#SaudiArabia Economy Concerns Put Aramco Dividend Payout in Focus - Bloomberg

Saudi Arabia Economy Concerns Put Aramco Dividend Payout in Focus - Bloomberg

Aramco’s key decision this week on its dividend — the world’s largest — is set to have major implications for Saudi Arabia’s weakening finances.

Saudi Aramco is scheduled to announce on Tuesday how it will change its $124 billion annual payout to shareholders. It could continue some elevated payments and let its balance sheet take the increasing pain, or cut the distribution and risk widening the Saudi budget deficit.

What the company does would also have an impact of debt issuances by the kingdom, whose nearly $15 billion in bond sales this year make it the biggest borrower in emerging markets.

Aramco’s crude sales and generous payments are key elements in Crown Prince Mohammed bin Salman’s multitrillion-dollar economic transformation plan. But the level of the distribution has outstripped the company’s earnings, putting increasing stress on the balance sheet and flipping into a net debt position from over $27 billion in net cash just over a year ago.

Analysts and Saudi economy-watchers are watching closely.

“Dividends from Aramco are a major source of revenue, funding various government projects and initiatives,” said Samsara Wang, a sovereign debt analyst at Pinebridge Investments. While additional Aramco dividends can help relieve funding pressure, Wang said that the government is also likely to sell another $5 billion to $6 billion in bonds this year.

Aramco’s dividend is made up of two parts: a base payment of $20.3 billion a quarter that has used up about 95% of free cash flow in the first three quarters of 2024, and a performance-linked portion pegged at $10.8 billion for each three-month period.

Starting in 2025, the company plans to start paying the special component, initially based on the huge profits from oil’s boom following Russia’s invasion of Ukraine, as a portion of free cash flow after covering the base dividend and any investments. With analysts forecasting cash in 2025 at less than the base dividend, that leaves little scope for an additional payout.

Aramco’s been clear that the base dividend will remain in place and is set to gradually increase over time. Analysts have speculated that the company could borrow more for the distribution or tweak its dividend policy.

To be sure, it’s common for large oil companies to use their balance sheets to boost borrowings during periods of low oil prices to be able to keep paying shareholders. Rising debt isn’t necessarily a bad thing, given its low leverage, Aramco’s Chief Financial Officer Ziad Al-Murshed has said. The company plans to sell more debt after a $9 billion in dollar and Islamic issuances last year, he said in an interview in November.

Still, a weak outlook for oil means Aramco would need to be careful not to put too much stress on the balance sheet. OPEC+ delegates said last month that Saudi Arabia and others in the alliance may again delay increasing production from April amid concerns over economic growth. Crude in London fell to the lowest level this year last week.

Aramco’s net income has declined year-on-year for seven consecutive quarters, and analysts are forecasting another drop in the fourth quarter. The company’s shares have also suffered, declining about 3% this year, and lagging behind the so-called oil supermajors that includes Exxon Mobil Corp. and Shell Plc.

Most Gulf markets in black on hopes for US tariff relief | Reuters

Most Gulf markets in black on hopes for US tariff relief | Reuters

Most stock markets in the Gulf ended higher on Monday as investors waited to see if imminent U.S. tariffs would be implemented.

U.S. Commerce Secretary Howard Lutnick said on Sunday that tariffs on Canada and Mexico will go into effect on Tuesday, but that President Donald Trump will determine whether to stick with the planned 25% level.

Lutnick's comments were the first indication from Trump's administration that it may not impose the full threatened 25% tariffs on all goods from Mexico and non-energy imports from Canada.

Saudi Arabia's benchmark index (.TASI), opens new tab gained 0.7%, snapping a five-session losing streak, with Al Rajhi Bank (1120.SE), opens new tab advancing 2.6% and the country's biggest lender Saudi National Bank (1180.SE), opens new tab concluding 2% higher.

Among other gainers, Saudi Aramco (2222.SE), opens new tab climbed 1.1%, as the oil giant is slated to report its 2024 earnings on Tuesday.

However, utility firm Marafiq (2083.SE), opens new tab slid 4.8%, after its annual profit nosedived 97%.

Dubai's main share index (.DFMGI), opens new tab added 0.2%, helped by a 2.2% rise in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.

Separately, Dubai-based GEMS Education plans to spend around $300 million over the next two-to-three years to increase organic growth, its CEO told Reuters, as it bets on population growth and an inflow of wealthy individuals.

In Abu Dhabi, the index (.FTFADGI), opens new tab closed 0.1% lower.

Oil prices - a catalyst for the Gulf's financial markets - were little changed after registering a monthly loss for the first time since November, while investors await the outcome of efforts to end the Russia-Ukraine war and repercussions from U.S. tariffs.

The Qatari index (.QSI), opens new tab finished 0.2% higher, with petrochemical maker Industries Qatar (IQCD.QA), opens new tab rising 0.5% and Qatar Fuel (QFLS.QA), opens new tab putting on 1.6%.

On the other hand, Gulf International Services (GISS.QA), opens new tab tumbled 4.5%, as the firm traded ex-dividend.

Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab added 0.4%, with Commercial International Bank (COMI.CA), opens new tab rising 0.8%.

Egypt's net foreign assets (NFAs) jumped by $2.74 billion in January, boosted apparently by the sale of $2 billion in dollar-denominated bonds, central bank data showed.

