MENA Weekly Monitor (20) 15-05-2020

1Week 20 May 10 - May 16, 2020

MAY 10 - MAY 16, 2020

WEEK 20

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MENA MARKETS: WEEK OF MAY 10 - MAY 16, 2020

The MENA WEEKLY MONITOR

Economy___________________________________________________________________________p.2 FITCH EXPECTS SIGNIFICANT GCC NON-OIL ECONOMIC CONTRACTION IN 2020In a recently released note, Fitch Ratings said that the OPEC+ agreement to cut oil output and the additional

production cuts announced by KSA, UAE and Kuwait will push GCC countries’ budgets even deeper into

deficit amid the collapse in oil prices.

Also in this issuep.3 Weakening KSA support to banks leads Moody’s to set “negative” outlook for 10 out of 11

banks rated

p.4 Oman to reduce the budgets of ministries and government units

p.4 COVID-19 impact on Egypt trade and tourism to be severe, says EIU

Surveys___________________________________________________________________________p.5 ABU DHABI TOPS MIDDLE EAST CITIES IN OCCUPANCY RATES IN FIRST QUARTER OF 2020, AS PER EYEY issued its latest Hotel Benchmark Survey on the Middle East for the first three months of 2020 (four and

five star hotels), according to which occupancy rates decreased in all fourteen cities within the region.

Also in this issuep.6 Pandemic is cratering businesses in Gulf States, creating the need for short-term liquidity, as

per Invesco

p.6 Dubai clocks 1,824 property sales deals amid COVID-19 lockdown, as per Property Finder

Corporate News___________________________________________________________________________p.7 ACCIONA AND RTCC WIN US$ 500 MILLION SAUDI DESALINATION PLANT CONTRACTAcciona said it secured a US$ 500 million contract from Saline Water Conversion Corporation (SWCC) to

build its fourth desalination plant in Saudi Arabia.

Also in this issuep.7 DEWA signs power purchase deal for MBR solar park Phase V

p.8 SirajPower seals two key residential partnerships in Dubai

p.8 ADNOC and ADPower issue tender for sub-sea power transmission network

p.8 Dubai firm in deal to acquire Lithuania bank

Markets In Brief___________________________________________________________________________p.9 TWO-WAY FLOWS IN REGIONAL EQUITIES, BOND PRICES ON THE RISEMENA equity markets saw mixed price movements this week. The Saudi Tadawul and the Egyptian

Exchange bounced back mainly supported by some favorable market-specific and company-specific

factors, while the Qatar Exchange and the UAE equity posted price falls on lower global oil demand

estimates and due to some unfavorable financial results. In parallel, activity in MENA bond markets

remained mostly tilted to the upside this week, mainly tracking US Treasuries move amid escalating US-

China tensions and after the US Federal Reserve warned of a prolonged US economic recession resulting

from the coronavirus outbreak, while new bond issues continued to see the light in the region.

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ECONOMY______________________________________________________________________________FITCH EXPECTS SIGNIFICANT GCC NON-OIL ECONOMIC CONTRACTION IN 2020

In a recently released note on GCC sovereigns, Fitch Ratings said that the OPEC+ agreement to cut oil

output and the additional production cuts announced by Saudi Arabia, the UAE and Kuwait will push

GCC countries’ budgets even deeper into deficit amid the collapse in oil prices. Oil production cuts will

also contribute to a stark contraction in overall economic output, along with an unprecedented recession

in non-oil economies in the GCC.

In the higher-rated GCC sovereigns, large wealth funds and Central Bank reserves and manageable

government debt levels will stave off pressure on external funding and on exchange rate pegs, as per the

Fitch note. In lower-rated Oman (BB/Negative) and Bahrain (BB-/Stable), (further) support from the rest

of the GCC may be necessary, said Fitch. Erosion of fiscal and external positions has been a factor in past

rating downgrades in the GCC, particularly for Saudi Arabia (A/Stable), Bahrain and Oman. It remains a

negative rating sensitivity for all GCC sovereigns, according to Fitch.

