Capital spending by non-financial companies in Europe, the Middle East and Africa is expected to increase to $920 billion in the 12 months to June this year, according to Moody’s Investors Service.
This will be driven by an increase in investments linked to the coronavirus-induced shift to online sales and remote working.
Capital expenditure by Moody’s rated non-financial corporate entities in the region is estimated to be about $150bn higher than its forecast for the same period in 2020, the rating agency said in a report on Tuesday.
"The utilities, telecoms and energy sectors will dominate capital spending, accounting for half the total – but nearly all sectors are contributing to the overall increase," said Richard Morawetz, a vice president and senior credit officer at Moody's.
"Stronger earnings and accumulated cash balances provide rated companies with the firepower to increase spending."
Companies covered by Moody’s hold about $400bn more cash than they did before the pandemic. However, they also accumulated more debt during the early stages of the outbreak.
Corporations, government-related entities and sovereigns all tapped into debt markets in 2020, taking advantage of historically low interest rates and abundant liquidity as they looked to shore up their capital bases amid the uncertainty caused by Covid-19.
The global economy, which fell into its deepest recession in 2020, has made a strong recovery and businesses are now looking to use the cash on their balance sheets.
Some companies will seek to repay debt or increase shareholder returns, with capital spending one of several priorities competing for the use of cash, Moody’s said.
“Even as capital spending rises, we forecast stronger free cash flow in most sectors, underpinned by stronger earnings,” the rating agency said.
The shift to online sales and remote working, as well as government targets to increase 5G broadband penetration and connectivity are factors that are influencing investment spending in retail, telecoms and other sectors.
Companies that were hardest hit by the coronavirus pandemic often cut capital spending as a defensive measure. However, spending is expected to bounce back as the economy recovers.
In sectors such as transport, services and retail, capital spending will pick up but remain "vulnerable to the pace of recovery".
"We forecast the companies we rate in the utilities and energy sectors to invest close to $200bn [in] each [sector] or about $30bn more on average than in the previous year," Moody's said.
"Half of total capital spending is by 45 mostly investment-grade companies."
The oil and gas sector is benefiting from increased operating cash flow owing to higher crude prices but only a portion of this will be used to raise capital spending as many companies focus on strengthening their balance sheets and improving shareholder returns.
"Upstream oil companies already have the dilemma of whether to invest to meet future demand for oil while facing the prospect of oversupply and stranded assets as governments introduce regulations to reduce carbon emissions," according to the Moody's report.
The utilities, telecoms and energy sectors will dominate capital spending, accounting for half the total – but nearly all sectors are contributing to the overall increase
Richard Morawetz,
vice president and senior credit officer at Moody's
Global oil and gas companies will need to invest $650bn a year on average between 2021 and 2030 under the International Energy Agency's stated policies scenario.
They would need $500bn under the agency's sustainable development scenario, where demand for oil begins to ease sooner. However, oil and gas companies have not met either of these targets for several years, Moody's said, citing data from the agency.
Environmental, social and governance considerations are also playing an increasing part in the spending decisions of non-financial companies, especially in sectors such as utilities, oil and gas, automotive, metals and mining, chemicals, transport and property.
“A more demanding regulatory environment and increased investor scrutiny are accelerating this change in focus,” Moody’s said.
Countries’ own emissions targets may also result in more regulations and companies could face "higher borrowing costs or reduced access to funding in coming years if investors believe they are not adhering to emissions targets", the report said.
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Zayed Sustainability Prize
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
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Expo details
Expo 2020 Dubai will be the first World Expo to be held in the Middle East, Africa and South Asia
The world fair will run for six months from October 20, 2020 to April 10, 2021.
It is expected to attract 25 million visits
Some 70 per cent visitors are projected to come from outside the UAE, the largest proportion of international visitors in the 167-year history of World Expos.
More than 30,000 volunteers are required for Expo 2020
The site covers a total of 4.38 sqkm, including a 2 sqkm gated area
It is located adjacent to Al Maktoum International Airport in Dubai South
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Mohammed bin Zayed Majlis
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Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Zayed Sustainability Prize
ICC Women's T20 World Cup Asia Qualifier 2025, Thailand
UAE fixtures
May 9, v Malaysia
May 10, v Qatar
May 13, v Malaysia
May 15, v Qatar
May 18 and 19, semi-finals
May 20, final
The specs
Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)
What are the influencer academy modules?
- Mastery of audio-visual content creation.
- Cinematography, shots and movement.
- All aspects of post-production.
