Saudi Arabia’s first sovereign bond issue has been a success. The bond raised US$17.5 billion, the largest ever by an emerging market country, was around four times subscribed, totalled orders of $67bn, and since its issuance last week it has performed well in the secondary market.
This bond issue was well distributed globally, especially among investors in the Americas, who covered close to half of the order book. There is not much else that a debut sovereign issuer can ask for.
This is an important event from an economic perspective, and important for corporate bond issuers in the kingdom and the wider Arabian Gulf, particularly in the UAE. It’s important the issuance went well as the kingdom plans to be a prolific issuer through 2020, with about $100bn of it.
This could easily have been a much bigger offering and priced more aggressively. It was smart by banks and issuers to leave some upside for investors – a window has been left open for future deals.
True, investors demanded a bigger premium over similarly rated US Treasuries to hold the Saudi bonds than in recent offerings by Qatar and Abu Dhabi. That is a given – Saudi is rated A1 by Moody’s, two steps lower than Qatar – but the gap is narrowing fast.
More than 1,500 accounts put orders in for the 30-year bond. Spreads are tightening, and the five, 10 and 30-year bonds, which were all issued below par, are heading higher. The kingdom raised $5.5bn in the five and 10-year bonds and $6.5bn in 30-year debt.
That is a clear sign of a not-too-greedy issuer that is also skilful in pushing for long-dated debt. Investors were happy to take up 30-year bonds, which is a testament to the country’s long-term debt sustainability and credibility.
Saudi Arabia priced the 30-year note at the same spread that higher-rated Qatar printed its similarly dated bonds in May, at 210 basis points over Treasuries.
Investors provided an affirmation of Saudi Arabia’s long-term diversification plans and Deputy Crown Prince Mohammed bin Salman’s much-needed economic overhaul programme.
Saudi Arabia’s debt to GDP, including the latest bond, is among the lowest in the world at 12 per cent. In contrast, Italy and Portugal have surpassed 125 per cent and Greece is at 177 per cent.
Given Saudi Arabia’s dollar peg, it has tools available on two fronts during an era of low oil revenue – fiscal policy and oil. Saudi is fiscally consolidating and reducing profligate spending. On oil, it is proactive on output cuts.
Saudi Arabia’s minister of energy and industry Khalid Al Falih said many nations are willing to join Opec in cutting production to secure a continued improvement in oil prices.
Russia has said it is considering an output freeze or a reduction. Brent could assume levels above $60 next year and $70 in 2018. Higher oil prices will eventually help to tighten spreads (cost of borrowing) for the current tranche of bonds as well as future ones.
The bond provides a fiscal bonus that can over time alleviate some domestic liquidity pressure to support pro-cyclical fiscal policies and provide dollars to the system. It seems that investors have been prepared to overlook, for now, the damage low oil prices are inflicting on Saudi Arabia’s economy. A rising budget deficit is forcing the country to cut generous subsidies.
This first bond offering will go a long way in reassuring investors that there is change and fiscal consolidation is taken seriously.
However, financing productive public investments that spur private sector growth, confidence and consumption are central. They will also allow the country to start repaying debts to its contractors.
The IMF has projected a fiscal deficit of 13 per cent this year, compared to 15.9 per cent last year and 9.5 per cent for next year.
Saudi Arabia had $73bn in direct government debt as of the end of August, $63bn of which was raised from monthly sales of local currency debt from local banks.
The Saudi riyal offerings and a drop in deposits as well as lower confidence have tightened liquidity in the country’s banks, prompting lenders to raise the interest rates they charge one another for loans.
The three-month Saudi interbank offered rate has climbed for 15 straight months, more than trebling to 2.38 per cent over the past year, the highest level in more than seven years.
Nevertheless, markets are responding favourably to the changes in Saudi Arabia. Five-year credit default swaps have been falling over the past month. The cost to insure Saudi debt against default has fallen this month as a reflection of improved fiscal outlook.
