Download 29-03-2016

NBAD morning news summary (29-March-2016)
Global News

US consumer spending, trade data signal sluggish growth: US consumer spending
barely rose in February and inflation retreated, suggesting the Federal Reserve could
remain cautious about raising interest rates this year even as the labor market
rapidly tightens. Monday's report from the Commerce Department also showed
consumer spending in January was not as strong as previously reported. That,
together with other data showing a widening in the goods trade deficit in February,
indicated economic growth remained sluggish in the first quarter. Consumer
spending edged up 0.1% as households cut back on goods purchases after a
downwardly revised 0.1% gain in January. Consumer spending, which accounts for
more than two-thirds of US economic activity, was previously reported to have
increased 0.5% in January. When adjusted for inflation, consumer spending rose
0.2%. Inflation-adjusted consumer spending for January was revised down to show
it unchanged rather than the 0.4% rise that was previously reported. In the 12
months through February, the personal consumption expenditures (PCE) price index
increased 1.0% after rising 1.2% in January. Excluding food and energy, prices
gained 0.1% after advancing 0.3% in January. In the 12 months through February, the
so-called core PCE price index increased 1.7% after a similar increase in January. The
core PCE is the Fed's preferred inflation measure and is running below its 2% target.
In a separate report, the Commerce Department said the advance goods trade deficit
widened to $62.9bn in February from $62.2bn, rising for a fourth straight month as
an increase in exports was offset by a gain in imports. The government will publish
February's trade data, which includes services, on April 5.
Source:http://www.reuters.com/article/us-usa-economy-idUSKCN0WU0Z4

Atlanta Fed revises down first quarter US GDP growth to less than 1% as real
consumer spending growth slows: The US economy is growing at a pace below 1%
in the first quarter following data that showed sluggish consumer spending and a
large trade gap in February, the Atlanta Federal Reserve's GDPNow forecast model
showed on Monday. The 0.6% annualised pace for US gross domestic product seen
for the first three months of 2016 was slower than the regional Fed's prior estimate of
1.4% on March 24, the Atlanta Fed said on its website. The Atlanta Fed said its GDP
forecast program revised its estimate on real consumer spending growth slowing to
1.8% in the first quarter from an earlier projection of 2.5%. It also raised the amount
of drag from trade on the GDP to 0.52 percentage point from an earlier 0.26 point.
On Friday, the Commerce Department upgraded its GDP reading in the fourth
quarter of 2015 to an annual pace of 1.4% from 1.0%, led by an upwardly revised
2.4% growth in consumer spending. Exports fell 2.0% in the final quarter of last year,
while imports slipped 0.7%. In the wake of the latest consumer spending and trade
data, economists slashed their first-quarter gross domestic product growth estimates
by as much as half a percentage point to as low as a 0.9% annualised rate.
Source:http://www.reuters.com/article/usa-economy-atlantafed-idUSL2N1700SG

Dallas Fed factory index least negative since November: A gauge of Texas factory
activity in March rose to its least negative level since November, suggesting an
improvement in the state's manufacturing sector, which had been stung by
plummeting oil prices, according to the Dallas Federal Reserve. The Dallas Fed said
on Monday its regional manufacturing index was -13.6 points in March, compared
with -31.8 in February. A reading below zero shows the region's manufacturing
sector is contracting, while a figure above zero shows it is expanding. In January, the
index was -34.6 which was the weakest level since April 2009. The last time the
Dallas Fed index was above zero was December 2014.
Source:http://www.reuters.com/article/us-usa-economy-texas-idUSKCN0WU1AI