Fitch now expects most GCC sovereigns to post fiscal deficits of 15%-25% of GDP in 2020, with only

Qatar’s deficit staying in the single digits at 8% of GDP. This assumes an average Brent oil price of US$

35/bbl and full compliance of the GCC with the OPEC+ deal to limit production, resulting in significant

declines in oil output. Fitch also assumes that the additional cuts recently announced by Saudi Arabia,

Abu Dhabi and Kuwait last until the end of the year. A further US$ 10/bbl decline in average prices would

increase deficits by 4%-6% of GDP (Kuwait being an outlier with an impact of 9% of GDP). A 5% cut to oil

production would widen fiscal deficits by 1%-2% of GDP (less in Bahrain and Qatar), as per Fitch estimates.

All GCC countries have announced economic stimulus packages. These amount to nearly 30% of GDP

in Bahrain and Oman, more than 10% of GDP in Kuwait, Qatar and the UAE, and more than 7% of GDP

in Saudi Arabia. They consist largely of monetary and off-budget measures such as loan repayment

holidays to businesses. Fitch estimates that the budgetary effect of stimulus will be smaller (at around

5% of GDP in Saudi Arabia and 1%-2% of GDP elsewhere), mostly relating to suspension and deferral of

government fees and taxes, accelerated payments to contractors, increased health spending and salary

support to the private sector.

NON-OIL GROWTH

Source: Fitch Ratings

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Fitch expects the governments with the weakest balance sheets to press ahead with spending cuts

sufficient to outweigh the direct fiscal effect of stimulus measures. This will exacerbate the recession

in the non-oil economy, stemming from measures to contain the coronavirus outbreak. Fitch forecasts

a non-oil sector recession ranging from a decline of 1% in Kuwait to 5% in Oman, adding that this is

unprecedented in the recent history of most GCC States and heightens social stability risks.

Fitch expects significant non-oil economic contraction in 2020, which is unprecedented in the GCC.

Growth stayed positive even during the global financial crisis of 2008-2009 (except in Kuwait) and the oil

price crash of 2015-2016. Oman is likely to see the deepest contraction, reflecting pre-existing economic

weakness and sharp fiscal consolidation. Rebound in non-oil activity in 2021 should allow governments

to restore some non-oil revenue and could offer more scope for fiscal consolidation, as per Fitch.

Wider fiscal deficits will lead to higher debt and drawdowns of fiscal reserves. In 2020, Fitch expects the

GCC funding mix to shift in favor of drawdowns from fiscal reserves. Fitch expects the GCC to issue around

US$ 48 billion in foreign debt this year (of which US$ 30 billion has already been issued), roughly in line

with last year. This will be accompanied by around US$ 140 billion in drawdowns from fiscal reserves and

wealth funds, compared with only about US$ 10 billion last year.

The reserve drawdown is likely to be led by Kuwait (where the government’s authority to borrow has

expired), Saudi Arabia and Abu Dhabi. Fitch believes that negative financial returns could put further

pressure on the assets of GCC sovereign wealth funds (SWFs) this year, although asset prices have

recovered from their lows in mid-March (which had largely erased 2019 gains).

_____________________________________________________________________________WEAKENING KSA SUPPORT TO BANKS LEADS MOODY’S TO SET “NEGATIVE” OUTLOOK FOR 10 OUT OF 11 BANKS RATED

Moody's affirmed all ratings and assessments of the 11 banks it rates in Saudi Arabia (“A1 negative”). At

the same time, the rating agency changed the outlook on the long-term deposit ratings to “negative”

from “stable” for ten of the banks and maintained the “negative” outlook on the long-term deposits of

one bank.

The rating action follows Moody's decision to change the outlook to “negative” from “stable” on the

Saudi Arabian government's “A1” rating

Moody's decision to affirm the ratings of all 11 banks reflects the rating agency's view that the current

ratings continue to reflect the resilience in their financial performance underpinned by strong capital

buffers, favorable funding profiles and ample liquidity buffers. Rationales for the individual banks are

provided later in this press release, as per the rating agency.

Moody's decision to change the outlook to “negative” from “stable” on ten of the banks long-term

deposit ratings captures the potential weakening capacity of the government of Saudi Arabia to provide

support in case of need, as implied by the negative outlook on the A1 government issuer rating.

Moody's continues to incorporate a high/very high probability of government support for the ratings

of Saudi banks driven by their government shareholdings, importance in the domestic banking and

payment system and the track record of pre-emptive government support.

