Saudi Arabia

Ratings on Saudi Arabia lowered to 'A+/A-1'; outlook remains negative

On Oct. 30, 2015, Standard & Poor's Ratings Services lowered its unsolicited long- and short-term foreign- and local-currency sovereign credit ratings on the Kingdom of Saudi Arabia to 'A+/A-1' from 'AA-/A-1+'. The outlook remains negative. At the same time, S&P revised its transfer and convertibility (T&C) assessment on Saudi Arabia to 'AA-' from 'AA'. Standard & Poor's has converted its sovereign credit ratings on Saudi Arabia to "unsolicited" following Saudi Arabia's decision to terminate its rating agreement. A pronounced negative swing in Saudi Arabia's fiscal balance has prompted our downgrade. The kingdom has run fiscal surpluses over the 10 years to 2013 (averaging 13% of GDP).

Saudi Arabia Considers World’s Largest IPO for Aramco

Saudi Arabia is considering offering shares in the largest oil company in the world, Saudi Aramco, in an initial public offering (IPO) which may mean that assets of about 3.63 trillion US dollars will be accessible to citizens and investors. Saudi Aramco yesterday confirmed that it had been considering various options to provide the opportunity to a large segment of investors via an IPO in the finance market. The company said in a statement that it is studying two scenarios to present its shares for an IPO; the first is to sell an appropriate share of its assets directly, and the second is to offer a package of major projects for the IPO in several sectors, particularly the refining and chemicals sector. In addition to this, Aramco could sell about 5% of its assets which amounts to about 181.5 billion dollars in the stock market.

Saudi insurance sector to outperform oil

The Saudi insurance sector will grow by up to 17 per cent a year over the next five years thanks to regulation enforcement and growth in motor insurance, the Dubai-based investment bank Arqaam Capital said yesterday. Arquaam expects the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively. According to an Alpen Capital report released last year, the Saudi central bank has issued several new regulations regarding underwriting practices, reserving, actuarial-backed pricing and solvency requirements in the past two years, to help grow the industry.

NCB announces successful completion of subordinated Tier 1 Sukuk by way of private placement

The National Commercial Bank (NCB) has settled an issuance of subordinated Additional Tier 1 Capital Sukuk on Wednesday 23 December 2015, in the amount of SAR 2.7 billion through a private placement offer in Saudi Arabia. The issuance is intended to strengthen the Bank's capital base in accordance with the Basel III framework and sustain its growth while maintaining healthy capital adequacy levels. Additionally, the Sukuk will continue to extend the maturity profile of NCB's liabilities while continuing to diversify its sources of funding. The Sukuk are perpetual securities with no fixed redemption date. However, NCB has the right to call the Sukuk on a predefined date. All required approvals from the regulatory authorities have been obtained for the issuance. NCB Capital Company acted as Sole Lead Manager.

IIRA reaffirms Fiduciary Ratings of Bank AlJazira: Jan 2016

Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Bank AlJazira (‘BAJ’) on the international scale at ‘A-/A2’ (SingleA Minus/A Two) and at ‘A+(sa)/A1(sa)’ (Single A Plus/A One) on the national scale. Outlook on the assigned ratings is ‘Stable’. The fiduciary score has also been reassessed in the range of ’71-75’, reflecting adequate fiduciary standards wherein rights of various stakeholders are adequately protected. The consistent growth in business volumes at BAJ, facilitated by expansion in branch network has been noted. The bank’s low net impairment ratio and sufficient liquidity held, lends support to the assigned ratings. Although financing counterparty concentration remains higher than desired levels, an improving trend has been noted. Capitalisation is adequate and above the regulatory minimum.

Alinma Bank to disburse SR745 million dividend

The Alinma Bank Board of Directors has recommended the distribution of share dividend to its shareholders for the 2015 fiscal year. After approval at the bank’s next general assembly meeting in March 2016, shareholders will receive SR0.50 per share (5% of nominal value). The total disbursal will amount to SR745 million. Alinma Bank Chairman Engr. Abdulaziz Al-Zamil congratulated the bank’s staff and shareholders on a year of growth and success.

