials caught American charges. An electronic mon- up in a probe of what had been the Middle East’s biggest private-equity fund. itoring tag “is not a panacea, as anyone involved in Mr Assange’s case will tell render to authorities, “if appropriate of millions of dollars. He denies the you,” Rachel Kapila, the US govern- conditions are imposed” on his bail, accusations and says the idea he took ment’s lawyer, said at the hearing. the judge said on Friday. money out for his own personal ben- WikiLeaks founder Julian Assange Naqvi is one of several Abraaj offi - efi t is “ludicrous.” was reportedly wearing an electronic cials caught up in a probe of what had Naqvi’s sureties include Javed tag when he entered Ecuador’s embas- been the Middle East’s biggest pri- Ahmed, the former chief executive of- sy in London in 2012. vate-equity fund. He is charged with fi cer of Tate & Lyle Plc, who’s “willing “I am not persuaded” that “there’s infl ating the value of the Dubai-based to stand £300,000” for Naqvi, his law- a real risk” that Naqvi will fail to sur- fi rm’s holdings and stealing hundreds yer Hugo Keith said at the hearing. Gulf Times Sunday, May 5, 2019 3 BUSINESS

Iran must resist US sanctions through oil, non-oil exports: Rouhani President Hassan Rouhani said yesterday Iran at halting its ballistic missile programme and must counter US sanctions by continuing curbing its regional power. “America is trying to export its oil as well as boosting non-oil to decrease our foreign reserves...So we have exports. to increase our hard currency income and Iran hasn’t cut off shore Rouhani’s comments, carried live on Iranian cut our currency expenditures,” Rouhani TV, came a day after Washington acted to said. “Last year, we had we non-oil exports of force Iran to stop producing low-enriched $43bn. We should increase production and uranium and expanding its only nuclear raise our (non-oil) exports and resist America’s oil output and halted power plant, intensifying a campaign aimed plots against the sale of our oil.” exports: IOOC head

Bloomberg Tehran/London

ran’s off shore oil production hasn’t seen any reduction and Ithe country just loaded crude for export, said Hamid Bovard, head of the Iranian Off shore Oil Co. It loaded the latest batch of crude from its off shore fi elds for export three days ago, Bovard said at a press conference, without elabo- rating on the volume or the desti- nation. Exports are underway as planned, he said. The US government terminated waivers allowing a handful of coun- tries to buy Iranian crude in an ef- fort to reduce Iran’s critical oil ex- ports to zero. More than 130mn barrels of oil were exported from Iran’s off shore fi elds in the fi scal year that ended March 20, Bovard said. A tender to raise production at the Forouzan oil fi eld will be fi nalised by the end of June. Its development requires an additional €300mn ($336mn) investment, he said. Iran has about 100bn barrels of oil in 40 off shore fi elds in the Gulf and Sea of Oman, Bovard said. Iran’s oil minister on Friday warned that Opec is in danger of collapse as some nations seek to un- A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in Gulf (file). More dermine their fellow members, an than 130mn barrels of oil were exported from Iran’s off shore fields in the fiscal year that ended March 20, said apparent reference to Saudi Arabia’s Hamid Bovard, head of the Iranian Off shore Oil Co. pledge to fi ll the supply gap created by US sanctions on Iranian exports. eral Mohammad Barkindo in Tehran zero, backed by a promise from Saudi of American sanctions hit Iran, “Iran is a member of Opec for its on Thursday, according to the oil Arabia and its Gulf allies to increase without splitting the Organisation interests and any threat from mem- ministry’s Shana news agency. production to ensure the squeeze of Petroleum Exporting Countries. ber states won’t go unanswered,” His comments come as US Presi- doesn’t create a supply shortage. This year, however, Iran is under Bijan Namdar Zanganeh said after a dent Donald Trump tries to cut the Those countries boosted pro- even greater pressure, with fewer meeting with Opec secretary-gen- Islamic Republic’s oil exports to duction last year as the fi rst round options to keep its economy afl oat. Gulf Times 4 Sunday, May 5, 2019 BUSINESS

Luxury mansion linked to Malaysia’s 1MDB fund scandal to be sold

Reuters United States for his central role in the The mansion was now empty and the proposed sale will be held in a proceed in a timely fashion.” “We several associates to buy about Kuala Lumpur alleged theft of $4.5bn from state fund falling into disrepair, costing nearly government account pending the look forward to the continued $1.7bn in assets including luxury real 1Malaysia Development Berhad (1MDB). $690,000 in maintenance, insurance outcome of the forfeiture case, they amicable resolution of these claims,” estate, a private jet, jewelry and art. Low, whose whereabouts are and taxes annually, US prosecutors said. The parties filed a separate the spokesman said. The United States this month US prosecutors are seeking to sell unknown, has consistently denied and the property’s holding company request for the court to lift a stay on The DoJ, in the biggest case to date will return to Malaysia $200mn a $39mn Los Angeles mansion wrongdoing through spokesmen. said on Friday. the forfeiture lawsuit so that the sale in its anti-kleptocracy programme, recovered as part of the seizure of allegedly bought by fugitive In 2017, the US Department of A sale of the property was necessary can proceed. is pursuing billions of dollars it says 1MDB-linked assets, sources have Malaysian financier Low Taek Jho Justice (DoJ) filed civil forfeiture as “the expense of keeping the Low’s spokesman said in a statement were misappropriated from 1MDB, told Reuters. Najib, who lost power with money stolen from a state fund, lawsuits on several assets said to property is excessive and/or is his client was aware of the proposed a state fund founded by former in a general election last year, is court filings showed. have been bought with stolen 1MDB disproportionate to its fair market sale to “preserve the property’s Malaysian prime minister Najib Razak. facing more than 40 criminal charges Low, popularly known as Jho Low, funds, including the mansion near value”, the parties said in the filing in value while ensuring the owners’ US prosecutors say funds diverted related to losses at 1MDB and other has been charged in Malaysia and the Hollywood’s famed Sunset Strip. a California court. The money from claims are protected and may from 1MDB were used by Low and government entities. Even Hollywood knows a happy ending to US and China talks no guarantee

Wood: Planning to leave CLSA after almost two decades. Bloomberg Washington

or evidence of how tricky it will be CLSA strategist to conclude sweeping trade talks Fbetween the US and China, look to Hollywood. With a deal potentially days away, demands by American fi lm studios Wood to resign as remain the subject of intense haggling. The US fi lm industry currently receives about 25% of the ticket sales for movies exodus hits research that play in China and the Trump admin- istration is pushing Beijing to increase that number to roughly 40%, in line with Bloomberg national investment bank, comes other countries, according to people Hong Kong amid escalating concerns among briefed on the talks. American industry is some employees that CLSA is los- framing a concession in this area as a win ing its independence. that would help boost US service exports hristopher Wood, one of The reasons for Wood’s resig- at a time when President Donald Trump Asia’s best-known market nation weren’t immediately clear. is trying to reduce the trade defi cit with Cstrategists, plans to leave The strategist, who often sits near China, according to the people. Beijing CLSA Ltd after almost two dec- the top of rankings in magazines has shown a willingness to make conces- ades, the latest in a spate of high- like Institutional Investor, didn’t sions on the issue, but it hasn’t yet com- level resignations that have rocked immediately respond to requests mitted to a fi rm off er. the Hong Kong securities fi rm in for comment. A CLSA spokes- The issue of movie revenue-sharing recent weeks. woman declined to comment. underscores the hurdles the US and China Wood, whose weekly “Greed & Wood, a former Tokyo bureau still face as they work toward announc- Fear” report is among CLSA’s most chief for The Economist who ing a fi nal trade agreement by about May popular research off erings, has ten- joined CLSA in 2002, made his 10 to end a months-long trade confl ict dered his resignation, said a person name by correctly predicting Ja- between the world’s two-largest econo- familiar with the matter, who asked pan’s era of stagnant growth and mies. Trump and Chinese President Xi not to be identifi ed discussing pri- bear markets in the 1990s. He also Jinping will decide after negotiations vate information. At least half a sounded early alarms about the next week whether they’ll meet to fi nish dozen senior CLSA executives, most US housing market, warning that the trade deal, White House spokeswom- of whom joined the fi rm before its a surge in mortgage securitisation an Sarah Sanders said Thursday, adding Steven Mnuchin, US Treasury secretary (centre), arrives at a hotel in Beijing (file). China and the US have indicated the trade talks takeover by China’s Citic Securities would create huge gains in prop- that the US sees such a meeting as likely. were progressing well, the White House’s tone shifted recently, ramping up pressure on Beijing. US off icials this week warned that Co in 2013, have left this year amid erty prices and similar declines “At the end of the day you’re going to they’re willing to walk away if a pact isn’t reached after Liu’s visit to Washington next week. rising tensions with managers of the once the credit spigot was turned have to see the two leaders sit down and state-owned brokerage. off . fi nalise some of the details of any major Trade Representative Robert Lighthizer to be at the point where we can either rec- likely to be reached than not. But the Wood’s planned departure is While the departure of highly trade deal like this,” Sanders said. “We and Chinese Vice Premier Liu Hehave ommend to the the president we have a movie industry example demonstrates the fi rst sign that the exodus is paid employees may help CLSA continue to see progress.” been discussing tariff options in recent deal or make a recommendation that we just how hard it can be to tie up all the spreading from CLSA’s upper cut costs and boost profi tability, Concluding a deal will hinge on the months but they’ve not been able to agree don’t,” Mnuchin said in interview Monday loose ends. In addition to revenue-shar- management to its research talent, questions remain over whether two sides resolving the stickiest issues on a solution, they said. on the Fox Business Network programme ing, the USTR is discussing other issues among the strongest components the loss of seasoned international in their trade dispute. Some of the big- Lighthizer and Treasury Secretary Ste- “Mornings with Maria.” that have been raised by the Motion Pic- of a franchise that has struggled talent will hurt the fi rm’s ability to gest issues remaining include an enforce- ven Mnuchin on Wednesday wrapped up Offi cials from USTR have been call- ture Association of America, which has to become a major global player grow its business outside China. ment mechanism to police the agreement the latest round of talks in Beijing and Liu ing US business representatives in the been in regular conversation with its on par with Goldman Sachs Group Citic Securities last week re- and a decision over whether tariff s will is due to arrive in Washington on May 8 for past weeks to brief them on progress members that are the major fi lm studios, Inc and Morgan Stanley. placed Slone with Rick Gould, be removed or stay in place, according more discussions. Mnuchin called the Be- that’s being made in their sectors, and and now include Netfl ix Inc. CLSA’s longtime chief, Jonath- CLSA’s head of Americas. In a to the people, who spoke on the condi- ijing meetings “productive” in a tweet, but to ask that they publicly support the fi - One is to increase the number of dis- an Slone, resigned in February memo announcing the move, tion of anonymity. The nations have been neither side gave an update on the status nal agreement, according to three people tributors in China, the people said. Only after Citic Securities began to Zhang Youjun, chairman of Citic engaged in intense negotiations since a of talks. While both sides have indicated representing industry groups, who de- two Chinese government-controlled dis- tighten its grip on the business, Securities and CLSA, said the fi rm December 1 tariff truce between Trump the talks were progressing well, the White clined to be identifi ed. tributors are permitted to distribute for- not least by overhauling the fi rm’s is “optimistic” about growth op- and Xi, after imposing duties on $360bn House’s tone shifted recently, ramping up If the countries fail to reach an agree- eign fi lms in China. Studios also cannot compensation structure. The portunities. “Our goal is to ensure worth of each other’s goods last year. pressure on Beijing. US offi cials this week ment next week, the US has range of op- select release dates or control the mar- souring of the tie-up, which was both Citic Securities and CLSA The decision on what tariff s will be warned that they’re willing to walk away tions at its disposal to crank up pressure keting of their movies. The Chinese box seen as a test of whether a Chinese work more closely together to de- lifted and which stay in place and for how if a pact isn’t reached after Liu’s visit to on Beijing, including the imposition of offi ce reached $9bn in 2018, second only fi nancial company could success- velop opportunities and solutions long might be punted to the two leaders Washington next week. “We hope within new tariff s, said people familiar with the to the US market which reaped $11.9bn, fully acquire and grow an inter- for clients,” he said. for a fi nal decision, the people said. US the next two rounds in China and in DC matter. They added that a deal is more according to the MPAA. Anil Ambani needs $2bn in sales to save last bastion

