Download 01-03-2016

NBAD morning news summary (01-March-2016)
Global News

ISM-Chicago PMI falls in Feb, while manufacturing activity contracts in Texas;
pending home sales hit one-year low: Data from the US on Monday showed that
factory activity contracted in the Midwest and remained subdued in Texas this
month, while the Institute for Supply Management-Chicago said its purchasing
managers index slips in February. However, coming on the heels of recent strong
data on consumer spending, the labor market, industrial production and durable
goods orders, Monday's reports did little to change the view that the economy was
regaining momentum after slowing to a 1.0% annual rate in the fourth quarter. The
Institute for Supply Management-Chicago on Monday said its purchasing managers
index fell 8.0 points to 47.6 in February as production, new orders and order
backlogs declined sharply. Factory employment in the Chicago area fell to its lowest
level since November 2009 and firms continued to draw down stocks in February,
with inventories remaining in contraction for a fourth straight month. In another
reported the Federal Reserve Bank of Dallas showed manufacturing activity in Texas
contracted in February, though the pace of decline slowed. The Dallas Fed's Texas
manufacturing index was at -31.8 this month compared to a reading of -34.6 in
January. Texas is one of the states that have been hard hit by the oil price rout. In a
separate data release, the National Association of Realtors (NAR) said its pending
home sales index declined 2.5% to 106.0 last month, the lowest level since January of
last year. The NAR attributed the drop to tight housing inventories, which are
limiting choice for potential buyers and pushing up home prices.
Source: http://www.reuters.com/article/us-usa-economy-housing-idUSKCN0W21YI

Eurozone inflation falls into negative territory heightening pressure on ECB:
Prices across the eurozone fell back into deflation in February. Analysts, according to
the FT, said that the unwelcomed development will all but ensure further monetary
stimulus from the European Central Bank next week. Eurostat, the European
Commission’s statistics bureau, said on Monday that prices fell by 0.2% in the year
to February, marking the first negative figure for prices since September. Economists
had expected a flat reading, following inflation of 0.3% in the year to January, but the
decline in energy costs weighed more than expected. Most of the drop was down to
the renewed slide in the price of oil, down more than 40% over the past 12 months.
But the core reading, which excludes more volatile items such as oil and food prices,
eased to 0.7%, from 1% in January. Several analysts have renewed their calls for
additional easing, the FT reported. The fall in broader inflation should provide
clarity on what the ECB calls “second round effects” from oil prices on inflation. In
January, Mario Draghi, the ECB president, warned: “We have to take seriously the
fact that low oil prices, low commodity prices for a long period of time may actually
have second-round effects that we definitely want to take action against.” One
reason the ECB did not offer stimulus in January was that Draghi wanted “a more
comprehensive picture” of how low oil prices feed into broader inflation.
Source:http://www.ft.com/intl/cms/s/0/5def5434-decd-11e5-b072006d8d362ba3.html#axzz41WIuSq36

China’s February manufacturing PMI slips; services PMI falls to 7-yr low showing
deepening slowdown: China’s factory gauge extended its stretch of deteriorating
conditions to a record seven months while a measure of services fell to the weakest
in seven years, underscoring the challenge for policy makers as they seek to cut
overcapacity in manufacturing without derailing growth. The manufacturing
purchasing managers index dropped to 49 in February, missing the median estimate
of 49.4 in a Bloomberg News survey of economists. It hasn’t been weaker since
January 2009. Numbers below 50 indicate conditions worsened. In a sign China’s
slowdown is spreading, the non-manufacturing PMI – which has been
outperforming the factory measure – fell to the lowest level since December 2008.
The services gauge slipped to 52.7 in February, from 53.5 in January. Measures of
new orders, selling prices, employment, backlogs and inventories were below the 50
dividing line between improving and worsening conditions. A separate
manufacturing reading from Caixin Media and Markit Economics fell to 48 in
February, from 48.4 in January On the official manufacturing measure, the new
orders, employment and purchasing quantity components slipped.
Source:http://www.bloomberg.com/news/articles/2016-03-01/china-s-pmideteriorated-in-february-as-old-growth-drivers-slow