A secondary driver for the negative outlook is the weakening operating environment on the back of

lower oil prices, reduced government spending and spread of coronavirus which, if prolonged, could

lead Moody's to revise downwards its assessment of the operating environment, through a lower macro

profile from its current level of “moderate+”.

Moody's expects that the Saudi government's spending cuts, announced in the 2020 budget, will weigh

on the non-oil sector of the country's economy (forecast contraction of -4% for 2020 compared to 3.3%

growth in 2019), where the banks do most of their business.

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At the same time, travel restrictions aimed at stemming the spread of the coronavirus are disrupting

the tourism industry and particularly religious pilgrimages to Mecca and Medina. Moody's regards the

coronavirus outbreak as a social risk under its environmental, social and governance (ESG) framework,

given the substantial implications for public health and safety.

_____________________________________________________________________________OMAN TO REDUCE THE BUDGETS OF MINISTRIES AND GOVERNMENT UNITS

Oman’s Ministry of Finance announced plans to reduce the budgets of ministries and government units

to address the adverse impacts of the oil price slump alongside the impact of the Coronavirus (COVID-19)

pandemic on public finances and overall economy.

The Sultanate plans to carry out an additional 5% cut on budgets allocated for all civil, military and

security government units through fiscal year 2020.

It also plans to negotiate with owners of real estate properties leased by the government for a discount

of at least 10% of the existing rent of each leased property.

Lastly, Oman’s announced its plans to suspend all unnecessary ceremonies and activities, like annual

celebrations and inaugural ceremonies.

______________________________________________________________________________COVID-19 IMPACT ON EGYPT TRADE AND TOURISM TO BE SEVERE, SAYS EIU

Although Egypt’s growth in the first half of 2019/20 was robust, averaging more than 5.6% year on year,

the impact of the coronavirus on trade and tourism flows and on domestic economic activity will be

severe in 2019/20 and the first half of 2020/21, according to the Economist Intelligence Unit (EIU).

The Economist Intelligence Unit expects Egypt’s economic growth to average 1.8% a year in 2019/20-

2020/21, despite government spending being ramped up.

Tourism, which accounts for about 9.5% of employment and 5.5% of GDP, has shut down, and private

consumption growth, exports and investment will suffer the impact of the coronavirus outbreak.

The economy will expand more strongly from 2021/22 as new energy projects gain momentum. Lower

unemployment will boost private consumption, although widespread poverty will remain a constraint

on consumer demand growth, as per the EIU. The government will have to work hard to restore investor

confidence.

The construction and energy sectors will be the main engines of growth in the middle of the forecast

period, said the EIU. The government is pursuing various low-income housing schemes with private

contractors and is building a new capital city east of Cairo, which is almost completed. Capital goods

imports will grow to support infrastructure projects.

Despite weakening international oil prices and faltering domestic demand, concerns over supply, owing

to pandemic restrictions, will push up food prices, which comprise about one-third of the consumer

price basket. Inflation will average 5.2% in 2020. Price growth will dip slightly in 2020 as food import

pressures ease and other prices increase only slowly, as per EIU.

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SURVEYS_____________________________________________________________________________ABU DHABI TOPS MIDDLE EAST CITIES IN OCCUPANCY RATES IN FIRST QUARTER OF 2020, AS PER EY

Ernst & Young issued its latest Hotel Benchmark Survey on the Middle East for the first three months of

2020 (four and five star hotels), according to which occupancy rates decreased in all fourteen cities within

the region.

Occupancy rates decreased in 14 cities considered in the survey with Beirut registering the most

significant decrease of 48.1%. The largest declines after Beirut were seen by Dubai with a fall of 21.3%

and Muscat which saw a decrease of 19.7%.

According to the survey, the cities of Abu Dhabi, Doha and Dubai took over the first three ranks amongst

peers in hotel occupancy, with 77% for Abu Dhabi, 66% for Doha and 65% for Dubai. At the lower end of

the regional scale were Jeddah (46%), Manama (43%) and Beirut (22%).

Furthermore, a total of 11 cities reported decreases in the average room rate, registering 31.3% in the

case of Beirut. The most significant downward movements after Beirut were posted by Abu Dhabi

(-19.9%) and Kuwait City (-14.0%). Only three cities reported increases in average room rate namely

Makkah (+14.1%), Riyadh (+2.5%) and Doha (+1.2%).

