INTERVIEW: ‘Aramco IPO is going to change markets in the region,’ says strategist Yazan Abdeen

INTERVIEW: ‘Aramco IPO is going to change markets in the region,’ says strategist Yazan Abdeen
Illustration by Luis Grañena
Updated 16 September 2019

INTERVIEW: ‘Aramco IPO is going to change markets in the region,’ says strategist Yazan Abdeen

INTERVIEW: ‘Aramco IPO is going to change markets in the region,’ says strategist Yazan Abdeen
  • Yazan Abdeen, CEO of AD Investment Management, part of Invest AD, tells how the share sale will change the perception of MENA markets

Seasoned regional investor Yazan Abdeen has developed a simple formula for successful investing in the Arabian Gulf: “Buy when people cry. Sell when they yell.”

His maxim implies that investors should appreciate the buying opportunities in falling markets, as well as the chances of realizing a healthy profit in periods of market enthusiasm. It has served him well in a career of nearly two decades in the UAE and Saudi Arabia.

Abdeen is chief executive officer of Abu Dhabi Investment Management, managing a portfolio on behalf of InvestAD, one of the UAE’s big investment vehicles owned ultimately by the giant Mubadala. It is, he said, a specialist asset management firm that invests in Middle East and North Africa equities, with a basic strategy of maximizing return while managing risk.

That position gives him a good vantage point from which to survey financial business in the Gulf, and especially in Saudi Arabia, where he worked for several years with SEDCO, the Jeddah-based investment group, and in Riyadh, where he spent much of his youth.

Abdeen’s take on the current state of the Kingdom, as it gears up for the initial public offering of Saudi Aramco — the biggest event in its investment history — is illuminating. Some critics bemoan the relative lack of progress toward the Vision 2030 goals, but he believes analysts should distinguish between the long-term nature of the Vision strategy and the short-term changes that have already been accomplished.

“The National Transformation Program of 2015-16 has definitely created a shock effect in the economy. The previous standard of corporates living through government subsidy been completely changed. 

BIO

BORN:

• 1981, Jordanian citizen

EDUCATION:

• American University of Beirut, BA applied science

• London Business School, MBAs in business administration and business, finance and economics

CAREER:

• Analyst, Capital Trust

• Investment manager, Damac Holding

• VP Asset management, Noor Holding

• Asset manager, Union Properties

• Fund manager, ING Investment Management

• Head of MENA Capital Markets, SEDCO

• Head of Capital Markets, Scope Investments

• CEO and Portfolio Manager, AD Investment Management

“The major changes were seen in the contracting sector, where the main contractors were living off government spending. They would simply put a 5 percent margin on top of the government cost of a project and live off that. This situation has changed drastically. It’s also been felt in the petrochemical sector where subsidies on feedstocks have been reduced or removed,” he said.

Consumers have also felt the effect. Petrol prices have risen, as have utilities bills, as government subventions have been stopped. “I could tell the difference in the electricity bills straightaway when I moved back to Saudi Arabia after some years in Dubai,” he said.

Growth rates in the non-oil sector have slowed as a result of the cuts in government subsidies, but Abdeen believes the short-term pain will be worth it. “It was a systemic shock, but a necessary one for Saudi Arabia to refine the operational viability of the private sector,” he said.

The policy of Saudization has also had a radical effect. “One third of the population was foreign labor, and this has also been changed, creating certain stress points in the economy. The securities that have been most affected are consumer discretionary ones, retail for example, but there are companies that have changed their business modes drastically and growth market share and today are running a profitability level significantly higher than they were in 2015.”

He highlighted the electronics retail group Extra as an example of a Saudi company nimble enough to take advantages of the changes.

Abdeen agreed that the privatization program — which was estimated at one point to bring $200 billion of assets to markets and attract foreign investment through public-private partnerships and other transactions — has been slow to get off the ground, but he pointed to the sale of shares in the bank NCB as an example of a successful Saudi IPO.

He said there was still a lot of pent-up interest in the assets being prepared for sale by the National Privatization Center, and that Tadawul had needed the time to make preparation for more share sales and achieve inclusion into the MSCI index, which has been done.

