Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems
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Updated 21 January 2022

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems

Turkey’s swap deal with the UAE is a boost, but won’t solve the lira’s underlying problems
  • Agreement is valued at $4.9 billion
  • Comes ahead of Turkey's President Erdogan planned visit to Abu Dhabi in February

ANKARA: At a time when Ankara is searching for foreign resources and facing unprecedented inflation rates, Turkey’s currency swap deal with the UAE is a much-needed confidence boost for the country’s economy.

However, analysts have warned that this deal alone will not solve the underlying problems facing the lira. 

The two nations have signed a three-year agreement worth $4.9 billion, including finance and trade relations.

Securing foreign swap lines are expected to fuel Turkey’s much-needed foreign currency reserves. 

“While this is a good vote of longer-term confidence in the Turkish economy, the currency swap will not address the roots of Turkey’s economic challenges. Many of these challenges are linked to nonconventional economic policy decisions,” Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, told Arab News.

According to Mogielnicki, the currency swap puts some cash behind recent efforts to improve strained relations between the UAE and Turkey.

“The UAE is likely interested in using the currency swap to better position Emirati firms and investors to engage with Turkish markets as well as to support foreign policy objectives,” he said. 

Noting that currency swaps reduce dependency on a third currency and thus avoid fees arising from exchange rate volatility and transfer costs, Mogielnicki said that this move paves the way for greater trade and investment between countries.

“The broader MENA region is unlikely to be worse off because of the currency swap, but I don’t view this agreement as especially significant for the region,” he added. 

Enver Erkan, the chief economist of Tera Investment in Istanbul, welcomes the swap agreement with the UAE as a positive step towards increasing the gross foreign exchange reserves held by the Turkish Central Bank.

 “We, on the other hand, also consider the economic landscape in terms of net reserves excluding swaps. While net reserves are around $8 billion under the current circumstances, there is a negative picture of minus $56 billion in net reserves excluding swaps,” he told Arab News. 

Talks between Turkey's central bank and its counterpart in Azerbaijan on securing a possible currency swap line are also ongoing. 

Swap agreements are mainly used by countries that conduct large-scale trade relations between each other to finance part of these relations to be paid in local currencies.

Turkey already has some swap deals with China, Qatar and South Korea worth about $23 billion.

With this latest currency swap agreement, the Turkish Central Bank's total swap figure with foreign central banks reached $28 billion.

The swap agreement with China in 2012 and subsequent arrangements have permitted Turkish companies to pay for imports from China using yuan.

The agreement between Turkish and Emirati Central Banks will be valid for a period of three years, with the possibility of being extended further. 

Emre Peker, European director for political risk consultancy Eurasia Group, thinks the swap agreement will not have a material impact on Turkey's economy, but it will help Turkish companies trading with the UAE on the margins. 

“It is not a game changer, but will alleviate some financing pressures, considering that the swap covers Turkey's average annual exports to the UAE,” he told Arab News. 

The agreement comes ahead of a trip by Turkish President Recep Tayyip Erdogan to Abu Dhabi in February as part of Turkey’s moves to repair ties and concentrate on the economy.

Mustafa Sentop, Speaker of the Grand National Assembly of Turkey, told the Emirates News Agency the visit is “going to be a testament to the improved ties between our countries.”

"We believe that the leaders of Turkey and the UAE standing next to each other will deliver an important message on its own. The objective is to further strengthen the bilateral relations. There are mutual efforts to conclude new agreements and to renew previous commitments to cover a wider range in our current cooperation," he added.

According to the Emirates News Agency, the UAE is Turkey’s top trading partner among the Gulf Cooperation Council countries, with trade between the two countries US$8 billion in 2020. 

