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Monday, 23 Mar 2020

UAE best-positioned in GCC to absorb oil shock


Insights MENA

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Economic Outlook

Economic Outlook

  • UAE is best positioned among GCC economies to absorb the decrease in oil prices as it can finance its current account deficit longer than any of its regional peers. According to Capital Economics, UAE can finance its current account deficit for 35 years if oil prices stay at 25 USD a barrel. Kuwait comes second followed by Qatar, Saudi Arabia, Bahrain and Oman.
  • The total assets of the Central Bank of UAE increased 3% to 457 BN AED (124.4 BN USD) in February 2020, a growth of 10.3% compared to 414.4 BN AED (112.8 BN USD) in February 2019. The significant growth is driven by an increase in cash and bank balances to 243 BN AED (66.15 BN USD) in February 2020 compared to 188.12 BN AED (51.2 BN USD in February 2019.
  • UAE Ministry of Foreign Affairs and International Cooperation has suspended the entry of GCC citizens, starting 21 March 2020, until undergoing COVID-19 medical tests and place themselves under house quarantine for 14 days; otherwise, they will be quarantined at designated places by the relevant authorities.
  • The Central Bank of Egypt (CBE) issued treasury bills (T-bills) worth 5 BN EGP yesterday, in coordination with the Ministry of Finance (MoF) to bridge the budget deficit. The issuance was through two tranches, 91-day bills worth 4 BN EGP, and 266-day bills at 10.5 BN EGP. State-run banks are the biggest buyers of government-issued debt instruments.
  • A new 500 MM USD funding package from the World Bank will finance existing low-income housing programs by the Egyptian government. The funding will raise the housing sector’s capacity while ensuring the design of customized programs to satisfy the needs of low-income families. In addition, it will encourage more investments by the private sector in social housing projects.
  • The Egyptian tourism sector is expected to incur losses of up to 1 BN USD monthly due to the suspension of all flights. The government decided to halt all flights from Thursday, 19 March, until the end of March in a bid to curb the spread of the new coronavirus (COVID-19).
  • The Egyptian Tax Authority announced extending the season for filing tax returns for natural persons to 9 April from 31 March. This move is in line with the government’s efforts to curb the spread of the new coronavirus (COVID-19).
  • The price of Kuwait’s crude oil recorded 75 USD per barrel (pb) last Wednesday decreased by 2.14 USD compared to 31.89 USD pb last Tuesday. At the global level, oil prices have fallen to their lowest level in 18 years, dropping by more than 24% amid fears over a global recession.
  • Trade balance surplus between Kuwait and Japan narrowed by 9% in February 2020 to 369 MM USD. The decline in surplus is the first in three months and attributed to weak exports. Moreover, imports from Japan decreased by 8.7% reaching 149 MM USD, posting the first decline in four months.
Political Events

Political Events

  • The Egyptian Supreme Council of Antiquities has decided to close all museums and archaeological sites from 23 March until 31 March 2020. The move will allow disinfecting and sanitizing the mentioned sites. Meanwhile, the Ministry of Awqaf has decided to close mosques across the country for two weeks, starting Saturday 21 March, as part of efforts to stop the spread of the new coronavirus (COVID-19). It is worth noting that the number of COVID-19 cases in Egypt reached 285.
  • Saudi Customs has stopped the export of medicines, pharmaceuticals, and medical devices. The customs issued a circular to all land, sea, and air customs ports to impose the new rules, in line with precautionary measures to combat the outbreak of the novel Coronavirus (COVID-19).
Stock Market

Stock Market

  • State-owned Banque du Caire (BdC) has postponed plans to debut 20-30% of its shares on the EGX in April due to market volatility. The bank was preparing to go public next month, the sale would depend on the state of the markets. The transaction was the most booming anticipated IPO of 2020 which could go ahead in H2-2020 if calm returns to the markets.
  • The Saudi Stock Exchange (Tadawul) announced the implementation of the fifth and final tranche inclusion in FTSE Russell as an Emerging Market with an inclusion factor of 25%. This will be carried out over two phases; the first phase will be effective on 23 March 2020 based on the closing prices of 19 March with 25% of the inclusion factor. The second phase will be effective in the course of June 2020 with 75% of the inclusion factor.

Note:  Weekly values are calculated on Thursday of each week.

Companies Transactions

Companies Transactions

  • The shareholders of CI Capital Holding for financial investments have approved raising the issued and paid-up capital by 200 MM EGP from 800 MM EGP to 1 BN EGP. The capital increase is distributed over 200 million shares at a nominal value of 1 EGP per share, to be distributed at 0.25 bonus share for every share held.
  • Banque Misr and the National Bank of Egypt (NBE) will issue savings certificates with a 15% annual yield, the highest in the local market. These certificates aim to support the bank's customers in the upcoming period amid the rising concerns over the coronavirus (COVID-19). Both banks earlier revealed that they will keep interest rates on their fixed-rate certificates unchanged.
  • Nozha International Hospital’s net profits after tax surged by 40% y-o-y to 5 MM EGP in 2019 compared to 43.13 MM EGP in 2018. The hospital’s revenues increased by 13% to 214.89 MM EGP in 2019 compared to 189.71 MM EGP in 2018.
  • Dana Gas has confirmed that the coronavirus (COVID-19) outbreak has not impacted its exploration and production operations and facilities in the Kurdistan Region of Iraq (KRI) and Egypt. The company’s balance sheet remained strong in 2019, with a cash balance of 425 MM USD.
  • Tabuk Agricultural Development Company has approved the board’s proposed capital cut by 27% to amortize accumulated losses of 208.23 MM SAR (55.4 MM USD). The Saudi firm’s capital will be reduced to 241.77 MM SAR (64.3 MM USD) from 450 MM SAR (119.7 MM USD), while the total number of shares will reach 24.17 million shares compared to a current 45 million shares.
  • Moody's Investors Service has affirmed the A1 long-term deposit ratings and P-1 short-term deposit ratings of Banque Saudi Fransi (BSF) and changed the outlook on the bank's long-term deposit ratings to negative from stable. Moody's also affirmed the bank's baseline credit assessment (BCA) and adjusted BCA at a3.
  • The Saudi Ministry of Energy has directed the Saudi Arabian Oil Company (Saudi Aramco) to continue to supply crude oil at a level of 3 million barrels per day (b/d). Saudi Arabia recently decided to increase crude oil exports in the months to come above the 10 million b/d level. Moreover, the Saudi oil giant has lowered its official selling prices (OSP) for April shipments.
  • The value of total securities brokerage transactions carried out by the Egyptian Financial Group Hermes Holding (EFG Hermes) in the Saudi, Kuwaiti, Egyptian and UAE markets increased by 46% y-o-y reaching 9 BN USD in 2019.
  • The shareholders of Societe Arabe Internationale de Banque (SAIB) have approved paying out cash dividends at a total value of 5 MM USD in 2019. It is note worthy that in 2019, the bank reported 12.39 MM USD net profits compared to 19.25 MM USD net losses in 2018.
Sports and Culture

Sports and Culture

  • The Dubai World Cup, one of the world's richest horse races and a premier annual sporting event in UAE, will not go ahead this year amid the worsening coronavirus The 25th edition of the multi-race meet, scheduled for March 28, has been postponed to 2021 to safeguard the health of participants.
  • The Japanese Deputy Prime Minister Taro Aso stated that even if Japan can contain the coronavirus outbreak, the Summer Olympic Games "would not make sense" if other countries cannot send their athletes. He added that it's desirable to hold the Olympics in an environment where everyone feels safe and happy. But that's not something Japan alone can decide.

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