21-month slump in deposits, reserves

Updated 02 March 2015

21-month slump in deposits, reserves

The government’s reserves and deposits with the Saudi Arabian Monetary Agency (SAMA) dropped at the end of January to SR1.39 trillion, the lowest level in 21 months.

This was a 2 percent change on a monthly basis compared to December, and 8 percent change on an annual basis compared to January last year.


“The reserves and deposits of the government is part of the liabilities in SAMA’s financial statements, which amounts to SR2.79 trillion, equal to its assets,” Al-Eqtisadiah reported.


The assets include investments in security bonds, deposits with banks abroad, cash, foreign exchange, gold, and other assets. “The government reserves and deposits are divided into three categories, the general reserve of the government, allocations for government projects and government’s current account.”


Commenting on the fall in reserves and deposits, John Sfakianakis, Middle East director at Ashmore Group, told Arab News: “This should be seen as perfectly normal as reserves are to be used in an environment of low oil revenues.”
He also said: “Definitely reserves both on a total as well as related to government related reserves are falling. This is to be expected given the low oil revenues and government spending that can be filled by deploying reserve assets. The economy depends on government spending which can only remain high if reserves are used or debt is deployed.”
The general reserve of the government accounts for 60 percent of the total government reserves and deposits, allocations for government projects is 32 percent and government’s current account 8 percent.

The 8 percent fall in the general reserve, accounting for SR74.8 billion in January compared to December, was a major factor in the decline of the level of reserves and deposits.


Allocations for government projects dropped SR15.9 billion, a 3 percent fall during the same period, and totaled SR439.2 billion in January.



In terms of annual performance, the government’s current account is the biggest loser and a major influencing factor in the decline of its reserves and deposits at SAMA. Its decline was about SR55.7 billion equivalent to 32 percent at the end of January of the current year, to reach SR116.9 billion, compared to SR172.5 billion in the same period last year.


“The allocations for government projects registered an 8 percent fall or SR36 billion from its level at the end of January last year, to reached SR475.2 billion. The general state reserve declined by 3 percent or SR21.8 billion from its level at the end of January last year, to reach SR851.6 billion.”


Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 32 min 29 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.