Saudis May Raise Stake in Top Builder to Support Economic Rejig - Bloomberg
Saudi Arabia’s government may increase its stake in a struggling construction conglomerate that’s seen as key to the country’s trillion-dollar economic transformation plans.
The ministry of finance is weighing a series of measures to stabilize Saudi Binladin Group’s financial structure, according to a statement. That could include helping pay off dues to banks, lending to the firm, and even potentially increase the government’s stake.
Riyadh currently owns just over a third of Binladin, a firm that’s seeking to recover from years of losses and reduce a debt pile of billions of dollars. The kingdom hopes to turn it into a national champion again, capable of building projects key to Crown Prince Mohammed bin Salman’s ambitious plans.
The government said its move is a continuation of the support the construction sector has received in the past, according to the statement. It will enhance Binladin’s ability to complete projects, including the Two Holy Mosques, and potentially help secure financing required for other developments.
Binladin has been working with Houlihan Lokey Inc. on a restructuring and its history has been intertwined with the kingdom’s since Saudi Arabia was founded in 1932. The company helped modernize Saudi Arabia by building highways, airports and freezones. It’s also known for its work in the Islamic holy cities of Mecca and Medina.
The firm could now be key to the kingdom’s plans to host events such as the World Expo exhibition in 2030 and the 2034 FIFA World Cup football, which will require huge infrastructure investments and the help of experienced builders.
The Public Investment Fund is working with Morgan Stanley on a potential deal to buy into Binladin, Bloomberg News has previously reported. The $925 billion PIF is considering acquiring part or all of the 36% stake owned by the ministry of finance, people familiar with the matter said earlier this year.
Monday, 5 August 2024
Middle Eastern stocks slump on US recession fears, regional tensions | Reuters
Middle Eastern stocks slump on US recession fears, regional tensions | Reuters
Stock markets in the Middle East ended lower on Monday, with the Dubai index falling most, on fears that the United States could be heading for recession, while concerns about a widening conflict in the region added to the worries.
The U.S. unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labour market was deteriorating and potentially making the economy vulnerable to a recession.
The worryingly weak July payrolls report saw markets price in a 78% chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points. FEDWATCH
Dubai's main share index (.DFMGI), opens new tab plunged 4.5%, its biggest intraday fall since May 2022, dragged down by a 7.6% slide in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.
The concerns that the Fed could be late in reducing its interest rates could reverberate in all financial markets, said Bas Kooijman CEO and asset manager of DHF Capital S.A.
"A recession in the U.S. could have a broad economic impact and could affect the economies in the GCC."
In Abu Dhabi, the index (.FTFADGI), opens new tab closed 3.4% lower, hit by a 7.3% decline in the country's biggest lender First Abu Dhabi Bank (FAB.AD), opens new tab.
Meanwhile, the United Arab Emirates' non-oil private sector expanded at its slowest pace in almost three years in July, a survey showed on Monday, with both output and new order growth easing.
Saudi Arabia's benchmark index (.TASI), opens new tab pared some losses to close 2.1% lower, closing its lowest since mid-December, weighed down by a 6.1% drop in Al Taiseer Group (4143.SE), opens new tab, while the kingdom's biggest lender Saudi National Bank (1180.SE), opens new tab fell 5.2% despite reporting an increase in quarterly profit.
Oil prices - a catalyst for the Gulf's financial markets - eased as concerns about global energy demand offset worries about the potential impact to supply from a widening conflict in the Middle East.
Israel and the U.S are bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah pledged to retaliate against Israel for the killings of Hamas's leader and a top Hezbollah military commander last week.
The U.S. is deploying additional military might in the Middle East as a defensive measure to de-escalate tensions in the region, a White House official said on Sunday.
The Qatari benchmark (.QSI), opens new tab reversed early losses to finish flat.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab dropped 2.3%, with El Sewedy Electric (SWDY.CA), opens new tab losing 6.4%.
Stock markets in the Middle East ended lower on Monday, with the Dubai index falling most, on fears that the United States could be heading for recession, while concerns about a widening conflict in the region added to the worries.
The U.S. unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labour market was deteriorating and potentially making the economy vulnerable to a recession.
The worryingly weak July payrolls report saw markets price in a 78% chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points. FEDWATCH
Dubai's main share index (.DFMGI), opens new tab plunged 4.5%, its biggest intraday fall since May 2022, dragged down by a 7.6% slide in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.
The concerns that the Fed could be late in reducing its interest rates could reverberate in all financial markets, said Bas Kooijman CEO and asset manager of DHF Capital S.A.