Sentop said the trade in the first 10 months of 2021 had amounted to US$6.4 billion.lira


Saudi developer Al Akaria’s losses widen by 539% despite higher sales

Saudi developer Al Akaria’s losses widen by 539% despite higher sales
Updated 12 sec ago

Saudi developer Al Akaria’s losses widen by 539% despite higher sales

Saudi developer Al Akaria’s losses widen by 539% despite higher sales

RIYADH: Saudi real estate developer Al Akaria has seen its losses widen by 539 percent in the first quarter of 2022, despite a surge in sales.

Saudi Real Estate Co., as the firm is formally known, reported SR29.4 million ($7.8 million) in net loss, compared to SR4.6 million in the same period last year, according to a bourse filing.

The company attributed the results to rising finance costs following the suspension of activities in Al Widyan Project as well as higher marketing and other expenses.

Revenues, on the other hand, soared by 54 percent on the year to SR282 million.

Established in 1976, Al Akaria is one of Saudi Arabia's leading real estate firms with a track record of delivering residential, retail, and commercial projects.


Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday
Updated 20 min 45 sec ago

Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday

RIYADH: Saudi Arabia’s main stock market ended Monday with another steep decline, as concerns over the global economy and mixed earnings reports tempered investor optimism.

TASI lost 0.8 percent to 12,235, while the parallel market Nomu added 0.15 percent to 22,363.

Dubai’s stock market led the fall in the Gulf as it shed 2.5 percent, followed by indexes of Abu Dhabi and Kuwait, with a 2.2 and 1.5 percent decline, respectively.

Bourses of Bahrain and Oman edged lower, while Qatar’s QSI bucked the trend to close 1.4 percent higher.

Elsewhere in the Middle East, the Egyptian main index was up 0.5 percent in the previous session.

In energy trading, concerns over a possible recession and China’s COVID-19 curbs caused oil prices to drop on Tuesday.

Brent crude went down to $112.06 a barrel and US West Texas Intermediate retreated to $108.97 a barrel as of 9:06 a.m. Saudi time.

Stock news

SATORP, a joint venture between oil giant Aramco and France’s Total Oil Co., has turned in a profit of SR1.43 billion ($382 million) in the first quarter of 2022

Saudi Real Estate Co.’s losses widened by 539 percent to SR29.4 million in the first quarter despite a surge in sales

Shareholders of Etihad Etisalat Co., known as Mobily, approved the board’s proposal to pay out SR0.85 per share in dividends for 2021

Alkhaleej Training and Education Co.’s losses were trimmed by 33 percent to SR5.09 million in the first quarter of 2022

Alhokair Group saw its losses narrowing by 48 percent in the first quarter to SR31 million

National Gypsum Co.’s profit dropped by 77-percent to SR3.2 million in the first quarter

Basic Chemical Industries Co. said it will not distribute cash dividends to shareholders for 2021

Al Moammar Information Systems Co., also known as MIS, reported a 50 percent drop in quarterly profit to SR4.6 million

Shareholders of Riyadh Cement Co. approved a dividend distribution of SR0.75 for the second half of 2021

Al-Babtain Power and Telecommunication Co. posted a 43 percent profit decline to SR8.7 million in the first quarter

Allied Cooperative Insurance swung into a net loss before Zakat of SR29.6 million in the first quarter, compared to SR3.4 million in profit a year ago

National Metal and Manufacturing Co. slightly widened first-quarter losses from SR7.08 million to SR7.14 million

Raydan Food Co.’s losses were narrowed by 49 percent to SR4.7 million in the first quarter as its accumulated losses reached 48 percent of capital

Scientific & Medical Equipment House reported a 10-percent drop in first-quarter profit to SR16.8 million

Jazan Energy and Development Co. posted a 75 percent profit jump to SR3.56 million for the first quarter of 2022

Salama Cooperative Insurance Co. turned into a net loss of SR6.8 million before Zakat in the first quarter of 2022

Al Jouf Cement Co. submitted a filing to the Capital Market Authority as it seeks to cut capital by SR343 million

Saudi Arabia Refineries Co. swung into losses of SR658,446 in the first quarter of 2022