Oil drops a 4th day as US crude stockpiles seen expanding glut: Oil declined for a
fourth day before weekly US government data forecast to show increasing crude
stockpiles kept supplies at the highest level in more than eight decades. Futures lost
as much as 0.6% in New York after slipping 0.2% Monday. Inventories probably
increased by 3 million barrels last week, a Bloomberg survey shows before an
Energy Information Administration report Wednesday. That would be a seventh
weekly gain. US crude inventories increased to 532.5 million barrels through March
18, according to data from the EIA. Indonesia will attend a meeting of major oil
exporters in Doha next month to consider an output freeze, according to Energy and
Mineral Resources Minister Sudirman Said. Oil tumbled to a 12-year low this year
before rebounding on speculation the global surplus will ease as US output declines.
Saudi Arabia, Russia, Qatar and Venezuela agreed last month they would cap
production at January levels if other producers followed suit to tackle a global
oversupply. WTI crude for May delivery was at $39.23 a barrel on the New York
Mercantile Exchange, down 16 cents, at 7:15 a.m. Abu Dhabi time. The contract lost 7
cents to close at $39.39 Monday. Brent for May settlement was 20 cents lower at
$40.07 a barrel on the London-based ICE Futures Europe exchange. The contract fell
17 cents to $40.27 Monday, the lowest close since March 15.
Source:http://www.bloomberg.com/news/articles/2016-03-28/oil-trades-near-39amid-doubts-producer-talks-will-ease-glut

Offshore yuan gains as PBOC raises fixing; Dollar falls as Fed rate bets recede;
Asian stocks mixed: 10yr TY at 1.89%: The offshore yuan rose for a second day as
China’s central bank increased its daily reference rate by the most in a week after the
dollar weakened amid data showing US policy makers’ preferred measure of
inflation slowing last month. The Bloomberg Dollar Spot Index, which tracks the US
currency against 10 major peers, was steady after falling 0.4% last session on weak
US personal spending data in February. The data spurred speculation the Fed may
hold off from a rate hike anytime soon as traders bet a 38% chance of hike in June
meeting, down from 42% a week ago. According to Bloomberg, the yuan traded in
Hong Kong gained 0.07% to 6.5132 a dollar today, extending its two-day advance to
0.19%. The currency in Shanghai rose 0.02% to 6.5095, according to China Foreign
Exchange Trade System prices. The PBOC boosted its fixing, which limits onshore
moves to 2% on either side, by 0.26% to 6.5060. That’s the biggest increase since
March 18. The yen slipped 0.1% to 113.57 per dollar after capping a seventh day of
losses on Monday, falling 0.3%. The MSCI Asia Pacific Index fell 0.3% as Japan’s
Topix index declined 0.3%. More than 1,500 Topix members traded ex-dividend
Tuesday, equating to a 13.2 point drag on the measure, according to Bloomberg
showed. The Kospi index in Seoul added 0.3% after falling the past four days.
Australia’s S&P/ASX 200 Index lost 0.9%, slipping for a third session, while New
Zealand’s S&P/NZX 50 Index increased 0.4%. Futures on the Standard & Poor’s 500
Index gained 0.3%. The Shanghai Composite Index slipped 0.5%, while the Hang
Seng Index in Hong Kong was little changed after dropping as much as 0.5% in early
trading. The Hang Seng China Enterprises Index was 0.2% higher. 10-year US
treasury yield was trading flat at 1.89% after falling one basis point on Monday. The
equivalent Australia government bonds were trading at 2.59%, up 2 bps, while the
Japanese 10-year bond was trading unchanged at a negative yield of 0.089%.
Source:http://www.bloomberg.com/news/articles/2016-03-28/dollar-holds-dropafter-rally-amid-mixed-outlook-for-asia-stocks
Middle East & Africa News

