Equities in Saudi Arabia could face a bumpier ride in the coming days and weeks amid uncertainty about the implications of the country’s anti-corruption drive, with the impact already being felt in the wider Arabian Gulf region, even as the shake-up promises to improve the kingdom’s economy in the longer-term.
The Saudi stock exchange (Tadawul) fell as much as 3 per cent on Tuesday afternoon, before recovering to close down 0.7 per cent, as investors concerned by the recent arrest of several prominent business leaders wondered if other figures are likely to be detained.
Every stock market in the Arabian Gulf ended the day lower, with Dubai and Kuwait both recording their steepest one-day declines of the year.
“Investors are very wary,” Meriem Kaddour, an analyst with Alphamena in Tunis said.
“The political context is dominating investors’ mood, so they’re neglecting company’s strong operating models and positive financial results, as they’re only seeing the politics.”
The uncertainty has pushed oil to $64 per barrel, a two-and- a-half-year high, and had a negative impact on the share price of Kingdom Holding, the investment vehicle of billionaire businessman Prince Alwaleed bin Talal, after reports of his detention emerged on Sunday.
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Read more:
Trump lends support to Saudi Arabia in arresting those 'milking the country'
New Saudi committee to investigate public corruption opens 'new era of transparency'
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The company’s shares sank 10 per cent on Tuesday to 8.10 Saudi riyals, its lowest close since late-2011, taking its losses for the week so far to 21 per cent.
“This is a natural concern for investors to reduce exposure…due to the fact that there is an allegation under process against the biggest shareholder of the company,” said Tariq Qaqish, managing director of asset management at Menacorp. “This is their right to be concerned, I think the Saudi government will play it right in terms of protecting minority interests.”
Shares in Al Tayyar Travel slumped 9.9 per cent yesterday, after it emerged that the company’s founder, Nasser bin Aqeel Al Tayyar was also among those detained.
The anti-corruption drive, launched by Crown Prince Mohammed bin Salman on Sunday, may prompt Saudi companies to delay investment decisions in the short-term, impacting economic growth.
“Other firms that haven’t been impacted so far will be waiting to see if they’ll be implicated in a future crackdown, leading them to hold back investment,” said Jason Tuvey, a Middle East economist with London-based Capital Economics.
“Foreign investors may also be deterred from making short-term investments, as much of the business that’s conducted is in partnership with such large firms.”
However Mr Tuvey noted that the anti-corruption drive, if followed through on, may benefit Saudi Arabia’s economy in the longer term, significantly improving the ease of doing business, particularly for SMEs.
Exotix Capital said yesterday in a research note that the arrest of senior business and political leaders may prove to be “a necessary condition for pushing the austerity and transformation agenda, the benefits of which very few investors are pricing in.
“Austerity and transformation require such a profound shift in Saudi economics that is it really so surprising that they are coincident with an equally profound, precursory shift in Saudi politics? Those investors prepared to take on board the long-term risks of Saudi may welcome the disruption of status quo politics.”
In the shorter term, Lebanon's economic prospects also face uncertainty, after Saudi Arabia accused the country's government of declaring war against it because of what it said was aggression by the Iranian-backed Lebanese Shiite group Hezbollah.
In an interview with Saudi's Al-Arabiya TV, the country's Gulf affairs minister Thamer al-Sabhan said the Lebanese government would "be dealt with as a government declaring war on Saudi Arabia" because of what he described as aggression by Hezbollah.
His remarks came following the resignation of Prime Minister Saad Hariri during a visit to Saudi Arabia on Saturday, blaming Iran for internal meddling and its proxy Hezbollah in his resignation speech.
Rating agency Moody’s warned the reopening of the country's political vacuum would damage the country’s credit rating.
“A drawn-out political stalemate less than a month after the government passed its first budget in 12 years would undermine recent institutional improvements and expose the banking system to a loss in confidence,” the agency said in an emailed note.
“Any loss of confidence in the banking system or in the stability of Lebanon’s institutions leading to a significant slowdown in private sector deposit inflows or outright outflows would be credit negative.”
The price of Lebanese 10 and 20 year bonds fell to fresh lows yesterday. Lebanese banks hold the bulk of the country's public debt which reached $77.3 billion in August, a debt to GDP ratio of 148 per cent, due to a sluggish economy and increased geopolitical tensions that have dented investor confidence.
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
Company%20Profile
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
Company%20Profile
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KILLING OF QASSEM SULEIMANI
Kamindu Mendis bio
Full name: Pasqual Handi Kamindu Dilanka Mendis
Born: September 30, 1998
Age: 20 years and 26 days
Nationality: Sri Lankan
Major teams Sri Lanka's Under 19 team
Batting style: Left-hander
Bowling style: Right-arm off-spin and slow left-arm orthodox (that's right!)
The specs
Engine: 77.4kW all-wheel-drive dual motor
Power: 320bhp
Torque: 605Nm
Transmission: Single-speed automatic
Price: From Dh219,000
On sale: Now
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
MATCH INFO
Europa League final
Marseille 0
Atletico Madrid 3
Greizmann (21', 49'), Gabi (89')
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
ENGLAND WORLD CUP SQUAD
Eoin Morgan (captain), Moeen Ali, Jonny Bairstow, Jos Buttler (wicketkeeper), Tom Curran, Joe Denly, Alex Hales, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, David Willey, Chris Woakes, Mark Wood
UAE currency: the story behind the money in your pockets
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
Company%20profile
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