S.Arabia licenses 900-mln-riyal national home finance company

Saudi Arabia's central bank has granted a license to its national home finance company, Bidaya and it will launch with 900 million riyals ($239.94 million) in capital. The decision by the Saudi Arabian Monetary Agency (SAMA) joins efforts to boost home ownership in the kingdom, where a shortage of affordable housing has become an economic and social issue. In development since 2010, Bidaya is a venture between the finance ministry's Public Investment Fund and the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD). The company aims to make financing more readily available in a kingdom where home ownership levels lag behind the global average of 70 percent.

Saudi Arabia approves 2.5% ‘white land tax’

Saudi Arabia has approved proposals for a 2.5% ‘white land tax’, which will apply to undeveloped residential and residential/commercial plots within urban boundaries. The law will come into force six months after the Ministry of Housing’s release of detailed regulations, the publication of which will take place within the next six months. Once implemented, proceeds from the tax will be deposited into an account of the Saudi Arabian Monetary Agency, and will be used to fund housing and related infrastructure projects in the Kingdom. The law is intended to stimulate further development to meet the demand for middle-income housing in Saudi Arabia. JLL predicts that some land owners will bring forward plans and begin development in order to avoid the additional tax burden of holding undeveloped land. Others, it suggests, will seek to sell sites to other developers, which should help to reduce land values.

Bahrain's Arcapita and Saudi's Al Rajhi Capital exit real estate fund

Bahrain-based Arcapita has sold real estate assets it jointly held with Saudi Arabia's Al Rajhi Capital for 1.35 billion Saudi riyals ($359.81 million), the two companies said in a joint statement. The ARC Real Estate Fund, which had a lifespan of five years, acquired seven assets in logistics, warehousing and retail in Saudi Arabia and the United Arab Emirates, they said in the statement. The fund appointed an external consultant to advise on the sale in April. They did not say who they had sold the assets to. Al Rajhi Capital is the investment banking arm of Saudi Arabian lender, Al Rajhi Bank.

UPDATE 1-Saudi's Kingdom Holding, Alinma plan $2.2 bln fund for tallest building

Saudi Arabia's Kingdom Holding said its affiliate Jeddah Economic Co (JEC) had arranged financing to complete construction of the world's tallest building. JEC agreed with Alinma Bank to establish an 8.4 billion riyal ($2.2 billion) real estate development fund that will finish work on the $1.2 billion Kingdom Tower in Jeddah. The Islamic fund will also develop the 1.5 sq km (0.6 sq miles) first phase of the Jeddah Economic City project. In addition to Kingdom Tower, the scheme is to include Saudi Arabia's largest shopping mall. Alinma Bank will finance the new fund, which is to be managed by Alinma Investment, Kingdom added without elaborating on how the money would be raised.

MENA Sukuk market expanded 14 % YTD

The Middle East and North Africa region recorded strong growth in the Sukuk market in the first 10 months of 2015, according to Michele Leung, Director, Fixed Income Indices, S&P Dow Jones Indices.
The market value, as tracked by the S&P MENA Sukuk Index, rose 14 % YTD to 37 billion, compared with the mere 1 % growth in the conventional bond market in the region. The Sukuk market has expanded 37 % since the S&P MENA Sukuk Index’s inception in July 2013. United Arab Emirates is the most active issuing country in the region, and it remains dominant in terms of country exposure at 52 %, followed by Saudi Arabia at 17 %.
Overall, governments have continued to diversify their funding platforms, and the global Sukuk market has witnessed solid support from the lack of primary supply. Looking at the indices’ total return performance, there has been a 1.1 - 1.3 % decline in both Sukuk and bond markets month-to-date. As of Nov 18, 2015, the S&P MENA Sukuk Index rose 1.05 % YTD, while the S&P MENA Bond Index outperformed and gained 1.90 % in the same period.