#Dubai’s Job Market Feels the Strain as Expats Flood the City - Bloomberg

Dubai’s Job Market Feels the Strain as Expats Flood the City - Bloomberg

Trefor Murphy, the head of recruitment firm Cooper Fitch, recalls a time when a Dubai job posting might have received just about 100 applicants. These days, some draw as many as 2,000 as foreigners flood a city reputed for lucrative paydays and upscale lifestyles.

That expat influx is now making Dubai’s job market “a victim of its own success,” Murphy said.

The effect of the surging population is already being widely felt. Rents have surged to record levels, traffic is regularly snarled and top schools are running full. The over abundance of talent is weighing on salaries, recruiters say.

Dubai shot into the international spotlight after the Covid-19 pandemic as foreigners from around the world arrived to capitalize on its easy visa policies and low taxes. Three years later, residents are facing the flip side of that boom as the city grows more expensive and competition for plum jobs rises.

A Cooper Fitch survey found that salaries at many positions could remain flat this year.

Salary estimates differ across hiring firms and some individuals continue to command outsized pay increases. The Dubai Media Office said the Gulf emirate is adding new companies that will create jobs. It pointed to a Mercer study projecting a 4% average salary rise this year, with plenty of firms planning to increase their workforce.

An influx of expats is denting the plush salaries and luxury lifestyles on offer in Dubai. A population surge since the pandemic has seen costs rise and competition for jobs increase.

But most headhunters and executives interviewed by Bloomberg agreed that Dubai’s financial and lifestyle benefits for foreign executives are moderating because there are too many people vying for the same positions.

Since 2020, over 400,000 people have arrived, pushing the population to more than 3.8 million. The surge in traffic jams during rush hours has led the city to increase the fees of its toll operator, Salik Co. Rents for single family homes, known locally as villas, have soared 94% since the start of the pandemic, while apartments surged 66%, according to real estate consultancy JLL.

Last year, Dubai jumped up the rankings to become the costliest city in the Middle East for international employees, according to data from consultancy Mercer. It ranked 15th on the global order, up three places from 2023 and topping Tel Aviv and Riyadh regionally. That has many families saying they are saving much less than they once did.

Many executives continue to take home more in Dubai because of the absence of income tax. Still, the “salary margin between London and Dubai is narrowing as employers don’t have to offer a lot more to entice people,” said Nick Aiyegbusi, an associate director at Robert Walters Middle East specializing in legal recruitment.

There was a time in the not-too-distant past when a professional services worker in London could expect a big pay rise and plenty of perks for accepting a job offer in Dubai, including generous packages that covered school and housing.

But employers in the Middle Eastern financial hub no longer need to offer big perks to lure new hires, according to recruiters. Tax-free pay is sometimes the only real incentive.

“Over the past two or three years we have seen pressure on salaries,” said Gareth El Mettouri, who until recently was a senior recruiter at a large firm in Dubai. “In my opinion this is because we are seeing so much talent relocate here from the UK.”

But there are problems well beyond pay. Foreigners have almost no access to public schools, and there are now wait-lists at many private institutions. One school just announced it would open with fees of as much as $33,000 a year.

All that’s put new pressure on policymakers to manage the demands of a growing population. Dubai has 11 large-scale road projects in progress and 22 more planned by 2027 to reduce congestion. The government it trying to ensure the property market remains accessible, according to the city’s media office. Its efforts include providing installment plans and maintaining the balance between supply and demand.

Despite the rising pressures, there hasn’t be any significant outflow of people. That’s partly because Dubai’s of tax-free income and many residents see few opportunities elsewhere.

In 2021, the UAE had introduced a new class of visas in a series of moves aimed at attracting more people and boosting growth. Long-term ‘golden visas’ allowed high-skilled workers to remain in the country for 10 years without being tied to one employer. The government also allowed foreigners to own 100% of businesses in some industries, lifting a federal requirement that had long capped their ownership of local companies at 49%.

Many expat residents are finding ways to adapt. Surging rents are now forcing some to move to the outskirts of the city or even shift to the less glamorous emirate of Sharjah.

“The Dubai challenge has always been to decide if it wants people to stay longer term,” said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy. “New rules on long-term visas and property holding have encouraged that. But I don’t know if we see the number of people putting down roots of 20 years or more really changing that much.”

Mideast Stocks: #Saudi bourse extends losses on lacklustre earnings; Egypt gains

Mideast Stocks: Saudi bourse extends losses on lacklustre earnings; Egypt gains

Saudi Arabia's stock market ended lower on Sunday, extending losses for a fourth session, amid disappointing corporate earnings, while Egypt's stock index was buoyed by upbeat company results.

Saudi Arabia's benchmark index fell 0.6%, hit by a 0.4% drop in Al Rajhi Bank and a 3.4% decrease in Riyad Bank.

Elsewhere, Saudi Tadawul Group eased 0.5%, after the operator of Saudi Arabia's stock exchange missed analysts' estimates on annual profit.

Meanwhile, oil prices fell on Friday as markets watched an Oval Office argument between the U.S. and Ukrainian presidents while also bracing for Washington's new tariffs and Iraq's decision to resume oil exports from the Kurdistan region.

Outside the Gulf, Egypt's blue-chip index gained 0.8%, snapping a four-day losing streak. Commercial International Bank rose 1.1%, while Fawry for Banking Technology and Electronic Payment jumped 4.4%, following a rise in 2024 profit.

Among other gainers, E-Finance for Digital and Financial Investments finished 2.7% higher, as the payments company reported a steep rise in fourth-quarter profit.

Egypt's M2 money supply was up by 32.1% year-on-year in January, central bank data showed.

"Ramadan Kareem" to all celebrants of the Holy Month

 Ramadan Kareem