Dubai, Riyadh and Jeddah reported the highest average room rates of US$ 234, US$ 169 and US$ 162

respectively. At the lower end were Makkah, Cairo-City and Abu Dhabi with US$ 109 for Makkah, US$ 107

for Cairo-City and Abu Dhabi with US$ 96.

In this context, the rooms’ yield decreased in all cities in the survey. The most significant decreases were

seen in Beirut, Muscat and Dubai with -78.6% for Beirut and -35.0% for Dubai and Muscat. Dubai (US$

152), Riyadh (US$ 105) and Ras Al Khaimah (US$ 94) had the highest rooms’ yields, while those of Makkah

(US$ 61), Manama (US$ 59) and Beirut (US$ 28) were the lowest.

It is worth noting that in Abu Dhabi, the temporary closure of major tourism attractions, theme parks

and cultural destinations along with the postponement or cancellation of major entertainment events,

and the suspension of international and domestic flights in response to the ongoing pandemic have

heavily impacted the sector performance. The ongoing lockdown and a hard-hit economy engender a

longer road to recovery for the hotel sector. Although the Emirate is expected to gradually start lifting

some movement restrictions, the travel industry is not expected to see any immediate benefits. As part

of its stimulus package, the UAE government has suspended the levying of tourism and municipality

fees and is providing rebates on rentals for the tourism and entertainment sectors.

_____________________________________________________________________________PANDEMIC IS CRATERING BUSINESSES IN GULF STATES, CREATING THE NEED FOR SHORT-TERM LIQUIDITY, AS PER INVESCO

It's a rough ride for the Gulf states. The pandemic is cratering businesses and people are losing their

jobs, creating the need for short-term liquidity. The Central Banks are rolling out one relief measure after

another to mitigate the damage.

According to global asset management firm Invesco such liquidity injections, however, do not have an

automatic inflationary effect.

The driver of inflation is money in the hands of the public, not money in the books of the Central Bank,

as per the same source.

Actions of the central banks during the global financial crisis only stabilized broad money growth, with

subsequent inflation remaining below 2% year-on-year in most developed economies, as per Invesco.

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Historically when Central Banks played this "lender of last resort" role in a market panic, they were able

to create the additional funds needed to calm the panic, and after the panic had subsided, they would

gradually withdraw the excess cash or deposits from the banking system, as per the same source.

Excess funds were gradually drained from the banking system after the panic subsided and before

inflation could take hold.

Regarding the current situation, the plunge in oil prices along with fallout in the various industries that

drive GCC economies will likely result in disinflation for most of 2020 and 2021.

For the Gulf states the steep fall in the price of oil and the collapse of tourism and international business

travel inevitably mean that disinflation or even deflation will likely prevail in the short-term, as per the

same source.

On inflation, countries with fixed exchange rates tend to have a broadly similar profile of inflation to

those whose currencies they are pegged to.

Thus, the general profile of inflation in those Gulf states pegged to the US dollar (Saudi, Muscat & UAE)

follows inflation in the US in broad outline.

However, there are some significant deviations due to administered price changes (for petrol or utilities)

in individual countries from time to time. It is also true that the composition of the price indices varies

from country to country, again introducing some degree of divergence, as per Invesco.

Separately, "expansionary monetary policies" only lead to inflation if the policy results in rapid growth of

the broad quantity of money (e.g. M2 or M3). Lowering interest rates to zero alone does not guarantee

rapid growth of money.

According to Invesco, expanding the Fed's balance sheet does not guarantee rapid growth of M2 or M3,

and therefore may not result in inflation. This is what happened with quantitative easing in 2009-2019

after the great financial crisis. As a result, US inflation over that period remained below the 2% target

most of the time, as per the same source.

______________________________________________________________________________DUBAI CLOCKS 1,824 PROPERTY SALES DEALS AMID COVID-19 LOCKDOWN, AS PER PROPERTY FINDER

Despite the Dubai real estate market having to deal with a full lockdown, innovative tools like Live

Viewings and Virtual Tours aided in the successful closing of a total of 1,824 transactions worth over AED

3.6 billion (US$ 985.4 million) in April, according to UAE-based real estate portal Property Finder.