Bloomberg ing debt. The company told exchanges bankruptcy cases and regulatory snags. Reliance Mutual Fund wrote down Mumbai on April 27 that it has short-term debt Anil Ambani carved out these newer about $233 million of investments in of Rs9.5bn, which will get fully repaid businesses for himself from Reliance Reliance Home Finance Ltd. and Re- by end-September using proceeds Industries Ltd. as part of a 2005 settle- liance Commercial Finance Ltd last he last stronghold in embattled from the sale of its stake in the asset ment with his older brother, Mukesh month, although it said investors’ in- tycoon Anil Ambani’s phone management business. The 43% stake Ambani, following the death of their terests will be protected. Tcarrier-to-power empire is also was valued at Rs53bn, it said. father Dhirubhai Ambani three years About nine local mutual funds, in- developing fault lines. Of the Rs140bn of planned divest- earlier. cluding of the biggest, have sold their Reliance Capital Ltd, his fi nancial ment, almost all the transactions are The younger tycoon’s woes came share holdings in Reliance Capital in services business that almost dou- behind schedule, CARE Ratings said to the fore in March when Mukesh 2019, according to data compiled by bled its profi t in fi ve years, had largely in an April 18 statement while slashing stepped just in time to settle an overdue Bloomberg. Mutual funds held 1.23% remained insulated from the distress Reliance Capital’s long-term rating to payment and save Anil the embarrass- of its equity at the end of March, down plaguing the wider conglomerate. A from A+ and putting it on a “credit ment of a stint in jail. The value of An- from 4.1% at the end of December, ac- Now, the company that controls In- watch.’’ il’s holdings in companies has plunged cording to data on the BSE Ltd’s web- dia’s fi fth-biggest mutual fund, is rac- Brickwork Ratings pared it to A+ to about $120 million from a net worth site. ing to close a planned $2bn of asset from AA last month while ICRA, of at least $31bn in 2008, according to Despite the recent downgrades, the sales to bolster its fi nances after cash Moody’s local unit, had downgraded data compiled by Bloomberg. ratings are still several notches above dwindled to Rs110mn ($1.6mn) as of the short-term ratings in March, say- ICRA has also red-fl agged Reli- the junk category. Quoting the meth- March, according to CARE Ratings. ing the “timeliness of receipt of funds” ance Capital’s “substantial exposure odology of CARE and Brickworks, the With $252mn of debt falling due from divestment “remains critical.” toward” group companies which can company said that its current rating over May and June, a unit of Moody’s More cuts have followed for other curb its ability to raise and repay its implies “adequate degree of safety re- Investors Service and two other local group companies as well. near-term debt obligations. garding timely servicing of fi nancial fi rms have slashed ratings of Reliance The conglomerate has struggled to Reliance Capital has invested and obligations.” Capital or its short-term instruments, sell assets in other fi rms. While Am- lent a total Rs137.48bn to other Anil Still, asset sales “in a time bound citing holdups in asset sales, deterio- bani managed to dispose of the Mum- Ambani group companies, including manner” are essential for Reliance rating liquidity and risks on loans to bai power distribution and road assets, loss-making ones in telecom, media Capital to tide over its diffi culties, ac- unprofi table affi liates. many others, especially in telecommu- and entertainment cording to Kranthi Bathini, an analyst The downgrades came against the Ambani: An embattled tycoon. nications were scuttled due to regula- Consolidated net worth tumbled to at WealthMills Securities. backdrop of soaring fi nance costs for tory hurdles or legal delays. Rs81.4bn by December 31, less than Shares of Reliance Capital have an industry shaken by last year’s melt- bai-based Aditya Consulting, a credit meeting short term or long term fund- The strain at Reliance Capital half the level at the end of March 2018 plummeted 40 percent this year, trig- down at one of the nation’s biggest advisory fi rm. “Unless some strategic ing obligations,” Amit Bapna, Reliance heightens the challenges facing Am- The fi nancier had achieved only gered partly by adverse news fl ow shadow lenders that’s unrelated to Re- infusion of long-term equity comes Capital’s chief fi nancial offi cer said in bani, 59, who’s seen his indebted tel- about a third of the total deals that around Ambani’s companies and partly liance Capital. into the company, the day when Reli- Mumbai on Friday. The fi nancier ex- ecom operator Reliance Communica- were originally scheduled to wrap up the shock default of shadow fi nancier Asset disposals are key to averting a ance Capital falls into a liquidity crisis pects to raise as much as Rs120bn in the tions Ltd collapse into insolvency. His by September 2018 Infrastructure Leasing and Financial crisis at Reliance Capital, said Mathew isn’t too far,” he said. next four months, Bapna said, which ventures in power, defence and infra- Three-quarters of controlling Services Ltd, which squeezed funding Antony, a managing partner at Mum- “We don’t foresee any issues in will reduce up to 70% of its outstand- structure too have battled piling debt, shareholder’s stake is pledged for all non-bank lenders. Gulf Times Sunday, May 5, 2019 5 BUSINESS

