Most Gulf markets in red on weak oil, global growth concern | Reuters

Most Gulf markets in red on weak oil, global growth concern | Reuters

Most stock markets in the Gulf ended lower on Wednesday on weak oil prices and as worries about the global growth outlook drove investors away from risky assets.

U.S. manufacturing contracted at a moderate pace in August amid some improvement in employment, but a further decline in new orders and rise in inventory suggested factory activity could remain subdued for a while.

A slew of U.S. economic data is due this week, including figures on job openings, jobless claims and the closely-watched non-farm payrolls report, which is due on Friday.

Given the Federal Reserve's focus on the labour market, the payrolls report could decide whether the U.S. central bank will likely cut rates by 25 basis points or a super-sized 50 bps. FEDWATCH

Monetary policy in the six-member Gulf Cooperation Council, including Saudi Arabia, is usually guided by the Fed's decisions, as most regional currencies are pegged to the U.S. dollar.

Saudi Arabia's benchmark index (.TASI), opens new tab dropped 0.4%, hit by a 1.7% fall in aluminium products manufacturer Al Taiseer Group (4143.SE), opens new tab.

Elsewhere, oil giant Saudi Aramco (2222.SE), opens new tab fell 0.9%.

Oil prices - a catalyst for the Gulf's financial markets - fell, extending a plunge of more than 4% the previous day and hovering at their lowest since December, on expectations that a political dispute halting Libyan exports could be resolved and concerns over sluggish global demand.

In China, the world's biggest importer of crude, recent data showed that manufacturing activity sank to a six-month low in August, when growth in new home prices slowed.

Dubai's main share index (.DFMGI), opens new tab eased 0.1%, with blue-chip developer Emaar Properties (EMAR.DU), opens new tab declining 1%.

The Qatari benchmark (.QSI), opens new tab dropped 0.6%, as most of its constituents were in negative territory including Qatar Islamic Bank (QISB.QA), opens new tab, which was down 0.8%.

Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab finished 0.1% lower, with EFG Holding (HRHO.CA), opens new tab losing 1%.

JPM sets up #Dubai private banking team to serve wealthy influx | Reuters

JPM sets up Dubai private banking team to serve wealthy influx | Reuters

JP Morgan (JPM.N), opens new tab has set up a private banking team in Dubai to provide wealth management services, it said on Wednesday, as the Wall Street bank responds to a growing number of rich people moving to the Gulf.

JPM picked Sebastian Botana de Beauvau and Carol Mushriqui, who join from its Geneva and London offices respectively, to start the team, which will cater for individual people, family offices, charities and family foundations across the region, it said in a statement.

Western wealth managers have increased their presence in the United Arab Emirates as its relatively neutral political stance, ease of doing business, convenient time zones, and tax free status has lured an increasingly diverse pool of investors.

In June, UBS (UBSG.S), opens new tab said it was boosting its wealth management team in the Middle East with 10 new hires, joining expansion efforts by other Western banks such as Deutsche Bank (DBKGn.DE), opens new tab and Lombard Odier, as well as by Asian wealth managers.

"The Middle East has for some time now, been a fast-growing global hub for innovation, attracting global interest and investment. Our dedicated local team strengthen our ability to better serve our clients," Karim Rekik, JPM's head of Emerging Markets and Middle East, International Private Bank, was quoted as saying in the statement.

The bank added it had plans "to grow the team steadily in the coming years," without providing a specific figure.

#UAE Bonds Post Longest Rally in 3 Years Amid Rush for Quality - Bloomberg

UAE Bonds Post Longest Rally in 3 Years Amid Rush for Quality - Bloomberg

The United Arab Emirates is benefiting the most among higher-rated borrowers in emerging markets as a plunge in US Treasury yields drives a rush into safety.

Investors positioning for global equity losses, a slowdown in US growth and easing by the Federal Reserve sent AA-rated bonds in the Bloomberg EM Sovereign Total Return Index, the highest quality segment, to the biggest gains among rating categories in August. Within the group, UAE bonds posted the best performance.

That sent the country’s federal securities as well as those issued by individual emirates to a fourth successive monthly advance, the longest since 2021. The bonds have handed investors a 8.1% return since the end of April, beating 55 of their 70 peers in the emerging-market gauge including many high-yield names.

The UAE has arrived at a sweet spot as one of safest emerging markets when global yields are headed south and investors’ risk aversion is growing. Money managers are looking for countries with political and financial stability to ride out the rest of the year, which could be turbulent amid softening US data and noise relating to presidential elections.

“While the rally has come on the back of large moves in US Treasuries, the appeal of the UAE federal government as well as the emirates comes from very strong fundamentals,” said Fady Gendy, a fixed-income portfolio manager at Arqaam Capital in Dubai. “Investors like the combination of twin surpluses, FX reserve accumulation, lack of political noise and a supportive local bid.”

The UAE enjoys positive balances on both its budget and external accounts. It’s projected to end 2024 with an 8.8% current-account surplus and a 4.7% budget surplus, according to Bloomberg surveys. Moderate inflation, low unemployment and gross-domestic-product growth moving closer to 4% per year complete the economic picture.

Given that financial strength, the nation and its individual governments wouldn’t need to issue debt, but still do so to “stay relevant” in the market and maintain a yield curve, Gendy said.