- Emerging technologies and VFX with AI and CGI.
- Understanding of marketing objectives and audience engagement.
- Tourism industry knowledge.
- Professional ethics.
Zayed Sustainability Prize
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Results:
6.30pm: Maiden | US$45,000 (Dirt) | 1,400 metres
Winner: Tabarak, Royston Ffrench (jockey), Rashed Bouresly (trainer)
7.05pm: Handicap | $175,000 (Turf) | 3,200m
Winner: Dubhe, William Buick, Charlie Appleby
7.40pm: UAE 2000 Guineas Group 3 | $250,000 (D) | 1,600m
Winner: Estihdaaf, Christophe Soumillon, Saeed bin Suroor
8.15pm: Handicap | $135,000 (T) | 1,800m
Winner: Nordic Lights, William Buick, Charlie Appleby
8.50pm: Al Maktoum Challenge Round 2 Group 2 | $450,000 (D) | 1,900m
Winner: North America, Richard Mullen, Satish Seemar
9.25pm: Handicap | $175,000 (T) | 1,200m
Winner: Mazzini, Adrie de Vries, Fawzi Nass
10pm: Handicap | $135,000 (T) | 1,400m.
Winner: Mubtasim, William Buick, Charlie Appleby
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
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Top investing tips for UAE residents in 2021
Build an emergency fund: Make sure you have enough cash to cover six months of expenses as a buffer against unexpected problems before you begin investing, advises Steve Cronin, the founder of DeadSimpleSaving.com.
Think long-term: When you invest, you need to have a long-term mindset, so don’t worry about momentary ups and downs in the stock market.
Invest worldwide: Diversify your investments globally, ideally by way of a global stock index fund.
Is your money tied up: Avoid anything where you cannot get your money back in full within a month at any time without any penalty.
Skip past the promises: “If an investment product is offering more than 10 per cent return per year, it is either extremely risky or a scam,” Mr Cronin says.
Choose plans with low fees: Make sure that any funds you buy do not charge more than 1 per cent in fees, Mr Cronin says. “If you invest by yourself, you can easily stay below this figure.” Managed funds and commissionable investments often come with higher fees.
Be sceptical about recommendations: If someone suggests an investment to you, ask if they stand to gain, advises Mr Cronin. “If they are receiving commission, they are unlikely to recommend an investment that’s best for you.”
Get financially independent: Mr Cronin advises UAE residents to pursue financial independence. Start with a Google search and improve your knowledge via expat investing websites or Facebook groups such as SimplyFI.
The years Ramadan fell in May
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Company Profile
Founder: Omar Onsi
Launched: 2018
Employees: 35
Financing stage: Seed round ($12 million)
Investors: B&Y, Phoenician Funds, M1 Group, Shorooq Partners
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KILLING OF QASSEM SULEIMANI
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
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In numbers
Number of Chinese tourists coming to UAE in 2017 was... 1.3m
Alibaba’s new ‘Tech Town’ in Dubai is worth... $600m
China’s investment in the MIddle East in 2016 was... $29.5bn
The world’s most valuable start-up in 2018, TikTok, is valued at... $75bn
Boost to the UAE economy of 5G connectivity will be... $269bn
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The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
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TO A LAND UNKNOWN
Director: Mahdi Fleifel
Starring: Mahmoud Bakri, Aram Sabbah, Mohammad Alsurafa
Rating: 4.5/5
Mohammed bin Zayed Majlis
Reading List
Practitioners of mindful eating recommend the following books to get you started:
Savor: Mindful Eating, Mindful Life by Thich Nhat Hanh and Dr Lilian Cheung
How to Eat by Thich Nhat Hanh
The Mindful Diet by Dr Ruth Wolever
Mindful Eating by Dr Jan Bays
How to Raise a Mindful Eaterby Maryann Jacobsen
Andor
%3Cp%3E%3Cstrong%3ECreator%3A%3C%2Fstrong%3E%20Tony%20Gilroy%3Cbr%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EDiego%20Luna%2C%20Genevieve%20O'Reilly%2C%20Alex%20Ferns%3Cbr%3E%3Cstrong%3ERating%3A%205%3C%2Fstrong%3E%2F5%3C%2Fp%3E%0A
The Gentlemen
Director: Guy Ritchie
Stars: Colin Farrell, Hugh Grant
Three out of five stars
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Mohammed bin Zayed Majlis
Asian Cup 2019
Quarter-final
UAE v Australia, Friday, 8pm, Hazza bin Zayed Stadium, Al Ain
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