Saudi economy shows deepening signs of strain as spending drops; reserves fall
$9.36bn in Feb. to $593bn: The Saudi economy is showing deepening signs of strain
under the weight of cheap oil, a Bloomberg article reported Monday citing various
data from the central bank. Saudi consumers withdrew and spent less money in
February, according to central bank data released on Monday. M3, one of the
broadest measures of money supply, shrank for the first time since at least 2000,
when Bloomberg started tracking the data, the article reported. According to the
latest central bank data, net foreign assets fell 2.4% in February on month-on-month
basis to SAR 2,229.6bn ($594.6bn). Total reserves fell by SAR 35.1bn ($9.36bn) in
February to SAR 222.5bn ($592.7bn) as compared to SAR 2,257.6bn in January. The
pace of the drop was though the slowest since October as Brent crude prices
rebounded during the month. Oil exports make up about 70% of the government’s
revenue. While the kingdom still has one of the world’s largest foreign-currency
reserves, cuts in government spending to shore up public finances are taking a toll
on the economy. Growth may slow to 1.5% this year, according to the median
estimate of a Bloomberg survey, the slowest pace since at least 2009. Saudi officials
have repeatedly said that the nation can weather the slump in oil prices. Cash
withdrawals through ATMs fell 8% after expanding for at least the previous five
months, central bank data show. Point-of-sale transactions, an indicator of consumer
confidence in the economy, dropped to SAR 15.2bn ($4.1bn). The government is
seeking to plug a budget deficit that reached about 15% of gross domestic product in
2015. Authorities have also raised energy prices. Saudi banks’ February loansdeposits ratio deteriorated as deposits fell at banks. According to the central bank
data banks’ loans-to-deposit ratio climbed to 88.1% in February vs. 86.1% in January.
Source:http://www.bloomberg.com/news/articles/2016-03-28/saudi-economy-showsdeepening-signs-of-strain-as-spending-drops

Saudi 12-month interbank rate exceeds 2% first time since 2009: The interbank rate
in Saudi Arabia has crossed past 2% for the first time since 2009, a Bloomberg article
reported Monday. Saudi Riyal Interbank Average Offered Rate for 12 months as
calculated by Riyad Bank climbs to 2.00111%, highest level in 7-years, the article
reported.
Source: Bloomberg–“Saudi 12-month interbank rate exceeds 2% first time since 2009”

Qatar trade surplus shrinks 53.5% in February: Qatar's foreign trade surplus shrank
53.5% from a year earlier to QAR 7.41bn ($2.04bn) in February, data from the
Ministry of Development Planning and Statistics showed on Monday. Exports of
petroleum gases and other gaseous hydrocarbons fell 41.2% to QAR 10.35bn, a
statement said. It added that Qatar's exports in February totalled QAR 17bn, a 32.5%
decline year-on-year and a 4.8% drop compared to January. Revenue from gas and
hydrocarbons exports declined in February to QAR 10.2bn. Imports meanwhile were
QAR 9.6bn, a 10.1% decline compared to January 2016. Japan was the top destination
for Qatari exports, with 17.2% of total exports, followed by South Korea and India.
As for imports, Qatar relied on the US for 12.1% of its needs, ahead of China and the
UAE. Qatar said in December that it has halved its forecasts for economic growth in
2016, the latest sign of the hit taken by the wealthy Gulf state's economy at a time of
low oil prices. Growth expectations were slashed to 3.7% from the 7.3% forecast in
June. But the government's biannual outlook said the hydrocarbon-rich nation
would record a fiscal surplus this year of 1.7% of GDP, a figure above the 1.4% it
projected in June.
Source:http://www.arabianbusiness.com/qatar-trade-surplus-shrinks-53-5-as-energyexports-slump-626512.html

UAE set to raise petrol prices by at least 10% in April: Petrol prices in the UAE will
rise by more than 10% in April, according to an announcement by the Ministry of
Energy on Monday. The cost of Super 98 fuel will increase 10.2% from AED1.47 in
March to AED1.62 in April, Special 95 is up 11% from AED1.36 to AED1.51 and E-
Plus 91 will rise 11.6% from AED1.29 to AED1.44. Diesel will also increase 11.4%
from AED1.40 to AED1.56, according to the announcement made on Twitter. The
rise tracks the increase in the price of Brent crude in the past month which has risen
from around $36 a barrel to more than $40. The increase in prices for April follows
seven consecutive months of declines. Last July, the UAE said it was shifting from a
system of fixed, subsidised fuel prices to adjusting prices monthly in response to
global trends and prices would be "based on the average global prices with the
addition of operating costs".
Source:http://www.arabianbusiness.com/uae-set-raise-petrol-prices-by-at-least-10-inapril-626521.html

