Sovereign wealth funds keen on Turkish markets

Sovereign wealth funds keen on Turkish markets
Updated 26 April 2013

Sovereign wealth funds keen on Turkish markets

Sovereign wealth funds keen on Turkish markets

DUBAI: A $ 500 million sukuk from Turkiye Finans this week was just the latest in a flood of international debt issues from Turkey. But the identity of the arranging banks, and the investors who bought the issue, pointed to a shift in capital markets.
Of the four banks arranging the deal for Turkiye Finans, an Islamic bank majority-owned by Saudi Arabia’s National Commercial Bank, two were based in the Gulf: NCB Capital and Dubai’s Noor Islamic Bank.
And Middle Eastern investors dominated buying of the sukuk, taking 51 percent of the deal, which received just under $ 2 billion in orders.
In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons.
“You will find more demand from investors in this region, in particular banks which are fairly liquid and sovereign wealth funds, to invest in financing in Turkey, be it through private placements, new issuances, or the public debt capital markets space,” said Georges Elhedery, head of global markets in the Middle East and North Africa (MENA) for HSBC.
“These investment flows are a developing trend as Turkey, which has a low savings rate, looks to tap the deep and liquid capital pools in MENA to fund its 2023 Vision, which includes investing some $ 350 billion in transport and other infrastructure.”
Turkey’s upgrade to investment status by Fitch Ratings last November, and expectations that it will secure similar ratings from the other two major agencies, have fueled an explosion of international issuance this year.
Turkish companies have issued about $ 9.5 billion of US dollar-denominated bonds so far this year, compared to a total of $ 16.5 billion for the whole of 2012, according to John Bates, corporate fixed income analyst for emerging markets at PineBridge Investments.
About $ 10 billion of last year’s Turkish issuance came in the final four months of the year, and was dominated by banks.
A few years ago, Gulf arrangers and investors might have been expected to play only a small role in Turkish bond sales; their attention was fixed on their own region, and Turkey focused on Western capital markets.
But the Gulf is central to the current stream of issuance.
Another Turkish bank, AlBaraka Turk, the local unit of Bahrain’s Al-Baraka Bank, is expected to price a bond early next week, and three of the mandated arrangers are Gulf-based: Dubai’s Emirates NBD, Abu Dhabi’s Al Hilal Bank and Qatar’s Barwa Bank.
One reason for the shift is Turkey’s move into Islamic finance. After developing the industry only slowly for years, Turkey issued its first sovereign sukuk last September; nearly 60 percent of the $1.5 billion issue was placed among Middle Eastern investors.
The appearance of the sovereign sukuk has facilitated more issuance by Islamic banks in Turkey, which is meeting strong demand among Islamic funds in the Gulf that are unable to satisfy their appetite for sukuk within the region.
“Turkish issuers want to tap the liquidity that sits with money managers in this region,” said Chavan Bhogaita, head of markets strategy at National Bank of Abu Dhabi.
The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region.
Sales of Turkish sukuk to Gulf investors may increase further as Turkey expands its offerings; Istanbul is working on new regulations to allow use of a wider range of sukuk structures, which could see Islamic bonds used for project finance and infrastructure development.
There are other factors behind the trend, however. One is Turkey’s increasing emphasis on developing political and economic ties with the Gulf, rather than merely focusing on the West, as the country seeks to play a more active diplomatic role in the Middle East and diversify its trade.
Two-way trade between Turkey and the six countries in the Gulf Cooperation Council jumped 60 percent to $22 billion in 2012, according to a report from a joint economic committee. Growing economic ties have familiarized Gulf institutions with Turkish issuers.
Pricing is also a factor. A dramatic compression of yields in the Gulf over the past 18 months, partly because of increasing investor confidence in the area, has reduced the returns from bonds issued within the region.
That is prompting Gulf investors to take a fresh look at the yields on offer from Turkey, which are generally higher for similar credit ratings.
For example, Sharjah Islamic Bank, based in the UAE and rated BBB+, priced a five-year, $ 500 million sukuk this month at a profit rate of 2.95 percent.
That was one full percentage point below the 3.95 percent profit rate offered on the five-year Turkiye Finans sukuk, which is rated BBB, just one notch lower than the Sharjah issue.
“Despite the flurry of recent issuance, the Turkish corporate sector is still relatively limited in scale and is dominated by the banks,” PineBridge’s Bates said.