The UAE government has enjoyed a boom in the past few years thanks to high oil and natural gas revenues. It’s one of the world’s richest countries and among just a few to manage over $1 trillion in sovereign-wealth funds.
Scarce Issuance

Bond issuances are rare, with the federal government selling only its fourth eurobond ever in June this year. Abu Dhabi, the capital, sold $5 billion of debt in April. No more bond sales are likely this year, Gendy said.

“That brings the advantage of scarcity,” Gendy added.

Yet, money managers say the nation’s bonds remain vulnerable to moves in US yields as spreads are already tight and the outlook for emerging markets as a whole depends on the varying expectations around Fed policy.

“I am still positive the name but the rally should fade,” said Guillaume Tresca, global EM strategist at Generali Asset Management in Paris. “US rates have rallied too much and so the risk is to see some upward correction for US rates. So, even if the UAE bonds can outperform on a spread basis, US rate rebound may dampen the total return.”

Beyond the rates turbulence, however, UAE bonds remain attractive to investors thanks to their credit quality, Tresca said. Sound balance sheets should support the federation and Abu Dhabi, he added. Some idiosyncratic factors may also help at the margins, such as the real estate boom in Dubai.

Exxon, #AbuDhabi's ADNOC to partner in delayed Texas hydrogen project | Reuters

Exxon, Abu Dhabi's ADNOC to partner in delayed Texas hydrogen project | Reuters

Abu Dhabi National Oil Company (ADNOC) will acquire a 35% equity stake in Exxon Mobil Corp's (XOM.N), opens new tab proposed low-carbon hydrogen project in Texas, with the companies announcing a one-year start-up delay until 2029.

ADNOC's investment shows a sign of confidence in a multi-billion dollar project that Exxon has threatened to cancel if the U.S. government restricts tax credits for it. A final investment decision has been pushed into 2025, from 2024.

Exxon and ADNOC declined to disclose the value of the transaction.

"This is a very significant investment and the partners it is attracting give a sense for the momentum that's building around this project," Exxon President of Low Carbon Solutions Dan Ammann told Reuters.

TAX INCENTIVES
Exxon in 2022 disclosed, opens new tab plans to build the world's largest low-carbon hydrogen facility at its refining site at Baytown, Texas. Hydrogen is a fuel that produces water when burnt.

The project would be powered by natural gas, with associated CO2 captured and buried underground. It was announced on the back of clean energy tax incentives proposed by the administration of U.S. President Joe Biden.

But the government limited incentives for natural gas-run facilities. Exxon CEO Darren Woods earlier this year said the project could be canceled without similar tax credits offered to hydrogen facilities powered by renewable fuels.

AMMONIA BOOST
The project's estimated production has been revised since its initial announcement. It was initially set to produce 1 million tons of hydrogen annually.

Now, the goal is to produce 900,000 tons of low-carbon hydrogen and over 1 million tons of low-carbon ammonia, a well-established industrial product commonly used as fertilizer.

Ammonia, which has three atoms of hydrogen in its composition, is also used as a carrier for hydrogen, allowing it to be exported by ship in a liquid form.

Exxon earlier this year signed an agreement with JERA, Japan's top power generator, to explore selling about 500,000 tonnes annually of low-carbon ammonia.

"The timing (for the hydrogen project) depends on supply, demand and supporting regulation coming together in sync," said Ammann.

Major Gulf markets ease on weak oil prices, global growth concerns | Reuters

Major Gulf markets ease on weak oil prices, global growth concerns | Reuters

Major stock markets in the Gulf fell in early trade on Wednesday amid weak oil prices and as worries about the global growth outlook drove investors away from risky assets.

U.S. manufacturing contracted at a moderate pace in August amid some improvement in employment, but a further decline in new orders and rise in inventory suggested factory activity could remain subdued for a while.

A slew of U.S. economic data is due this week, including figures on job openings, jobless claims and the closely-watched non-farm payrolls report which is due on Friday.

Given the Federal Reserve's focus on the labour market, the payrolls report could decide whether the U.S. central bank will likely cut rates by 25 basis points or a super-sized 50 bps.

Monetary policy in the six-member Gulf Cooperation Council, including Saudi Arabia, is usually guided by the Fed's decisions, as most regional currencies are pegged to the U.S. dollar.

Saudi Arabia's benchmark index (.TASI), opens new tab dropped 0.6%, weighed down by a 1.3% fall in aluminium products manufacturer Al Taiseer Group (4143.SE), opens new tab.

Among other losers, oil giant Saudi Aramco (2222.SE), opens new tab was down 0.7%.

Oil prices - a catalyst for the Gulf's financial markets - fell, extending a plunge of more than 4% the previous day and hovering at their lowest since December, on expectations that a political dispute halting Libyan exports could be resolved and concerns over sluggish global demand.

Concerns over the sluggish outlook in China - the world's biggest oil importer - and the possibility of a global slowdown that would mean reduced fuel demand have exacerbated the decline in oil prices.

Dubai's main share index (.DFMGI), opens new tab lost 0.3%, hit by a 1.1% drop in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.

In Abu Dhabi, the index (.FTFADGI), opens new tab declined 0.5%.

The Qarari benchmark (.QSI), opens new tab retreated 0.5%, with Qatar Islamic Bank (QISB.QA), opens new tab losing 1%.