Experts: Real estate prices in Saudi Arabia will fall gradually

Expected to decrease by up to 30 % of land and real estate value. Real estate experts expect property prices in Saudi Arabia to decline gradually over the coming years and return to normal levels.
According to their forecasts, this will only happen with implementing the new regulation of fees on undeveloped plots of land in urban areas (white lands), the decline in real estate mortgage and the drop in oil prices in the Kingdom. Prices are expected to fall by up to 30 % of the land and real estate value, reports investing.com.
On this basis, Ihsan Buhulaiga, a former member of the Shura Council and an economic expert, says: “White lands’ law will ensure that landlords have only two alternatives: the first one is selling the land and the other is to develop an economic project based on market need.”
Eng. Mohammed Babahar says: “These new procedures are considered an excellent step to cure the Saudi real estate market and escape the inflation that has swept the market and pushed the prices up by more than 300 % and doubled the rental rates.”

UPDATE 1-MOVES-Standard Chartered appoints CEO for Islamic banking business

Standard Chartered has appointed Rehan Shaikh as chief executive of its global Islamic banking business, it said in a statement on Wednesday.
Shaikh moves to Standard Chartered Saadiq from Dubai Islamic Bank, where he was senior vice president and business head, private sector and transaction banking. He previously worked for StanChart in Pakistan from 1998 to 2007, the statement said.
He takes over from Sohail Akbar, who was interim chief executive of the Islamic banking operation after the departure of Afaq Khan earlier this year.
StanChart remains committed to the business despite a period of hiatus across other parts of the bank as global chief executive Bill Winters moves to restore profitability. It announced plans this month to reduce costs by $2.9 billion by 2018 and cut 15,000 jobs.
"Islamic finance is an integral part of the business at Standard Chartered and we continue to see growing demand from clients in many of our markets," said Sunil Kaushal, the bank's regional chief executive for Africa and the Middle East.

Ivory Coast launches Sovereign Sukuk

Five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%
The Ivory Coast is to become the latest state to issue a Sovereign Sukuk as it today launched its debut five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%. The addition of the Ivory Coast displays the continued growth of the Islamic finance market into Africa and represents a highlight in quiet year for sukuk issuance’s with total issuance volumes down considerably due to tightening of liquidity in traditional Islamic financial markets of the Gulf and South East Asia.
The sukuk is being arranged by the Islamic Corporation for Private Sector Development (ICD). The ICD signed an agreement in April 2015 for the implementation of a five-year Sukuk programme for 300 billion CFA to be issued in two equal phases of 150 billion CFA each. A road show was held in Saudi Arabia from 14 to 19 November and followed a recent upward revision of the Ivory Coast’s sovereign rating by Moody’s from B1 to Ba3.

KAUST and ICD collaborate on venture capital fund for KSA

The King Abdullah University of Science and Technology (KAUST) and the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank Group (IDB), in collaboration with Anfaal Capital agreed to establish a Saudi Arabia-focused venture capital fund.
The joint initiative aims to promote and foster the development of the domestic venture capital market in Saudi Arabia. The initiative leverages KAUST’s expertise in new technologies, as well as the ICD SME Program’s experience in the development and management of investment vehicles.
The Fund will provide venture capital (VC) funding for high-tech start-ups located in Saudi Arabia and lead early-stage financing rounds attracting local investors and international venture capitalists. Furthermore, it will invest in sectors that are strategic for the region and nurture entrepreneurship and technological innovation, stimulating the creation of high-value jobs.
The Fund will search for unique and innovative venture capital opportunities and provide the “smart and hands-on capital” needed to start and then sustain these companies.

