State Street banker sees pace of reforms in Arabian Gulf accelerating

State Street banker sees pace of reforms in Arabian Gulf accelerating
Illustration by Luis Grañena
Updated 12 August 2018

State Street banker sees pace of reforms in Arabian Gulf accelerating

State Street banker sees pace of reforms in Arabian Gulf accelerating
  • Laurina began his career in banking at the Bank of New York’s Brussels and London offices
  • He believes that the pace of economic growth in the region will continue to accelerate

The rapid economic changes taking place in the Arabian Gulf economies require a cadre of top global financial institutions to help see them through, and State Street Corporation fits the bill completely.

The 226-year-old American financial group, ranked among the biggest banking businesses in the world, recently joined the Dubai International Financial Center (DIFC) through its investment banking and asset management unit State Street Global Advisers (SSGA), cementing a presence in the region it has held for 26 years.

Emmanuel Laurina, the 43-year-old Belgian who heads up the Middle East business for State Street, told Arab News that the UAE was a good place to be based to exploit the new economic environment in the region, and especially the business opportunities in Saudi Arabia, undergoing rapid change as a result of the Vision 2030 strategy to diversify away from oil dependency.

“The DIFC is a well-regulated global financial center through which we can accommodate those clients for whom it is most appropriate. SSGA has had a presence in the Middle East since 1992, and opening a DIFC presence is a natural complement to that business.

“We currently serve the needs of all our Middle East and Africa clients from our Dubai and Abu Dhabi offices. Saudi Arabia has always been a key contributor to our business in the region and we look forward to further deepening our presence and business in the Kingdom,” he added.

Laurina began his career in banking at the Bank of New York’s Brussels and London offices, before moving to State Street in 2005, transferring to Dubai eight years later to head up the Middle East and Africa business. 

He believes that the pace of economic growth in the region will continue to accelerate. The bank’s analysts see UAE growth at 2.5 percent this year, up from 0.5 percent in 2017, and have marked in 1.6 percent for Saudi Arabia, a jump from last year’s 0.9 percent, while the region as a whole is looking at 2.6 percent (up from 1.8 percent).

The recent stability in the oil market is the main reason for the forecast improvement in gross domestic product, and SSGA believes the current good run in oil is likely to continue. “Governments and central banks should be able to escape the tough economic decisions they have faced over the past few years,” he said.

That will be especially good for Saudi Arabia as it seeks foreign investment to help fund the economic changes under way in the Kingdom, boosted by recent upgrades to its financial markets to emerging market status.

“SSGA is very positive about the reform agenda in Saudi Arabia and the entire Vision 2030 plan. While the economic environment remains challenging, we feel that the reforms to companies, markets, and investment regulations are wholly positive.

“Of all the countries in the Gulf, Saudi represents one of the best opportunities for investors, and we are ready to support clients not only in equities, as the Tadawul opens up, but also in the debt markets, an important factor in the modernization plans of the Kingdom,” Laurina said.

Those modernization plans include the privatization of large chunks of the Kingdom’s state-dominated economy, including Saudi Aramco, the biggest oil company in the world. The partial sale of some of Aramco’s shares via an initial public offering (IPO) has been delayed, but most financial experts believe some form of sell-off will eventually take place.

“We made the point recently that the non-Aramco privatization plans were equally — if not more — important to the success of the Saudi reform agenda. These include many state assets whose valuation is relatively easy to assess and where there are clear templates for private-sector participation.

“In short, there is some lower-hanging fruit in the area of privatization and we believe this will be forthcoming. Above all, for Saudi Arabia, it is more important to see this program through correctly, rather than urgently, as the reform impetus is more valuable than the actual proceeds,” he said.

On Aramco, other options have recently emerged as an alternative to full-blown privatization, including raising debt in international markets and the multibillion-dollar acquisition of Saudi Arabian Basic Industries Corporation (SABIC). Laurina sees sense in considering these possibilities.

“The potential Aramco IPO is huge, complex, and far from straightforward. We are not surprised, and indeed we applaud, the pause for reflection that appears to be taking place. 

“While the delay of IPO may have disappointed some, it may be a welcome move,” he said.




Illustration by Luis Grañena

Emerging market equity investors have had a short time to adjust their portfolios for the inclusion of Saudi Arabia in the three main indices, Laurina explained. “Aramco’s IPO would likely lead to a larger weight to Saudi Arabia and lead to further turnover to fund that increase. A delay of the IPO to a later date would give investors time to adjust and accommodate the new IPO when this is issued,” he said.

“For an institution of Aramco’s size, any debt fundraising brings complexities: If Aramco was to buy the full stake Public Investment Fund holds in SABIC, for example, and fund it entirely out of debt issuance, it would be one of the biggest debt issuances ever from any corporate, and would catapult Aramco into a top-three spot in the EM debt indices. This alone brings new issues, and so again we would counsel a cautious approach,” he said.