"A recession in the U.S. could have a broad economic impact and could affect the economies in the GCC."
In Abu Dhabi, the index (.FTFADGI), opens new tab closed 3.4% lower, hit by a 7.3% decline in the country's biggest lender First Abu Dhabi Bank (FAB.AD), opens new tab.
Meanwhile, the United Arab Emirates' non-oil private sector expanded at its slowest pace in almost three years in July, a survey showed on Monday, with both output and new order growth easing.
Saudi Arabia's benchmark index (.TASI), opens new tab pared some losses to close 2.1% lower, closing its lowest since mid-December, weighed down by a 6.1% drop in Al Taiseer Group (4143.SE), opens new tab, while the kingdom's biggest lender Saudi National Bank (1180.SE), opens new tab fell 5.2% despite reporting an increase in quarterly profit.
Oil prices - a catalyst for the Gulf's financial markets - eased as concerns about global energy demand offset worries about the potential impact to supply from a widening conflict in the Middle East.
Israel and the U.S are bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah pledged to retaliate against Israel for the killings of Hamas's leader and a top Hezbollah military commander last week.
The U.S. is deploying additional military might in the Middle East as a defensive measure to de-escalate tensions in the region, a White House official said on Sunday.
The Qatari benchmark (.QSI), opens new tab reversed early losses to finish flat.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab dropped 2.3%, with El Sewedy Electric (SWDY.CA), opens new tab losing 6.4%.
Aramco Investors Miss Rally in Oil Stocks After Output Cuts - Bloomberg
Aramco Investors Miss Rally in Oil Stocks After Output Cuts - Bloomberg
In a year when shares of some major oil producers have hit records, Saudi Aramco’s stock has gone the other way.
Aramco is down 17% in 2024, the worst performance among the world’s 10 biggest oil companies by revenue, as the company has cut production at the behest of its government owner. The stock on Sunday dropped below the price of this year’s secondary share sale. PetroChina Co., by contrast, is up 24% in Hong Kong, while Exxon Mobil Corp. has gained 17% and Shell Plc is 4.6% higher.
Of course, Aramco is unlike those other oil firms. The Saudi government and its investment fund own a combined 97% of the company, and the kingdom relies heavily on the business for its funding needs as Crown Prince Mohammed Bin Salman pushes ahead with his economic transformation plan. The stock came under additional pressure Monday from a global stocks selloff over concern the Federal Reserve is behind the curve with policy support for a slowing US economy.
The government oversight on Aramco, along with the war in Gaza and mounting regional tensions, has weighed on the stock even as crude prices have risen this year: Aramco has curbed production as part of OPEC+ policy, and the state raised more than $12 billion in June by selling shares in the company. The company also pays a fat dividend, equal to 7.2% of the share price, most of which goes to the state.
“Aramco will be one of the last standing oil producers after a long transition to renewables and its dividend yield is significantly higher than oil major peers,” said Hasnain Malik, head of equity strategy research at Tellimer in Dubai. “But, near-term, its growth is hamstrung by Saudi shouldering the burden of OPEC+ output restraint whereas the majors are under no such constraint.”
Aramco is under pressure to maintain the dividend because the Saudi government needs the funds more than ever. The economy shrank for a fourth straight quarter and officials say the kingdom’s budget will be in deficit for at least several years. MBS, as the crown prince is known, has set in motion a massive spending plan intended to create jobs and develop entirely new cities and kickstart industries.
Investors are now awaiting second-quarter earnings on Tuesday. Morgan Stanley’s Martijn Rats estimates Aramco’s net income at $27.8 billion, in line with the previous quarter.
“We expect slightly higher oil prices to offset the impact from softer refining margins globally in the period,” the analyst wrote in a note.
Aramco, which has a market value of $1.8 trillion, said last year it would pay an additional, variable dividend tied to the company’s free cash flow. Rats said he sees limited room for the company to continue paying such surplus dividends beyond 2024. The performance-linked payout is likely to make up about $43 billion of Aramco’s $124 billion total payout for this year, according to the company.
“The new variable dividend component marks an important and long-awaited change to the company’s remuneration policy,” Rats said. “But we think this catalyst has now largely played out.”
Aramco shares dropped 0.7% to 26.95 riyals at 10:34 a.m. in Riyadh, below the secondary offering price of 27.25 riyals. The stock is underperforming the kingdom’s benchmark Tadawul All Share Index, which is down 4% this year. Some of the pressure on the company may ease later this year, since OPEC+ plans to gradually unwind part of its production cuts.
Aramco didn’t respond to a request for comment.