Pakistan’s oil sales decline ‘S Korea needs another 24% in July-April period economic overhaul’ Internews Karachi Bloomberg Seoul Pakistan’s oil sales plunged by 24% to 15.3mn tonnes during outh Korea needs another eco- the first 10 months of this fiscal nomic overhaul like the one fol- year owing to significant drop in Slowing the International Mon- furnace oil (FO) and high-speed etary Fund bailout in the late-1990s to diesel (HSD) demand. stay competitive globally, according to The sales of furnace oil and a major global restructuring consulting HSD stood at 2.448mn tonnes fi rm. and 6mn tonnes, depicting It’s as if Asia’s fourth-largest econo- 56.6% and 19% fall over the my is being squeezed with a nutcracker, same period last fiscal year. with China catching up to Korea and However, petrol sales grew overtaking it in some sectors, while Ja- by 1.9% to 6.204mn tonnes from pan is regaining its competitiveness as 6.090mn tonnes in July-April the economy recovers and it comes up period of 2018-19. with innovative technologies, said Yung According to a report by Chung, Seoul-based managing director Shajar Capital, oil marketing of AlixPartners LLP. Low productivity, companies off take during April high wages and overcapacity are hurt- 19 rose by 13.6% month-on- ing Korea’s corporate sector, he said. month primarily on the back of “Korea needs to go through restruc- a significant rise in FO sales by turing 2.0 – 1.0 was IMF,” Chung said in 48.3% month-on-month, which an interview. South Korea’s economic stood at 274,000 tonnes. woes were highlighted in data last week Similarly, petrol volume in- that showed gross domestic product creased by 4.8% MoM to stand shrank the most in a decade due to de- at 677,000 tonnes month-on- clining investment, weakness in the month. The report attributed technology sector and falling exports. decline in FO and HSD sales in Korea Inc’s troubles are also seen in a the 10-month period to shift in big increase in companies whose oper- government’s policy on power ating income doesn’t cover interest ex- generation and dampened penses, to the most since 2014, in spite demand. of low interest rates, according to Korea PSO performed relatively Economic Research Institute data. better than its peers in the “Korea must quickly eliminate the outgoing month by posting overcapacity and zombie companies a substantial increase in total that are critically burdening the econo- off take of 17.2% month-on- my,” Chung said. See also: auditors get- month (more than industry ting tougher in Korea may be a blessing average) as volumes clocked-in for investors Aggressive restructuring at 733,000 tonnes. that results in big job losses, though, This was mainly on the back might not be welcomed by President of an upsurge in FO sales which Moon Jae-in’s administration, which came out at 154,000 tonnes, has pledged to deal with the nation’s A container terminal is seen at Incheon port in South Korea. South Korea’s economic woes were highlighted in data last week that showed gross domestic product up by 69.3% month-on-month, high unemployment and dwindling shrank the most in a decade due to declining investment, weakness in the technology sector and falling exports. where the government lifted household income. Moon has ramped ban on import of FO to meet up fi scal support for Korea’s economy, make the country more competitive still too much stigma attached to com- emerge from Chapter 11 bankruptcies in leave them strapped for cash in an eco- power sector demand during announcing an extra budget last month internationally, they sparked massive pany restructuring in Korea, and more 6 months on average, whereas in South nomic downturn, while the shipyard the summer months. that added to a record budget already in protests and a jump in unemployment. eff ective measures would help rejuve- Korea they take 17 to 18 months, with and consumer electronic sectors are In 10MFY19, PSO did worse place for 2019. President Moon said in a 2017 speech nate the corporate sector. less chance of success, he said. challenged by rising overseas competi- than its peers by posting a The IMF’s bailout of Korea in 1997 that the aftereff ects of the IMF rescue Korea needs to push for increased “In the US, restructuring is renewal,” tion, according to Chung. decline of 38.8% year-on-year, forced the nation to open up more to “have changed the lives of the people,” private-sector participation in dealing said Chung. “In Korea, restructuring Those and other sectors such as sem- predominantly contributed by foreign investment, cut government and that their “sense of pride in being a with distressed assets and insolvencies, basically means you’re in fi nal-stage iconductors, shipping and steel need to a fall in FO by 70%, followed by spending and make it easier to hire and middle-class citizen has disappeared.” and should speed up bankruptcy pro- cancer.” Automotive supply companies reduce overcapacity and invest for the HSD (28.7%), the report said. fi re workers. While the reforms helped For Chung at AlixPartners, there’s ceedings, he said. In the US, companies are faced with low margins that may future, he said. Pakistan’s central US, China upside shocks fail bank governor to revive export powerhouses Bloomberg HSBC Holdings Plc attributes the world trade car demand refl ects increasing environmen- Beijing downturn to a cooling in global investment tal concerns and more stringent policies. And and consumer spending. while electronics might be through the worst “Two sectors have fared particularly badly – of it, there’s little prospect of an upturn before resigns; FBR he US and China both surprised with cars and electronics,” said Janet Henry, global 2020 when new 5G smartphones are rolled strong expansions in the fi rst three chief economist at HSBC, noting they togeth- out, according to HSBC. Tmonths of 2019, yet their imports re- er account for about 35% of manufacturing in “With no strong broad-based investment mained weak, meaning a limited growth cas- Korea and that vehicles are about 20% of Ger- recovery on the cards, overall import growth cade onto export powerhouses Germany and man production. “Not only have these sectors in the world’s major importers point to sta- chairman removed South Korea. been particularly depressed over the past year bilisation rather than a rapid revival,” Henry The American economy accelerated to but their weakness threatens to be longer- said. “For the world’s major export-oriented an annualised 3.2% and China’s GDP rose lasting.” The ongoing global trade funk shows economies, the growth picture will hinge on Internews There has been resentment in the federal cabi- 6.4%, both exceeding estimates. Yet in Ger- little sign of abating, with volumes falling at their ability to drive domestic consumption, Islamabad net over the decision to continue with the peo- many manufacturing gauges remain weak, the fastest pace since the depths of the 2008 which in many countries will be helped along ple who had served with former fi nance minister while Korea reported a surprise contraction. fi nancial crisis. The weakness in international by a dose of fi scal stimulus. Ishaq Dar. tate Bank of Pakistan (SBP) governor Tariq Dr Baqir, who is being tipped as the new SBP Bajwa stepped down from his post after governor, is a Pakistani by birth and currently SPrime Minister Imran Khan sought his res- serving as the senior resident representative of ignation while Federal Board of Revenue (FBR) the IMF in Egypt. chairman Jehanzeb Khan has also been trans- Dr Baqir had earlier visited Pakistan and met ferred. Prime Minister Imran Khan, the sources said. Dr Reza Baqir, who is currently serving at the Baqir has remained the IMF’s head of mission International Monetary Fund (IMF), is likely to to Romania and is working with the global lender become the new head of the central bank, sourc- since 2000 when he was the head of its debt pol- es said. The offi ce of the SBP governor has con- icy division. fi rmed the development. His resume includes graduating from Harvard The prime minister does not have the powers University; a PhD in economics from the Uni- to remove the governor of the central bank except versity of California, Berkeley; and working with in certain circumstances that are defi ned in the the World Bank, the Massachusetts Institute of SBP Act of 1956. Bajwa was holding a statutory Technology and the Union Bank of Switzerland. position for a period of three years that would If Baqir is appointed the new head of the SBP, have ended on July 6, 2020. both the adviser to the PM on fi nance and the Jehanzeb Khan, an offi cer of the Pakistan Ad- central bank governor will be from the Bretton ministrative Service (PAS), is likely to be replaced Woods institutions the World Bank and the IMF. by someone from the tax machinery, possibly Dr Shaikh has also worked with the World a Customs Service Group offi cial, the sources Bank. The Pakistan Muslim League-Nawaz added. Despite repeated attempts, Adviser to the (PML-N) government appointed Tariq Bajwa as PM on Finance Dr Abdul Hafeez Shaikh did not the SBP governor on July 7, 2017. respond to questions about the reasons behind The SBP Act of 1956 empowers the president the move. of Pakistan to appoint a governor for a term of Sources close to Bajwa said that the governor three years did not resist the government’s decision because Bajwa retired from civil service in June 2017 as of the prevailing macroeconomic conditions. the fi nance secretary and was the third bureau- A confrontation between the federal govern- crat to be appointed the head of the central bank. ment and the governor could have created un- He is the only Pakistani to have won the pres- certainty and that is why Bajwa decided to quit tigious Littauer Fellowship. gracefully, the sources added. He earned the reputation of being a competent The decision to remove the heads of two im- and upright offi cer during his civil service career. portant economic policymaking institutions has He was among a handful of offi cers whose been taken after Dr Shaikh expressed his desire to reputation remained clean despite serving as the bring his own team. FBR chairman for two and a half years. The prime minister has already unceremoni- The new SBP governor will face the imme- ously removed Asad Umar as the fi nance minister diate challenge of negotiating a bailout pack- about two weeks ago. These changes are taking age with his previous employer and implement place at a time when Pakistan is in the midst of its conditions on the monetary policy and ex- negotiations with the IMF for a bailout package. change rates. An employee works at a steel plant in Shanghai. The US and China both surprised with strong expansions in the first three months of 2019. Gulf Times 6 Sunday, May 5, 2019 BUSINESS India top lender says liabilities biggest hurdle to Jet Air sale

Bloomberg as low as 1 cent to lure first time flyers. Mumbai The airline, which stopped all flights last month, has made losses in nine of the past 11 years. Jet Airways has The top lender of ailing Jet Airways seen lessors taking away its aircraft India Ltd said the burden of reversing while rivals start services on routes it the grounded carrier’s negative net previously operated. worth before it can fly again is the Grounded Jet Airways planes in biggest challenge for any potential Mumbai. investor. The deadline for submission of “Liabilities and losses are binding bids to take over control and considerable,” Rajnish Kumar, chairman ownership of Jet Airways is May 10, of State Bank of India, said in an Kumar said. The lenders, to which the interview with Bloomberg Television on airline owes more than $1bn, have yet Thursday. “All these past liabilities and to take a call on how much debt will be then, profitably, can they fly in future? forgiven, he said. These are some of the considerations Jet Airways, the oldest surviving which are weighing upon the minds of private airline which broke into a the potential investors.” monopoly of Air India Ltd, had a fleet Creditors led by State Bank of India of 124 and flew profitable routes like have put Jet Airways up for sale after connecting India with London and the carrier failed to pay back debt. Toronto. With almost 23,000 jobs Once India’s biggest airline by market at stake, the airline’s woes couldn’t value, Jet Airways has been a victim of have come at a worse time for Prime a budget airline boom in the fiercely Minister Narendra Modi, who’s seeking Jet Airways aircraft sit on the tarmac at Chhatrapati Shivaji Maharaj International Airport in Mumbai. Creditors led by State Bank of India have put the airline up for competitive market in the South Asian a second term based on his business- sale after the carrier failed to pay back debt. nation, where carriers off er base fare of friendly image.

Swiss fi rm to exit California port deal clears way Malaysia, Singapore for big China shipping merger

Bloomberg Bloomberg Kuala Lumpur Beijing

afargeHolcim Ltd will rient Overseas (International) sell its operations in Ma- Ltd found a buyer for its port Llaysia and Singapore to Obusiness in California, fulfill- infrastructure group YTL Corp ing a pledge made to US regulators Bhd for at least $396mn as when China’s Cosco Shipping Hold- the Swiss cement maker takes ings Co took over the Hong Kong steps to shore up its balance company to create the world’s third- sheet. largest container-ship operator. YTL agreed to pay 3.75 ring- Orient Overseas agreed to sell its git per share for a 51% stake in terminal in Long Beach, Califor- Lafarge Malaysia Bhd, a 43% nia, for $1.78bn to Macquarie As- premium to the stock’s av- set Management, it said in a state- erage value over the past 90 ment on Tuesday. The sale, which days, Lafarge said in a state- still needs regulatory clearance, ment on Thursday. The agree- was a condition set by US authori- ment also includes selling a ties for approving a deal last year 91% holding in Holcim Singa- for Shanghai-based Cosco Shipping pore Ltd to YTL for an undis- to acquire Orient Overseas for more closed price. than $6bn. LafargeHolcim chief ex- The long-awaited disposal clears ecutive officer Jan Jenisch has the way for Cosco Shipping to focus made deleveraging a prior- on integrating Orient Overseas and ity following a messy merger reap rewards from the acquisition, of French and Swiss cement the biggest for a major container- companies in 2015. Part of that shipping deal since 1997. Shipping is focusing on fewer markets, lines have consolidated or collapsed and the retreat from Malaysia in the past five years as they strug- could be followed by the sale gled to stay afloat amid excess capac- of other assets, including in ity and weak global demand. the Middle East and Africa, The Chinese company offered to Bloomberg has reported. He’s buy Orient Overseas in July 2017 and set a target of getting net debt subsequently received Chinese and to below two times earnings by European Union antitrust clearances. the end of this year. A year later, Cosco Shipping pledged “We have committed to di- to sell the Long Beach terminal to vestments in order to delever- allay US regulators’ concerns over age and to further strengthen the transaction, which would make our balance sheet,” the CEO Cosco Shipping the owner of the fa- said in the statement. cility. Under such mandated trans- YTL, in a separate state- actions, the Committee on Foreign ment, said it will make a man- Investment in the US must also ap- datory offer for remaining prove the buyer. A container ship operated by Orient Overseas Container Line (OOCL), sits docked at the Port of Fremantle, Western Australia. Orient Overseas found a buyer for its port shares, adding the purchase is Orient Overseas shares gained as business in California, fulfilling a pledge made to US regulators when China’s Cosco Shipping Holdings Co took over the Hong Kong company to create the world’s part a wider to push to expand much as 4.6%, the biggest intraday third-largest container-ship operator. in cement and it expects sav- gain since January 4, and were up ings in production, logistics, 3.9% as of 10:56am in Hong Kong. the country. Orient Overseas agreed ing capital, the company said.The Long Beach and Port of Los Angeles, terranean Shipping Co. are the big- distribution and procurement. Cosco Shipping gained as much as to berth its vessels at the terminal Hong Kong company could pay a spe- together the largest shipping facility gest container-shipping companies The deal is expected to close 1.9%, while Hong Kong’s benchmark under a 20-year accord. cial dividend from the deal, Jefferies in the US, serve as major US gateways in terms of capacity, ahead of Cosco in the second quarter. Hang Seng Index fell 0.5%. Orient Overseas said it expects Group analyst Andrew Lee said in a for trans-Pacific trade. Port of Long Shipping, according to Alphaliner, a Shares of LafargeHolcim The consortium led by Macquarie to realise an estimated pretax gain note. Beach handled 8.09mn 20-foot con- shipping-data provider. were little changed at 52.34 will gain access to the second-busi- of about $1.29bn from the sale. The Orient Overseas has been operat- tainers last year, 7.2% more than in JPMorgan Chase & Co. served as francs at the open of trading in est port into the US and to one of the proceeds could be used to fund new ing the Long Beach terminal under a 2017, according to its website. financial adviser to Orient Overseas Zurich. most modern shipping facilities in growth opportunities and as work- 40-year lease agreed in 2012. Port of AP Moller-Maersk A/S and Medi- for the deal. A $4.4bn accounting error burns investors in China