This brings the year-to-date total to 12,254 sales transactions worth AED 24.15 billion, it stated.

Off-plan accounted for 72% of all transactions and was dominated by Villanova and Dubai Creek Harbour

for villa/townhouses and apartments respectively.

Top off-plan sales locations were The Lagoons in Dubai Creek Harbour (123 transactions), Jumeirah

Village Circle (112), Villanova (110), Umm Suqeim (105) and Business Bay (97), said the Emirati portal citing

figures from Data Finder, its real estate insights and data platform.

According to the report, the volume of transactions for the secondary market were considerably lower

than the off-plan market however Dubai Marina (40) and Palm Jumeirah (39) dominated as always

followed by Mudon (31), Downtown Dubai (26) and Dubai Hills Estate (21).

The top communities for apartment sales were: Jumeirah Village Circle (125); Dubai Creek Harbour (123);

Umm Suqeim (105); Downtown Dubai (92) and Jumeirah Beach Residence (86).

The top communities for villa/townhouses sales were: Villanova (118), Serena (36), Dubai South (26),

Jumeirah (18) and Arabian Ranches (12).

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CORPORATE NEWS_____________________________________________________________________________ACCIONA AND RTCC WIN US$ 500 MILLION SAUDI DESALINATION PLANT CONTRACT

Acciona, a supplier of sustainable infrastructure solutions and renewable energy projects, said it

secured a US$ 500 million contract from Saline Water Conversion Corporation (SWCC) to build its fourth

desalination plant in Saudi Arabia.

The Al Khobar 2 desalination plant, being built in partnership with Al Rashid Trading and Contracting

Company (RTCC), will be equipped with reverse osmosis (RO) technology.

To be developed in Al Khobar on the east coast of Saudi Arabia, the plant will boast a daily capacity of

more than 600,000 cubic meters. It will cater to the needs of three million people in the area.

With this turnkey contract, Acciona consolidates its presence in the water treatment sector in Saudi

Arabia, a country in which it currently has three projects under way.

Spanish conglomerate Acciona develops and manages sustainable infrastructure solutions, particularly

in renewable energy projects. Its range of services covers the entire value chain of design, construction,

operation and maintenance.

Last year, a € 750 million (US$ 813 million) contract was awarded to the company for the financing, design,

construction, operation and maintenance (for 25 years) of the Shuqaiq3 desalination plant. Located in

the south-west of the country on the Red Sea coast, it is expected to be completed next year. The plant

will have a treatment capacity of 450,000 cubic meters per day to provide a service to a population

equivalent of two million. It will also be equipped with a photovoltaic plant to reduce internal energy

consumption, said the statement from Acciona.

In July 2018, a contract was also awarded for around € 200 million to build and commission the Al Khobar

1 desalination plant. It is located close to the Al Khobar 2 plant.

The company has also designed and built the Al Jubail RO4 seawater desalination plant in the east of the

country for the utility Marafiq. With a capacity of 100,000 cubic meters per day, it serves both the city

and the nearby industrial complex.

_____________________________________________________________________________DEWA SIGNS POWER PURCHASE DEAL FOR MBR SOLAR PARK PHASE V

Dubai Electricity and Water Authority (DEWA) signed a 25-year power purchase agreement (PPA) for the

fifth phase of the Mohammed bin Rashid Al Maktoum Solar Park with a capacity of 900 MW, supporting

its efforts to achieve the Dubai Clean Energy Strategy 2050 to provide 75% of Dubai’s total power output

from clean energy by 2050.

This phase will use photovoltaic solar panels and will be commissioned in stages starting from the third

quarter of 2021, said a statement from DEWA.

On completion, it will become the largest single-site solar park in the world, based on an independent

power producer (IPP) model with a planned capacity of 5,000 MW in 2030, as per a statement.

In November last year, DEWA had announced the consortium led by Acwa Power and Gulf Investment

Corporation as the preferred bidder to build and operate the fifth phase of the solar park.

To implement the project, the DEWA had established Shuaa Energy 3 in partnership with the consortium

led by Acwa Power and GIC. The Dubai utility owns 60% of the company, and the consortium owns the

remaining 40%. The project will use the latest solar photovoltaic bifacial technologies, which allows

solar radiation to reach the front and back of the panels, with single-axis tracking to increase generation.

