Oil price uncertainty pulls down petchem performance

Updated 05 April 2015
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Oil price uncertainty pulls down petchem performance

The Tadawul All-Share Index fell 1.65 percent to 8,589.7 points on Sunday after Iran's nuclear deal with world powers fueled concern about a further decline in oil prices, which would hurt margins at Saudi petrochemical firms.
"The petrochemical sector will remain under pressure; mainly due to lower prices of end products," Mushtaq Ahmed, a senior financial analyst at Zughaibi & Kabbani Financial Consultants, Jeddah, told Arab News, reacting to the market performance.
"There high level of uncertainty exists in oil market; the improvement in oil prices will reflect on petrochemical stocks," he added.
The petrochemical index fell on Sunday by 1.33 percent to 5,580.17 points. The index is down 4.73 percent so far this year.
The stocks of Saudi Basic Industries Corp., the biggest petrochemical maker, lost 1.5 percent on Sunday.
The value of traded shares on Sunday reached SR5.88 billion.
Brent oil plunged nearly 4.0 percent on Thursday.
Basul Al-Ghalayini, CEO of BMG Financial Group, told Arab News: “Obviously, there are several positive factors that have been affecting the market to date. They include good Q1 results, Moody’s upgrade of the Saudi sovereign risk rating to Aa3 and the anticipation to the market opening before the summer to the international institutional players.”
He added: “However, the unknown geopolitical factor in the south is still a matter of concern to some investors, which is reflected by low trading volume, especially if there are advancements by the Allied ground troops into the Houthi strongholds inside Yemen.”
According to Saudi Stock Exchange’s Statistical Report – First Quarter 2015 released this week, the TASI closed at 8,778.89 at the end of the first quarter, dropped 694.82 points or 7.33 percent over the close of the same period of the previous year.
On an YTD basis, TASI registered a positive increase of 5.35 percent or 445.59 points. The highest close level for the index during the period was 9,691.00 as on March 12, 2015.
The report said total equity market capitalization at the end of the
first quarter 2015 reached SR1.90 trillion ($506.33 billion), decreased by 1.37 percent over the same period of the previous year.
The total value of shares traded for reached SR571.19 billion ($152.32 billion) at the end of the first quarter, increased by 21.95 percent over the same period of the previous year.
The Tadawul report said total number of shares traded reached 21.91 billion shares for the first quarter 2015 compared to 17.29 billion shares traded during the first quarter 2014, increased by 26.73 percent.
The total number of transactions executed during the first quarter 2015 reached 9.67 million compared to 7.78 million trades during the first quarter 2014, increased by 24.24 percent.
Francisco Quintana, head of Research at Asiya Investments, said: “The Tadawul’s performance has been driven by investor sentiment stemming from the trend in oil prices, and rise in risk coming from developments in Yemen. In my opinion both factors will continue to weigh on performance in April.”
He said it’s unclear what could drive a recovery. Actually, a deterioration of the situation is likelier. The framework nuclear agreement that Iran signed last week will probably weaken oil prices. Markets will expect a supply increase (even though it might take years to materialize) and pay less for oil.
He said the situation in the petrochemical sector is particularly worrying. Earnings are reported in annual terms therefore this quarter will exhibit, again, substantial decreases in earnings compared to Q2, 2014.
“The evolution of stocks is not unique to Saudi Arabia, all GCC markets have suffered more or less the same correction this month.
“We do not expect a strong recovery in oil prices, rather a mild one toward the end of the year. After the summer the outlook should improve, at least superficially, because the market and firms will have absorbed the impact of the decrease in prices,” Quintana said.


Shareholders of India’s Jet Airways approve debt-for-equity swap

Updated 23 February 2019
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Shareholders of India’s Jet Airways approve debt-for-equity swap

  • The plan will mean the lenders will have a bigger holding than any other shareholder
  • Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent

MUMBAI: India’s Jet Airways said late on Friday that its shareholders approved a plan to convert existing debt to equity, paving the way for the troubled company’s lenders to infuse funds and nominate directors to its board.
Jet’s board last week approved a plan by lenders, led by State Bank of India, for an equity infusion, debt restructuring and the sale or sale-and-lease-back of aircraft.
The plan will mean the lenders will have a bigger holding than any other shareholder.
Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent.
Jet, which had net debt of 72.99 billion rupees ($1.03 billion) as of end-December, has debt payments looming next month, according to rating agency ICRA. It has been unable to pay pilots’ salaries and has outstanding bills to aircraft lessors.
The company, India’s biggest full-service carrier, is struggling with competition from budget rivals, high oil prices and a weaker rupee. The share price took a beating in 2018, losing nearly 70 percent of its value.
In a regulatory filing, Jet said on Friday that 98 percent of its shareholders voted to increase the share capital to 22 billion rupees ($309.8 million) from 2 billion rupees at a special meeting.
Jet, whose financial woes are set against the backdrop of wider aviation industry problems, has been in the red for four straight quarters.