GCC faces pressure over $94bn of outstanding debt, says HSBC

Updated 29 February 2016
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GCC faces pressure over $94bn of outstanding debt, says HSBC

JEDDAH: The GCC is facing a $94 billion debt shortfall that it could struggle to meet amid low oil prices and regional economic insecurity, Arabian Business reported, citing HSBC.
In what the bank says is the first time it has compiled all GCC medium-term debt estimates, HSBC research claims sovereign, financial and corporate borrowers in the region must repay or refinance $94 billion in bonds and syndicated loans over 2016 and 2017 as GCC debt matures in the years to 2020.
However, slowing growth, rising rates and rating downgrades in the low oil price era “only adds to the scale of the region’s funding challenge” and could make it harder to repay the debts, the report warns.
It says the UAE makes up the biggest chunk of repayment or refinancing obligations over the 2016-2017 period, followed by sovereign debt in Bahrain and Qatar.
By sector, most of the debt is owed by financial institutions at 22 percent, followed by sovereign wealth funds and energy borrowers with 19 percent each.
According to Arabian Business, the report’s author Simon Williams, HSBC’s chief economist for the Middle East, said: “As we have noted at length in previous reports, the slump in oil prices looks set to leave the GCC oil producers with aggregate fiscal and current account shortfalls of $260 billion and $135 billion over 2016-17 respectively, the equivalent of 8.7 percent and 4.5 percent of GDP.
“The refinancing sum includes outstanding financial and corporate paper as well as debt issued by the sovereign, which is largely focused in UAE, Bahrain and Qatar.
“We remain confident that these funding gaps will be covered. However, expectations that they will be part-financed through the sale of sovereign US dollar debt will complicate efforts to refinance existing paper that matures over 2016-17.”
He noted that close to half of the maturities over 2016-17 center on the banking sector, suggesting any increase in costs at refinancing could contribute to a broader monetary tightening in the region.
Said Williams: “With the Gulf acting as a single credit market… the refinancing challenge will likely be much more broadly felt, with its impact compounded by tightening regional liquidity, rising rates and recent downgrades by international rating agencies.”


US in criminal probe of China's Huawei

Updated 2 min 45 sec ago
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US in criminal probe of China's Huawei

  • The Wall Street Journal said the US justice department is looking into allegations of theft of trade secrets from Huawei's US business partners
  • Huawei forcefully denied accusations that his firm engaged in espionage on behalf of the Chinese government

WASHINGTON: US authorities are in the "advanced" stages of a criminal probe that could result in an indictment of Chinese technology giant Huawei, a report said Wednesday.
The Wall Street Journal, citing anonymous sources, said the Department of Justice is looking into allegations of theft of trade secrets from Huawei's US business partners, including a T-Mobile robotic device used to test smartphones.
Huawei and the Department of Justice declined to comment on the media report.
However, Huawei noted that "Huawei and T-Mobile settled their disputes in 2017 following a US jury verdict finding neither damage, unjust enrichment nor willful and malicious conduct by Huawei in T-Mobile's trade secret claim."
The move would further escalate tensions between the US and China after the arrest last year in Canada of Huawei's chief financial officer Meng Wanzhou, who is the daughter of the company founder.
The case of Meng, under house arrest awaiting proceedings, has inflamed US-China and Canada-China relations.
Two Canadians have been detained in China since Meng's arrest and a third has been sentenced to death on drug trafficking charges -- moves observers see as attempts by Beijing to pressure Ottawa over her case.
Huawei, the second-largest global smartphone maker and biggest producer of telecommunications equipment, has for years been under scrutiny in the US over purported links to the Chinese government.
Huawei's reclusive founder Ren Zhengfei, in a rare media interview Tuesday, forcefully denied accusations that his firm engaged in espionage on behalf of the Chinese government.
The tensions come amid a backdrop of President Donald Trump's efforts to get more manufacturing on US soil and slap hefty tariffs on Chinese goods for what he claims are unfair trade practices by Beijing.
In a related move, lawmakers introduced a bill to ban the export of American parts and components to Chinese telecom companies that are in violation of US export control or sanctions laws -- with Huawei and fellow Chinese firm ZTE the likely targets.
"Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People's Liberation Army," said Republican Senator Tom Cotton, one of the bill's sponsors.
Democratic Senator Chris Van Hollen said in the same statement: "Huawei and ZTE are two sides of the same coin. Both companies have repeatedly violated US laws, represent a significant risk to American national security interests and need to be held accountable."
Last year, Trump reached a deal with ZTE that eases tough financial penalties on the firm for helping Iran and North Korea evade American sanctions.
Trump said his decision in May to spare ZTE came following an appeal by Chinese President Xi Jinping to help save Chinese jobs.