Bloomberg The issue has become increasingly im- pay debt, the firm said in a filing on Tues- Hong Kongw portant for global investors and securities day. fi rms as they gain unprecedented access to Other companies that have faced similar China’s gargantuan stock and bond markets. scrutiny from regulators include Kangde ne of China’s largest listed drug- “Investors have to be more careful about Xin Composite Material Group Co, which makers said it overstated cash hold- Chinese firms’ reporting,” said Andrew defaulted on a bond in January after report- Oings by $4.4bn, sending its shares Lam, a director at BDO, an international ing cash levels just four months earlier that and bonds tumbling and heightening con- accounting firm. “They will have to do real were enough to pay the debt 15 times over. cerns about the quality of accounting in a homework, examining closely companies’ The CSRC began investigating Kangde Xin country that has become a fast-growing financial reporting for any potential ir- in October. part of global investment portfolios. regularities.” “We have seen a number of Chinese Kangmei Pharmaceutical Co, a producer The China Securities Regulatory Com- companies with high cash balances still of traditional Chinese medicines, said in a mission, which in recent years has been seek funding from investors, and later on filing on Tuesday that an accounting “er- pushing the nation’s stock exchanges to the cash just disappears,” said Raymond ror” led to the overstatement of its 2017 delist companies that provide inaccurate Chia, head of credit research for Asia ex- cash position. The disclosure came about disclosures, didn’t immediately reply to a cluding Japan at Schroder Investment four months after Kangmei told investors faxed request for comment. The Shanghai Management Ltd. “We should really ques- it was being investigated by regulators. The Composite Index rose 0.5% at 1:36pm lo- tion borrowers.” stock, a constituent of MSCI Inc’s global cal time. Investors will watch the CSRC for more indexes, plunged by the 10% daily limit. Kangmei, based in China’s southern details on what went wrong at Kangmei, Kangmei’s 2.4bn yuan ($356mn) notes due Guangdong province, said it faces forced according to Guo Feng, head of the wealth 2022 fell as much as 14 yuan to 60 yuan. delisting if the CSRC classifies its behav- management department at Northeast Secu- The immense size of Kangmei’s restate- iour as a major legal violation, according rities Co. Whatever the result, the company ment, described by one securities lawyer as to a company notice on risks related to its may struggle to win back investor confi - unprecedented for China, puts a spotlight ongoing CSRC investigation. The drug- dence, said Shen Chen, a partner at Shanghai on disclosure practices in a country where maker’s upcoming bond maturities include Maoliang Investment Management. companies are defaulting at a record pace a 750mn yuan note due September 3. Kang- “This scandal could narrow their refi- and several instances of questionable ac- mei plans to sell as much as 20bn yuan of nancing channels as investors flee,” Shen counting have emerged in recent months. bonds to replenish working capital and re- said. Gulf Times Sunday, May 5, 2019 13 BUSINESS

he Qatar Stock Exchange (QSE) the second biggest contributor to the QSE Index and Volume index increased by 29.39 points, overall trading value, accounting for Tor 0.28%, during the trading 31.7% of the total. QNB Group (QNBK) week to close at 10,480.52. Market was the top value traded stock dur- capitalisation receded by 0.27% to ing the week with total traded value QR586.5bn versus QR588.1bn the of QR179.4mn. previous trading week. Of the 46 list- Trading volume increased by 24.2% ed companies, 19 companies ended to reach 64.6mn shares versus 52.0mn the week higher, while 26 declined shares in the prior week. The number and one remained unchanged. Gulf of transactions increased by 17.2% International Services (GISS) was the to 26,653 transactions versus 22,750 best performing stock for the week transactions in the prior week. The in- Weekly Market Report with a gain of 16.9% on a trading vol- dustrials sector led the trading volume, ume of 2.0mn shares. On the other accounting for 45.2%, followed by the hand, Qatar Aluminium Manufactur- banks and financial services sector ing Co (QAMC) was the worst per- which accounted for 24.3% of the over- forming stock for the week with a de- all trading volume. QAMC was the top Source: Qatar Exchange (QE) cline of 8.9% on 11.7mn shares traded. volume traded stock during the week Woqod (QFLS), Industries Qatar with 11.7mn shares. (IQCD) and Gulf International Servic- Foreign institutions remained bull- Weekly Index Performance es (GISS) were the primary contribu- ish with net buying of QR188.6mn ver- tors to the weekly index gain. QFLS sus net buying of QR142.9mn in the was the biggest contributor to the prior week. Qatari institutions turned Source: Qatar Exchange (QE) index’s weekly increase, adding 20.9 bearish with net selling of QR89.0mn points to the index. IQCD was the sec- versus net buying of QR14.6mn in the ond biggest contributor to the men- week before. Foreign retail investors tioned gain, contributing 16.9 points remained negative with net selling to the index. Moreover, GISS tacked of QR11.0mn versus net selling of on 16.3 points to the index. QR15.1mn in the prior week. Qatari Trading value during the week retail investors remained bearish decreased by 9.3% to QR1.13bn ver- with net selling of QR88.5mn versus sus QR1.24bn in the prior week. The net selling of QR142.3mn the week banks and financial services sector before. led the trading value during the week, Foreign institutions have bought accounting for 37.8% of the total trad- (net basis) $740mn worth of Qatari Source: Bloomberg ing value. The industrials sector was equities in 2019. Source: Qatar Exchange (QE)

DISCLAIMER

This report expresses the views and opinions of Qatar National Bank Financial Services SPC (“QNBFS”) at a given time only. It is not an off er, promotion or recommendation to buy or sell securities or other investments, nor is it intended to constitute legal, tax, accounting, or financial advice. We therefore strongly advise potential investors to seek independent professional advice before making any investment decision. Although the information in this report has been obtained from sources that QNBFS believes to be reliable, we have not independently verified such information and it may not be accurate or complete. Gulf Times and QNBFS hereby disclaim any responsibility or any direct or indirect claim resulting from using this report.

Qatar Stock Exchange Top Five Gainers Top Five Decliners

Most Active Shares by Value (QR Million) Most Active Shares by Volume (Million)

Investor Trading Percentage to Total Value Traded Net Traded Value by Nationality (QR Million)

Source: Bloomberg

Technical analysis of the QSE index

he QE Index managed to in a pullback phase since March. close up for the sixth week in As a result, we update our next ex- Ta row, gaining by only 0.28% pected resistance level to 10,800 from the week before, and closed points and the weekly support to at 10,480.52. The index has been 10,000 points.

Definitions of key terms used in technical analysis andlestick chart – A candle- stick represents one trading day) stick chart is a price chart in our analysis. Cthat displays the high, low, Doji candlestick pattern – A open, and close for a security. The Doji candlestick is formed when ‘body’ of the chart is portion be- a security’s open and close are tween the open and close price, practically equal. The pattern while the high and low intraday indicates indecisiveness, and movements form the ‘shadow’. based on preceding price actions The candlestick may represent and future confirmation, may in- any time frame. We use a one-day dicate a bullish or bearish trend candlestick chart (every candle- reversal. Gulf Times 14 Sunday, May 5, 2019 BUSINESS Wall Street deaf to Fed warnings on leveraged loans

