Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry

Saudi Arabia’s bonds will have a 3.1 percent weighting in the JP Morgan indexes. (File/AFP)
Updated 29 September 2018
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Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry

  • Saudi Arabia, together with the UAE, Qatar, Bahrain and Kuwait, will enter JP Morgan’s emerging market government bond indexes next year
  • Saudi Arabia’s bonds will have a 3.1 percent weighting in the JP Morgan indexes

Arab news LONDON: Saudi Arabia looks set to attract an $11 billion windfall of foreign funds after being included in a key international debt index.

The Kingdom will be part of JP Morgan’s emerging market government bond indexes next year, helping to reduce borrowing costs and opening up Saudi Arabia to a much bigger pool of debt investors.

“Since the first launch of international bonds in 2016, the Debt Management Office’s (DMO) approach to international issues has evolved to facilitate access to global debt markets, the Saudi Ministry of Finance said in a statement on Saturday

“Continued communication with investors globally has also contributed an increase in strategic initiatives such as index inclusion.”

The DMO estimates inflows of about $11 billion as a result of the JP Morgan listing. It comes at an important time for the Kingdom’s emerging capital markets as both the government and companies increasingly consider bond sales to raise capital, encouraged by financial reforms that are aimed at reducing economic reliance on oil revenues.

The UAE, Bahrain, Kuwait and Qatar will also become eligible for EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes. The process will be phased between Jan. 31 and Sept. 30, 2019.

That could lead to an estimated $30 billion in inflows, leading to tighter spreads and making primary market access easier, according to Bank of America Merrill Lynch.

Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging market countries in each of the past three years, according to Reuters data.
 


Egyptian economy on right track after 5.6% growth in 2018-2019: prime minister

Updated 17 July 2019
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Egyptian economy on right track after 5.6% growth in 2018-2019: prime minister

  • Egypt is emerging from a three-year economic reform program tied to a $12 billion loan from the IMF
  • Egypt has been praised by international lenders for swift reforms implemented since 2016

CAIRO: Egypt’s economy grew 5.6 percent in the 2018/19 fiscal year and is “on the right track” as it completes IMF-backed reforms, Prime Minister Mustafa Madbouli said on Wednesday.
The budget deficit came in at 8.2 percent of GDP, he said, which was slightly below an official forecast of 8.4 percent.
Egypt is emerging from a three-year economic reform program tied to a $12 billion loan from the International Monetary Fund.
Madbouli said Egypt’s primary surplus stood at 2 percent for the fiscal year, which ended in June, and also pointed to a recent drop in inflation as positive signs. Economic growth was up from 5.3 percent in 2017/18 and in line with a government forecast.
“At the same time, it induces us to complete the implementation of reforms and the efforts exerted to achieve the targets for the new fiscal year,” Madbouli said in a statement said.
Egypt has been praised by international lenders for swift reforms implemented since 2016, though austerity measures and inflation have left many Egyptians struggling to get by.
The reforms included a sharp devaluation of the currency, the introduction of value-added tax and the elimination of subsidies on most fuel products.
Headline annual inflation dropped to 9.4 percent in June from 14.1 percent the previous month, though it is expected to rise over the rest of the summer as the impact of the latest round of fuel subsidy cuts kicks in.