Shares of oil companies such as Shell have done better this year as they focus more on their core businesses, dialing back some of their energy transition plans and boosting shareholder returns.
Even after this year’s drop in the stock price, investors still value the Saudi company at 14.8 times estimated earnings, about double the valuation of BP Plc and Shell.
That reflects the sustained, bond-like payments that shareholders can expect from Aramco.
“It’s a stock that’s a quasi-fixed income instrument, and that’s how we hold it,” said Ryan Lemand, chief executive officer of Neovision Wealth Management. “It’s a buy and hold over the long term, and we do believe Aramco will pick up again and that we will continue to hold it.”
In a year when shares of some major oil producers have hit records, Saudi Aramco’s stock has gone the other way.
Aramco is down 17% in 2024, the worst performance among the world’s 10 biggest oil companies by revenue, as the company has cut production at the behest of its government owner. The stock on Sunday dropped below the price of this year’s secondary share sale. PetroChina Co., by contrast, is up 24% in Hong Kong, while Exxon Mobil Corp. has gained 17% and Shell Plc is 4.6% higher.
Of course, Aramco is unlike those other oil firms. The Saudi government and its investment fund own a combined 97% of the company, and the kingdom relies heavily on the business for its funding needs as Crown Prince Mohammed Bin Salman pushes ahead with his economic transformation plan. The stock came under additional pressure Monday from a global stocks selloff over concern the Federal Reserve is behind the curve with policy support for a slowing US economy.
The government oversight on Aramco, along with the war in Gaza and mounting regional tensions, has weighed on the stock even as crude prices have risen this year: Aramco has curbed production as part of OPEC+ policy, and the state raised more than $12 billion in June by selling shares in the company. The company also pays a fat dividend, equal to 7.2% of the share price, most of which goes to the state.
“Aramco will be one of the last standing oil producers after a long transition to renewables and its dividend yield is significantly higher than oil major peers,” said Hasnain Malik, head of equity strategy research at Tellimer in Dubai. “But, near-term, its growth is hamstrung by Saudi shouldering the burden of OPEC+ output restraint whereas the majors are under no such constraint.”
Aramco is under pressure to maintain the dividend because the Saudi government needs the funds more than ever. The economy shrank for a fourth straight quarter and officials say the kingdom’s budget will be in deficit for at least several years. MBS, as the crown prince is known, has set in motion a massive spending plan intended to create jobs and develop entirely new cities and kickstart industries.
Investors are now awaiting second-quarter earnings on Tuesday. Morgan Stanley’s Martijn Rats estimates Aramco’s net income at $27.8 billion, in line with the previous quarter.
“We expect slightly higher oil prices to offset the impact from softer refining margins globally in the period,” the analyst wrote in a note.
Aramco, which has a market value of $1.8 trillion, said last year it would pay an additional, variable dividend tied to the company’s free cash flow. Rats said he sees limited room for the company to continue paying such surplus dividends beyond 2024. The performance-linked payout is likely to make up about $43 billion of Aramco’s $124 billion total payout for this year, according to the company.
“The new variable dividend component marks an important and long-awaited change to the company’s remuneration policy,” Rats said. “But we think this catalyst has now largely played out.”
Aramco shares dropped 0.7% to 26.95 riyals at 10:34 a.m. in Riyadh, below the secondary offering price of 27.25 riyals. The stock is underperforming the kingdom’s benchmark Tadawul All Share Index, which is down 4% this year. Some of the pressure on the company may ease later this year, since OPEC+ plans to gradually unwind part of its production cuts.
Aramco didn’t respond to a request for comment.
Shares of oil companies such as Shell have done better this year as they focus more on their core businesses, dialing back some of their energy transition plans and boosting shareholder returns.
Even after this year’s drop in the stock price, investors still value the Saudi company at 14.8 times estimated earnings, about double the valuation of BP Plc and Shell.
That reflects the sustained, bond-like payments that shareholders can expect from Aramco.
“It’s a stock that’s a quasi-fixed income instrument, and that’s how we hold it,” said Ryan Lemand, chief executive officer of Neovision Wealth Management. “It’s a buy and hold over the long term, and we do believe Aramco will pick up again and that we will continue to hold it.”
Israel, Mideast Markets Fall on Iran Threat, Global Stock Plunge - Bloomberg
Israel, Mideast Markets Fall on Iran Threat, Global Stock Plunge - Bloomberg
Financial markets across the Middle East tumbled Monday, as concerns over a potential Iranian attack on Israel added to bearish sentiment spawned by the ongoing global equity rout.