China central bank resumes easing cycle on Monday to stem capital outflows and
boost growth; cuts reserve requirement ratio: China's central bank resumed its
easing cycle on Monday, injecting an estimated $100bn worth of long-term cash into
the economy to cushion the pain from job layoffs and bankruptcies in industries
plagued by overcapacity. The People's Bank of China (PBOC) said on its website it
was cutting the reserve requirement ratio, or the amount of cash that banks must
hold as reserves, by 50 basis points, taking the ratio to 17% for the biggest lenders.
The cut is effective from March 1, and it comes after signs of increasing tightness in
the money market last week, despite repeated daily injections through open market
operations, including a 230 billion yuan injection on Monday morning. The PBOC
said the RRR cut would help create an appropriate monetary environment to
support a "supply-side reform". The Financial Times said, based on central bank
data, it estimated that the cut to the RRR will inject about Rmb 690bn ($106bn) into
the banking system. The cut came just days after China used its role as host of the
Group of 20 (G20) to reassure trading partners that it did not intend to further
devalue the yuan, after a surprise 2% devaluation last August threw markets into a
spin. The National People’s Congress will gather Saturday, where plans for 2016 and
the next five years will be outlined. The PBOC's announcement also comes shortly
before the annual meeting of China's parliament, which must try to engineer a huge
economic shift toward services and consumption and away from basic
manufacturing, while also keeping growth stable. The move was a surprise to some
observers, given that the PBOC had previously said it would rely more on daily
injections of short-term money to keep cash flowing, rather than the long-term
addition of funds from an RRR cut.
Source:http://www.reuters.com/article/us-china-economy-rrr-idUSKCN0W214P;
http://www.ft.com/intl/cms/s/0/aa8a84fa-deda-11e5-b7fd-0dfe89910bd6.html

China stocks rise on stimulus ignoring factory slowdown, while Japanese stocks
fall as stronger yen; Oil slips from 7-week high; 10yr TY reaches 1.71%: Most
Chinese stocks advanced after the central bank’s move to cut the amount of cash
lenders must hold in reserve and a strengthening yuan countered disappointing
manufacturing data. Japanese stocks dropped on stronger yen, while other Asian
markets fluctuated. The Shanghai Composite Index edged higher in mid-morning
trading and added 0.2% to 2,693.95, rebounding from Monday’s 2.9% decline. The
Hang Seng China Enterprises Index rose 0.6%, while the Hang Seng Index added
0.4%. The Topix index in Japan slid 0.7% to 1,288.85 at the trading break in Tokyo
after rising as much as 0.4%. The Nikkei 225 Stock Average fell 0.7% to 15,916.84. The
yen gained 0.3% to 112.33 per dollar after rising 1.2% the previous day amid
speculation Japan won’t intervene to weaken the currency. Australia’s S&P/ASX 200
Index rose 0.1% and New Zealand’s S&P/NZX 50 Index climbed 0.2%. Singapore’s
Straits Times Index dropped 0.2% and Taiwan’s Taiex Index rose 0.6%. South Korea
is closed for a holiday. Futures on the Standard & Poor’s 500 fell 0.3%. Oil fell from a
seven-week high as China factory data signalled deteriorating conditions. WTI crude
for April delivery dropped as much as 23 cents to $33.52 a barrel today and was at
$33.60 at 7:20 a.m. Abu Dhabi time. The contract climbed 97 cents to $33.75 on
Monday, the highest close since Jan. 6. Brent for May settlement slid as much as 31
cents, or 0.9%, to $36.26 a barrel after the April contract expired Monday up 87 cents
at $35.97. 10-year US treasury extended its gained today as yield fell 3 basis points
today to 1.71% after falling two basis points on Monday.
Source:http://www.bloomberg.com/news/articles/2016-03-01/asia-stocks-littlechanged-as-yen-gains-offset-china-stimulus
Middle East & Africa News

Saudi says to work with oil producers to limit market volatility: Saudi Arabia will
continue to work with all main oil producers to limit market volatility and is
committed to meeting a big part of global oil demand based on commercial
considerations, its cabinet said on Monday, state news agency SPA reported. The
cabinet added in its statement after the weekly meeting that Saudi Arabia will
continue to invest in its energy sector to keep its oil production capacity to help meet
any extra demand or to deal with any disruption in global supply. "The kingdom
seeks to achieve stability in the oil markets and will always remain in contact with all
main producers in an attempt to limit volatility and it welcomes any cooperative
action," the cabinet statement said.
Source: http://www.reuters.com/article/us-saudi-oil-idUSKCN0W21CI