UAE banks agree ‘mini insolvency law’ to help struggling SMEs: Banks in the
United Arab Emirates will suspend legal action against small and medium sized
enterprises (SMEs) struggling to repay debt for up to three months to prevent a
surge in defaults. The initiative, which involves businesses working with lenders to
restructure their loans, is intended to give breathing space to SMEs, which contribute
around 60% of UAE's gross domestic product. "What we have put on the table is a
mini insolvency law," said Abdul Aziz al-Ghurair chairman of the UAE Banks
Federation, the industry body representing 49 banks. "We will give the customer
time and space as long as they're genuine." The federation was lobbying the
government to "expedite" the new insolvency law, said al-Ghurair, also chief
executive of Dubai-based lender Mashreq. The plan will be open to companies that
have borrowed AED 50m or more from a number of banks and were showing signs
of financial stress, typically leading to an inability to make repayments. The
federation will coordinate requests from companies with the lending banks,
resulting in the signing of a standstill agreement ensuring that no lender will take
pre-emptive action for a period up to 90 days. Led by the bank with the largest
exposure, the lenders will then agree how to manage or restructure the borrower's
debt. The initiative had the backing of the central bank, as well as the unanimous
agreement of banks, said al-Ghurair. SMEs made up about 3% of banks' total
lending, he said. "We will lend as long as the economy is in good shape and the
customer is in good shape. If the economy slows and the customer slows the bank
will also slow its lending," he added.
Source:http://in.reuters.com/article/emirates-smes-debt-idINL5N1700Y5

Majid Al Futtaim net profit up 29% to AED 3.3bn in 2015: Majid Al Futtaim (MAF),
the Dubai-based retail and hospitality conglomerate, released its audited financial
results for 2015 on Monday, posting a 29% growth in net profit from continuing
operations in 2015 over the previous year. Net profit reached AED 3.3bn last year,
while revenue was up 8% year-on-year to AED 27.3bn, the company said in a
statement. A large part of profit increase is attributed to higher valuations for the
company’s investment properties. The net gain on the valuation of MAF’s
investment properties amounted to AED 1.12bn last year versus AED 767m in 2014.
The company did not specify which of its properties had earned higher valuation.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 7% to
AED 3.8bn. “In the face of a softening in global economy, we achieved growth by
continuing to move forward with a number of large scale projects,” said Alain
Bejjani, Chief Executive Officer of Majid Al Futtaim. Last year, the company
completed the redevelopment of City Centre Muscat, and added 36,000 square
metres of space at Mall of the Emirates in Dubai. It also expanded its City Centre
mall network, with the opening of City Centre Me’aisem and City Centre Shindagha
in Dubai, as well added nine new Carrefour hypermarkets, 11 new supermarkets
and five convenience stores. “We truly believe in the potential of the Mena [Middle
East and North Africa] region and look forward to delivering solid results in the
years to come as we continue to grow our business in new markets in the region and
beyond,” Bejjani said. The company also issued its first 10-year $500m sukuk last
year. MAF is bullish about Egypt, having announced last year its plan to increase
investment in the country to EGP 22.5bn (AED 9.26bn) from EGP 18bn pounds
Source:http://gulfnews.com/business/sectors/retail/majid-al-futtaim-net-profit-up-29to-dh3-3b-in-2015-1.1699521;http://www.thenational.ae/business/retail/majid-alfuttaim-profit-up-on-higher-property-valuations

Saudi Sipchem says board approves sukuk issuance: Saudi International
Petrochemical Co (Sipchem) said on Monday that its board had approved issuance
of sharia-compliant bonds. The firm appointed Riyad Capital and NCB Capital as
lead managers for the issue of sukuk, it said in a bourse statement. The size of the
issue, the timing and other details were not disclosed in the filing.
Source:http://uk.reuters.com/article/sipchem-sukuk-idUKD5N13P02R

