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Saudi Arabia sold $5.5 billion of international bonds on Tuesday to help plug its budget deficit, putting it on course for a record year of issuance as it continues to spend heavily on Crown Prince Mohammed bin Salman’s economic-diversification projects.
The two-part Sukuk, or Islamic debt, sale was made up of a $2.25 billion five-year note and a $3.25 billion 10-year bond. The shorter tranche priced with a spread of 65 basis points over US Treasuries, while the longer one was sold at 75 basis points.
Investors had placed around $17.5 billion of orders, underscoring the strong demand for Saudi debt even as the Gulf nation ramps ups issuance in the face of lower oil prices and high spending that’s squeezing the government’s finances.
Saudi Arabia has now sold almost $20 billion in dollar- and euro-denominated debt this year, according to data compiled by Bloomberg. That cements its status as one of the busiest issuers in emerging markets. It is also well above the 2024 full-year tally and within a whisker of the annual record of $21.5 billion set in 2017.
The latest sale adds to a pick up in syndicated loan activity and a fresh wave of local bank issuance as Saudi companies, the government and sovereign wealth fund come up with extra financing to back the crown prince’s Vision 2030 agenda.
Those financing needs are increasingly pressing, with Brent oil prices down about 8% this year to around $69 a barrel. With prices subdued, the Saudi government projects a fiscal shortfall of about 2.3% of gross domestic product this year. It has widely telegraphed its intention to issue bonds to fill the hole. That’s in addition to measures such as privatizing some assets.
While the kingdom’s ratio of debt to GDP is low by global standards at under 30%, the International Monetary Fund sees it rising to 41% by 2030. The IMF’s own forecast is for the Saudi budget deficit to increase to 4% this year, a level the Washington-based lender says is “quite appropriate” given the country’s high foreign reserves.
There are some early signs the government is reducing spending. In the second quarter, government expenditure was down 9% from the same period in 2024.
Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., and Standard Chartered Plc were the main banks that arranged Saudi Arabia’s latest bond deal.
When Anthropic went looking for more money to support its pursuit of building artificial intelligence models, the startup turned to a familiar network of venture capitalists. It also opened the door to a source of capital it had previously ignored: Middle Eastern sovereign wealth.
Anthropic named the Qatar Investment Authority as a “significant” investor in a $13 billion financing round that valued the company at $183 billion.That puts Doha’s wealth fund on a list that already includes Amazon.com Inc., Goldman Sachs Group Inc. and a slew of prominent venture capital firms, while vaulting Qatar into a race with its deep-pocketed Gulf neighbors for AI deals.
The QIA praised Anthropic for its prowess in coding automation and business uses. “It’s definitely found its niche in the enterprise,” Mohammed Al-Hardan, head of technology, media and telecommunications at the $524 billion fund, said in an interview.
The funding marks a turning point for Anthropic, which has positioned itself as a more responsible alternative in AI. Its Chief Executive Officer Dario Amodei has long raised concerns about handing authoritarian regimes access to advanced AI models, and Middle Eastern funds weren’t part of previous funding rounds.
Amodei appeared to soften his stance ahead of Anthropic’s recent fundraise, underscoring the importance of the region’s deep pools of capital. Rival firms have already turned to the region — Abu Dhabi’s MGX invested in OpenAI last year and was named as one of the backers for the ChatGPT maker’s Stargate infrastructure project, while Elon Musk’s xAI has raised funds from the QIA, MGX and Saudi Arabia’s Kingdom Holdings.
The QIA was the sole Gulf investor in a list of more than 20 Anthropic shared on Tuesday. The deal signals Doha’s willingness to more aggressively deploy cash into the sector and reassert itself despite a recent setback with Builder.ai’s messy bankruptcy. The fund is seeking to spend half a trillion dollars in the US over the next decade as its gas-fueled coffers balloon further, positioning it as an even more prominent force in Silicon Valley.
Anthropic is one of many more AI deals to come, according to Al-Hardan. While the fund didn’t lead the startup’s latest funding round, it might choose to do so on future deals, writing early-stage checks or as companies near public listings.
“You would see us doing it all,” Al-Hardan said. “The luxury that we have — that the other funds don’t have — is that, because our mandate is so wide, we get to choose.” That includes planned investments in chips and media, as well as an ongoing push into China.
Trophies to Tech
Set up in 2005 to manage the country’s bountiful revenue from liquefied natural gas, the QIA quickly developed a reputation for a fund with a penchant for so-called trophy assets; it splashed out on stakes in Credit Suisse Group AG, the London Stock Exchange Group Plc and the iconic Harrods.
It began shifting to tech, backing venture capital firms and startups directly, in 2021, the year before OpenAI released ChatGPT and set off a flurry of investments. Both the United Arab Emirates and Saudi Arabia have launched multibillion-dollar funds targeting companies developing new models, chips and data centers — and established their own national AI champions. Qatar, in contrast, has moved relatively more gingerly.
The QIA entered tech and AI for strategic reasons, as well as a way to avoid “falling behind” more prominent Gulf states, according to Sara Bazoobandi, a research fellow at the German Institute for Global and Area Studies, who tracks Middle Eastern funds. “There is always a flying geese pattern,” she said. “As soon as one enters a new market, sector or region, the rest tend to follow.”