Bloomberg noting that Corps with the riskiest the market more power to push for Financial Analytics, a Washington on average, up from 6.9 in the fourth Other lender protections are getting New York balance sheets “have been increasing weaker protections. And the money regulatory-analysis firm, adding that quarter, based on un-adjusted Ebitda weaker, too. Moody’s Investors Service their debt loads the most.” supply may not be shrinking as fast as regulators say the biggest banks figures for acquisitions and buyouts, said last week that loan covenants show In October, Todd Vermilyea, the Fed’s investors had feared. themselves are safe. “The federal according to data from Covenant “no signs of improving in 2019” and are US regulators told banks and investors head of risk surveillance and data, told In an unexpected shift in January, the banking agencies have limited ability to Review. Those figures, which exclude hovering close to the worst on record. that it was OK to make riskier loans to bankers at a conference that lenders Fed pivoted away from further interest- control non-banks.” Ebitda massaging that companies are Investors should expect weak companies. Now they’re having trouble appear to be chasing increasingly rate increases and signaled it may be The government has eased up on allowed to engage in, are well above the protections to be the new normal, the reining in the excesses that resulted. dangerous deals and forgoing on hold for all of 2019 due to “muted” leveraged loans after a decade of 6 times level that regulators pushed for ratings firm said. In the first quarter, banks and investors protections against borrowers going inflation pressures. With rates peaking companies having been awash in under the 2013 guidelines. Covenant Review said that lender helped bring some of the highest debt bust. in the 2% to 3% range, more money capital, thanks in part to near-zero Ebitda massaging has also grown more protections deteriorated in the first levels of this decade to leveraged That caution came after regulators had could tilt into riskier investments, interest rates. Loans outstanding to intense, according to Covenant Review. quarter, after improving a touch in the buyouts and other acquisitions. Lenders loosened up on lenders. In March 2018, including loans to highly indebted junk-rated Corps have more than These changes allow companies to final quarter of last year. are letting companies aggressively US Comptroller of the Currency Joseph companies. doubled since 2007, reaching about say that a measure of their earnings And even as lending volume decreases massage measures of their profits when Otting and Fed chairman Jerome Powell It’s unclear how much of the risk in $1.3tn. is higher than it would otherwise be, overall, a higher percentage of loans posting them for credit investors. And separately said that 2013 guidelines for the leveraged loan market will hit the Part of that increase is because and to avoid triggering contractual are going for riskier purposes, namely more and more lender protections are leverage limits weren’t hard-and-fast biggest US banks, which usually try to individual companies are taking terms that give lenders more power in dividends to shareholders. Those being watered down. rules, and that they were focused on sell off most of their exposure to any on more debt. A key gauge of negotiating with borrowers when credit financings don’t help the company and Those trends have some regulators the safety of the banking system as a particular credit. Hedge funds, mutual indebtedness for companies - the metrics deteriorate. only enrich investors like private equity worried. In December, Federal Reserve whole rather than individual loans. funds, and other asset managers tend amount of debt they have relative to a Those adjustments, or “addbacks,” owners. About $3bn of loans backing governor Lael Brainard called out “a The risk taking that ensued may get to buy the risk. measure of income known as earnings accounted for about 28% of the total dividends to private equity firms were notable deterioration in underwriting worse. The volume of borrowing in the “The neighbourhoods around the banks before interest, taxes, depreciation and adjusted Ebitda figure on average in the sold in April, the most since October, standards” for borrowings at junk-rated leveraged loan market has fallen this are getting a lot worse,’’ said Karen amortisation - has climbed ever higher. first quarter for acquisition loans, up when it was $4.4bn, according to data companies known as leveraged loans, year, giving the companies that do tap Petrou, managing partner at Federal In the first quarter, that ratio was 7.7 from 17% in the first quarter of 2017. compiled by Bloomberg.

Norway’s wealth fund surges $84bn after Fed offi cials diverge stock swoop

Bloomberg monetary policy. The Oslo investor, built from Nor- on need for possible way’s oil and gas revenue, is off to a good start to orway’s $1tn meet its 3% real return wealth fund target. Ngained $84bn The target was lowered in the fi rst quarter, or from 4% in 2017 after $16,000 per citizen, af- years of record low in- ter it took advantage of a terest rates and negative interest rate cut market sell-off late last bond yields. A slump in year to build its massive crude prices also forced Bloomberg portfolio. to the government to Washington Return was 9.1%, or make its fi rst ever with- 738bn kroner ($84bn) drawals in 2016, but those Stocks rose 12.2%, bonds have now ended. wo Federal Reserve offi cials 2.9% and real estate 1.7% The largest stock hold- laid out the case for a pos- Fund held 69.2% in eq- ings at the end of the Tsible interest-rate cut just uities, 28% in bonds and quarter were Apple Inc days after chairman Jerome Powell 2.8% in real estate. and Microsoft Corp. said there was no reason to move in The fund’s chief ex- The fund’s technology either direction. ecutive offi cer, Yngve stocks rose 17.6%, with Two other US central bankers Slyngstad, said it was an Apple making the most sounded more comfortable with “exceptional” quarter positive contribution to the current policy stance. with the third highest its returns. St Louis Federal Reserve Bank quarterly return on record Among its biggest los- president James Bullard and Chi- and the highest ever in ers, it said, was Swedbank cago Fed president Charles Evans, terms of kroner. He di- AB, which is weighed both policy voters this year, ex- rected the fund to buy down by money launder- pressed caution Friday over weak almost $30bn in stocks in ing allegations. prices and said the central bank November through Janu- Its highest stock re- may have to act to lift infl ation out ary to take advantage of turns were 20.3% in Chi- of a persistently low trend. a drop in prices and drive na and 14.6% in North That contrasts with Powell’s its holdings to near the America. dismissal of the most recent dip 70% limit. Its largest bond hold- in infl ation readings as tempo- “The most significant ings were in US Treasur- rary during his press conference change in the first quar- ies, followed by Japanese on Wednesday after the Fed held The US Federal Reserve building in Washington, DC. Two Fed off icials laid out the case for a possible interest-rate cut just days after chairman Jerome ter was probably the new and German government rates steady, pushing back against Powell said there was no reason to move in either direction. signals from the Federal debt. In the fi rst quarter, pressure for a cut from traders and Reserve, which to a large the government deposited President Donald Trump. seem to be picking up then I think the economy was in a “very good cials is not uncommon at the cen- sent at her fi rst scheduled FOMC degree drove the market,” 8bn kroner into the fund, Remarks by vice chairman Ri- the level of my concern would get place” with infl ation muted and tral bank. Still, those views haven’t meeting on March 19, 2014. Ben Ber- he said in an interview down from 29bn kroner in chard Clarida and Cleveland Fed more intense,” he told Reuters in an expectations stable. That meant so far led to any dissents by policy nanke got one at his fourth meeting. after a press briefing in the fourth quarter. chief Loretta Mester who is not a interview on Friday. the central bank can aff ord to voters since Powell became chair- There may be an obvious reason Oslo. “There have been The fund earlier this voter this year were more in line “I am open to a rate cut to try be data dependent as it assesses man in February 2018. Also, during for the unity around Powell at this very different views on year announced that it with Powell. to combat this.’’ Evans, answering “what, if any, further adjustments post-meeting press conferences time. The Fed has suff ered a bar- macroeconomic devel- would scale back its real The chairman had said offi cials questions after a speech in Stock- in our policy stance might be re- he hasn’t conveyed much sense of rage of attacks from Trump and opments from different estate push as a way of wouldn’t ignore infl ation that ran holm, said he would “not be afraid quired to maintain our dual-man- the variety of views on the Federal others in his administration de- actors.” cutting costs and simpli- too low for too long below their 2% to act” if a rate cut was warranted date objectives,” he said. Open Market Committee, which manding Powell cut rates. The Oslo-based fund, fying its approach after target, but argued price pressures by the infl ation outlook, though Mester, speaking in an interview are more apparent in meeting min- The drumbeat continued Friday which holds on average struggling to fi nd prop- should be supported by a healthy he also said it would take some to Bloomberg Television’s Michael utes released with a three-week lag. when Vice President Mike Pence 1.4% of global stocks, is erties to buy amid near economy and the lowest unem- time for him to come to that view. McKee on the sidelines of the event, Messaging by the FOMC, such told CNBC that low infl ation means largely at the mercy of record prices. ployment in nearly 50 years. Data “It would take a number of data said the Fed was “in a good spot to as the policy statement and sub- “this is exactly the time, not only overall markets, though But Slyngstad said that released on Friday showed surpris- reports to take as very serious the wait and let the economy tell us how sequent press conference, “has to not raise interest rates, but we it has some leeway in how as long as real estate can ingly strong hiring and cooler-than- under-running of infl ation. I am it’s doing.” She also said she was diffi culty communicating sce- ought to consider cutting them.” it weighs its indexes and deliver a real return above projected wage gains, suggesting a certainly saying I want to see more “not there” in response to a ques- narios’’ in which they would alter “I think the president’s pres- can also stray from the 3% it will continue to be hot labor market can extend its run. monthly reports,” he said. tion about whether low-infl ation policy, said Michael Gapen, chief sure has had an important eff ect,” benchmarks. After tak- an “important invest- Infl ation excluding food and en- The day featured a number concerns might lead to a rate cut. US economist at Barclays Capital. said Mark Spindel, chief invest- ing a beating at the end ment area.” ergy prices slowed to 1.6% in the 12 of public remarks by US central Dallas Fed chief Robert Kaplan That may be because that would ment offi cer at Potomac River of 2018, it benefi ted from “We have found that months through March compared bankers, several of whom were told the conference that, despite be a form of forward guidance that Capital and co-author of a book on a rally in equity markets it’s comfortable to oper- with 1.95% in December. taking part in a Hoover Institu- some recent weakness in headline Powell is currently averse to. the Fed’s relationship with Con- and rising bond prices as ate with 8 cities,” he said. Bullard said he is prepared to tion monetary policy conference in and core infl ation readings, price Powell has not suff ered a single gress. “It bands them together, but central banks, led by the “In Berlin and Tokyo we wait through the summer. But if Stanford, California. pressures should rebound and end dissent in the 10 policy meetings that sometimes raising your hand and US Federal Reserve, sig- would like to see more as- infl ation expectations “are still too Clarida, in a speech to the con- the year in the range of 2%. he’s chaired, in contrast with his two saying, ‘I disagree’ can be an im- nalled an end to tighter sets over time.” low and actual infl ation doesn’t ference, echoed Powell by noting A diversity of views among offi - predecessors. Janet Yellen had a dis- portant way to communicate.” Louis Dreyfus in talks to sell equity stakes to key partners