Egyptian pound weakens to record against the dollar on black market: The
Egyptian pound fell to an unprecedented low on the black market on Monday,
Reuters reported citing five traders, as hard currency demand rises in the dollarstarved economy. Rates on the black market continued to climb on Monday,
reaching unprecedented levels of 10 pounds per dollar compared with around 9.8
pounds last week, five traders told Reuters. No volumes of trade were given. In an
attempt to close the gap between official and black market rates the central bank
devalued the currency to 8.85 per dollar from 7.7301 this month. It later strengthened
it to 8.78 per dollar, while adopting a more flexible exchange-rate policy. Egypt,
which relies heavily on imports, has faced a shortage of foreign currency since a
popular uprising in 2011 drove away many tourists and foreign investors. A black
market for dollars has sucked up liquidity from the banking system and put a strain
on the country's foreign reserves, while the central bank had been keeping the
pound artificially strong through weekly dollar auctions. Reserves more than halved
to $16.5bn in February from around $36bn before the uprising. The central bank has
also recently raised caps that were imposed in 2015 on dollar deposits and
withdrawals for individuals, exporters under certain conditions, and some importers
of essential goods. That allowed them to source some of their dollar needs from the
black market.
Source:http://uk.reuters.com/article/egypt-currency-idUKL5N1700U9

Egypt's Banque Misr in talks for 300 mln euro syndicated loan: Egypt's secondlargest state bank, Banque Misr, is in talks with a foreign financial institution for a
€300m ($334.92m) syndicated loan to shore up its foreign currency resources, Banque
Misr said on Monday. Egypt is experiencing a foreign currency crisis and its central
bank has been rationing dollars through auctions with commercial banks, giving
priority to imports of strategic goods. It sells around $120m a week. "The
negotiations come within the framework of increasing hard currency resources at the
bank. The negotiations are due to be complete six months from now, at most," Bank
Misr Chairman Mohamed Mahmoud Eletreby said, without naming the bank
involved in the negotiations. In an attempt to increase their dollar resources, Egypt's
three state banks, Banque Misr, the National Bank of Egypt and Banque du Caire
began offering in February dollar denominated certificates of deposits with attractive
yields to Egyptians living abroad. NBE and Banque Misr also started offering this
month Egyptian pound certificates of deposits with an interest rate of 15% in
exchange for foreign currency.
Source:http://uk.reuters.com/article/banque-misr-loans-idUKL5N1700MF

Middle East markets narrowly mixed, Dubai holds chart support: Middle East
stock markets were mostly mixed in narrow ranges and moderate trading volumes
on Monday, as Dubai tested and held technical support and petrochemical shares
supported Saudi Arabia. The Dubai index closed 0.4% lower at 3,266 points, off a
low of 3,248 points. According to a Reuters article, it has chart support on its midMarch low of 3,253 points. Dubai Parks & Resorts tumbled 6.9% in heavy trade. On
Sunday it had pulled back 5.1% after proposing to boost its capital by AED 1.68bn
($458m) through a rights issue to finance development of a Six Flags theme park.
Builder Arabtec added 1.3% after it scheduled a board meeting for Wednesday to
discuss its business. Abu Dhabi fell 0.4% as telecommunications firm Etisalat
dropped 0.6%. It appointed Saleh Abdullah al-Abdooli, a veteran of the company
who headed its United Arab Emirates and Egyptian operations, as its new chief
executive; Etisalat said Abdooli would oversee restructuring of the group but gave
no details. The Saudi index edged up 0.2% as petrochemicals blue chip Saudi Basic
Industries climbed 1.0%. Saudi Research and Marketing rose 6.1% after it said it
expected to book a capital gain of £28.85m ($41.1m) in the first quarter from the sale
of a British real estate asset. Qatar's index fell 0.8% as telecommunications firm
Ooredoo, which had been suspended for its annual general meeting as the overall
market slid on Sunday, dropped 2.2%. Kuwait Finance House rose 4.1% after saying
it had received an offer from investors to buy its stake in affiliate Aref Investment
Group. The Kuwaiti stock index edged up 0.2%. Oman index gained 0.2% and
Bahrain index fell 0.4%. Egypt's index fell in early trade as Egyptian billionaire
Naguib Sawiris's Orascom Telecom continued sliding. It had dropped 3.8% on
Sunday after Sawiris said a bid to acquire CI Capital, the investment arm of
Commercial International Bank (CIB), was being held up by national security
concerns. Orascom Telecom rebounded in late trade, closing 1.3% higher and
helping the Cairo index finish 0.2% higher.
Source:http://in.reuters.com/article/mideast-stocks-idINL5N1700SV