Israel’s equity benchmark, the TA-35 Index, slid as much as 3.1%, to trade at the lowest since February, extending last week’s 3.3% slide — the biggest weekly loss since last October. The shekel fell as much as 1% against the dollar to trade nearly at a nine-month low, while its $3 billion eurobond maturing 2023 was quoted lower.
The latest losses were sparked in part by an Axios report that US Secretary of State Antony Blinken had told his G-7 counterparts that Iran and its ally Hezbollah could attack as early as Monday. Citing three unidentified sources briefed on the call, Axios said Blinken saw the attacks starting in the next 24 to 48 hours.
However, regional markets were also feeling the heat from a global selloff that’s been fueled by signs of a worse-than-expected US economic slowdown. The growth concerns also weighed on oil prices, sending crude futures to a seven-month low.
The Saudi Tadawul Index and Egypt’s Hermes benchmark shed as much as 3.7% and 5.8% respectively. Turkey’s Borsa Istanbul 100 Index was the hardest hit, sliding more than 7% at one point.
Regional stocks pared some falls after Iran vowed to punish Israel for the assassinations of Hezbollah and Hamas officials but said wants to avoid all out war. Meanwhile, the US is pressing Israel to redouble negotiations for a Gaza cease-fire to prevent the nearly 10-month-long war from escalating.
Hasnain Malik, head of equity strategy research at Tellimer, downplayed the risk of a global or even region-wide impact, noting that major oil-producing and tourism facilities in the Middle East are distant from the conflict zones of Israel and Lebanon.
“There has been an exchange of air attacks with Iran directly, albeit these have been very targeted or very well telegraphed,” Malik said. “However, a full inter-state war with Iran would lack a clear and achievable goal.”
“There remains much greater risk to asset prices in Israel, Lebanon, and Iran, with the latter fully sanctioned for foreign investors anyway, than anywhere else in the region,” he added.
But with the conflict threatening to escalate, markets will likely remain under pressure. The shekel was down for the sixth straight day, while the Egyptian pound slid as much as 1.6% against the dollar to trade at a five-month low. Yields on Egypt’s May 2050 dollar bonds exceeded 12%, advancing for the sixth day to their highest level since February, according to data compiled by Bloomberg.
With the economic growth fears taking a toll sending crude prices to seven-month lows, Saudi Arabia’s January 2054 dollar bonds fell for the first time in seven days.
Financial markets across the Middle East tumbled Monday, as concerns over a potential Iranian attack on Israel added to bearish sentiment spawned by the ongoing global equity rout.
Israel’s equity benchmark, the TA-35 Index, slid as much as 3.1%, to trade at the lowest since February, extending last week’s 3.3% slide — the biggest weekly loss since last October. The shekel fell as much as 1% against the dollar to trade nearly at a nine-month low, while its $3 billion eurobond maturing 2023 was quoted lower.
The latest losses were sparked in part by an Axios report that US Secretary of State Antony Blinken had told his G-7 counterparts that Iran and its ally Hezbollah could attack as early as Monday. Citing three unidentified sources briefed on the call, Axios said Blinken saw the attacks starting in the next 24 to 48 hours.
However, regional markets were also feeling the heat from a global selloff that’s been fueled by signs of a worse-than-expected US economic slowdown. The growth concerns also weighed on oil prices, sending crude futures to a seven-month low.
The Saudi Tadawul Index and Egypt’s Hermes benchmark shed as much as 3.7% and 5.8% respectively. Turkey’s Borsa Istanbul 100 Index was the hardest hit, sliding more than 7% at one point.
Regional stocks pared some falls after Iran vowed to punish Israel for the assassinations of Hezbollah and Hamas officials but said wants to avoid all out war. Meanwhile, the US is pressing Israel to redouble negotiations for a Gaza cease-fire to prevent the nearly 10-month-long war from escalating.
Hasnain Malik, head of equity strategy research at Tellimer, downplayed the risk of a global or even region-wide impact, noting that major oil-producing and tourism facilities in the Middle East are distant from the conflict zones of Israel and Lebanon.
“There has been an exchange of air attacks with Iran directly, albeit these have been very targeted or very well telegraphed,” Malik said. “However, a full inter-state war with Iran would lack a clear and achievable goal.”
“There remains much greater risk to asset prices in Israel, Lebanon, and Iran, with the latter fully sanctioned for foreign investors anyway, than anywhere else in the region,” he added.
But with the conflict threatening to escalate, markets will likely remain under pressure. The shekel was down for the sixth straight day, while the Egyptian pound slid as much as 1.6% against the dollar to trade at a five-month low. Yields on Egypt’s May 2050 dollar bonds exceeded 12%, advancing for the sixth day to their highest level since February, according to data compiled by Bloomberg.