He sees big opportunities in the tech sector in Saudi Arabia, with its large youthful demographic and high Internet penetration, and also pointed to the big profits Saudi investors made on the $3.1 billion sale of Careem to Uber as positive factors in the Kingdom’s investment scene: “You could argue that Careem was a Saudi company, and it is also the largest market in the region for Careem’s business.” 

In some ways, you might see the Saudi market changes and limited privatization steps so far as preparation for “the big one” — the forthcoming IPO of Saudi Aramco, confirmed to take place on Tadawul, perhaps as a prelude to a global offering, very soon. How does Abdeen view the Aramco IPO?

“I think that Aramco is going to change the platform not just for markets but also for us as asset managers in this part of the world. The weighting of Saudi Arabia in the global indices like MSCI and S&P is between 2 and 3 percent, but with the inclusion of Aramco you are talking about a significant increase, depending on the valuation,” he said.

Because Saudi markets comprise about 60 percent of the value of all regional markets, the Aramco IPO would significantly raise the profile of the Middle East in the emerging markets, he said.

“There is also the nature of Aramco itself. It is not only the most profitable company in the world, it is also the biggest single company producing crude oil. So it will have an impact both on emerging markets and on global markets,” he said.

“Whether you are a Middle East investor, or an emerging markets investor, or indeed a global investor, it is a subject you just cannot ignore. It is important for us as Middle East investors to be part of that offering,” he said.

“The rhetoric hasn’t changed since the beginning, that there will be a Tadawul listing of Aramco, and that is only natural. It needs to be offered locally, but with the Saudi market opening, it means that regional investors like us, and even global investors, will be able to invest in it in Saudi.

“After that, most of the exchanges in the world would like to have a company like Aramco listed on their exchange, but valuation and liquidity will be decisive factors in deciding where else in the world it will list. It needs to be in a global hub of capital, and the big ones around the world are well known — in New York, or London or Tokyo for that matter,” he added.

Although events in Saudi Arabia and at Aramco are taking center stage in most regional asset managers’ minds, Abdeen is still focused on the UAE, where a large proportion of his resources are committed.

He said that the biggest factors determining investor sentiment in the Emirates are commodity prices, interest rates, the real estate market and the health of the banking sector, all viewed against the backdrop of global financial, economic and geo-political pressures.

“The experts say there is a 100 percent probability that the Fed will cut rates in September, and there are two more possibilities to cut in the rest of the year,” he said. Meanwhile, he is conscious of the effect on regional investment prospects of the fallout from trade war between China and the US.

In the UAE, he believes there are challenges in the real estate, retail and some consumer sectors, but he still sees significant investment opportunities elsewhere — in the rapidly consolidating banking sector, as well as certain industrials and logistics equities.

In Dubai, he said that “hope is a stronger emotion that fear” as the emirate gears up for the Expo 2020 extravaganza next year. “The incremental capital spending to host the Expo make for good opportunities, and will drive the corporate sector. The millions of visitors who will come are going to create capital flows that will make for good opportunities. Maybe now is the time to bite the bullet on Dubai investment. It’s certainly not a time to be throwing in the towel.

“It all depends on your appetite for risk. For example, immediately after the global financial crisis you could buy Emaar shares for less than the price they eventually sold just their malls business for; equally, in Saudi Arabia in 2016 the big banks were just too cheap. The big test is, if I buy now and hold the stock for five years, whether I will still be happy,” he said.


Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Updated 20 April 2021

Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
  • The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations

RIYADH: South Korean Ambassador Jo Byung-Wook has invited Saudi Arabia to attend the Global Infrastructure Cooperation Conference (GICC2021).

The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations.

The ambassador met Prince Saud bin Talal bin Badr, undersecretary at the Ministry of Municipal and Rural Affairs and Housing for housing subsidies, and general supervisor of the International Cooperation Department at the ministry in Riyadh.

GICC2021 is scheduled for “later this year,” the ambassador told Arab News, adding that the meeting “reviewed the close, friendly and cooperative relations” between the two countries, and “agreed to continue to expand bilateral cooperation in the housing sector.”

He said: “I commended the Saudi government’s efforts to help Saudi families own their house through the Sakani program, taking note of the signing of four agreements during the Sakani Forum held last Thursday in Riyadh.”