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______________________________________________________________________________SIRAJPOWER SEALS TWO KEY RESIDENTIAL PARTNERSHIPS IN DUBAI

SirajPower, UAE’s distributed solar energy provider, announced two new residential partnerships in

Dubai.

The Emirati group signed a deal with Al Khail Heights by Texture Holding and Mirdif Villa Complex by

Green Coast Real Estate that will result in a total 3 MWp system capacity, and generate 5 GWh of annual

energy production, whilst displacing more than 3,000 tons of carbon dioxide emission per annum.

The partnership is SirajPower’s second important project in the residential sector this year, said the

company in a statement.

______________________________________________________________________________ADNOC AND ADPOWER ISSUE TENDER FOR SUB-SEA POWER TRANSMISSION NETWORK

Abu Dhabi National Oil Company (ADNOC) and Abu Dhabi Power Corporation (ADPower) announced the

issuance of a joint tender for a first-of-its-kind project in the Middle East and North Africa (MENA) region.

The joint tender sets out to develop and operate the region’s first high-voltage, direct current HVDC sub-

sea transmission system that will connect ADNOC’s offshore production facilities to ADPower’s onshore

electricity grid using state-of-the-art technology.

Requests for proposal have been sent to international companies that have the required experience to

partner with ADNOC and ADPower on this important infrastructure project for Abu Dhabi.

The transmission system will comprise two independent sub-sea HVDC transmission links and converter

stations that will connect to ADPower’s onshore electricity grid – operated by its subsidiary, Abu Dhabi

Transmission and Dispatch Company, Transco – and provide a total installed capacity of 3,200 megawatts.

Commercial operation is expected in 2025.

This significant capital project will be funded through a special purpose vehicle jointly owned by ADNOC

(30%), ADPower (30%) and the selected developers and investors (40%). The project is to be executed on

a build, own, operate and transfer (BOOT) basis. The successful bidders, alongside ADNOC and ADPower,

will develop and operate the transmission system, with the full project being returned to ADNOC at the

end of the transmission agreement.

The project is expected to reduce the carbon footprint of ADNOC’s offshore facilities by up to 30% through

ADPower’s efficient onshore power production. It also offers power supply cost optimization potential

for ADNOC’s offshore facilities and will drive operational efficiency and system reliability by replacing

the existing offshore localized gas turbine generators with diverse, more efficient and environmentally

sustainable sources of energy, including renewable and nuclear power.

______________________________________________________________________________DUBAI FIRM IN DEAL TO ACQUIRE LITHUANIA BANK

Growmore Group, a UAE-based global investment and financial services conglomerate, announced that

it has entered into a strategic agreement to fully acquire Medicinos Bankas UAB, a retail bank in Lithuania

with assets of US$ 395 million.

The acquisition will mark the expansion of Growmore's banking sector investments into Europe, backed

by its expertise in financial services including offshore banking and asset management, the company

said.

Ernst & Young and Sorainen were Growmore's financial and legal advisors on the deal, respectively. The

bank's sale process was managed by Deloitte and legal firm TGS Baltic.

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EQUITY MARKETS INDICATORS (MAY 10 TILL MAY 16, 2020)

Sources: S&P, Bloomberg, Bank Audi's Group Research Department

CAPITAL MARKETS____________________________________________________________________________EQUITY MARKETS: MIXED PRICE MOVEMENTS IN REGIONAL EQUITIES

MENA equity markets saw mixed price movements this week, which was reflected by a nil change

in the S&P Pan Arab Composite index. The Saudi Tadawul and the Egyptian Exchange bounced back

mainly supported by some favorable market-specific and company-specific factors, while the Qatar

Exchange and the UAE equity posted price falls on lower global oil demand estimates and due to

some unfavorable financial results.

The heavyweight Saudi Tadawul, whose market capitalization represents 78.5% of the total regional

market capitalization, saw a price rebound this week, as reflected by a 1.8% increase in the S&P Saudi

index, mainly on improved sentiment after Saudi Arabia pledged additional oil production cuts in

June 2020 to reach a two-decade low to help drain a global oil glut. Price gains took place despite

news that the Kingdom has adopted a slew of austerity measures to deal with a double blow of

historically low oil price levels and the COVID-19 crisis, and although OPEC has revised down its global

oil demand forecast for the year 2020.