Middle East Specialized Cables Co.’s first-quarter profits dropped from SR900,000 to SR100,000 despite a 68-percent jump in sales

Amana Cooperative Insurance Co.  got approval from CMA to raise its capital by SR300 million through a rights issue

Development Works Food Co. turned into losses of SR2.26 million last quarter on the back of higher costs

Arabia Insurance Cooperative Co.’s request to raise capital by SR265 million was approved by CMA

Calendar

May 24, 2022

Naseej for Communication and Information Technology Co.’s listing on Nomu

May 25, 2022

End of Amwaj International Co.’s IPO subscription

Aqaseem Factory for Chemicals and Plastics Co.’s listing on Nomu

May 26, 2022

End of Ladun Investment Co.’s IPO book-building

May 30, 2022

Close of Anaam International Holding Group’s rights trading

June 2, 2022

Close of Anaam International Holding Group’s new shares subscription


UAE’s ADNOC, BP and Masdar sign new energy partnership

UAE’s ADNOC, BP and Masdar sign new energy partnership
Updated 31 min 43 sec ago

UAE’s ADNOC, BP and Masdar sign new energy partnership

UAE’s ADNOC, BP and Masdar sign new energy partnership

DUBAI: The Abu Dhabi National Oil Company (ADNOC) said on Tuesday it, oil major BP and Abu Dhabi future energy company Masdar will advance their new energy partnership through the development of clean hydrogen and technology hubs.

ADNOC said it, alongside BP, moved to the design phase of the H2Teesside low-carbon hydrogen project, its first UK investment.

Other partnerships included a feasibility study for a low-carbon hydrogen project in the UAE and an expanded ADNOC-BP-Masdar partnership to explore the production of sustainable aviation fuels from municipal waste and green hydrogen in Abu Dhabi. 


India In-Focus — Indian shares rise; Serum plans African vaccine plant; Paytm expects central bank curbs to be lifted soon

India In-Focus — Indian shares rise; Serum plans African vaccine plant; Paytm expects central bank curbs to be lifted soon
Updated 41 min 15 sec ago

India In-Focus — Indian shares rise; Serum plans African vaccine plant; Paytm expects central bank curbs to be lifted soon

India In-Focus — Indian shares rise; Serum plans African vaccine plant; Paytm expects central bank curbs to be lifted soon
  • Africa was the only continent that did not have its own manufacturing capacity for COVID-19 vaccines during the worst phases of the pandemic

MUMBAI: Indian shares rose slightly on Tuesday, helped by automobile and metal stocks, with investors watching the shares of newly-listed logistics firm Delhivery.

The NSE Nifty 50 index was up 0.13 percent at 16,236.35 by 0350 GMT, while the S&P BSE Sensex rose 0.14 percent to 54,365.34.

Vaccine giant Serum plans African plant in global expansion

The Serum Institute of India, the world’s biggest vaccine maker, is considering setting up its first manufacturing plant in Africa as it looks to expand globally after its success in selling COVID-19 vaccines, its CEO told Reuters on Monday.

“It’s never been a better time to be a vaccine manufacturer. I’m looking at expanding our manufacturing across the globe,” SII CEO Adar Poonawalla said during an interview at the World Economic Forum in Davos.

“There are some great countries out there: South Africa, Rwanda, you know, to name a few that we’re looking at.”

Africa was the only continent that did not have its own manufacturing capacity for COVID-19 vaccines during the worst phases of the pandemic in the last two years, leaving it at the mercy of suppliers from overseas, including the SII.

Paytm payments bank expects central bank curbs to be lifted soon

India’s Paytm Payments Bank, which facilitates transactions on mobile commerce platform Paytm, expects the central bank to allow it to resume taking on new customers in the next few months, a top executive told Reuters.

In March, the Reserve Bank of India ordered a comprehensive audit of the company’s IT systems, citing “material” supervisory concerns, without elaborating further, and barring it from taking on new customers.