Bloomberg tunity set is now,” McIntosh said in an sourcing, transporting and processing coff ee roasting plant. LDC also has a Chicago interview in London. He declined to bulk agricultural commodities. Profi t joint venture to produce fi shfeed at an name any of the companies involved in margins in the industry are falling oilseed plant in Tianjin, China. the discussions. due to better technology, weak prices “Finding local businesses and lo- ouis Dreyfus Co is holding talks People familiar with the matter said caused by years of bumper crops and cal entry points to support new de- with investors about selling eq- LDC has held early-stage talks with increased competition. velopments in the industry are a very Luity stakes in the agriculture several trading houses in Asia with a The company earned $355mn in powerful way of furthering that value trader, potentially opening up the global presence. The list includes some 2018, a far cry from 2012 when prof- chain integration that we see,” McIn- family-controlled business to outside of Japan’s biggest trading houses, the its topped $1bn. tosh said. capital for the fi rst time in its 168-year people said. McIntosh said the company can That strategy contrasts with com- history. LDC has also approached potential eventually return to those lofty petitors, such as Glencore Plc’s agri- Chief executive offi cer Ian McIntosh Chinese partners, such as Cofco Corp, earnings levels, but only through culture chief Chris Mahoney, who be- said the company is seeking partners China’s biggest food company, and its new lines of business and by going lieves the industry needs to slim down to buy equity and help it expand in global trading arm, Cofco Internation- deeper into regional markets. and it’s too expensive to invest in con- fast-growing emerging markets, like al, according to one person, who asked “Can you get back to $1bn? The an- sumer-oriented food businesses. China. While Dreyfus has traditionally not to be identifi ed discussing confi - swer is yes, absolutely yes. But not in McIntosh said LDC can increase dominated bulk commodity trading dential matters. the same way that we achieved that profi ts and keep costs down through like sugar and cotton, profi t margins in A representative for Cofco Corp fi gure a few years ago,” he said. partnerships. He doesn’t expect the the business are shrinking. McIntosh’s wasn’t immediately able to comment His strategy is to expand in consum- sector to consolidate through big M&A strategy to revive growth is to push and a spokesperson for its trading er-focused businesses, especially in deals, but rather the exit or acquisition Dreyfus into business lines that are house declined to comment. Asia. The company plans to invest in of smaller players. closer to the consumer. A major equity investment could Margarita Louis-Dreyfus squeezed from Credit Suisse Group AG used to Leong Hup International, a Malaysian “Diversifi cation is a benefi t and size “We see our business evolving in this bring fresh capital and new markets to the company for cash in 2018 and ce- pay for the shares. poultry producer that’s in the process clearly matters. That is becoming more direction. We see regional partners as LDC, which is trying to recover from a mented her control by spending almost McIntosh, who took the top job in of going public. the case as our business evolves. By being the powerful way to leverage that crisis last year that saw the departure a $1bn buying out family members. September, wants LDC to expand be- It bought a stake in China’s Luckin size, I don’t just mean volume, I mean growth story and we think the oppor- of top leadership. Billionaire heiress She’ll eventually need to repay a loan yond its traditional trading business of Coff ee Inc and partnered to build a geographic coverage,” McIntosh said. Gulf Times Sunday, May 5, 2019 15 BUSINESS

Norway’s krone faces headwinds US rejects Tesla bid for tariff from lower oil to stronger dollar exemption for Autopilot ‘brain’ Bloomberg London

Reuters Washington After the best first quarter since 2015, Norway’s krone has hit a rough patch due to a mix of fac- S trade offi cials rejected Tesla tors from unfavourable market Inc’s bid for relief from Presi- positioning to a stronger dollar Udent Donald Trump’s 25% tar- and a pullback in oil prices. iff s on the Chinese-made Autopilot The Norwegian currency has “brain” of its Model 3 and other electric slipped 0.6% against the euro vehicles, one of more than 1,000 prod- since end-March, after a 2.3% uct denials linked to China’s industrial rally in the first three months development plans. of the year. Even as the Norges According to documents fi led by Bank is widely expected to the US Trade Representative’s offi ce reiterate a hawkish policy bias (USTR) and reviewed by Reuters, exclu- and signal a June interest-rate sion requests from Tesla and others for increase at its meeting next Chinese-made products from aircraft week, some analysts are grow- parts to biotechnology instruments ing cautious about keeping long were denied because they were deemed positions. “strategically important” to the “Made While Danske Bank is in China 2025” programme. maintaining its long-term posi- Tesla declined to comment. The tive view on the krone, it sees company has separate pending tariff limited scope for strength in the exclusion requests for duties on the short term with the dollar gain- Chinese-made Model 3 Center Screen ing support after the US Federal and for the Model 3 Car Computer be- Reserve refrained from signal- fore USTR. ling rate cuts. Crowded long Tesla said in a securities fi ling: “Our positioning and shaky global costs for producing our vehicles in the risk appetite could also weigh US have also been aff ected by import on the Norwegian currency, duties on certain components sourced according to Andreas Steno from China.” Larsen, a currency strategist at The denials illustrate a systematic ap- Nordea Bank. proach by the Trump administration to “A strong dollar and weaker thwart China’s eff orts to develop high- risk appetite will hit the krone technology industries that Washington the most as the Norges Bank is alleges benefi ted from theft and forced People visit a Tesla booth during the media day for the Shanghai auto show (file). US trade off icials rejected Tesla’s bid for relief from Donald Trump’s 25% tariff s on the the most aggressively priced transfer of US intellectual property. Chinese-made Autopilot ‘brain’ of its Model 3 and other electric vehicles, one of more than 1,000 product denials linked to China’s industrial development plans. central bank in the G10 space,” Made in China 2025, a program Larsen said. “I am bearish the aimed at growing China’s prowess in 2025 or other Chinese industrial pro- products and denied 5,311. Of the deni- from a supplier.” The Autopilot ECU, answers. General Motors Co in late July krone” as oil-price declines and 10 strategic industries dominated by grams.” USTR issued a separate letter als, 1,166, or more than a fi fth, contained also used in the Model S and X, includes sought an exemption to a 25-percent US seasonal dividend outflows are the United States, is at the heart of also denying a request for the earlier 2.5 the same language as the Tesla request, two printed circuit board assemblies, tariff on its Chinese-made Buick Envi- set to weigh on the currency, trade negotiations and US demands for version of the Autopilot ECU. citing links to Made in China 2025. Tesla which Tesla calls “the brain responsible sion sport utility vehicle. he said. sweeping changes to China’s policies. It was not clear when the letter was told USTR it was unable to fi nd a manu- for Tesla’s Autopilot functionality” and The Envision accounted for nearly The krone is on track for this Those industries include new energy posted on a US government website. facturer in the United States, adding that the main safety system for the vehicle. 15% of US Buick sales last year. GM year’s biggest two-week decline and autonomous vehicles, aerospace, Other exclusion denials were posted “choosing any other supplier would have Tesla has a separate pending tariff has also sought exclusions for dozen of against both the euro and the semiconductors, biopharmaceuticals, at the same time, including for indus- delayed the (Model 3) programme by 18 exclusion request fi led in December parts, including push button ignition dollar. It was around 9.7500 to robotics and artifi cial intelligence. trial robots imported by Kawasaki Ro- months with clean room setup, line vali- for duties on the Chinese-made Model switches and transmission bearings. the common currency Friday Tesla fi rst made its request to exclude botics USA and composite panels made dation, and staff training.” 3 Center Screen. Other exclusion re- Nissan Motor Co and Fiat Chrysler Au- afternoon in London, losing its 3.0 Autopilot electronic control unit by Hexcel Corp in China for use in vari- Tesla says it refl ashes the Autopilot quests also cited the lack of US sources. tomobiles NV have also fi led exclusion about 2% since April 19. Bearish in July 2018, which it called the “brain ous Boeing Co aircraft. ECU with the latest Firmware created Kawasaki said there are no indus- requests for parts, while Uber Technolo- sentiment toward Norway’s of the vehicle” when the Palo Alto, Some less high-tech products cited in California when it is shipped from trial robots manufactured in the United gies Inc asked for an exclusion for elec- currency was even more stark California-based automaker warned in the 2025 denials included a wiring China by supplier Quanta Shanghai. States, and it only produces robots in tric bikes rented through the Uber app. in the options market, where that “increased tariff s on this particu- harness for a rear door imported by “For a product as safety critical to China and Japan. Even if the United States and China three-month euro-krone risk lar part cause economic harm to Tesla, Lear Corp’s Chinese joint venture, Ky- consumers, and critical to the essence In a previously unreported request, reach a trade deal in the coming weeks reversals have surged to the through the increase of costs and im- ungshin-Lear Sales and Engineering. of Tesla, we turned to industry experts Tesla also asked USTR to waive tariff s to resolve their disputes, companies highest level since last April. pact to profi tability.” “The material composition of the who could achieve this quality and on the 17-inch (43-cm) cockpit touch- may not see tariff relief for months or Domestic economic data have In a March 15 letter, USTR general product consists of insulated wire, complexity in addition to the dead- screen control panel that displays navi- possibly years. People familiar with the been patchy too. While Norway’s counsel Stephen Vaughn said the agen- connectors, terminals, tape, and con- lines, which was not possible outside gation, media, audio, climate control, talks say that some tariff s, especially employment numbers Friday cy was denying Tesla’s request because duit,” Kyungshin-Lear said in its re- of China,” Tesla wrote. “When it comes energy display, and all in-cabin controls. those aimed at the Made in China 2025 were encouraging, manufactur- it “concerns a product strategically quest. USTR has received China tariff to identifying a supplier, we cannot Other automakers have sought similar industries, could remain in place as ing figures released a day earlier important or related to ‘Made in China exclusion requests for nearly 13,000 risk our customers’ lives due to a defect exemptions but have not yet received part of an enforcement mechanism. signalled a slowdown. The Citi Economic Surprise Index for the nation has dipped to its lowest in three months. “Fundamentally, we remain bullish on the krone,” said Krist- SocGen’s Oudea lifts capital strength as slump continues off er Kjaer Lomholt, a senior currency strategist at Danske Bank. “Yet the external post-Fed Bloomberg jobs after he had to give up his main suggesting stockholders are yet to be Bloomberg Television interview. He from 11.2% three months earlier. Soc- environment combined with Paris mid-term targets for growth and prof- convinced the bank is doing enough to confi rmed a Bloomberg report earlier Gen has been scrambling to reduce or short-term downside risks to itability. turn the situation around. this week that the bank’s global head exit some trading activities to help ab- domestic releases suggests a He is trying to show he can preserve Some analysts have said that ongoing of trading role will disappear as part of sorb the eff ect of a regulatory review. At limited near-term downside ociete Generale SA got some relief leadership in businesses such as equity turnover at the trading unit might dent the reorganisation. the end of 2018, it exceeded its capital potential in euro-krone in the from its key equities business and derivatives while meeting targets for revenue and that the changes come Revenue from fi xed-income trading requirement by the narrowest margin coming week.” Sstronger capital levels in a quarter capital and exiting or refocusing some with high risks. In February, SocGen slumped 16%, while equity and prime- of the top 10 listed eurozone banks. Japanese markets will reopen that prolonged the slump in its invest- fi xed-income activities. replaced the markets unit’s head and services sales declined 5.3%. Overall, The bank has sold several retail units next week after being shut April ment banking unit. “We are adjusting the business the head of the fi xed-income business trading was down 7%. in Eastern and central Europe and has 27-May 6 for the Golden Week The French bank’s business of buy- where it’s necessary,” Oudea said in is also leaving. The results contrasted with BNP pledged to accelerate disposals to bol- holidays; UK markets closed on ing and selling equities and providing an interview with French broadcaster Here are some more key highlights Paribas, which on Thursday surprised ster its funding levels. SocGen is sell- May 6 for Bank Holiday. services to hedge funds did better than BFM. The increase in fi nancial strength from SocGen’s fi rst-quarter results: markets with a rebound in fi xed-in- ing its Slovenian retail unit SKB to OTP Norges bank announces rate most peers, a rare bright spot as earn- should reassure investors that the bank Net income fell 26% to €631mn, miss- come trading that beat European and Bank Nyrt. The transaction will lift decision on May 9; Riksbank ings were dragged down by a slump in won’t need to tap shareholders for fresh ing analyst estimates Group revenue US peers, off setting continued weak- SocGen’s core capital ratio by about 7 publishes minutes of April fi xed-income trading. A key measure capital, said Oudea, who will hold an declined 1.6% to €6.19bn, in line with ness in equities. BNP, the country’s basis points but it will also represent 24 meeting and governor of fi nancial strength improved after investor presentation in London on estimates. largest lender, is also cutting some a 67mn-euro drag on its fi rst-half re- Stefan Ingves speaks on May 7. the bank pulled back from some riskier Tuesday to give more details on the re- Corporate fi nancing & advisory trading businesses after revising down sults. Other policymakers speeches businesses and sold assets. structuring. revenue rose 19%. Bank expects 250 its goals. Sales at the French retail business include Fed chairman Jerome The diverging results show the chal- SocGen jumped as much as 4.5% to €300mn of restructuring costs in Societe Generale deputy CEO Sever- fell 3.2%, while they were fl at at BNP Powell; New York Fed president lenge for chief executive offi cer Fre- and was trading 3.9% higher at €29.49 2019. SocGen has a “solid team” in in Cabannes comments on fi rst quarter Paribas. Good news came from the in- John Williams among other deric Oudea, who is facing a crucial in Paris on Friday, the highest since a place to manage the key global bank- results, trading conditions and job cuts. ternational banking and fi nancial serv- policy makers including Patrick shareholder vote this month on a new shock profi t warning in mid-January. ing and investor solutions unit and The bank’s common equity Tier 1 ra- ices operations, which posted a 4.4% Harker, Robert Kaplan, Randal term. Oudea, the longest-serving CEO The shares have been trailing those doesn’t need new executives, dep- tio - a key measure of capital strength increase, partly boosted by insurance Quarles, Raphael Bostic. of a top European bank, is cutting 1,600 of larger rival BNP Paribas SA this year, uty CEO Severin Cabannes said in a – climbed to 11.7% at the end of March, and car-leasing. Diesel traders anticipate shortage, but not just yet