A closer look at individual stocks shows that Saudi Aramco’s shares registered weekly price gains of

1.3% to reach SR 31.40. SABIC’s share price jumped by 7.3% to SR 76.0. Petrochem’s share price surged

by 12.1% to reach SR 22.44. Also, NCB’s share price rose by 0.7% to SR 34.15. SABB’s share price closed

3.5% higher at SR 22.60. Al Rajhi’s share price increased by 0.8% to SR 54.0.

Also, the Egyptian Exchange bounced back this week, as reflected by a 1.4% rise in the S&P BMI Egypt

index, mainly on improved investor sentiment after the IMF approved Egypt’s request for emergency

financial assistance of US$ 2.8 billion to meet the urgent balance of payments’ needs stemming from

the outbreak of the new coronavirus pandemic, and on news that Egypt is in talks with the IMF for

a second bundle of financial support of US$ 5 billion and seeks a further US$ 4 billion from other

sources. Commercial International Bank’s share price went up by 1.4% to LE 64.10. Orange’s share

price jumped by 20.3% to LE 24.88. Eastern Tobacco’s share price surged by 5.0% to LE 12.58. EFG

Hermes’s share climbed by 9.1% to LE 11.08. Juhayna Food Industries’ share price increased by 1.7%

to LE 7.24.

In contrast, the Qatar Exchange posted a 0.7% decline in prices week-on-week, mainly driven by

some unfavorable market-specific and company-specific factors. OPEC slashed its global oil demand

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estimate for the year 2020. Concurrently, all listed companies in the Qatar Exchange posted combined

net profits of QR 8.3 billion during the first quarter of the year 2020, which marks a 20% contraction

relative to the same period of the previous year.

29 out of 47 listed stocks registered price contractions, while 18 stocks posted price gains week-on-

week. Nakilat’s share price plunged by 10.3% to QR 2.365. MSCI deleted Nakilat from MSCI Qatar

Small Cap Index in its Semi-Annual Index Review. Milaha’s share price fell by 3.4% to QR 5.601. Gulf

International Services’ share price shed 11.5% to QR 1.30. As to banking stocks, QNB’s share price

retreated by 0.6% to QR 17.15. Qatar First Bank’s share price dropped by 8.5% to QR 0.931. The bank

announced 2020 first quarter loss of QR 192 million versus net profits of QR 3.2 million a year earlier.

The UAE equity markets registered a 0.8% retreat in prices week-on-week, mainly on lower global oil

demand estimates and due to some unfavorable company-specific factors. In Dubai, Emirates NBD’s

share price shed 1.8% to AED 8.50. Emirates NBD announced a 24% year-on-year drop in its 2020 first

quarter net profits to reach AED 2.1 billion. Dubai Islamic Bank’s share price fell by 2.3% to AED 3.40.

DIB announced an 18% year-on-year decrease in its 2020 net profits to reach AED 1.1 billion. Arabtec

Holding Company’s share price went down by 6.6% to AED 0.624. Emaar Properties’ share price closed

3.3% lower at AED 2.38.

In Abu Dhabi, First Abu Dhabi Bank’s share price declined by 2.3% over the week to AED 11.08. FAB

posted a 22% year-on-year fall in its 2020 net profits to reach AED 2.4 billion. ADIB’s share price went

down by 3.6% to AED 3.26. ADIB announced 2020 first quarter net profits of AED 270 million versus

higher net profits of AED 600 million a year earlier. National Bank of Ras Al Khaimah’s share price shed

2.9% to AED 3.40. International Holdings’ share price decreased by 0.7% to AED 26.06.

_____________________________________________________________________________FIXED INCOME MARKETS: MENA BOND MARKETS UP, TRACKING US TREASURIES MOVE

Activity in MENA fixed income markets remained mostly tilted to the upside this week, mainly tracking

US Treasuries move amid escalating US-China tensions and after the US Federal Reserve warned of

a prolonged US economic recession resulting from the coronavirus outbreak, while new bond issues

continued to see the light in the region as issuers seek to shore up liquidity to contain the fallout from

COVID-19 and lower oil prices.