The global investor view of the Gulf region wavers between enthusiasm for the economic opportunities presented by reform and privatization, and concern about the effects on investment prospects from geopolitical tensions, such as the current stand-off with Qatar and the increasing possibility that confrontation between Iran and the US will lead to trade dislocation in the region. 

Laurina is alert to the risks, but sanguine on the overall investment climate. “Having been in the region for 26 years, through two Gulf wars and the Arab Spring, SSGA is acutely aware of the geopolitical drivers and risks in this region. 

“But we remain positive on the investment prospects in the Gulf: Emerging market status is going to be a major driver of equity investment; Saudi reform, China’s Belt and Road initiative, and a stable oil price should combine to maintain our upbeat outlook on the region, in spite of regional tensions,” he said.

The Middle East, of course, is an increasingly important part of the international financial and economic system, and is subject to the swings and roundabouts of global forces. Some experts have forecast challenging times ahead, as the US economy tries to maintain the impressive growth of recent years amid the threat of all-out trade war with the second biggest global economy, China, as well as strains within European economies. 

“We predict that global economic performance is likely to become less uniform in the next few years. It is expected that the US will outperform if meaningful trade sanctions are imposed on China, the European Union, Japan and Mexico. Also, a ‘No Deal Brexit’ is likely to have a negative impact on the EU,” he said. 

On the US investment scene, some analysts have wondered whether soaring stock market indices — the “Trump boom” — will eventually have to give way.

“The US economy is increasingly driven by investment and technology-related growth, and this should drive productivity improvement. This, in turn, will help make the Trump boom sustainable,” Laurina said.

What does this mean for the economic prospects of the Arabian Gulf, still dominated by energy revenues? 

“The global oil trade should be relatively unaffected by trade wars. However, oil exporters may see some fallout in demand if there is economic slowdown in trade-impacted countries and regions. It is also worth noting that the US is no longer a significant source of demand — it has scaled back on oil imports over the years, for example — and currently generates a surplus in its balance of trade and services with Saudi Arabia,”
he added.

SSGA’s 12-strong team in the Middle East — now based in Dubai but with a branch office also in Abu Dhabi — looks set to grow as the asset management business expands. “The Middle East and Africa market is extremely dynamic and demanding, and we believe that only those firms that are nimble and agile enough will be successful in the long run,” Laurina said.

 


First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
Updated 22 April 2021

First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
  • Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt

CAIRO: First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt, a subsidiary of the Lebanese Bank Audi Group, the bank announced on Thursday.

In a statement, the bank said that after the completion of the share transfer process, First Abu Dhabi Bank will begin merging the assets and operations of Bank Audi Egypt and First Abu Dhabi Bank — Egypt, with the merger process expected to be completed in 2022.

Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt, with assets exceeding EGP 130 billion ($8.5 billion) after consolidating on Dec. 31, 2020.

“This step represents a strategic achievement that supports First Abu Dhabi Bank’s development aspirations at the international level and will accelerate the expansion of its business in one of the most important markets with high growth potential. This acquisition will play an essential role to enhance the volume and momentum of First Abu Dhabi Bank’s business in Egypt,” Hana Al-Rostamani, CEO of First Abu Dhabi Bank Group, said in a statement.

The banking services Bank Audi Egypt provides to individuals and companies through its wide network of branches will support the operations of First Abu Dhabi Bank in Egypt, which has operated in Egypt since 1975.

Mohamed Abbas Fayed has been appointed CEO of the combined entity. He joined First Abu Dhabi Bank in 2019 and was previously CEO and managing director of Bank Audi Egypt, which helped him gain extensive experience over three decades in the sector and in the Egyptian market.


Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
Updated 22 April 2021

Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
  • The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month

RIYADH: Saudi Arabia recorded a 110 percent month-on-month surge in people searching for flights in March, according to global online travel platform Skyscanner, as the Kingdom’s travelers get ready for international flights to reopen from May 17.
The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month, followed by international destinations in India, Pakistan, the Philippines and Egypt.
Flights were grounded in the Kingdom in March 2020. Domestic traffic resumed at the end of May 2020 and the Saudi General Authority of Civil Aviation (GACA) recently announced that international flights will resume by May 17, 2021.
In a bit to capitalize on this, Skyscanner has launched an Arabic language version of its platform on desktop and mobile web.
“We’re pleased to be able to offer travelers in the Middle East a far more relevant experience on desktop, allowing them to plan and book travel in their local language and currency,” Gavin Harris, director of strategic partnerships, Skyscanner, said in a press statement.
“Arabic is one of the 5th most spoken languages in the world and outbound travel from Saudi Arabia and the UAE accounts for a significant proportion of the total travel market,” he added.
In December, the “Global Holiday Intent” survey, conducted by YouGov on behalf of Reed Travel Exhibitions — organizer of the Arabian Travel Market (ATM) exhibition in Dubai — found that 46 percent of those surveyed in Saudi Arabia said that they intended to travel internationally once restrictions were lifted.
Additional research released this week by global travel services company Collinson found that more than four fifths of business travelers in Saudi Arabia had seen their job affected in some way by a lack of cross-border business travel, and about one third of survey respondents said that they felt unable to do their job effectively.


Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
Updated 22 April 2021

Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
  • $74 million of loan will finance construction of fertilizer plant in Sadat City
  • Mashreq Bank and National Bank of Egypt led 12-bank syndicate

RIYADH: Egyptian fertilizer company Evergrow has signed a $400 million loan agreement with a syndicate of 12 banks led by Mashreq Bank and the National Bank of Egypt (NBE), who acted as the facility arrangers, Asharq reported citing a joint statement on Wednesday.

The plan consists of $326 million that will be used to restructure previous debts Evergrow owes to the same banks, while the remaining $74 million will finance the construction of the third phase of the company’s fertilizer plant in Sadat City, slated for completion within nine months.

The financing is one of the largest dollar loans granted by banks to private sector companies in the Egyptian market in the field of potassium fertilizers during the past 10 years.

The deal is part of Evergrow’s financial reform program sponsored by the Central Bank of Egypt.

The new funds will help raise the annual production capacity of all the company’s products from 817,000 tons currently to 1.15 million tons annually, said Evergrow Chairman Mohamed El Kheshen.

Egypt’s Minister of Trade and Industry Neveen Gamea in March said that Egypt aims to increase its exports — especially to EU, African and Arab markets — to $100 billion, through the implementation of a strategic plan.


Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
Updated 22 April 2021

Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
  • Launched aggressive campaigns to lure investors
  • Founder reported to have flown to either Albania or Thailand
ISTANBUL: Turkish prosecutors on Thursday opened an investigation after the Istanbul-based founder of a cryptocurrency exchange shut down his site and fled the country with a reported $2 billion in investors’ assets.
The Thodex website went dark after posting a mysterious message saying it was suspending trading for five days on Wednesday because of an unspecified outside investment.
Turkish security officials then released a photo of Thodex founder Faruk Fatih Ozer going through passport control at Istanbul airport on his way to an unspecified location.
Local media reports said Ozer — reported to be either 27 or 28 years old — had flown either to Albania or Thailand.
HaberTurk and other media said Thodex shut down after running a promotional campaign that sold Dogecoins at a big rebate — but did not allow investors to sell.
Reports said the website and the entire exchange had shut down while holding at least $2 billion from 391,000 investors.
“The victims are panicked,” investors’ lawyer Oguz Evren Kilic was quoted as saying by HaberTurk.
“They are lodging complaints at prosecutors’ offices in the cities they reside.”
Prosecutors launched an investigation into the businessman on charges of “aggravated fraud and founding a criminal organization,” the private DHA news agency said.
Thodex has launched aggressive campaigns to lure investors.
It had first pledged to distribute luxury cars through a flashy advertising campaign featuring famous Turkish models.
The platform then launched its Dogecoin drive.
The cryptocurrency is getting particularly popular among Turks who are looking to preserve their saving in the middle of a sharp decline in the value of the local lira.
The Turkish crypto market remains unregulated despite growing skepticism from President Recep Tayyip Erdogan’s government about the safety and use of digital currencies.
The Turkish central bank has decided to ban the use of crypto currencies in payments for goods and services starting from April 30.
It warned that cryptos “entail significant risks” because the market is volatile and lacks oversight.
“Wallets can be stolen or used unlawfully without the authorization of their holders,” the central banks warned last week.

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
Updated 22 April 2021

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
  • Mortgages rise, underpinning demand
  • Office sector remains under pandemic pressure

RIYADH: Property prices in the Saudi capital edged higher in the first quarter even as rental rates eased, JLL said.
Riyadh’s residential sale prices registered an annual increase of 2 percent for apartments and villas. By contrast, rental rates reported yearly declines of 1 percent for apartments and villas, it said. Some 7,700 homes were handed over during the period, the broker said.
“Looking ahead, the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand,” JLL said in the report.
It said that strong government support helped to boost demand for residential property in the first three months of the year.
New mortgage loans for individuals jumped by 33,000 contracts in January 2021, it said.
The total value of mortgages increased to SR16.4 billion, according to the Saudi Arabia Monetary Agency (SAMA).
The Riyadh office market remains under pressure with average lease rates across a basket of Grade A & B office spaces in the city falling by 2 percent over the quarter compared to a year earlier.