Tadawul likely to keep upward trend

Updated 12 January 2013

Tadawul likely to keep upward trend

The Saudi stock market is likely to open higher when it resumes trading today after weekend holidays, encouraged by yesterday’s gains in global markets, analysts said.
An improving economic outlook held world stock prices near a 20-month high yesterday.
A massive stimulus plan in Japan also boosted optimism about future business activity, but worries persisted about global demand and a possible drag from the debt ceiling fight in Washington, spurring selling in oil and basic metals.
The Tadawul All-Share Index broke the psychological barrier of 7,000 points mark last week, up 186.4 points and closed at 7,126.71 points. It posted weekly gain of 2.69 percent.
“With the Saudi market enjoying a rally of consecutive positive trading sessions since the start of the year, local fundamentals would push for this trend to continue,” commented Basil Al-Ghalayini, CEO OF BMG Financial Group.
“From a global perspective, this trend might witness a negative impact as the oil tumbling toward $110 a barrel on growing concern that oil demand may be weakening in the short term as global economic activity remains subdued,” said Al-Ghalayini.
Dealers earlier said oil prices spiked to three-month peaks last week as traders took their cue from the China data and reports of a cut in Saudi Arabian crude production.
Jarmo T Kotilaine, a regional analyst, commented: “The Kingdom continues to play a unique role in stabilizing the oil market at a time when concerns about demand erosion persist and non-OPEC production looks likely to accelerate somewhat from last year’s modest pace.”
Kotilaine added: “However, the pattern in this area is likely to remain one of continued volatility as periods of optimism are interspersed with bouts of increased risk aversion. Overall, global oil demand is continuing to go up, although more slowly than previously projected.”
Brent February crude was down $1.95 at $109.94 a barrel, after dropping to $109.60 and having reached $111.95.
US February crude was down 90 cents at $92.92 a barrel, after dropping to $92.65 and having reached $94.13.
Total market capitalization of Saudi stock exchange increased over 2.7 percent to SR1.46 trillion last week as compared to previous week's SR 1.42 trillion.
“Tadawul will probably take its cue from the record highs for global equities last week given the strong correlation, yet my concern in the next few weeks will be centered on another showdown pertaining to the US debt ceiling, with the US Treasury exhausting its extraordinary measures to borrow,” Tamer El Zayat, senior economist at the National Commercial Bank (NCB), said.
He added: “The political polarization in the US will surely impact oil demand prospects negatively in the first quarter and might offset another positive earnings' season for corporate Saudi via the downward pressure on crude prices.”
The MSCI index of world shares was little changed at 349.33 points after rising earlier to 350.15, the highest level since May 2011, Reuters said.
On Wall Street, the three major stock indexes opened lower despite record earnings from Wells Fargo, the No. 4 US bank. The Standard & Poor's 500 index dialed back from its five-year closing high on Thursday.
The Dow Jones Industrial Average was down 24.03 points, or 0.18 percent, at 13,447.19. The S&P 500 was down 3.86 points, or 0.26 percent, at 1,468.26. The Nasdaq Composite Index was down 5.54 points, or 0.18 percent, at 3,116.22.
Europe's FTSEurofirst 300 index of top companies across the region also neared levels last seen in March 2011 shortly after the ECB decision and was consolidating those gains yesterday to be little changed at 1,163.62 points.
In the currency market, according to Reuters, the euro extended Thursday's rally against the dollar, rising 0.45 percent to $1.3327 after touching $1.3365 earlier, its highest since April.
The greenback however strengthened against the yen, rising 0.61 percent to 89.28 yen, a 2-1/2 year high, after the Japanese government agreed a $117 billion spending boost for the economy.

Iran sanctions shadow falls on smaller German banks

Updated 27 May 2018

Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.