In the Qatari credit space, sovereigns maturing in 2024 and 2029 saw price expansions of 0.13 pt and

0.25 pt respectively week-on-week. Standard & Poor’s affirmed its “AA-/A-1+” long-term and short-

term foreign and local currency sovereign credit ratings on Qatar, with a “stable” outlook. The “stable”

outlook indicates S&P’s view of broadly balanced risks to the ratings. Despite a sharp economic

contraction and low hydrocarbon prices, S&P doesn't expect the government's fiscal and external

stock positions would materially deteriorate beyond its expectations. Amongst financials, Commercial

Bank of Qatar’23 closed up by 0.14 pt. QNB’24 was down by 0.14 pt. QNB raised US$ 1 billion from the

sale of five-year bonds at 225 bps over mid-swaps, 35 bps tighter than the initial price guidance. The

bond sale attracted more than US$ 3.75 billion in orders.

In the Bahraini credit space, sovereigns maturing in 2023, 2025 and 2029 posted price improvements

of 1.35 pt, 2.63 pts and 2.20 pts respectively week-on-week. Prices of NOGA’24 rose by 1.58 pt. Bahrain

raised US$ 2 billion through the sale of a dual-tranche bond. Bahrain sold US$ 1 billion in a 4.5-year

Sukuk at 6.25% versus an initial price guidance of 6.625%-6.75% and US$ 1 billion in 10-year bonds at

7.375% versus an initial price guidance of around 8%. The bond sale received more than US$ 11 billion

in orders.

In the Abu Dhabi credit space, prices of sovereigns maturing in 2024 and 2029 increased by 0.38 pt

and 0.25 pt week-on-week. Prices of Mubadala’24 remained stable. Mubadala raised US$ 4 billion

through the sale of a three-tranche bond. Mubadala sold US$ 1 billion in six-year bonds at 210 basis

points over midswaps, US$ 1 billion in 10-year bonds at 235 bps over midswaps and US$ 2 billion in

30-year Formosa bonds at 3.95%. The three-tranche bond sale attracted orders of US$ 23.5 billion.

11Week 20 May 10 - May 16, 2020

MAY 10 - MAY 16, 2020

WEEK 20

MIDDLE EAST 5Y CDS SPREADS V/S INTL BENCHMARKS

Sources: Bloomberg, Bank Audi's Group Research Department

Z-SPREAD BASED AUDI MENA BOND INDEX V/S INTERNATIONAL BENCHMARKS

Sources: Bloomberg, JP Morgan, Bank Audi's Group Research Department

In the Egyptian credit space, US dollar-denominated sovereigns maturing in 2023, 2025, 2030 and

2040 registered price gains of up to 2.67 pts this week. Prices of Euro-denominated papers maturing

in 2025 and 2030 improved by 2.40 pts and 3.93 pts respectively. Moody's affirmed the long-term

foreign and local currency issuer ratings of the Government of Egypt at “B2” with a “stable” outlook.

The affirmation of the “B2” rating and “stable” outlook reflect Egypt's ongoing credit strengths and

challenges that Moody's does not expect to change materially relative to similarly-rated sovereigns

through the global shock posed by the coronavirus pandemic. While the coronavirus shock exposes

Egypt's credit vulnerabilities, improvements in governance and policy effectiveness in recent years

shore up the sovereign's credit profile resilience to the current shock, as per the credit rating agency.

On the overall, regional bond markets continued to trace an upward trajectory this week, as the US

Federal Reserve’s dire warning on the US economy and the growing tensions between the US and

China spurred demand for safe haven assets.

12Week 20 May 10 - May 16, 2020

MAY 10 - MAY 16, 2020

WEEK 20

SOVEREIGN RATINGS & FX RATES

Sources: Bloomberg, Bank Audi's Group Research Department

___________________________________________________________________________DISCLAIMER

The content of this publication is provided as general information only and should not be taken as an

advice to invest or engage in any form of financial or commercial activity. Any action that you may take

as a result of information in this publication remains your sole responsibility. None of the materials

herein constitute offers or solicitations to purchase or sell securities, your investment decisions should

not be made based upon the information herein.

Although Bank Audi sal considers the content of this publication reliable, it shall have no liability for

its content and makes no warranty, representation or guarantee as to its accuracy or completeness.

MENA Weekly Monitor (20) 15-05-2020

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Transcript of MENA Weekly Monitor (20) 15-05-2020