Citigroup targets rapid Middle East, Africa growth in 2018

The investment bank expects bond sales, mergers and acquisitions and public share sales to pick-up. (Reuters)
Updated 08 February 2018
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Citigroup targets rapid Middle East, Africa growth in 2018

ABU DHABI: Citigroup expects 2018 to be its best year for investment banking in the Middle East and Africa in at least a decade, likely led by Saudi Arabia, a senior executive at the US bank said.
Nigeria, Egypt and the United Arab Emirates would also be the main growth drivers as bond sales, mergers and acquisitions and public share sales pick-up, Miguel Azevedo, Citigroup’s head of investment banking, Middle East and Africa, said.
“The pipeline in the Middle East and Africa is as good as we have seen since the global financial crisis of 2008,” he told Reuters in an interview, adding that emerging markets represented a larger weight of Citi’s earnings than for others.
“GDP growth for advanced economies this year is between 2.5 and 3 percent, while for emerging markets it is between 4.5 and 5 percent. For investment banking, the growth should maybe be even more,” Azevedo said.
In the Middle East and Africa, getting deals done would depend on market stability, but swings in global stocks in recent days represented a correction and were not “enough to put any of these transactions off.”
Citigroup said last month it had won formal approval from Saudi Arabia’s Capital Market Authority to begin an investment banking business there, enabling its return after an absence of almost 13 years.
Several international lenders are seeking to build a Saudi presence as opportunities emerge from reforms to wean the economy off a reliance on oil revenues. Those include privatizations such as the planned listing up to 5 percent of Saudi Aramco.
Citi was among those invited to pitch for a role in the stock market listing, sources told Reuters last month and the bank has already hired former Saudi Fransi Capital executive Majed Al-Hassoun to head its Saudi investment banking business, which it is developing with further hires.
“There is a very significant privatization push ... this could create the opportunity for investors to deploy capital to develop the industrial base and infrastructure,” he said.
The bank also expects significant opportunities in Nigeria, which has low debt levels and was expected to return to the bond markets in 2018, while Nigerian companies were also forecast to issue bonds and launch initial public offerings, Azevedo added.
Nigeria issued a $3 billion two-part international bond in November, a deal managed by Citigroup and Standard Chartered.
Egypt’s outlook was also positive after the 2016 currency devaluation and IPOs were slated in sectors such as industrial and manufacturing and financial services and consumer, he said.


Japan ships fewer cars to US as export growth slows

Updated 16 August 2018
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Japan ships fewer cars to US as export growth slows

  • Japan’s exports to the US fell 5.2 percent year-on-year in July, down for a second straight month
  • Shipments to Asia, which account for more than half of Japan’s overall exports, rose 8.0 percent

TOKYO: Japan’s export growth slowed more than expected in July as shipments to the US fell for a second straight month, with the automotive sector down sharply and global trade disputes casting doubts over foreign demand.
Ministry of Finance (MOF) data out on Thursday showed exports rose 3.9 percent year-on-year in July, far below a 6.3 percent increase expected by economists in a Reuters poll. The rise followed a 6.7 percent year-on-year gain in June.
Japan’s exports to the US fell 5.2 percent year-on-year in July, down for a second straight month, due to a 12.1 percent decline in car shipments.
“The drop in US-bound car exports was in reaction to brisk sales seen there a year ago, boosted by the solid US economy and declines in oil prices,” said an MOF official in charge of compiling the data.
“We cannot say whether it was affected by trade tensions with the US.” US President Donald Trump has made the threat of heavy tariffs a core part of his agenda, with an eye on the US auto sector’s trade deficit with countries such as Germany and Japan, raising speculation about restrictions on US-bound car exports.
Japanese carmakers have so far shown no sign of rushing to boost car shipments to the US, which would happen if they anticipated higher tariffs were to be imposed on their products in coming months.
“While caution is heightening over US trade policy, US car sales are levelling off, causing Japan’s car exports to the US to level off as well,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“If capital outflows from emerging economies accelerate on top of this, it would cause a marked slowdown in global economy, further weighing on Japan’s exports.” Imports from the US rose 11.0 percent in the year to July, led by crude oil, motors and liquefied petroleum gas.
As a result, Japan’s trade surplus with the US fell 22.1 percent year-on-year to ¥502.7 billion ($4.55 billion). Exports to China, Japan’s largest trading partner, rose 11.9 percent in July from a year ago.
Shipments to Asia, which account for more than half of Japan’s overall exports, rose 8.0 percent, led by semiconductor production equipment and electronics parts for China and sales of steel to Thailand.
Overall imports rose 14.6 percent in the year to July, roughly matching economists’ median estimate, resulting in a trade deficit of ¥231.2 billion, vastly exceeding the expected ¥50 billion.
Thursday’s trade figures came after gross domestic product (GDP) data last week showed Japan’s economy, the world’s third largest, rebounded in the second quarter from a January-March dip.
Analysts say global economic growth is likely to support Japan’s exports, but international trade conflicts are an ever-present risk to Japan’s export-reliant economy.
The impact on the broader economy from higher US tariffs on Japanese automotive exports would be significant, they say.
Japan’s economy grew at an annualized rate of 1.9 percent in the second quarter on the back of household and business spending, recovering from an earlier contraction.