With the economic growth fears taking a toll sending crude prices to seven-month lows, Saudi Arabia’s January 2054 dollar bonds fell for the first time in seven days.
Sidara drops plans to buy UK's Wood Group citing geopolitical risks | Reuters
Sidara drops plans to buy UK's Wood Group citing geopolitical risks | Reuters
Dubai's Sidara said on Monday it was walking away from its plan to buy UK's John Wood Group (WG.L), opens new tab, citing rising geopolitical risks and uncertainty in the financial market, prompting the British engineering group's shares to plunge 40%.
Wood had rejected Sidara's previous four buyout attempts, citing valuation concerns. The Dubai-based engineering and consulting firm had until this Friday to make a firm offer or walk away for at least six months.
There are growing concerns that the 10-month war in Gaza between Israel and Hamas could spread in the Middle East, a key growth area for Wood's strategy.
Wood, which provides consultation, management of assets and engineering services for the energy and materials sector, operates in more than 60 countries with the Middle East and Africa contributing about 18% of its total revenue, according to the group's 2023 annual report.
Wood said on Monday it was confident in its strategic directions and affirmed forecasts for 2024 and next year with expectations for core earnings growth to exceed its medium-term target and significant free cash flow in 2025.
Sidara had previously approached Scotland-based Wood Group with proposals ranging from 205 pence to 230 pence per share with the latest offer valuing Wood Group at about 1.56 billion pounds ($1.99 billion) which it had said would be it final offer.
Sidara had received a deadline extension twice over June and July to make a final offer for Wood Group.
Sidara is the second suitor to walk away from Wood in the past 15 months after U.S.- based Apollo Global Management (APO.N), opens new tab abandoned its 1.7-billion-pound bid for the UK-listed company following five approaches that Wood rejected.
Activist shareholder Sparta Capital Management has been pushing Wood Group to consider either selling itself or reconsider its UK listing.
Dubai's Sidara said on Monday it was walking away from its plan to buy UK's John Wood Group (WG.L), opens new tab, citing rising geopolitical risks and uncertainty in the financial market, prompting the British engineering group's shares to plunge 40%.
Wood had rejected Sidara's previous four buyout attempts, citing valuation concerns. The Dubai-based engineering and consulting firm had until this Friday to make a firm offer or walk away for at least six months.
There are growing concerns that the 10-month war in Gaza between Israel and Hamas could spread in the Middle East, a key growth area for Wood's strategy.
Wood, which provides consultation, management of assets and engineering services for the energy and materials sector, operates in more than 60 countries with the Middle East and Africa contributing about 18% of its total revenue, according to the group's 2023 annual report.
Wood said on Monday it was confident in its strategic directions and affirmed forecasts for 2024 and next year with expectations for core earnings growth to exceed its medium-term target and significant free cash flow in 2025.
Sidara had previously approached Scotland-based Wood Group with proposals ranging from 205 pence to 230 pence per share with the latest offer valuing Wood Group at about 1.56 billion pounds ($1.99 billion) which it had said would be it final offer.
Sidara had received a deadline extension twice over June and July to make a final offer for Wood Group.
Sidara is the second suitor to walk away from Wood in the past 15 months after U.S.- based Apollo Global Management (APO.N), opens new tab abandoned its 1.7-billion-pound bid for the UK-listed company following five approaches that Wood rejected.
Activist shareholder Sparta Capital Management has been pushing Wood Group to consider either selling itself or reconsider its UK listing.
#Saudi: SNB records growth in H1-24 net profits
Saudi: SNB records growth in H1-24 net profits
The Saudi National Bank (SNB) posted 2.32% higher net profits at SAR 10.27 billion in the first half (H1) of 2024, compared to SAR 10.03 billion in H1-23, according to the interim financials.
Earnings per share (EPS) went up to SAR 1.66 in H1-24 from SAR 1.62 a year earlier, while the clients' deposits grew by 5.06% to SAR 632.69 billion from SAR 602.20 billion.
The assets increased by 9.22% to SAR 1.08 trillion as of 30 June 2024 from SAR 996.20 billion in H1-23, while the investments climbed by 8.27% to SAR 286.73 billion from SAR 264.82 billion.
Financials for Q2-24
In the second quarter (Q2) of 2024, SNB achieved net profits valued at SAR 5.23 billion, marking an annual rise of 4.28% from SAR 5.01 billion.
On a quarterly basis, the Q2-24 net profits hiked by 3.78% from SAR 5.04 billion Q1-24.
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