The Sakani program helped 70,000 families in the first quarter of 2021, surpassing its target of serving 51,000 families.

It was formed in 2017 by the Ministry of Housing and the Real Estate Development Fund, with the aim of facilitating home ownership in the Kingdom by creating new housing stock, allocating plots and homes to nationals, and financing their purchase. It has a goal of reaching 70 percent home ownership by 2030.

The program aims to serve 220,000 Saudi families this year by creating 50,000 housing units, facilitating the reservation of 30,000 residential land plots, and arranging 140,000 real estate loans. To date, Sakani has enabled more than 350,000 families to own homes.


Finance giant Fitch partners with SIDF Academy for Saudi talent program

SIDF Academy has more than 47 years’ experience in training employees in the finance, technology, industry, mining, energy and logistics industries. (File Photo)
SIDF Academy has more than 47 years’ experience in training employees in the finance, technology, industry, mining, energy and logistics industries. (File Photo)
Updated 20 April 2021

Finance giant Fitch partners with SIDF Academy for Saudi talent program

SIDF Academy has more than 47 years’ experience in training employees in the finance, technology, industry, mining, energy and logistics industries. (File Photo)
  • Fitch Learning: Scheme will ‘set professionals on fast track for success’
  • SIDF Academy: ‘Collaboration represents major step on path to train, develop keen talent’

LONDON: Fitch Learning, the knowledge and training arm of global financial leader Fitch Group, has announced a partnership program with the Saudi Industrial Development Fund (SIDF) to boost financial education in the Kingdom.

The delivery of the Certified Investment Financing Professional (CIFP) training program will “enrich the financial skills of local talent,” and “provide them with a better insight into the increasingly complex global financial landscape,” Fitch Learning said in a statement.

The program will be delivered in cooperation with SIDF Academy, which aims to build knowledge in key sectors in line with Saudi Arabia’s industrial vision.

It will “allow CIFP participants to keep pace with the Saudi economy, and also offer them a pathway to building global expertise and qualifications,” Fitch Learning said.

The CIFP program will target employees in the finance, credit and investment industries. It will include three levels with 18 distinct training modules, including financial accounting, financial analysis, lending, business development and financial modeling.

“Saudi Arabia is a key strategic market for the Fitch Group, and we are delighted to play a key role helping the Kingdom enrich financial training skills across the Kingdom,” said Fitch Learning CEO Andreas Karaiskos.

“We will deliver exactly the right international financial certification opportunities via our CIFP program to set professionals on the fast track for success.”

SIDF Academy Director Dr. Kholod Ashgar said: “We are proud to be working together with Fitch Learning, a leading global provider of professional development courses for the financial services industry, to deliver this CIFP program via SIDF Academy.

“This collaboration represents a major step on our path to train and develop our keen talent to stimulate future prosperity, jobs and growth in this vital sector of the Saudi economy.”

SIDF Academy has more than 47 years’ experience in training employees in the finance, technology, industry, mining, energy and logistics industries.

In 2019, SIDF was aligned with Saudi Arabia’s Vision 2030 reform plan, enabling the fund to play a vital role in shaping the Kingdom’s future. 


Abu Dhabi issues major schools and lighting PPP tenders

The Abu Dhabi Investment Office (ADIO) has advertised the procurement of the schools. (Shutterstock/File Photo)
The Abu Dhabi Investment Office (ADIO) has advertised the procurement of the schools. (Shutterstock/File Photo)
Updated 20 April 2021

Abu Dhabi issues major schools and lighting PPP tenders

The Abu Dhabi Investment Office (ADIO) has advertised the procurement of the schools. (Shutterstock/File Photo)

RIYADH: Abu Dhabi is seeking private sector partners for three new schools and a street lighting project.

The Abu Dhabi Investment Office (ADIO) has advertised the procurement of the schools and phase 2 of its street lighting upgrade program, WAM reported.

Potential bidders can now submit expressions of interest.

“Collaboration with the private sector is an integral part of the Abu Dhabi leadership’s vision to drive long-term economic growth in the emirate. In 2020, ADIO laid the foundations to supercharge collaboration between business and government,” said the director-general of ADIO, Tariq Bin Hendi.

The Zayed City Schools PPP project will provide three new schools with a capacity of 5,360 students in Abu Dhabi’s Zayed City.