By John Kemp and introduction from Jan 1 of new 2019 has stayed in contango. on near-term distillate prices. Hedge London fuel rules by the International Maritime The market dynamics are consistent funds and other money managers hold Organisation (IMO). with reports that physical traders have a bullish position in US low-sulphur In most cases, the new rules will force started putting excess gasoil and other diesel futures and options of just 4mn Gasoil traders expect the middle shipowners to switch from burning middle distillates, such as heating barrels, down from 63mn at the start distillates market to stay well supplied high-sulphur residual fuel oil to low- oil and road diesel, into storage in of October and 86mn in May 2018. until almost the end of 2019 before sulphur distillate-type fuels. anticipation shortages later in 2019. Portfolio managers have a larger swinging into deficit with the introduction If they don’t change fuel, they must Contango structures help off set position in European gasoil, equivalent of new maritime fuel regulations. install exhaust-gas cleaning systems some, or all, of the cost of storing and to 72mn barrels, but that too is down Calendar spreads for low-sulphur gasoil commonly called scrubbers. financing distillate stocks in the next from last year’s highs of 126mn barrels delivered to Europe’s Amsterdam- Refinery crude processing is expected few months before the barrels are in September and 160mn in May. Rotterdam-Antwerp hub are currently to reach record rates in the third sold at the end of the year or in 2020, By contrast, fund managers hold a near- in contango through until October quarter, especially in the United States, potentially at a higher price. record bullish position in US gasoline of before shifting to backwardation from as refiners try to rebuild depleted Recent reports have suggested traders 112mn barrels, which is higher than at November onwards. gasoline stocks, which will swell gasoil are chartering vessels to act as floating most points in 2018. In futures markets, contango structures, stocks as a by-product. storage near gasoil delivery hubs or key Portfolio managers’ long positions where future contract prices are higher But as refiners cut back on crude bunkering ports, and filling them with now outnumber short ones by 35:1 in than front-month prices, are associated processing and gasoline production gasoil and other middle distillates. gasoline and 11:1 in crude, but just 3:1 in with expectations of adequate or rising in the autumn, distillate markets are Extra distillate inventories accumulated middle distillates. inventories. expected to tighten with winter heating during 2019 should help ameliorate The bottom line is that traders expect The reverse structure of backwardation demand and the entry into force of IMO shortages in 2020 and ease the the distillate market to tighten, but not tends to indicate a drawdown in stocks. bunkering rules. transition to the new bunkering until the US summer driving season is The current structure suggests the As a result, spreads for the fourth regulations. Before then, the gasoil over and the IMO regulations get much market will be plentifully supplied quarter of 2019 and the first half of market is set to remain in surplus closer. through the northern hemisphere’s 2020 have been marching steadily through the third quarter, which likely summer and autumn before shifting towards or deeper into backwardation, explains why most hedge funds are „ John Kemp is a Reuters market analyst. to a shortage with the onset of winter while the spread for June-September maintaining a relatively neutral position The views expressed are his own. Sunday, May 5, 2019 GULF TIMES BUSINESS Investors refuse to fall out of love with technology stocks

Bloomberg years ago. That’s a hazard with training time in 11 years. Only three American investment off icer, has likened the the average of 6.5% over the past two phones and cloud technology have San Francisco too close a lens on the sector’s day-to- companies have ever been valued persistent aff ection for tech stocks to years. The scorecard on sales is worse, not only revived legacy companies day missteps. at $1tn and they’re all in the index: the 1990s internet frenzy. In a note with the beat margin reaching 0.5%, such as Apple and Microsoft, but also Sure, Facebook is at war with regulators Microsoft, Apple and Amazon.com. published in early April, he warned versus 1.5% historically. ushered in new giants like Facebook Say what you want about the and Google’s advertising shortfall left Against that backdrop came earnings investors to watch out for the risk of Investors responded with a yawn. and Alphabet. technology earnings season. The beat analysts baff led. season, the quarterly ritual in which crowded stocks unwinding should With results from five of the largest At 36%, Nasdaq’s market value as a rate was down, Intel and Alphabet took Take a step back, and mainly what you investors get to see if the profit engine everyone start to exit at the same time. US companies in, Alphabet was the percentage of the S&P 500’s still sits lumps, and chipmakers failed to quiet see is the gaping moat of profitability is running hot enough to support The naysayers have their points. only one to see its stock fall the next above its relative profit share of 29%, critics. What you can’t say is that the – including almost $90bn in the first valuations. Four weeks into reporting season, day. The Nasdaq 100 ended the week indicating a higher price-earnings industry’s stocks are suff ering, up 33% quarter – that the Fangs and their And while what they saw gave them tech profits are poised to fall 6.8% in higher by 0.2%, capping it with a Friday multiple. But the gap is a far cry from in four months with another huge day brethren maintain. pause – earnings aren’t going up at the the January-March period, on course flourish of 1.6%. that seen 20 years ago: 44% for market just recorded. “Companies that have stood the test of moment – the Nasdaq’s mammoth rally for the worst quarter since 2009. Altogether, Nasdaq 100 companies cap and 7% for income. Now the Nasdaq 100 has risen an time have been able to adapt and as a remains largely intact. Growth is deteriorating as products earned more than $460bn in profits last “The US economy has changed and unprecedented 18 times in 19 weeks. result justify the stock price increases At least two Wall Street strategists such as smartphones have entered a year, a 9-fold increase from the peak there’s more investment in technology,” Is this the tech bubble part two? It’s that we’ve seen because they’ve got downgraded tech stocks last month, maturing phase and parts makers like year of the internet bubble. As fast as said Jason Benowitz, senior portfolio fair to ask, given how big that index is great earnings,” said Kevin Walkush, saying this year’s market-leading rally semiconductor companies have seen they’ve been, share-price gains during manager with Roosevelt Investment getting versus the rest of the market. portfolio manager at Jensen Investment has stretched valuations to extremes weak demand from a range of end the stretch are much slower: 66% from Group. At about 36% of the S&P 500, it’s Management. “With durability, growth and is unlikely to last. Noah Weisberger markets including data centres. its March 2000 high. “The technology companies are at creeping up on 1999-style dominance. and scale, that drives profits.” at Sanford C Bernstein & Co called the Companies delivered against those So while companies like Microsoft have a premium to the market but they Arguing against the comparison is the Bubble or not, investors refuse to fall stocks “unjustifiably rich.” Sean Darby subdued expectations, though by a needed two decades to restore their grow faster and they have higher share of overall earnings its companies out of love with tech. With $2tn added at Jeff eries said the group may have run little less than they usually do. Among share losses following the crash, the returns on capital. It doesn’t seem generate. Going by the quarter they just since Christmas, the Nasdaq 100 has a ahead of fundamentals. tech companies that reported, earnings industry itself never really stopped like valuation ought to hold this reported, it’s four times as much as 20 shot at beating the market for the 10th Doug Ramsey, Leuthold Group’s chief have beaten estimates by 6%, below expanding. Innovations such as mobile group back at present.”