IIUI holds international moot on Islamic finance

Speakers at a conference have urged the financial institutions and civil society to play their role by supporting an inclusive financial sector policy framework for equal access to financial services.
The workshop, which was attended by the scholars of Indonesia, Nigeria, Kenya, Kingdom of Saudi Arabia, Uganda, Sudan and US, is focused on bringing forth recommendations that will help in devising sustainable strategy for development of inclusive finance.
The two-day moot is jointly organised by International Institute for Islamic Economics of IIUI in collaboration with Islamic Research and Training Institute, Islamic Development Bank, Jeddah.
Speaking on the occasion as the chief guest, Islamic International University Islamabad President Dr Ahmed Yousif Al-Draiweesh stressed on the Muslim economic researchers to work for devising strategies for an interest-free transparent economic system. He was of the view that financial issues be observed in the light of Islamic teachings. The IIUI president hoped that conference would bring beneficial and significant recommendations pertaining to the financial and economic issues.

Islamic Development Bank looks to sukuk for Yemen reconstruction

The Islamic Development Bank wants to use Islamic bonds to help finance the reconstruction of countries ravaged by conflict, with the World Bank as a potential joint issuer, the head of the multilateral lender said.
Refugee and reconstruction financing is a priority for the Jeddah-based IDB, which last month launched an initiative with the World Bank and United Nations to help more than 15 million people displaced across the region.
Work is now underway to identify specific projects for the initiative, with a priority on war torn Yemen, which could see the IDB and World Bank as issuers of the sukuk.
"We need to finalize this with the World Bank, but most likely it will be a joint issuance", IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference in Kuwait.
The IDB, which operates to promote economic development in Muslim communities, has 56 member countries including Saudi Arabia, Libya and Iran as its largest shareholders.

Land deals accounted for 89 % of the total at SAR26.3bn

The value of real estate deals declined since mid of October 2015 until the middle of the current month by 24 per cent to SAR29.6 billon compared with the same period last year, recent data shows.
According to data issued by the Saudi Ministry of Justice, real estate deals divided between residential and commercial, witnessed a fall in residential deals by 36 % to reach SAR18.6bn, while commercial deals rose by 8 % to SAR11bn.
Real estate land deals accounted for 89 % of the total at SAR26.3bn, reports Al Riyadh Newspaper.
Riyadh was the most active city in terms of residential real estate deals with a value of SAR 6.2bn, down by 28 % YoY, followed by Jeddah with SAR3.7bn, down by 13 %. In terms of commercial deals, Riyadh came in first place with SAR4.9bn and a rise of 18 %.

King Abdullah University of Science and Technology and the Islamic Corporation for the Development of the Private Sector support the venture capital industry in the Kingdom of Saudi Arabia

The King Abdullah University of Science and Technology (KAUST) and the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank Group (IDB), in collaboration with Anfaal Capital agreed to establish a Saudi Arabia-focused venture capital fund.
The joint initiative aims to promote and foster the development of the domestic venture capital market in Saudi Arabia. The initiative leverages KAUST's expertise in new technologies, as well as the ICD SME Program's experience in the development and management of investment vehicles.

IMF chief calls for reforms in Gulf amid low oil prices

On a trip through a Gulf squeezed by low oil prices, the head of the International Monetary Fund repeatedly called on countries to cut back on subsidies, lower government spending and consider levying taxes. But implementing Christine Lagarde's suggestions is easier said than done in the oil-rich countries, even as crude prices have dropped by over 50 percent since last year. Generations have grown used to cradle-to-grave social programs, comfortable government jobs and tax-free living. While Gulf leaders, including those in Kuwait, have begun warning harder times may be ahead, some citizens remain opposed to any cuts.
"Almost every week we hear about Kuwait giving grants left, right and center to other nations that are in need of money. It's as if the government doesn't realize that we, in Kuwait, are also in need," said Abdulaziz Al-Adwani, a Kuwaiti school teacher. "It's not logical to start imposing a tax on citizens when the government can afford to give grants to this country and that country."

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