“The banks still offer decent value when compared to their EEMEA (Eastern Europe, Middle East and Africa) peers, yielding about 50 basis points more than other BBB-rated banks. In general, they also compare well on credit fundamentals.”


Saudi Arabia approves international central securities depositories instructions

Saudi Arabia approves international central securities depositories instructions
Updated 07 May 2021

Saudi Arabia approves international central securities depositories instructions

Saudi Arabia approves international central securities depositories instructions
  • New instructions are effective May 6

RIYADH: Saudi Capital Market Authority announced on Thursday the approval of International Central Securities Depositories Instructions by the Securities Depository Center Company (Edaa), effective May 6, 2021.

The instructions regulate the linkage application process and its conditions, related Depository Center accounts, and additional general provisions, Edaa said in a filing.

The development is consistent with Saudi Vision 2030, which includes a program to create a regulatory environment in keeping with international best practices and to increase Saudi capital markets’ attractiveness to foreign investors.


Abu Dhabi's IHC to list three subsidiaries on ADX in Q2

Abu Dhabi's IHC to list three subsidiaries on ADX in Q2
Updated 07 May 2021

Abu Dhabi's IHC to list three subsidiaries on ADX in Q2

Abu Dhabi's IHC to list three subsidiaries on ADX in Q2
  • Emirates Stallion Group, Al Seer Marine to IPO on ADX Second Market
  • IHC took stakes in SpaceX and Oxford Nanopore in past year

ABU DHABI: Three subsidiaries of International Holding Company (IHC) will be listed on Abu Dhabi Securities Exchange’s (ADX) Second Market in the second quarter of 2021, the company said in a filing on Thursday.

Real estate company Emirates Stallion Group (ESG), Al Seer Marine Supplies & Equipment Co. and an as yet unnamed third company will be listed, IHC said.

IHC, one of Abu Dhabi’s largest conglomerates is chaired by HH Sheikh Tahnoon Bin Zayed Al Nahyan, national security adviser to the UAE. Last year it listed Palm Sports, Easylease and Zee Stores on ADX’s Second Market.

ESG, founded in 2006, owns a diversified portfolio of businesses across engineering and construction, real estate investment, development and management. It had assets of 394 million dirhams ($107 million) as of the end of 2020 and over 1,000 employees, according to IHC.

Al Seer Marine, which provides services including yacht management, repair and maintenance, and boat building, was founded in 2002 and acquired by IHC in April 2020. It had assets of 717.8 million dirhams as at the end of 2020, IHC said.

Over the past six months, IHC and its subsidiaries have made investments in UK-based DNA sequencing firm Oxford Nanopore Technologies, Quantlase Lab and Tamouh Healthcare, which recently developed the concept of Containerized Aid for Respiratory Emergencies.

In 2020, it took a stake in Elon Musk’s aerospace company SpaceX, launched a partnership with DAL Group for a significant agricultural development in Sudan, and helped marketing consultancy Multiply make an investment in New York data-driven marketing firm YieldMissouri

IHC reported on Wednesday first-quarter net profit of $408 million.


Saudi-based B2B platforms Sary and Retailo raise combined $37.2m

Saudi-based B2B platforms Sary and Retailo raise combined $37.2m
Updated 07 May 2021

Saudi-based B2B platforms Sary and Retailo raise combined $37.2m

Saudi-based B2B platforms Sary and Retailo raise combined $37.2m
  • Sary raised $30.5 million in a Series B round led by VentureSouq
  • Retailo secured $6.7 million in a seed round led by Shorooq Partners

RIYADH: Two competing Saudi business-to-business online marketplaces have announced fundraising, a further sign of the growing interest in the region’s startups.