The bank is working with the RBI to complete the IT audit and address the regulator’s concerns.

“The process is underway and we think it should take three to five months from where we are right now,” Madhur Deora, group chief financial officer, Paytm, told Reuters on Sunday.

SoftBank-backed logistics firm Delhivery valued at $4.9bn in India debut

Shares of Delhivery, an Indian logistics startup backed by SoftBank Group, rose as much as 7.6 percent in their market debut on Tuesday, giving the company a valuation of 379.60 billion rupees ($4.89 billion).

The Gurugram-based company’s services include parcel transportation, warehousing, cross-border and supply chain services to more than 23,000 customers, and counts popular e-commerce sites such as Amazon Inc. and Walmart Inc’s Flipkart as its clients.

Delhivery’s IPO, trimmed by nearly 30 percent to 52.35 billion rupees, was subscribed 1.63 times earlier this month at an offer price set at 487 rupees.

The offering included a fresh issue of shares worth up to 40 billion rupees and an offer for sale of shares worth 12.35 billion rupees from existing shareholders, including US private-equity firm Carlyle Group Inc. and Japanese conglomerate SoftBank.

(With input from Reuters) 


Commodities Update — Gold inches lower; Soybean, corn ease; COFCO International sets 2030 target on soy land use

Commodities Update — Gold inches lower; Soybean, corn ease; COFCO International sets 2030 target on soy land use
Updated 48 min 35 sec ago

Commodities Update — Gold inches lower; Soybean, corn ease; COFCO International sets 2030 target on soy land use

Commodities Update — Gold inches lower; Soybean, corn ease; COFCO International sets 2030 target on soy land use

RIYADH: Gold edged lower on Tuesday, as the US dollar rebounded slightly after a slide in the previous session, weighing on demand for greenback-priced bullion.

Spot gold fell 0.2 percent to $1,850.40 per ounce, as of 0240 GMT, after rising to its highest since May 9 of $1,865.29 on Monday. 

US gold futures were flat at $1,848.20. 

Silver falls, Palladium up

Spot silver dipped 0.3 percent to $21.71 per ounce, while platinum eased 1.3 percent to $946.00. 

Palladium edged up 0.1 percent to $1,994.50. 

Wheat up

US wheat futures extended gains on Tuesday, supported by a slower pace of spring wheat planting and amid fears over yield for the winter crop in the US, while corn fell after output concerns in key producer Brazil eased with minor frost.

The most-active wheat contract on the Chicago Board of Trade was up 0.21 percent at $11.92-1/2 a bushel, as of 0348 GMT.

Corn eased 0.45 percent to $7.82-3/4 a bushel and soybeans edged 0.28 percent lower to $16.82-1/4 a bushel.

Copper eases

London copper prices edged lower on Tuesday after hitting a more than two-week high in the previous session, as the dollar rebounded and demand worries persisted due to ongoing lockdowns in top consumer China.

Benchmark three-month copper on the London Metal Exchange was down 0.4 percent at $9,510.50 a ton, as of 0217 GMT, after hitting its highest since May 5 at $9,565 on Monday.

The most-active June copper contract on the Shanghai Futures Exchange rose 0.2 percent to $10,827.48 a ton.

COFCO International sets 2030 target on soy land use in South America

COFCO International has committed to making its soy supply chain free of deforestation and land conversion by 2030 in environmentally sensitive regions of South America, including the Amazon and Cerrado, the Chinese-owned crop merchant said.

Like other global grain traders, COFCO International has previously pledged greater auditing of soybean crops to help stem land clearance in Brazil that is blamed for reducing biodiversity and contributing to global warming.

The 2030 target would cover the Amazon rainforest region, Brazil’s Cerrado savannah belt and the Gran Chaco zone, which spans parts of Argentina, Bolivia, Brazil and Paraguay, COFCO International’s CEO Wei (David) Dong said in a sustainability report published by the company on Monday.

(With input from Reuters)