Pound faces jolt as local polls give Sinclair to buy Disney’s impetus to Brexit

Bloomberg the fi rst time in a year. 21 Fox regional sports London Investors are pinning their hopes for a resolution on the dis- cussions between the two main he pound has climbed on parties, almost three years since optimism over a way for- the vote to leave the EU. The To- Tward on Brexit and next ries and Labour both lost ground week may give the currency a in local elections Thursday amid networks for $9.6bn decisive push, strategists say. frustration over Brexit, which Sterling ended its best week in makes it in their interest to strike Bloomberg two months with a rally on Fri- a deal. May and Labour leader Los Angeles day, following a battering in local Jeremy Corbyn both said that the elections for the two main polit- message from the election was to ical parties that could push them sort out Brexit. inclair Broadcast Group will buy 21 toward a Brexit compromise. The outlook for the Bank of Fox regional sports networks from The pound could either gain England’s interest-rate path also SWalt Disney Co for $9.6bn, a bet past $1.32 if an agreement is depends on Brexit. The market that the local-TV company can become a struck between the ruling Con- barely reacted on Thursday to cable-sports powerhouse. servatives and the opposition comments from BoE governor Sinclair will acquire the business Labour party, or fall back to $1.29 Mark Carney that policy makers via a new subsidiary called Diamond if Prime Minister Theresa May’s would raise rates by more than Sports Group, the company said on Fri- talks fail. investors are pricing if Brexit day. Byron Allen, the former comedian “Currently, cross-party talks goes smoothly. who founded Entertainment Studios are not making progress, but by Even though any agreement and owns the Weather Channel, is in- the middle of next week expec- in the talks would have to get vesting in the business and will help tations are that the government through Parliament, the pound supply content. will make it a ‘take-it-or-leave- would still gain further on the Investors applauded the transaction, it’ moment for both sides to try news, according to Jeremy sending Sinclair shares up as much as and fi nd a way through,” said Stretch, head of Group-of-10 16% in late trading on Friday. Even before Jordan Rochester, an analyst at currency strategy at Canadian the surge, the stock had gained 71% this Nomura International Plc. Imperial Bank of Commerce. A year. “If they were to fi nd an “systematic failure” would have Disney agreed to sell the networks as agreement this would send the a similar impact in the opposite part of its already-completed acquisi- pound much higher as the mar- direction, pushing the pound tion of 21st Century Fox’s entertainment ket would price out any hard down toward $1.29. assets. That attracted a varied cast of Brexit risk for October.” Sterling The cross-party talks are due suitors, including John Malone’s Liberty surged above $1.31 on Friday to to resume on Tuesday. Traders Media Corp, which teamed up with Ma- head for its biggest weekly gain will also have UK growth fi gures jor League Baseball, and Ice Cube’s Big3 since March, yet is still well in their sights next week, with US basketball league. The entertainer below its post-Brexit highs of gross domestic product expect- lined up Will Smith, Serena Williams and around $1.43. Bets on pound ed to pick up to 0.5% in the fi rst Snoop Dogg as content partners for his gains over one month in options quarter, from 0.2% in the last unsuccessful bid. markets have turned positive for three months of 2018. The networks have about 74mn subscrib- A signage is displayed outside the Sinclair Broadcast Group headquarters in Cockeysville, Maryland. Sinclair will buy 21 Fox ers and generated $3.8bn in revenue last regional sports networks from Walt Disney Co for $9.6bn, a bet that the local-TV company can become a cable-sports powerhouse. year. The have local broadcast rights to 42 professional teams, including Major League ESPN and the regional broadcasters. Dis- mained committed to the auction. Sin- grown more formidable. Nexstar Media Baseball, National Basketball Association ney had to sell the networks within 90 days clair expects to put $1.4bn cash into the Group Inc agreed to buy Tribune Media and National Hockey League squads. of the Fox deal’s completion in mid-March. new Diamond business. The rest will be Co for about $4.1bn in December, vault- “While consumer viewing habits have The New York Yankees decided to buy funded by $8.2bn in debt and $1bn in ing it past Sinclair as the largest owner of shifted, the tradition of watching live back their network from the group, re- privately placed preferred stock, Sinclair TV stations in the US. sports and news remains ingrained in our moving a crown jewel that’s valued at said. The total enterprise value will be The Fox sports networks give Sinclair a culture,” Sinclair chief executive offi cer about $4bn. And several deep-pocketed $10.6bn. major foothold in cable TV, and the kind Chris Ripley said in a statement. potential suitors, including Comcast The company’s advisers included of live programming that appeals to ad- “As one of the largest local news pro- Corp, Discovery Incand the new Fox Guggenheim Securities, Deutsche Bank vertisers. The channels serve cities such ducers in the country and an experienced Corp itself, bowed out of contention for and RBC Capital Markets, with Disney as Los Angeles, Atlanta and Detroit, with producer of sports content, we are ideally the remaining networks. relying on Allen & Co and JPMorgan games from major pro leagues. positioned to transfer our skills to deliver That hurt Disney’s ability to command Chase & Co. JPMorgan, Deutsche Bank Sinclair already owns some other and expand our focus on greater premi- top dollar. Analysts originally estimated and RBC will help supply the fi nancing. sports assets, including the Tennis um sports programming.” that the collection could fetch $20bn Sinclair has been one of the broadcast Channel and the Ring of Honor wrestling The transaction allowed Disney to get to $22bn, but bids for the 21 properties industry’s most acquisitive companies circuit. antitrust approval for its $71bn Fox takeo- – not counting the Yankees’ channel – for years, but this marks an aggressive “This acquisition is an extraordinary ver, a transaction that closed earlier this were considerably lower. push into sports. It previously focused opportunity to diversify Sinclair’s con- The pound has climbed on optimism over a way forward year. Regulators were concerned that the Disney’s bankers suggested spinning more on collecting local stations, at one tent sources and revenue streams with on Brexit and next week may give the currency a decisive company would have too much control off the networks to shareholders, rather point becoming the dominant company high-quality assets that are driving live push, strategists say over sports television if it owned both than selling them. But the company re- in that area. More recently, its rivals have viewing,” Ripley said. Soaring bankruptcies in farm belt force US banks to boost defences

Bloomberg said Don Vogel, the bank’s president tomers, trying to fi gure out how to keep hold a hearing on May 9 to review the New York and chief executive offi cer. them going,” said Chris Kalkowski, rough Farm Belt economy. Farm loans account for 79% of his vice president of agribusiness banking So far this year, personal income institution’s portfolio, Vogel said, and at First National Bank of Omaha. “If for farmers is down 25%, the steepest anks that serve US farmers are involve “probably three generations” you need liquidity, the advice is being decline since the fi rst three months of increasingly restructuring ex- of individuals. “It is a long rough patch given, you’re going to have to create it 2016, according to an April 29 Com- Bisting loans and boosting the and it’s probably going to last longer,” by doing something. And a lot of the merce Department report. Regional collateral needed for new ones as the he said by telephone. “There’s not one time, that turns out to be selling some banks, meanwhile, are holding their numbers of late and missed payments little thing that you can neglect during assets.” own. have risen. these times.” Even so, the crisis has become so The percentage of severely delin- While regional banks are healthy, Conditions that prompted lenders severe that Fleming said she recently quent loans for smaller and larger they’re clearly boosting their defences to ask for more collateral rose 2.5% in urged Chuck Grassley, an Iowa Repub- banks has converged in recent years, against the risks they face. In March, a the fourth-quarter of 2018 from a year lican and the second-highest rank- according to an April paper by econo- report by First Midwest Bank in Chica- earlier, according to a survey by the ing member of the US Senate, to push mists Cortney Cowley and Ty Kreit- go showed past-due agricultural loans Federal Reserve Bank of Kansas City, through new legislation to aid farmers man run out by the Federal Reserve up 287% in 2018 over the previous year. which covers parts of seven states. forced to seek bankruptcy. Bank of Kansas City. Small banks have Meanwhile, cases handled by the Meanwhile, as of January 1, average Grassley, meanwhile, said he’s al- taken steps including higher interest Iowa Mediation Service involving interest rates on farm operating loans ready taking steps to help. In March, rates and federal backing to mitigate farmers unable to make payments rose had edged up to 6.07%, its highest level expenses are up 31%, as crop prices selling machinery or restructuring Grassley and a bipartisan group of the less favorable environment, Cow- 20%. Farmer bankruptcies in six Mid- since the second quarter of 2010, ac- have fallen and a trade war with China loans. senators introduced a bill that would ley and Kreitman wrote. west states rose 30% to 103 in 2018, cording to February report by the Fed- has cut demand. Meanwhile, Midwest Her days have gotten considerably help farmers reorganise by raising For farmers, more pain may be according to the Federal Reserve Bank eral Reserve Bank of Chicago. fl oods have wiped out some growers, longer, she said, but her team has an the Chapter 12 operating debt cap to ahead. The Federal Reserve Bank of of Minneapolis. To hold back the tide, Steve Myers, a senior vice president and left others with planting delays 80% success rate in fi nding a solution, $10mn from about $4.2mn, he said in Kansas City last month said farmland Farmers National Bank in Prophet- at Busey Bank in LeRoy, Illinois, said and drowned supplies. she said. Some farmers just aren’t in a an telephone interview on Tuesday. prices may decline, and owners may stown, Illinois is restructuring more he’s starting to see more and more Kiley Fleming is the executive di- position to refi nance, she said. The al- “Even if the trade war ends, with receive lower returns on capital in- and more loans to keep growers solvent farmland sold. It’s not yet “rampant,” rector of the Iowa Mediation Service. ternative – selling equipment – is on this oversupply of corn and soybeans vested. That’s a change from the early while trimming the bank’s own risk. he said, “but it signals a warning sign State law there provides borrowers the the rise, with North American farm and wheat, we’re still going to have low stages of the downturn, when farm- “When you’re a rural community of sorts. The warning shots are valid. option to mediate with creditors before tractor inventories jumping 8% in the prices,” Grassley said in an interview. land values were relatively stable, and bank, if you’re not involved in agricul- The warning shots are here.” Farmer foreclosures can begin, she said. That past year to a record high in March. Separately, the US House of Represent- served as an attractive source of collat- ture, you probably don’t have a future,” incomes are down 11% since 2010 and can mean a resolution that includes “Banks are working with their cus- atives’ Agriculture Committee plans to eral for loans.