The contract will include the design, build, finance, maintenance and transfer of three schools with a concession period of 22 years, inclusive of a construction period of 24 months and a maintenance period of 20 years.

Phase 2 of the Street Lighting LED PPP program will see approximately 140,000 of the emirate’s streetlights replaced with energy-efficient LED technology.

This will offer a 76 percent reduction in their power consumption — equivalent to cost savings of 705 million dirhams — and will be structured as a 12-year concession agreement with the Department of Municipalities and Transport (DMT).

ADIO is the central Abu Dhabi government authority with responsibility for delivering infrastructure projects through a PPP framework.


Saudi Arabia’s biggest gym chain swings to loss

Saudi Arabia’s biggest gym chain swings to loss
Updated 20 April 2021

Saudi Arabia’s biggest gym chain swings to loss

Saudi Arabia’s biggest gym chain swings to loss
  • Operates 135 gyms in UAE and KSA
  • Pandemic has hit fitness sector hard

DUBAI: Saudi Arabia’s biggest gym chain swung to a first quarter loss as the pandemic forced the closure of thousands of fitness clubs worldwide.
Leejam Sports Company reported a net loss of more than SR6.9 million in the first quarter compared to a profit of SR6.2 million a year earlier, it said in filing to the Tadawul stock exchange where its shares are listed.
Overall revenues dipped by about a quarter over the period to SR148.5 million, it said.
Total gym memberships, personal training revenues and rental income fell by more than SR49 million as a result of gym closures in the Kingdom from Feb.5, 2021 to March 6, 2021, it said.
Meanwhile the need to apply precautionary measures in response to the pandemic reduced the number of members joining the clubs.
Leejam operates some 135 Fitness Time centers in Saudi Arabia and the UAE.


‘Many more airlines will go under’ Qatar Airways boss tells CNN

‘Many more airlines will go under’ Qatar Airways boss tells CNN
Updated 20 April 2021

‘Many more airlines will go under’ Qatar Airways boss tells CNN

‘Many more airlines will go under’ Qatar Airways boss tells CNN
  • Qatar Airways CEO Akbar Al-Baker gave a bleak assessment of the challenges facing the industry as it struggles to recover from the collapse in global air travel

DUBAI: Qatar Airways CEO Akbar Al-Baker has warned that many more airlines will be forced out of business by the pandemic.
In an exclusive interview on CNN’s Quest Means Business, Qatar Airways CEO Akbar Al-Baker gave a bleak assessment of the challenges facing the industry as it struggles to recover the collapse in global air travel.
“By the time this pandemic is over, there will only be few airlines that are strong and will continue operating,” he said. “A lot of other airlines will go under. And this will continue to happen, because we have not seen the worst of it over yet.”
He said that returning the airline industry to full strength should be a key priority to boost the global economic outlook.


“If this pandemic prolongs for too long, this will completely destroy the world’s economy which is so dependent on airlines for delivering business, carrying freight around, and most importantly creating jobs,” he said.
The outspoken airline chief highlighted some of the safety measures adopted by the airline and its hub at Hamad International Airport in Doha.
These include high-tech temperature sensors, ultraviolet disinfectant processes, and mask-wearing on flights.
He also spoke about the process of asking the company’s shareholders – the Qatari government – for a cash injection during the pandemic, “I couldn’t just jump the queue and go and tell my boss, the ruler of my country, that our situation is so dire, and this is what we need. Because I am sure there were a lot of other people in the queue before me telling him the same thing.”

The CEO also spoke about access to vaccinations and mitigating the risks amid the slow roll out of vaccines in some countries. He told Quest, “It will be a problem for the aviation industry. And we will have to work a way within this risks that we will have to take. But we will have to do things, we'll have to put processes, we'll have to put systems in place to mitigate that risk.” A resurgence of the coronavirus in many countries in recent weeks is threatening to quash some positive signs that had been slowly emerging from the sector. At the same time many passengers are reluctant to fly even where permitted, because of safety concerns and confusion over the different vaccination, testing and quarantine requirements of different countries. Industry body IATA has been trying to address that challenge with its trial Travel Pass initiative aimed at informing passengers about what tests, vaccines and other measures they require at their destinations.