Saudi sukuk market gains momentum in 2nd quarter

Updated 12 July 2013
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Saudi sukuk market gains momentum in 2nd quarter

Depressed initial public offering (IPO) activity in the Gulf Cooperation Council (GCC) continued into the second quarter (Q2) of 2013 with three new listings raising a total of only $ 48 million. This compared to two IPOs in Q1, 2013 raising an aggregate of $ 337 million, representing an 86 percent decrease in total value raised.
The average offering value dropped 94 percent this quarter compared to the same quarter last year where four IPOs were witnessed raising a total of $ 1.1 billion. The total value raised in Q2, 2012 was the result of a stronger performance in the Saudi market, where out of the total four IPOs, three were Saudi-based. While the value of offerings significantly dropped this quarter, the number of offerings remained relatively stable at 3 IPOs.
The Muscat Securities Market (MSM) witnessed its first listing of the year with the $ 6 million IPO of Sharqiyah Desalination Company which, with a small offering in value terms, received a strong response in the aftermarket. The other IPOs in Q2, 2013 comprised two Saudi-based insurance companies namely Aljazira Takaful Taawuni Company and AIG-ANB Cooperative Insurance Company, both listed on the Tadawul with offering values of $ 28 million and $ 14 million, respectively.
The most prominent share offering during the quarter was that of the Abu Dhabi-based Al Noor Hospitals Group, which listed 33 percent of its equity on the premium segment of the London Stock Exchange (LSE), raising total proceeds of $ 342 million. Al Noor is the second health care service provider in Abu Dhabi to have opted for an international listing after NMC Health Plc, which raised $ 187 million in an IPO on the LSE in 2012.
Steve Drake, head of PwC’s Capital Markets business in the Middle East region, said: "Concerns looming over the economic slowdown in certain global markets and the elevated political instability in Egypt and other countries in the Middle East would appear to have dampened investor appetite and contributed to the low offering values we have seen this quarter. Until volatility in global equity markets and the political situation stabilizes, regional equity markets are likely to remain subdued. However, we continue to see interest in companies looking to list within the next 12 to 18 months."
In contrast, Europe’s IPO markets have continued to gain momentum in Q2, building on the successful start to the year, with $ 6.8 billion being raised, a 58 percent increase on the $ 4.3 billion raised in the first quarter of 2013. Over 81 percent of proceeds raised in Q2 was generated from the top 10 deals.
Of note is the IPO of bpost, Belgium’s national postal service on Euronext and Platform Acquisition Holdings, the first major special purpose acquisition company to IPO in London since Vallares in Q2 2011.
The post IPO performance of the PE-backed IPOs in 2013 has been encouraging, particularly in London where they have achieved significant gains on the IPO price since listing and have also outperformed the FTSE index over the period since IPO. Elsewhere in Europe, with the exception of Moleskine and Evonik, which are trading below their respective IPO prices, the majority of PE-backed IPOs have held their IPO price since listing and remain generally in line with the market.
The GCC bond market, similar to the previous quarter, saw significant issuances from the Kuwait central bank, which raised a total of $ 6.7 billion from issuances of its treasury bills and long-term government bonds.
The banking sector continued to dominate the corporate bond market with noteworthy issuances by both the UAE- and Qatar-based banks. These included Emirates NBD’s $ 1 billion Tier one capital issue, another $ 1 billion issue by Qatar National Bank under its Euro Medium Term Note (EMTN) program and issuances by National Bank of Abu Dhabi and Commercial Bank of Dubai, which raised $ 465 million and $ 500 million each respectively.
After a quiet first quarter, the Saudi sukuk market was seen to be one of the most active in Q2, 2013 with sizable sukuk issuances on both the corporate and sovereign front. These included sukuk issued by Islamic Development Bank raising total proceeds of $ 1 billion, Saudi Electricity Company and Sadara Chemicals Company each raising $ 2 billion.
Another notable issuance during the quarter is Dana Gas PJSC’s sukuk, which raised $ 850 million and which was issued to refinance its existing debt.
Drake said: "The start of the quarter proved stronger for debt issuances where we saw most of the money being raised. However, toward the end of the quarter, market sentiment declined as the interest rate environment hardened causing some issuers to postpone their issuances."


Mnuchin expresses optimism trade standoffs can be resolved

Updated 18 min 25 sec ago
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Mnuchin expresses optimism trade standoffs can be resolved

  • “We are cautiously optimistic,” US treasury secretary says of trade talks with Chinese counterparts
  • China's commerce ministry welcomes prospect of US visit to discuss trade issues

The International Monetary Fund and the World Bank repeatedly warned at their meetings this week that intensifying trade tensions could jeopardize a healthy global economic expansion.
But US Treasury Secretary Steven Mnuchin expressed cautious optimism Saturday that countries could settle their differences without a trade war.
Mnuchin met during the past three days with financial officials from China, Japan and Europe over a series of punitive tariffs unveiled by the Trump administration against China and other trading partners.
In a session with reporters, Mnuchin refused to say how close the United States was to resolving the various trade disputes, but he did say progress had been made.
The United States and China are on the brink of what would be the biggest trade dispute since World War II. Each has proposed imposing tariffs of $50 billion on each other’s products; President Donald Trump is looking to impose tariffs up to $100 billion more on Chinese goods.
In a speech earlier this month, Chinese President Xi Jinping vowed to open China’s market wider to foreign companies, raising hopes the dispute with Washington could be resolved. Mnuchin said he discussed Xi’s proposals with Chinese officials. “We are cautiously optimistic,” Mnuchin told reporters, saying that he may soon travel to Beijing for further talks.
The Commerce Ministry in Beijing said Sunday that China welcomes a visit from the US to Beijing to discuss trade issues and confirms it has “received information” regarding Washington’s interest in such a trip.
Trade tensions dominated the three days of talks among top finance officials attending meetings of the Group of 20 major economies, the 189-nation International Monetary Fund and its sister lending agency, the World Bank.
The officials roundly criticized Trump’s get-tough approach to trade, a reversal of seven decades of US support for increasing freedom in global commerce. In his speech to the IMF’s policy committee Saturday, Yi Gang, the head of China’s central bank, said that global growth could be hurt by “an escalation of trade frictions caused by unilateral actions,” an obvious reference to America’s threatened tariffs against China.
Mnuchin insisted that the United States was not trying to provoke a global trade war but seeking to protect American jobs from unfair competition. “The president has been very clear on what our objectives are,” Mnuchin said. “We are looking for reciprocal treatment. This is not about protectionism.”
There were signs of conciliation. The US dropped its objection to the first increase in the World Bank’s capital resources since 2010, clearing the way for the bank’s board to OK a $13 billion increase in its capacity to make loans to poor countries. The move was tied to a package of reforms the US had sought.
Both the World Bank and IMF held meetings of their policy committees on Saturday. In a closing communique, the IMF expressed concern that the rising trade tensions could dim what at the moment are bright prospects for the global economy, which is expected to grow this year at the fastest pace since 2011.
“Trade tensions are not to the benefit of anyone,” said Lesetja Kganyago, who leads the policymaking committee and is governor of the South African Reserve Bank. “If there is a trade conflict, there could never be winners. We could all only be losers.”
On Friday, Mnuchin had called on the IMF to do more to police countries running large trade surpluses, a role that has traditionally been left to the Geneva-based World Trade Organization. The final IMF communique did state: “We will work together to reduce excessive global imbalances in a way that supports global growth.” The communique did not spell out how this would be accomplished.