The oil price rout is expected to spur debt sales next year to help US$640 billion in project spending across the Arabian Gulf says the regional chief of Standard & Poor’s.
New banking regulations and the expected opening of the Saudi stock market to foreign investors are also expected to provide a boost to debt markets.
Due to wobbly economic growth in Europe and Asia and an oil glut, Brent has shed about half of its value since June. That is likely to lead Gulf banks, which have traditionally provided most funding in the region, to become more cautious amid plummeting oil earnings, which account in some Gulf countries to more than 90 per cent of revenue.
“We are probably going to see some tightening of bank liquidity,” said Stuart Anderson, the managing director and regional head at S&P.
“One would imagine that will start feeding through into 2015. There is also increasing regulatory moves that will encourage more bond issuance, and that is related to Basel III and other measures implemented by various regional regulators and central banks.”
Gulf countries, some of which enjoy AA ratings, are forecast to spend $640bn on development projects through 2019, according to figures by the consultancy EC Harris. This sum is likely to be partly financed by Islamic bonds or sukuk and conventional bonds.
Central Banks around the region have been tightening bank rules as capital-boosting Basel III standards begin to be phased out over the coming years.
Some Gulf sovereigns are likely to tap the bond markets next year to finance fiscal deficits, which will occur due to the oil price crash. “There is nothing abnormal in introducing some minor degree of government borrowing, which would benefit the development of local debt markets and possibly help in the diversification of regional economies,” said Mr Anderson.
S&P has already lowered its long-term outlook for Saudi Arabia, Oman and Bahrain due to the falling price of crude. S&P expects government-related entities (GREs) to come to the market next year, although many of them shied away this year.
“There are still many names out there that have indicated they will come to the bond market. Some of the GREs and corporates have indicated this privately, but they are yet to tap the bond markets,’’ he said, declining to name any of them.
“There are also a number of projects out there which are completing 15 year anniversaries – some of them have 15 to 20 year tenors. Some of these projects are equally successful and it is very possible they will be refinanced through sukuk, and if not a sukuk, then through a conventional bond.”
Not all GREs, though, are eager to tap the bond market next year. Dubai Electricity and Water Authority, which has a $1bn bond maturing in April, plans to use its own resources and short-term loans to cover its expenses next year. Many GREs and corporates in the UAE did not tap the bond market this year because they refinanced debt more cheaply through banks, which are flush with cash. Although the UAE's Central Bank has capped the amount of bank lending to GREs to 100 per cent of capital, banks were given a five-year grace period to comply with the rules.
"Many of us would have expected the regulations to have logically led to some migration of bank lending to the bonds and sukuk market. But that doesn't seem to have happened yet," said Mr Anderson. S&P also expects sukuk issuance next year to continue to be robust as demand outstrips supply. Oman, the last Gulf state to introduce Islamic finance, is expected to go the market next year with a debut sukuk. Gulf authorities have been actively building bond markets for corporates to help expand funding sources away from bank lending, create financial hubs that would help diversify the oil-reliant economies and establish a bond-yield curve. The UAE's Securities and Commodities Authority has eased rules for bond and sukuk issuance by introducing a number of new measures.
The Saudi Arabian central bank has issued new rules for rating agencies that will be implemented starting next September. The rules include the requirement for a credit agency to have a presence in the country and have a minimum paid-up capital of 2m million riyals (Dh1.95m) or three months working capital – which ever is higher.
The Saudi central bank is also enforcing new lending rules, which limit lending to single borrowers to 25 per cent of a bank’s capital, a measure that will help to spur bond issuance in the country, said Mr Anderson.
Saudi Arabia’s stock market regulator, the Capital Market Authority, announced in July that it would open the market to foreign investors in the first half of next year, a boon for local and international investors.
“If you look at the Saudi market, the long-term potential for ratings is very positive. There are about 165 listed companies in Saudi Arabia and only 15 per cent of them have a rating from an agency.
dalsaadi@thenational.ae
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
THE TWIN BIO
Their favourite city: Dubai
Their favourite food: Khaleeji
Their favourite past-time : walking on the beach
Their favorite quote: ‘we rise by lifting others’ by Robert Ingersoll
MATCH INFO
AC Milan v Inter, Sunday, 6pm (UAE), match live on BeIN Sports
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
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Company%20profile
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
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Brescia 1 (Skrinia og, 76)
Inter Milan 2 (Martinez 33, Lukaku 63)
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Manchester United v Brighton, Sunday, 6pm UAE
Best Foreign Language Film nominees
Capernaum (Lebanon)
Cold War (Poland)
Never Look Away (Germany)
Roma (Mexico)
Shoplifters (Japan)
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COMPANY%20PROFILE
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Favourite things
Luxury: Enjoys window shopping for high-end bags and jewellery
Discount: She works in luxury retail, but is careful about spending, waits for sales, festivals and only buys on discount
University: The only person in her family to go to college, Jiang secured a bachelor’s degree in business management in China
Masters: Studying part-time for a master’s degree in international business marketing in Dubai
Vacation: Heads back home to see family in China
Community work: Member of the Chinese Business Women’s Association of the UAE to encourage other women entrepreneurs
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
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
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Museum of the Future in numbers
- 78 metres is the height of the museum
- 30,000 square metres is its total area
- 17,000 square metres is the length of the stainless steel facade
- 14 kilometres is the length of LED lights used on the facade
- 1,024 individual pieces make up the exterior
- 7 floors in all, with one for administrative offices
- 2,400 diagonally intersecting steel members frame the torus shape
- 100 species of trees and plants dot the gardens
- Dh145 is the price of a ticket
Wonka
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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
Profile
Co-founders of the company: Vilhelm Hedberg and Ravi Bhusari
Launch year: In 2016 ekar launched and signed an agreement with Etihad Airways in Abu Dhabi. In January 2017 ekar launched in Dubai in a partnership with the RTA.
Number of employees: Over 50
Financing stage: Series B currently being finalised
Investors: Series A - Audacia Capital
Sector of operation: Transport
The five stages of early child’s play
From Dubai-based clinical psychologist Daniella Salazar:
1. Solitary Play: This is where Infants and toddlers start to play on their own without seeming to notice the people around them. This is the beginning of play.
2. Onlooker play: This occurs where the toddler enjoys watching other people play. There doesn’t necessarily need to be any effort to begin play. They are learning how to imitate behaviours from others. This type of play may also appear in children who are more shy and introverted.
3. Parallel Play: This generally starts when children begin playing side-by-side without any interaction. Even though they aren’t physically interacting they are paying attention to each other. This is the beginning of the desire to be with other children.
4. Associative Play: At around age four or five, children become more interested in each other than in toys and begin to interact more. In this stage children start asking questions and talking about the different activities they are engaging in. They realise they have similar goals in play such as building a tower or playing with cars.
5. Social Play: In this stage children are starting to socialise more. They begin to share ideas and follow certain rules in a game. They slowly learn the definition of teamwork. They get to engage in basic social skills and interests begin to lead social interactions.
Biog
Mr Kandhari is legally authorised to conduct marriages in the gurdwara
He has officiated weddings of Sikhs and people of different faiths from Malaysia, Sri Lanka, Russia, the US and Canada
Father of two sons, grandfather of six
Plays golf once a week
Enjoys trying new holiday destinations with his wife and family
Walks for an hour every morning
Completed a Bachelor of Commerce degree in Loyola College, Chennai, India
2019 is a milestone because he completes 50 years in business
