Saudi capital markets set for sustained growth

Updated 29 May 2014
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Saudi capital markets set for sustained growth

Executives meeting for the 9th Euromoney Saudi Arabia Conference have been impressed by the confidence and optimism of the Kingdom’s financial sector.
Confidence is seen as one of the key elements for sustained economic growth, and speakers from both within the Kingdom and from international banks and financing groups have all expressed strong confidence during this week’s event.
On the second day, the tone was set by Adel Saleh Al-Ghamdi, CEO of the Saudi Stock Exchange (Tadawul), who outlined the dynamic factors supporting the growth of the Arab world’s largest exchange.
The Tadawul is now the ninth largest emerging market stock exchange out of a basket of 24 exchanges in terms of market capitalization, and has the sixth highest liquidity.
“We see strong demand coming from within the Saudi Arabian economy,” said Al-Ghamdi.
“There are currently 35 family-owned businesses in Saudi Arabia exploring their options for IPO with financial advisers at this time.”
A morning session also saw senior executives from leading banks and enterprises, including Saudi Aramco, Manafea Holding Company, Amundi Asset Management, Saudi Kuwait Finance House Bahrain and HSBC Saudi Arabia take part in a major discussion on the direction and evolution of the Kingdom’s capital markets.
In the session about Potential Risks and Future Financial Crises, Robert Parker, senior adviser at Credit Suisse, discussed the significant improvement of bank risk globally over the last 3 years and warned about real estate bubbles: “Real estate bubbles in Singapore, London, Switzerland and other countries are considered as big financial risks.”
He commented: “Other financial risks include youth unemployment, large current account deficits in emerging markets, China’s economic slowdown and shadow banking.”
In addition, Parker identified 3 major geo-political risks that might lead to future financial crises, including the Russia-Ukraine conflict, the negotiations with Iran and the China-Korea-Japan triangle.
In a recent report, Al-Rajhi Capital noted that Tadawul is “ready for foreign investors,” thanks to a strong economy, robust banking system, institutions to manage foreign investment in equity markets, and a track record for managing banking liquidity.
The 9th Euromoney Saudi Arabia Conference is the longest-running, largest and most influential financial conference in the Kingdom. It has attracted around 1,300 pre-registrations from all over the region and the world.


Asia’s refining profits slump as Mideast exports surge

Updated 23 February 2019
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Asia’s refining profits slump as Mideast exports surge

  • Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India
  • However, overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs

SINGAPORE: Asia’s biggest oil consumers are flooding the region with fuel as refining output is exceeding consumption amid a slowdown in demand growth, pressuring industry profits.
Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India.
Yet overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs.
Compounding the supply overhang, fuel exports from the Middle East, which BP data shows added more than 1 million barrels per day (bpd) of refining capacity from 2013 to 2017, have doubled since 2014 to around 55 million tons, according to Refinitiv.
Car sales in China, the world’s second-biggest oil user, fell for the first time on record last year, and early 2019 sales also remain weak, suggesting a slowdown in gasoline demand.
For diesel, China National Petroleum Corp. in January said that it expected demand to fall by 1.1 percent in 2019. That would be China’s first annual demand decline for a major fuel since its industrial ascent started in 1990.
The surge in fuel exports combined with a 25 percent jump in crude oil prices so far this year has collapsed Singapore refinery margins, the Asian benchmark, from more than $11 per barrel in mid-2017 to just over $2.
Combine the slumping margins with labor costs and taxes and many Asian refineries now struggle to make money.
The squeezed margins have pummelled the stocks of most major Asian petroleum companies, such as Japan’s refiners JXTG Holdings Inc. or Idemitsu Kosan, South Korea’s top oil processor SK Innovation, Asia’s top oil refiner China Petroleum & Chemical Corp. and Indian Oil Corp., with some companies dropping by about 40 percent over the past year. Jeff Brown, president of energy consultancy FGE, said the surge in exports and resulting oversupply were a “big problem” for the industry.
“The pressure on refinery margins is a case of death by a thousand cuts ... Refinery upgrades throughout the region are bumping up against softening demand growth,” he said.
The profit slump follows a surge in fuel exports from China, India, Japan, South Korea and Taiwan. Refinitiv shipping data shows fuel exports from those countries have risen threefold since 2014, to a record of around 15 million tons in January.
The biggest jump in exports has come from China, where refiners are selling off record amounts of excess fuel into Asia.
“There is a risk for Asian market turmoil if (China’s fuel) export capacity remains at the current level or grows further,” said Noriaki Sakai, chief executive officer at Idemitsu Kosan during a news conference last week.
But Japanese and South Korean fuel exports have also risen as demand at home falls amid mature industry and a shrinking population. Japan’s 2019 oil demand will drop by 0.1 percent from 2018, while South Korea’s will remain flat, according to forecasts from Energy Aspects.
In Japan, oil imports have been falling steadily for years, yet its refiners produce more fuel than its industry can absorb. The situation is similar in South Korea, the world’s fifth-biggest refiner by capacity, according to data from BP.
Cho Sang-bum, an official at the Korea Petroleum Association, which represents South Korean refiners, said the surging exports had “triggered a gasoline glut.”
That glut caused negative gasoline margins in January.