The QIA now expects to do as many as 25 deals in technology this year and next, up from an average of between 10 and 15 transactions annually by Al-Hardan’s team across software, semiconductors, media and communications. Still, Al-Hardan acknowledges the pitfalls of plowing money into the sector.
“A lot of these companies are still not mature,” he said. “With anything in AI, there’s always inherent risks.”
Case in point: the QIA’s 2023 bet on Builder.ai, a British startup promising to make apps with little to no code. Two years on, the firm fell apart after investors discovered the former CEO had allegedly overinflated sales. The QIA held a board seat and became aware of the financial mishap late last year, Bloomberg News has reported. Al-Hardan declined to comment.
The QIA now takes minority positions in startups, holding less than 15% of equity, while investing less per deal: typically about $100 million, but sometimes as little as $25 million. There are exceptions, though, and Al-Hardan said the fund put a “significant check” in 2023 in Databricks Inc., a software firm recently valued at more than $100 billion.
"Unsung Firms”
Since that deal, Qatar has mostly stuck with unsung AI companies selling to businesses. This year it has invested in Instabase, a startup that manages business data, in a down round, and Applied Intuition, a California-based provider for autonomous cars and drones.
It also backed Cresta, a startup focused on customer service automation. After that deal, Cresta CEO Ping Wu said the fund’s staff introduced him to other Gulf investors at an event in Doha, and have shown little appetite for interfering with his business. “They’re patient, permanent capital,” Wu said.
The QIA’s high-profile investment in xAI didn’t come until late last year, when it participated in a $6 billion round, driven in part by Musk’s access to data from his social network and Tesla Inc. The fund has also previously backed Musk’s X and Neuralink, his brain implant company.
The fund’s recently appointed CEO Mohammed Al-Sowaidi will be an added advantage as it scouts for more deals in the US. The executive spent most of his early years at the fund in the Americas, where he helped establish a US office and eventually became the region’s chief investment officer. He plans to steer the QIA toward providing capital to large companies, taking stakes in listed firms and prioritizing bigger deals, focusing on data centers and health care.
To help with that push, six of Al-Hardan’s team of about 30 people are in New York. While there are currently no plans to open an office in Silicon Valley, someone from the team is there “every other week,” the executive said. With its series of tech deals, senior executives at the fund, including Al-Hardan, have developed direct ties with some of Silicon Valley’s largest investors.
Among the long list of AI firms the QIA looks at, he singled out tech that can instantly generate music, photos or videos as the “most interesting” area in media. The fund is currently looking at a startup in the sector, he said, with plans to integrate it with North Road, a studio run by Hollywood luminary Peter Chernin and backed by Qatar.
The fund says it will continue to look at AI model developers as potential deals. Eventually, Al-Hardan said, these firms — currently bleeding money as they race to build commercial operations — will diverge into profitable lanes.
“Each and every one one of these companies will evolve differently,” he added.
Abu Dhabi's Etihad Airways first half was its most profitable yet, the company said Wednesday, as its net profit reached 1.12 billion UAE dirham ($304.96 million), up 32% year-on-year.
Etihad carried 10.2 million passengers in the six months ending June 30, a 17% increase from the previous year, even as regional tensions - including June's 12-day air war between Israel and Iran - affected airlines across the Middle East.
Chairman Mohamed Ali Al Shorafa attributed the airline’s growth to its international expansion, which included the launch or announcement of 27 new destinations since January and the addition of 20 aircraft over the last 18 months.
On Tuesday, chief executive Antonoaldo Neves told Reuters that the carrier was ready for an initial public offering, but had no immediate plans to go public and had sufficient resources to independently fund its $20 billion expansion strategy for the next 10 years.
Saudi Arabia's non-oil private sector growth was stable in August, with business activity expanding at a slightly quicker pace than in July, as new orders increased, a survey showed on Wednesday.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) rose to 56.4 in August from 56.3 in July, and remained well above the 50.0 mark indicating growth.
"The slight increase signalled another month of steady growth, driven by improving demand conditions, a modest rebound in output growth, and further gains in employment," said Naif Al-Ghaith, Riyad Bank's chief economist.
"Although activity growth has eased from the highs seen earlier this year, the underlying trend remains firmly positive."
New order growth accelerated, supported by improved economic conditions, while new export orders also rebounded, driven by marketing activities and collaborations within the Gulf Cooperation Council region, marking the fastest upturn in four months.
The subindex for new orders climbed to 60.1 in August from 59.7 in July.
Employment continued to grow, albeit at a slightly slower pace than in previous months, as companies expanded sales teams and initiated new projects. Inventory growth reached a four-month high, in response to rising orders.
Companies raised their selling prices for the third consecutive month, the survey showed, and were faced with a sharp rise in input costs, driven by higher purchasing costs and global inflationary pressures.
Business confidence improved from a 12-month low in July and the outlook for future output strengthened to indicate positive sentiment among private non-oil sector firms.
