Saudi Arabia’s Granular Gearing Grist

Saudi stocks which barely budged on foreign access permission struggled to stay positive on looming competition from domestic bond issuance resumed after a decade hiatus to cover budget spending based on original $100/barrel oil break-even value. The monetary authority will raise $25 billion by year-end though local bank placements and has already drawn down $75 billion in reserves which now stand at $675 billion to bridge this year’s estimated $125 billion deficit. GDP growth will dip below 3 percent, which may endanger the goal of reducing 5 percent unemployment and trigger another wave of guest worker expulsions as the new royal leadership seeks its footing. Public debt is negligible at 1.5 percent of GDP but a crisis occurred in the 1990s after the ratio hit 100 percent. The government has vowed to stagger maturities and create a yield curve as it plans to invite overseas buyers and ratings agencies to participate in market development. State utility companies have tapped the external sukuk space and experts predict the sovereign will soon follow given the limited individual and institutional investor base at home. UAE bonds have been well-received and recently rallied on fuel subsidy elimination and the prospects for Iran’s commercial re-integration. Energy deregulation will save almost $4 billion and solidifies the investment-grade rating, Moody’s asserts. Despite four years of sanctions the Emirates is the number two trading partner after China as a banking, air and free-zone hub. Half a million Iranians may live in Dubai and have been active in property speculation and commodity dealing in particular.

In the region Tunisia is preparing to float official and corporate sharia-compliant instruments with Islamic Development Bank help with banks and leasing firms up first after rules are finalized. Its MSCI stock market performance was off 5 percent through July after the Sousse beach resort attack killing forty visitors, as tourism contributing 7 percent of GDP as the main employer continues to nosedive. The ruling coalition with sweeping parliamentary control passed stiffer security laws posting patrols at hotels and sites with funding assistance from the US and Europe as the protectionist legacy of the Ben Ali era remains in place. According to the World Bank 60 percent of the economy faces entry barriers and phone costs are twenty times the regional average due to controls. 40 percent of jobs are informal in response to administrative and tax burdens often a legacy of the French colonial period. State banks in particular could be cleaned up with partial privatization but the process has historically been slow and lagged neighbors.

Egypt lost 10 percent on the MSCI core index despite record Suez Canal earnings the past year at $5.5 billion and its recent expansion as part of a larger industrial zone project championed by President al-Sisi. Ships will now be able to cross in both directions and waits should fall from ten to three hours. The venture was financed from $8.5 billion in retail investment certificates which also qualified holders for preferential loans as private sector credit jumped 15 percent on an annual basis. However double-digit inflation persists and the exchange rate was again tweaked to 7.6/dollar as the Canal flow was diverted by sharper currents.Saudi Arabia’s Granular Gearing Grist

Saudi stocks which barely budged on foreign access permission struggled to stay positive on looming competition from domestic bond issuance resumed after a decade hiatus to cover budget spending based on original $100/barrel oil break-even value. The monetary authority will raise $25 billion by year-end though local bank placements and has already drawn down $75 billion in reserves which now stand at $675 billion to bridge this year’s estimated $125 billion deficit. GDP growth will dip below 3 percent, which may endanger the goal of reducing 5 percent unemployment and trigger another wave of guest worker expulsions as the new royal leadership seeks its footing. Public debt is negligible at 1.5 percent of GDP but a crisis occurred in the 1990s after the ratio hit 100 percent. The government has vowed to stagger maturities and create a yield curve as it plans to invite overseas buyers and ratings agencies to participate in market development. State utility companies have tapped the external sukuk space and experts predict the sovereign will soon follow given the limited individual and institutional investor base at home. UAE bonds have been well-received and recently rallied on fuel subsidy elimination and the prospects for Iran’s commercial re-integration. Energy deregulation will save almost $4 billion and solidifies the investment-grade rating, Moody’s asserts. Despite four years of sanctions the Emirates is the number two trading partner after China as a banking, air and free-zone hub. Half a million Iranians may live in Dubai and have been active in property speculation and commodity dealing in particular.

In the region Tunisia is preparing to float official and corporate sharia-compliant instruments with Islamic Development Bank help with banks and leasing firms up first after rules are finalized. Its MSCI stock market performance was off 5 percent through July after the Sousse beach resort attack killing forty visitors, as tourism contributing 7 percent of GDP as the main employer continues to nosedive. The ruling coalition with sweeping parliamentary control passed stiffer security laws posting patrols at hotels and sites with funding assistance from the US and Europe as the protectionist legacy of the Ben Ali era remains in place. According to the World Bank 60 percent of the economy faces entry barriers and phone costs are twenty times the regional average due to controls. 40 percent of jobs are informal in response to administrative and tax burdens often a legacy of the French colonial period. State banks in particular could be cleaned up with partial privatization but the process has historically been slow and lagged neighbors.

Egypt lost 10 percent on the MSCI core index despite record Suez Canal earnings the past year at $5.5 billion and its recent expansion as part of a larger industrial zone project championed by President al-Sisi. Ships will now be able to cross in both directions and waits should fall from ten to three hours. The venture was financed from $8.5 billion in retail investment certificates which also qualified holders for preferential loans as private sector credit jumped 15 percent on an annual basis. However double-digit inflation persists and the exchange rate was again tweaked to 7.6/dollar as the Canal flow was diverted by sharper currents.