Senior finance executives in the Middle East upbeat despite uncertainty

In Saudi Arabia, 71 percent of finance executives expected strong or modest growth this year. (Reuters)
Updated 19 June 2019

Senior finance executives in the Middle East upbeat despite uncertainty

  • Some 72 percent of those polled regionally thought they would see economic growth this year
  • The report also highlighted the core importance of next-generation technology and innovation on corporate dynamics

DUBAI: Senior finance executives in the Middle East are less optimistic about the prospects for economic growth than they were 12 months ago, but remain positive on the outlook for their companies and investments.
That was the main finding for the region of an international poll conducted for American Express, the global financial services firm, by Institutional Investor, the business information group, and presented to media and corporate clients in Dubai yesterday.
Mazin Khoury, chief executive officer for American Express in the Middle East, said financial executives were “operating in unsettled times.” Despite this, “they are concentrating on their day-to-day business but keeping an eye on the future,” he added.
Some 72 percent of those polled regionally thought they would see economic growth this year, compared with 92 percent last year, in part due to oil price fluctuations. Only 10 percent said there would be a significant contraction in growth.
In Saudi Arabia, 71 percent of finance executives expected strong or modest growth this year, roughly the same as in the UAE. Amex noted that “despite oil prices rising in early 2019, long-term global trends point to more supply and less demand.”
The poll was taken late last year, before even greater recent volatility in the global oil markets, as well as worries about global trade and faltering economic growth.
A majority of them — some 64 percent — thought that “socio-economic changes and global trade policy” would strengthen their companies’ growth prospects, with only 5 percent expecting these factors would weaken their outlook. That was broadly in keeping with global averages, Amex said.
“Expanded foreign trade will be based more on organic strategies than partnerships, the executives through, with most companies likely to set up or expand foreign operations and use online media for marketing to pursue international growth strategies,” in a sign of a more nimble approach to foreign trade in the Middle East.
The report also highlighted the core importance of next-generation technology and innovation on corporate dynamics, as well as the importance of young people under the age of 24, as both customers and employees.
Some 78 percent of respondents said they had explicit strategies to appeal to “Generation Z” consumers, who make up between 50 and 64 percent of regional populations.
The report did not include data relating to consumer spending by Amex customers. Khoury said that his business had not seen any impact from recent negative trends in economics or geopolitical factors.
“If it happens it will not affect American Express alone, but there has been no impact. It is too early to judge,” he said, referring to increased tensions in the Arabian Gulf region.
“Our customers are still calling us to book their travel, we are still engaging with corporates
and signing new corporates. They are continuing to spend,” he told Arab News.


Saudi central bank ready for any Aramco-related liquidity squeeze

Updated 30 min 23 sec ago

Saudi central bank ready for any Aramco-related liquidity squeeze

  • Aramco’s long-awaited listing on the Saudi Arabian stock exchange is due on Wednesday
  • The central bank has set up a team to closely monitor all indicators in the banking system during the IPO

RIYADH: Saudi Arabia’s central bank is ready for any liquidity squeeze from Saudi Aramco’s initial public offering (IPO) and is closely monitoring local banks, its governor said, after heavy demand for loans to buy the stock.
Aramco’s long-awaited listing on the Saudi Arabian stock exchange is due on Wednesday, completing the largest IPO on record and raising $25.6 billion from retail and institutional buyers who took on debt to back their orders.
“We don’t rule out that there might be squeeze of liquidity later on, that’s why I am ready and stand ready to intervene,” Ahmed Al-Kholifey told Reuters.
Saudis had clamoured to own part of the “crown jewel” of the world’s top oil exporter in the lead up to its IPO, with Aramco’s institutional tranche 6.2 times oversubscribed, while more than 5 million individuals subscribed to a retail tranche.
The Aramco IPO is the centerpiece of the Saudi crown prince’s plans to diversify the economy away from a reliance on oil, as the money will be reinvested by the Saudi Public Investment Fund (PIF) to promote growth in other sectors.
During the IPO process, the loan-to-deposit ratio (LDR) at some banks had exceeded a 90% “soft guideline” set by the regulator, but the ratio improved after the allocation process ended, Kholifey said in an interview.
“So far no bank has come to ask for liquidity from the central bank. We are ready to intervene in case there is a squeeze of liquidity but most of the indicators right now are not worrying,” Kholifey added.
MONITORING TEAM
The central bank has set up a team specifically to closely monitor all indicators in the banking system during the IPO process, and it held meetings on a daily basis.
“I don’t think in the near future they will settle, we have to keep monitoring the situation until we see things are normal, especially the LDR,” he said.
Saudi corporates snapped up the biggest percentage of allocations to the Aramco IPO at 37.5% and Saudi government institutions were allocated 13.2% of the institutional tranche, the latest figures issued by the deal’s lead bank showed.
Kholifey said that less than 2% of retail subscriptions were leveraged, and most of the bank financing went to high-net-worth individuals and institutional buyers.
He expects most of the IPO proceeds to be invested locally by the PIF, given that most of subscription were internal.
Riyadh scaled back its original IPO plans, scrapping an international roadshow to focus on marketing Aramco to Saudi investors and Gulf Arab allies. It has remained silent on when or where it might list Aramco stock abroad.