Growth in the United Arab Emirates' non-oil private sector rebounded slightly in August on a faster expansion in output, but sales increased at their weakest pace in more than four years, a survey showed on Wednesday.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) rose slightly to 53.3 in August from a 49-month low of 52.9 in July, remaining above the 50.0 mark that signals growth.
Competition and supply chain challenges were among reasons cited for the slowdown in sales growth in August, with the New Orders subindex falling to 53.1 from July's 54.2, marking the lowest reading since June 2021.
"Sales growth weakened again in the UAE non-oil private sector in August, easing for the fourth month running," said David Owen, Senior Economist at S&P Global Market Intelligence.
"The slowdown added to concerns of fading growth momentum and meant that output was increasingly reliant on backlogs of work."
But output growth improved, reaching a six-month high, as companies reported increased activity due to ongoing projects and growth in local markets. However, purchases declined for the first time in more than four years, reflecting reduced stock positions amid softer demand.
There were increased cost pressures, with wage inflation reaching a 15-month high, while selling prices rose at the sharpest rate in five months, as firms passed on higher costs to consumers.
Overall, business confidence improved from the previous month, with firms expressing optimism about future growth due to stable domestic conditions and strong client relationships.
Dubai's non-oil sector continued to grow solidly, with its headline PMI at 53.6 in August, up slightly from 53.5 in July, supported by the sharpest rate of expansion in output for seven months, the survey showed.
Abu Dhabi's Etihad Airways CEO Antonoaldo Neves said on Tuesday the Gulf airline has no timeline for going public as it enjoys enough resources to "self-fund" its $20 billion growth plans for the next decade.
In an interview, Neves said while the carrier is ready for an initial public offering, the final decision rests with its shareholder, sovereign wealth fund ADQ.
"Any decision about an IPO is much more a broader decision from the shareholder rather than any specific decision related to Etihad," he told Reuters. "The time has not come yet."
Etihad, which started operations in 2003, spent billions of dollars buying minority stakes in other carriers to create a larger network through its Abu Dhabi hub and better compete with Gulf peers Emirates and Qatar Airways. However, many of those airlines ran into financial trouble and ADQ took over Etihad in October 2022.
Neves, who was appointed as CEO at the same time, said the United Arab Emirates' national carrier is focused on organic growth as M&A is not part of its strategic mandate.
Etihad has plans to bolster Abu Dhabi's role as a travel hub connecting Asia and Europe. Neves said the airline does not need an IPO to fund its growth plans, which he estimated would cost more than $20 billion for the next 10 years. "We believe we can self-fund that," he said.
Neves also shrugged off growing global economic uncertainty, geopolitical and trade tensions. He said the carrier remained steadfast in its network expansion strategy as the Middle East's growth prospects would underpin air travel demand.
Etihad's passenger traffic is up 17% year-on-year this year, and its load factor — a measure of how full its planes are — had increased to 88% from 86% a year ago.
While bookings slowed down during the Israel-Iran conflict, Neves said sales fully recovered by the end of July.
"People postponed their plans, but they did not cancel their plans," he said.
Etihad's fleet has more than 100 aircraft, with a mix of Airbus and Boeing models. In May, it confirmed an order for 28 wide-body Boeing aircraft, including 777X.
Neves said the 777X order is expected after 2030 and will replace Etihad's Airbus A380 planes. More aircraft deals are in the offing as the airline is looking to tap into the secondary market, including lessors for additional jets, he added.
"It's not necessarily with OEMs. It can be with lessors, it can be secondhand planes."
Most stock markets in the Gulf ended lower on Wednesday amid weak oil prices, with the Saudi index continuing its downward trend after a flat trading session the previous day.
Oil prices - a catalyst for the Gulf's financial markets - fell by about 2% ahead of a weekend meeting of OPEC+ producers that is expected to consider another increase in production targets in October.
Saudi Arabia's benchmark index dropped 0.5%, weighed down by a 1.4% fall in Al Rajhi Bank and a 1.2% decrease in the country's biggest lender by assets Saudi National Bank. Elsewhere, oil giant Saudi Aramco was down 0.6%.
Oil prices are unlikely to gain much traction from current levels this year as rising output from top producers adds to the risk of a surplus and U.S. tariff threats curb demand growth, a Reuters poll showed on Friday.
Lower prices and disruptions to crude exports impact fiscal balances in countries reliant on oil income. The kingdom's non-oil private sector growth was stable in August, with business activity expanding at a slightly quicker pace than in July, as new orders increased, a survey showed on Wednesday.
"However, this improved sentiment is offset by lower oil prices and risks emerging from uncertainty over future price movements," said Ahmed Negm, Head of Market Research MENA at XS.com.
Dubai's main share index declined 0.6%, hit by a 2.7% slide in toll operator Salik Co.
The Qatari benchmark finished 0.4% lower, with the Gulf's biggest lender Qatar National Bank losing 1%.
In Abu Dhabi, the index, however, gained 0.2%. The Abu Dhabi stock market is attempting to solidify its potential rebound after a period of correction, added Negm.
Outside the Gulf, Egypt's blue-chip index ended 1.1% lower as most of its constituents were in negative territory on profit-taking.