Saudi-led alliance says completes Yemen prisoner swap: A Saudi-led military
coalition said on Monday it had completed a prisoner swap in Yemen, exchanging
nine Saudi prisoners for 109 Yemeni nationals ahead of a planned truce and peace
talks aimed at ending the year-long war with Houthi rebels. The exchange coincided
with fresh air strikes by both the coalition and by US warplanes on Islamist militants
in southern Yemen that killed at least 21 people. According to Reuters, the coalition
did not say which group the swap was made with, but the Houthi movement said
on Sunday it had exchanged prisoners with its enemy Riyadh as a first step toward
ending a humanitarian crisis prompted by the war. The Iran-allied Houthis have
been battling forces loyal to Yemen's Saudi-backed President Abd-Rabbu Mansour
Hadi since last March in a conflict that has cost more than 6,200 lives. Saudi Arabia
received its nationals on Sunday, the coalition statement published on Saudi state
news agency SPA said. The alliance "hopes to begin a truce in conflict areas of the
Republic of Yemen" it added. Yemeni media said the nine Saudis were soldiers. The
freed Yemenis had been detained during operations in Yemen, SPA said. News
website Yemen Now published a photo of a group of smiling, waving men in white
robes and keffiyeh head scarves, which it said was of the soldiers. Reuters said it was
not immediately possible to verify the authenticity of the image.
Source:http://uk.reuters.com/article/us-yemen-security-swap-idUKKCN0WU0BX

Iran vows to pursue missile programme despite new US sanctions: Iran will
pursue its development of ballistic missiles despite the US blacklisting of more
Iranian companies linked to the programme, a senior Revolutionary Guards
commander said on Monday. The Islamic Revolutionary Guards Corps (IRGC) testfired several ballistic missiles this month, drawing condemnation from Western
leaders who believe the tests violate a United Nations resolution. The US Treasury
Department blacklisted on Thursday two Iranian companies, cutting them off from
international finance over their connection to the missile programme. Washington
had imposed similar sanctions on 11 businesses and individuals in January over a
missile test carried out by the IRGC in October 2015. "Even if they build a wall
around Iran, our missile programme will not stop," Brigadier General Amir Ali
Hajizadeh, commander of the IRGC's aerospace arm, was quoted as saying by
Tasnim news agency. "They are trying to frighten our officials with sanctions and
invasion. This fear is our biggest threat." US officials said Iran's missile test would
violate UN Security Council Resolution 2231, which calls on Iran not to conduct "any
activity" related to ballistic missiles capable of delivering nuclear weapons.
However, Washington said that a fresh missile test would not violate a July 2015
accord under which Iran has restricted its disputed nuclear programme and won
relief from UN and Western financial sanctions in return. That agreement between
Iran and six world powers was endorsed in Resolution 2231. President Hassan
Rouhani said on Sunday that boosting Iran's defence capabilities is a "strategic
policy" though Iran should take care not to provoke its enemies.
Source:http://in.reuters.com/article/iran-missiles-irgc-idINKCN0WU11Z
Rakesh Sahu
Chavan Bhogaita
Market Insights & Strategy
Global Markets
National Bank of Abu Dhabi
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