Saudi said to seek investment from US companies to plug gap in oil revenues:
Saudi Arabia has drawn up a new strategy to convince US companies to invest in the
kingdom, as it struggles to deal with the impact of sharply lower oil prices, a
Financial Times article reported Monday. Officials have been contacting a host of US
corporations as Riyadh looks to increase foreign investment in its stuttering
economy and boost employment, according to people familiar with the matter, the
FT reported. “The point is to attract inflows of cash and create jobs, which is why
there is a focus on retail and healthcare, which are both labour intensive sectors,”
said one Saudi banker briefed on the plans. Mohammed bin Salman Al Saud, Saudi’s
deputy crown prince, met a number of American chief executives when he and his
father, King Salman, visited the US in September. Saudi officials have also been in
contact with leading private equity firms to ask whether Riyadh can do business
with their portfolio companies, one financier said. The investment push is part of
Saudi Arabia’s drive to lessen reliance on oil prices, which have fallen from about
$115 a barrel in the summer of 2014 to $36. Mohammed bin Salman’s powerful
economic committee is working alongside the Saudi Arabian General Investment
Authority (Sagia), the promotion and licensing body for foreign investment, to boost
domestic competitiveness and channel investment. “We are figuring out ways to
attract global companies to invest over the long term,” Prince Saud bin Khalid Al
Saud, Sagia’s deputy governor, said last month. “The type of investment we are
targeting are those that add value to country.”
Source:http://www.ft.com/intl/cms/s/0/11706390-dc80-11e5-a72f1e7744c66818.html#axzz41WIuSq36

S&P says MENA sovereign debt will remain high in 2016; expects Egypt, Saudi &
Iraq to be the biggest issuers: Rating agency Standard & Poor's on Monday said it
expects MENA sovereign borrowings to remain high in 2016 and Egypt, Saudi
Arabia, & Iraq will be the biggest sovereign issuers in 2016. In a report entitled
"MENA Sovereign Debt Report 2016: Borrowing Increased Sharply In 2015 And Is
Expected To Remain Elevated In 2016", S&P said that the 13 Middle East and
Northern African (MENA) sovereigns that it rates borrowed a total of $143bn in 2015
from long-term commercial sources, which was more than double the $68bn S&P
expected in 2015. Following this sharp increase, S&P now expects that the borrowing
from similar sources for rated MENA sovereign will remain elevated in 2016 at
$134bn. S&P forecasts a $9bn, or 6%, decline in commercial borrowing in 2016,
largely due to its expectation of a modest fiscal consolidation in Egypt. Nevertheless,
S&P expects that Egypt, Saudi Arabia, and Iraq will be the biggest issuers in 2016.
S&P expects absolute debt levels in MENA to increase by $15bn by year-end 2016, to
reach $667bn in nominal terms. S&P’s estimates are focused on debt issued by a
central government in its own name and exclude local government and social
security debt, as well as debt issued by other public bodies and governmentguaranteed obligations. In terms of commercial debt instruments, S&P’s estimates
for long-term borrowing include bonds (with maturities of more than one year)
issued either on publicly listed markets or sold as private placements, as well as
commercial bank loans. In addition to commercial debt, some of the estimates S&P
uses in its study include official debt. S&P did not include government debt that may
be issued by central banks for monetary policy purposes in some countries.
Source: Bloomberg – “S&P Report Says MENA Sovereign Debt Will Remain High in
2016”

Union National Bank CEO says expects limited profit and loan growth in 2016,
could tap bond market this year: Union National Bank (UNB) doesn't expect to see
much growth in profits or lending in 2016, its chief executive said on Monday and
added that UDB could tap the bond market this year to raise funds. "I think it would
be challenging to see a higher growth rate in 2016," Mohammad Nasr Abdeen told
reporters on the sidelines of the bank's annual shareholders' meeting. UNB reported
55% profit slump in fourth quarter of 2015. Having seen provisioning levels jump by
44% year on year in the fourth quarter, and by 59% on an annual basis, Abdeen said
he expected the amount of cash set aside for bad loans in 2016 to be equal to last year
or lower. Any big jump in loan growth was also unlikely, Abdeen said. The bank
had posted a 7% increase in 2015. Abdeen said UNB could tap the bond market in
2016 to help supplement its deposit levels, which are expected to remain stable. He
also highlighted that most of its $3bn bond programme remained unused.
Source: http://in.reuters.com/article/unb-outlook-idINL8N1685Q9

Emirates Global Aluminium 2015 profit halves on weak prices: Emirates Global
Aluminium (EGA), one of the top five global producers, said its net profit fell by
nearly half in 2015, weighed down by weak prices and a slowdown in China. EGA,
owned by Abu Dhabi fund Mubadala and Investment Corporation of Dubai (ICD),
made a net profit of AED 1.9bn ($517.7m) in 2015, down 49% from AED 3.7bn a year
earlier, the company said in a statement. Revenue fell to AED 18.7bn in 2015 from
AED 19.8bn the previous year. "Last year was challenging for the aluminium
industry, largely due to global macro-economic uncertainty, growth slowdown in
China, a stronger US dollar and falling oil prices," Abdulla Kalban, EGA's chief
executive, said. The benchmark three-month aluminium price has tumbled nearly
30% in the past year to six-and-a-half year lows, pressured by output exceeding
demand. China's production of aluminium is expected to be 2-2.5 million tonnes
higher than the country's consumption in 2016, resulting in a global oversupply of
up to 1 million tonnes, Norse Hydro, a top global producer said in December. EGA
sold 2.4 million tonnes of aluminium in 2015 to more than 250 customers, up 4%
from the previous year. The firm concluded an AED 18bn conventional loan facility
and Islamic commodity murabaha facility with banks to prepay existing facilities
held by Emal and fund its growth plans, the statement said. EGA was created in
2013 from the merger of state-owned aluminium companies, Dubai Aluminium
(Dubal) and Abu Dhabi's Emirates Aluminium (Emal).
Source: http://uk.reuters.com/article/emirates-ega-results-idUKL8N1682O3

