Regional & GCC Developments:

• Egypt’s urban consumer inflation rose to 12.3% yoy in May (Apr: 10.3%), the highest level since Feb 2009, while core inflation also picked up to 12.23% (Apr: 9.51%).
• PMI in Egypt stayed below the 50-point mark for the 8th consecutive month, registering 47.6 in May (Apr: 46.9); new orders improved to 46.9 points, up from Apr’s 45.5.
• Egypt’s EFG Hermes disclosed that it had received Lebanon central bank’s approval to sell a 40% stake in Credit Libanais; EFG Hermes had bought the stake in 2010 for USD 542mn.
• Iraq’s central bank revealed that an estimated IQD 30 trillion in cash are held outside the Iraqi banking system vis-a-vis only IQD 10 trillion in the banking system. The central bank therefore plans to set up a deposit guarantee fund – with a capital of IQD 100bn – to encourage the use of banking services. The fund will collect an undisclosed percentage of the deposits held by the private and state-owned banks.
• Iraq plans to sell USD 2bn in eurobonds in Q4 this year, after receiving international aid which would subsequently lower cost of borrowing, according to the finance minister.
• Kuwait’s budget for the 2016/2017 fiscal year includes only about KWD 238mn for petroleum and gas products subsidies, versus the billions allocated in past years, according to the head of the National Assembly’s budgets committee. He also revealed that budget cuts to the tune of KWD 53mn were made across twelve government departments.
• The Omani government issued a USD 1bn 5-year note and a USD 1.5bn 10-year note. The price guidance is set at mid-swaps plus 262.5bp on the 5-year tranche and at 337.5bp on the 10-year tranche. It is the first sovereign issuance in almost two decades.
• Qatar Investment Authority is on track to acquire a major stake in Irish telecoms firm Eir, reported the Irish Times, without citing any sources.
• Qatar’s Ooredoo signed a USD 1.0bn six-year revolving credit facility; this will be used for general business purposes and refinancing debt due to mature in March 2017, according to the company.
• Qatar’s Aljaber Group – a construction firm – is planning an IPO that could be worth USD 800mn, reported Reuters, citing sources aware of the matter.
• Saudi Arabia released its National Transformation Plan, a 110-page list of policies and targets for 2016-2020 that aims to reduce the country’s dependence on oil. Efficiency savings and spending cuts on existing projects will help pay for the economic reform plan, estimated to cost around SAR 270bn, according to the finance minister. Ranging from cuts in electricity and water subsidies to reducing public sector wages, and taxation, the reform plan touches upon multiple aspects. The document is available at:http://vision2030.gov.sa/sites/default/files/NTP_En.pdf
• At the crux of the Saudi reforms is job creation: the plan aims to increase the number of private-sector jobs by 450k by 2020 in addition to lowering public-sector salaries as a proportion of budget to 40% from 45%. Unemployment among Saudis is targeted to fall to 9% from 11.6% in the next five years.
• The Saudi energy ministry, according to the NTP, expects to maintain its oil production capacity at 12.5mn barrels per day (bpd), raise gas output capacity to 17.8bn standard cubic feet a day from 12bn, and raise refining capacity to 3.3mn bpd from 2.9mn. It also aims to install 3.45 gigawatts of renewable power capacity by 2020 and spend SAR 300mn on identifying locations for atomic electricity plants and preparing them for construction.
• Saudi Arabia’s housing minister stated that a housing construction programme with an aim to build 1.5mn homes in the next 7-8 years is on the cards. The reform plans aim to double real estate sector’s contribution to GDP to 10% by 2020. This will be supported by reducing the average time required to approve and license new residential real estate projects as well as by allocating about SAR 59bn over the next five years to a loan guarantee programme and other schemes that provide financing to home buyers and real estate developers. The Real Estate Development Fund is also likely to issue a sukuk by end of 2017-18.
• Saudi Arabia’s PMI climbed to a 6-month high of 54.8 in May (Apr: 54.2), thanks to higher output and new orders at a 5-month high.
• The Saudi Capital Market Authority Board approved the final draft of the amended Investment Funds Regulations: this includes 104 articles covering fund management, custody, offering and selling units, merging funds and offering units of foreign funds in the country.
• The Saudi health care market, the largest in the GCC, is set to grow by 69% from USD 16bn in 2015 to USD 27bn by 2020, according to a recent report by Alpen Capital.
• In 2015, Saudi Arabia sent USD 7.57bn in remittances to Egypt, according to World Bank estimates, through the country’s 1 million expatriate Egyptians.
• SAMA has banned the use of options and other derivatives to speculate against the riyal, reported Reuters, citing banking sources; non-speculative trade in riyal forwards market is not prohibited.
• Businesses in the region are not yet prepared for VAT, according to two new surveys: Deloitte’s survey had more than half of its respondents indicating that their business had “minimal understanding” of the impact of VAT while around 81% stated that they were yet to incorporate VAT into their financial plans. An online survey by the CFA society found that 82% of the 68 respondents believed higher inflation to be one of the outcomes of VAT.

UAE Focus

• UAE PMI increased to 54.0 in May (Apr: 52.8), picking up at the fastest pace in 8 months, supported by higher output levels (59.9 in May vs. Apr’s 56.9). New orders rose to 55.8 from 54.6 while the index for employment rebounded to 50.4 after dropping to its lowest level since Dec 2011 in Apr (50.0).
• The Dubai Economy Tracker Index expanded to 54.5 in May, up from 52.7 the previous month, recording the strongest gain since last Aug.
• The UAE central bank reported a 16.6% yoy increase in net foreign assets to AED 323.8bn in Apr (Mar: AED 306.2bn).
• The dirham will continue to be pegged to the dollar, according to the UAE central bank governor, who also stated that any volatility in the forwards market was limited. The dirham has weakened to a premium of around 60 points against the dollar in the one-year forwards market since last Aug from around zero previously. Separately, the governor also reiterated that there was no issue of liquidity, citing the substantial amount of certificate of deposits banks hold with the central bank.
• A boost for SMEs: around 3500 businesses registered with Dubai SME will now be automatically enrolled as potential suppliers to Expo 2020 Dubai, according to a statement from Expo 2020.
• DP World earned a 50-year concession to develop a port project in Ecuador that will require initialinvestment of USD 500mn. This amount will be used for “the purchase of land, dredging of a new access channel, a 20 km access road and a 400 metre berth equipped to handle containers and other cargo”.

Regional news and commentary courtesy of Nasser Saidi.
Feature Image Courtesy of Richard Allen