Home > Insights > Amid falling oil prices, Standard & Poor’s (S&P) has downgraded the credit rating for Saudi Arabia.
Monday, 22 Feb 2016

Amid falling oil prices, Standard & Poor’s (S&P) has downgraded the credit rating for Saudi Arabia.


Insights MENA

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Economic Outlook

Economic Outlook

  • Amid falling oil prices, Standard & Poor's (S&P) has downgraded the credit rating for Saudi Arabia, Bahrain, Oman, and other large oil producing countries. Where Saudi Arabia's rating was cut from A+ to A-, Bahrain's investment grade dropped from BBB- to BB, while Oman's rating downgraded from BBB+ to BBB-.
  • Egypt's Central Bank has raised the cap on foreign currency deposits at banks to reach 1 MM USD for exporting companies after raising it last month to reach 250,000 USD.
  • Jordan's exports revenues have been witnessing a decline by 35-40% as the region started witnessing political instability and fuel prices dropped. It is worth mentioning that the kingdom used to receive 5 BN USD in revenue from free zone products where Iraq's market alone used to contribute with around 2.5 BN USD.
  • According to the Chairman of the New and Renewable Energy Authority (NREA), the Egyptian government is planning to remove the subsidy on electricity entirely by 2019.
  • To finance its budget deficit caused by low oil prices, the Saudi Arabian government is planning to start issuing floating rate bonds to encourage local banks to buy its debt.
  • 3 MM visitors have visited Qatar in 2015, according to Qatar Tourism Authority, and the country is planning to increase the number to reach 4 MM by 2020 supported by 45 BN USD worth of sector investments.
  • Government-backed Money and Credit Council approved a cut in Iranian commercial banks' deposit rates, after the sanctions have been removed. The deposit rate was cut from 20% to 18%. It's important to note that this fall in the rate is expected to encourage the public to invest and assist in enhancing the economy.
  • According to the Monster Employment Index (MEI), UAE is the best performing market in the region. The number of job opportunities posted online increased by 45% over the last year till January 2016. It's worthy to mention that those employment opportunities are mainly from non-oil sectors such as consumer goods, health care, retail, food & packed food, home appliances, and garments.
  • The head of the Egyptian central bank announced that the bank is not taking any steps to devaluate its currency until the foreign reserves increase to 25-30 BN USD up from the current 16.48 BN USD.
  • In a move to meet the requirements of the International Monetary Fund on government finance statistics, The UAE's ministry of finance announced that Dubai's financial system has been electronically linked to that of the federal government.
  • Iran's oil minister announced that both Oman and Iran are willing to have closer ties and shared investments in the energy sector. It is worth mentioning that, the most important shared project between them was a planned undersea gas pipeline to connect Iran's vast gas reserves to Omani liquefied natural gas (LNG) export plants.
  • According to a new report by the research firm STR Global, the Middle East witnessed a 50.4% y-o-y rise in hotel rooms under construction. It is worthy to note that the region had 251 hotels featuring 80,350 rooms under construction and 538 hotels with 151,771 rooms under contract last month.
  • According to Oman's central bank, Yields have jumped at an auction of domestic Oman government bonds this week showing pressure on banking system liquidity due to low oil prices. It is worth mentioning that, the government sold five-year development bonds at 100 MM OMR (260 MM USD) at an average yield of 4.32%.
Political Events

Political Events

  • The Arab world's best known political commentator Mohamed Hassanein Heikal has died last Wednesday at age 92.
  • Protesting over the release on bail of a former minister sentenced for smuggling explosives from Syria, Ashraf Rifi, Lebanon's justice minister resigned this week blaming political rivals, Hezbollah, for the country's political deadlock.
  • Al-Qaeda militants took control of the southern Yemeni town of Ahwar. It is worth mentioning that the coastal city and surrounding district is home to over 30,000 people and is an important geographic link between the major port city of Mukalla to the east and the smaller town of Zinjibar, both of which Al Qaeda seized months ago.
  • In response to Beirut's failure to condemn attacks on Saudi diplomatic missions in Iran, Saudi Arabia suspended a 3 BN USD aid package for the Lebanese army.
Stock Market

Stock Market

  • .TASI petrochemical sector witnessed a significant increase led by SABIC and Savola, and banking sector led by Rajhi Bank.
  • .KWSE has witnessed a slight increase in most of the sectors except real estate sector that declined led by Kuwait Real Estate and Taameer Real Estate.
  • .ADI banking sector increased led by First Gulf Bank, and real estate sector led by Aldar and RAK properties.
  • .DFMGI banking sector increased led by Emirates NBD and Dubai Islamic Bank, and real estate sector led by Emaar Properties and Arabtec Holding.
Index Watchlist
Weekly % Change
YTD% Change
Egypt
.EGX30
2.2%
-15.2%
Construction & Materials
0.4%
-16.1%
Telecommunication
6.1%
-7.2%
Banking
1.6%
-13.2%
KSA
.TASI
3.9%
-14.9%
Petrochemicals
8.9%
-13.5%
Banks & Financial Services
2.7%
-11.6%
Telecommunication & Information
1.9%
-12.2%
Kuwait
.KWSE
0.2%
-8.4%
Banking
0.75%
-12.3%
Telecommunication
2.4%
-5.6%
Financial Services
1.5%
-10.7%
Real Estate
-1.1%
-12.1%
Industrials
0.3%
-7.2%
Qatar
.QSI
5.1%
-4.4%
Banking & Financial Services
4.8%
-2.9%
Industrials
5.4%
-9.7%
Real Estate
5.8%
-6.6%
Telecommunication
-0.6%
6.0%
UAE, Abu Dhabi
.ADI
3.5%
-2.2%
Banking
4.3%
-4.4%
Telecommunication
1.6%
1.6%
Real Estate
7.3%
7.2%
UAE, Dubai
.DFMGI
3.7%
-1.8%
Banking
1.7%
-2.5%
Real Estate & Construction
1.3%
-2.3%
Investments & Financial Services
10.2%
-9.6%
Telecommunication
-1.0%
13.5%
Companies Transactions

Companies Transactions

  • Microsoft is planning to assist an average of 10,000 small and medium enterprises in Qatar in the coming three years through providing trainings and concessional pricing. It is worthy to note that Microsoft has supported 2,000 SMEs along the past two years.
  • Al Baraka Banking Group has reported a net profit rise of 15% which amounted to 42 MN USD in Q4 2015. Accordingly, the bank's board has proposed paying a cash dividend of 0.02 USD per share and a stock dividend of 3 free shares for every 100 held for the year ending Dec. 31 2015.
  • Dubai contractor, Arabtec, blamed current market conditions for its widening net loss in Q4 2015 which amounted to 360 MM AED compared to 94.4 MM AED in the corresponding period of 2014.
  • Aluminum Bahrain (Alba), owner of one of the world's largest aluminum smelters, has cut its dividend for 2015 to secure cash that will be used to finance its Line 6 smelter expansion project which is expected to cost 3.5 BN USD and boost Alba's annual output by 514,000 tones to reach 1.45 MM tones per year.
  • Patchi, the Lebanese luxury chocolatier, is discussing a potential stake sale, which aims to value the company at 500 MM USD, with Goldman Sachs and deNovo Corporate Advisors.
  • To help the kingdom meet surging domestic demand for electricity, Saudi Aramco, the state-owned oil giant, has started to operate a unit that will process offshore gas for its giant Wasit project, which mainly focuses on adding gas capacity.
  • As part of a planned partnership with Qatar Airways, Italian airline Meridiana is asking labor unions to agree to 900 job cuts - nearly half its workforce.

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