Egypt cancels 5-year T-bond issue, 10-year bond yield jumps; launches investment
scheme to lure expat dollars: Egypt cancelled Monday's 5-year treasury bond issue,
while the average yield on the 10-year bond jumped more than 21 basis points, the
Finance Ministry said on Monday. The average yield on the 10-year bonds sharply
rose to 15.999% on Monday from 15.788% in the previous auction on Feb. 15. In a
separate announcement, the country launched a new scheme on Monday to
encourage millions of Egyptians living abroad to pour their dollar savings into
special certificates, as it tries to ease an acute shortage of foreign currency that has hit
the economy. The dollar-denominated "Belady" certificate will be offered to Egyptian
expatriates by the country's three largest state-owned banks, Immigration Minister
Nabila Makram Ebeid told a news conference. "These certificates come to answer the
request of Egyptians abroad to use their savings to help their country's economy,"
said Makram Ebeid. Import-dependent Egypt has been suffering from a shortage of
foreign currency since the 2011 uprising scared off foreign investors and tourists -major sources of foreign exchange. Egypt is hoping the scheme will help it tap the
resources of almost 5 million Egyptians who live outside the country. The National
Bank of Egypt, Banque Misr, Banque Du Caire will offer maturities of one, three and
five years, with yields of 3.5%, 4.5% and 5.5% respectively. The Central Bank of
Egypt will guarantee the right of investors to repatriate the yields they earn as well
as their capital on maturity, in dollars to banks abroad, Ebeid said.
Source:http://in.reuters.com/article/egypt-treasury-bonds-idINC6N15201E;
http://af.reuters.com/article/egyptNews/idAFL8N1682FQ

UAE markets close higher Monday on momentum trades; Saudi stalls at chart
barrier: Stock markets in the Middle East ended mixed on Monday as local traders
chased after small and mid-cap stocks in the United Arab Emirates, while Saudi
Arabia, Egypt and Qatar gave up early gains as investors booked profits. Riyadh's
index initially rose as much as 1.0% as the banking sector gained, but then pulled
back as traders cashed out of speculative stocks and the petrochemical sector. The
index ended almost flat at 6,093 points, failing to break technical resistance on the
early February and end-January peaks of 6,056-6,099 points. Saudi Basic Industries,
the petrochemical giant, retreated 1.0%. But banking stocks remained resilient with
Samba Financial jumping 5.1% and Saudi British Bank adding 2.2%. In Qatar, the
main index fell 0.4% after trading up as much as 0.5%. A sell-off in blue chips was
the main drag with Islamic lender Masraf Al Rayan dropping 3.0%. After trading
down in the first hour, Dubai's index jumped 2.0% to 3,240 points, breaking technical
resistance on the late December peak of 3,189 points. Builder Arabtec surged its daily
limit and jumped 14.3% to 1.44 dirhams in its volume since June 2009. The stock is
now up 38.0% from its January low. Buying was triggered by exchange data
showing former chief executive Hasan Ismaik's stake had risen to 11.91% from
11.81%. Amlak Finance also saw its heaviest turnover since 2009; shares in the midsized finance firm rocketed 12.8% after it reported that net profit attributable to
equity holders jumped 130%. Abu Dhabi's stock index rose 1.8% after initially
trading down. Eshraq Properties was up 5.5% and First Gulf Bank surged 3.2%.
Oman index rose 0.2%, while Kuwait index slid 0.1% and Bahrain index fell 0.3%.
Egypt's main index did not hold onto early gains and closed 0.2% lower.
Source: http://uk.reuters.com/article/mideast-stocks-idUKL8N16838Q

Kenya's inflation falls, may pave way for easing of rates: Kenya's year-on-year
inflation rate slowed to 6.84% in February, the statistics office said on Monday.
According to Reuters, one analyst following this said the central bank could start
easing rates gradually. February's rate is the lowest since October last year, when it
stood at 6.72%, the statistics office said.
Source:http://af.reuters.com/article/investingNews/idAFKCN0W21UT
Rakesh Sahu
Chavan Bhogaita
Market Insights & Strategy
Global Markets
National Bank of Abu Dhabi
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