Sary raised $30.5 million in a Series B round led by VentureSouq and joined by new investors US-based Rocketship.vc and STV, Sary said in a press release. Existing shareholders Ra’ed Ventures, MSA Capital and Derayah also contributed to the funding round.

Riyadh-based Retailo raised $6.7 million in a seed round led by existing investor Shorooq Partners and UK private equity shop Abercross Holdings, Retailo said a separate press release. Retailo, founded by former Careem executives, has now raised $9 million after being in operation for just nine months.

While Sary is the more mature business having being founded in 2018, both companies offer a platform to connect small businesses with wholesalers and fast-moving consumer goods (FMCG) companies.

Sary plans to use the funds to grow geographically and expands the services it offers including credit provision.

“Core to VentureSouq’s overall fintech thesis is the emerging trend of embedded financial services,” VentureSouq Co-Founder and General Partner Suneel Gokhale said in the press release. “In Sary’s case, we see this move into credit as directly contributing to top-line growth, diversifying revenue streams, and improving unit economics for a strong, proven vertical-specific technology company.”

A rush to fund digital startups in the Middle East risks creating a valuation bubble, Fadi Ghandour, CEO of venture-capital investor Wamda, said last month.

“Since the pandemic the whole digital ecosystem which we were predicting to happen within ten years actually happened within a couple of months, so everything digital is growing exponentially,” he told Bloomberg Television. “Everything that is digital is exploding. So, lots of new money and lots of new startups.”

“There is so much new money coming into the market,” he said. “Sovereign wealth funds are starting to invest, and they are seeding a lot of VCs and so I think yes there is a little bit of a valuation bubble.”

Last month, 44 startups across the Middle East and North Africa raised more than $175 million, up $5 million from March, according to data from Wamda.

The biggest deal was by Riyadh-headquartered buy now pay later platform Tamara, which raised $110 million in a Series A round led by leading global payment processor Checkout.com. Helped by that transaction, Saudi Arabia topped the list in terms of number and value of startup investments for the first time.


Saudi financial liquidity rises to record at end of April

Saudi financial liquidity rises to record at end of April
Updated 07 May 2021

Saudi financial liquidity rises to record at end of April

Saudi financial liquidity rises to record at end of April
  • Money supply increased 1 percent in the week to SR2.199 trillion

RIYADH: Saudi liquidity reached its highest level ever at the end of last week, April 29th, at SR2.199 trillion ($586.2 billion), compared with SR2.177 trillion a week earlier.

Money supply increased by 1 percent during the week, and 2.3 percent since the end of last year, Al Eqtisadiah reported, citing Saudi Arabian Monetary Authority data.

Money supply has been above SR2 trillion since May 7, 2020.


Saudi insurance sector grew 2.3 percent in 2020 amid pandemic

Saudi insurance sector grew 2.3 percent in 2020 amid pandemic
Updated 07 May 2021

Saudi insurance sector grew 2.3 percent in 2020 amid pandemic

Saudi insurance sector grew 2.3 percent in 2020 amid pandemic
  • Written premiums rose to SR38.78 billion
  • Net profit increased 61.1 percent

RIYADH: The Saudi insurance sector grew 2.3 percent in terms of written premiums in 2020, to SR38.78 billion ($10.3 billion), according to the Saudi Arabian Monetary Authority’s (SAMA) 14th annual report on the Saudi insurance market, issued on Thursday.

Energy and accident & liability insurance classes showed notable increases in written premiums with penetration of the sector increasing from 1.3 percent in 2019 to 1.5 percent in 2020.

In terms of underwriting performance, the overall loss ratio improved to 77.5 percent.

Insurance net profit (after zakat and tax) increased by 61.1 percent compared to the previous year’s corresponding figure, thereby improving the return-on-assets and return-on-equity ratios.

The SAMA report also noted that the overall Saudization ratio increased from 74 percent in 2019 to 75 percent in 2020.