The sense that foreign investors are prepared to give Saudi time to adjust is also likely to have an effect on local confidence. The sense of success in the bond market will also be reflected in the equity market outlook.
Equity market liberalisation, in particular Saudi’s ultimate inclusion in the MSCI benchmark, should be a centrepiece of this. It is broadly expected that MSCI will add Saudi Arabia to the watch list next year for a potential announcement of an emerging market inclusion by 2018, and eventual implementation by 2019.
There are also other benefits – now there is a benchmark from which to price Saudi corporate bonds, as they will find it far easier to issue bonds at more competitive pricing. The debut sale will allow for other issuers in the region as well. Jordan is preparing another bond and others won’t be far behind.
The bond issue should relieve pressure on Gulf markets more broadly. Uncertainties about the implications of a slowing economy and rising fiscal dangers have spilled over into regional markets, also depressing valuations there. For the reasons discussed above, this doubtfulness can potentially wane.
The UAE, which has the best underlying story, is set to benefit over the short to medium term.
John Sfakianakis is the director of economic research at the Gulf Research Centre in Riyadh.
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Specs: 2024 McLaren Artura Spider
Engine: 3.0-litre twin-turbo V6 and electric motor
Max power: 700hp at 7,500rpm
Max torque: 720Nm at 2,250rpm
Transmission: Eight-speed dual-clutch auto
0-100km/h: 3.0sec
Top speed: 330kph
Price: From Dh1.14 million ($311,000)
On sale: Now
TWISTERS
Director:+Lee+Isaac+Chung
Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos
Rating:+2.5/5
Confirmed bouts (more to be added)
Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez
Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.
Company profile
Name: Fruitful Day
Founders: Marie-Christine Luijckx, Lyla Dalal AlRawi, Lindsey Fournie
Based: Dubai, UAE
Founded: 2015
Number of employees: 30
Sector: F&B
Funding so far: Dh3 million
Future funding plans: None at present
Future markets: Saudi Arabia, potentially Kuwait and other GCC countries
MATCH INFO
Real Madrid 2
Vinicius Junior (71') Mariano (90+2')
Barcelona 0
What went into the film
25 visual effects (VFX) studios
2,150 VFX shots in a film with 2,500 shots
1,000 VFX artists
3,000 technicians
10 Concept artists, 25 3D designers
New sound technology, named 4D SRL
Company profile
Name: Tratok Portal
Founded: 2017
Based: UAE
Sector: Travel & tourism
Size: 36 employees
Funding: Privately funded
Company profile
Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices
Kill
Director: Nikhil Nagesh Bhat
Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal
Rating: 4.5/5
The specs+
Engine: 2x201bhp AC Permanent-magnetic electric
Transmission: n/a
Power: 402bhp
Torque: 659Nm
Price estimate: Dh200,000
On sale: Q3 2022
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Pari
Produced by: Clean Slate Films (Anushka Sharma, Karnesh Sharma) & KriArj Entertainment
Director: Prosit Roy
Starring: Anushka Sharma, Parambrata Chattopadhyay, Ritabhari Chakraborty, Rajat Kapoor, Mansi Multani
Three stars
What's in my pazhamkootan?
Add:
Parippu – moong dal and coconut curry
Sambar – vegetable-infused toor dal curry
Aviyal – mixed vegetables in thick coconut paste
Thoran – beans and other dry veggies with spiced coconut
Khichdi – lentil and rice porridge
Optional:
Kootukari – stew of black chickpeas, raw banana, yam and coconut paste
Olan – ash gourd curry with coconut milk
Pulissery – spiced buttermilk curry
Rasam – spice-infused soup with a tamarind base
Avoid:
Payasam – sweet vermicelli kheer
COMPANY PROFILE
Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others
Founders: Ines Mena, Claudia Ribas, Simona Agolini, Nourhan Hassan and Therese Hundt
Date started: January 2017, app launched November 2017
Based: Dubai, UAE
Sector: Private/Retail/Leisure
Number of Employees: 18 employees, including full-time and flexible workers
Funding stage and size: Seed round completed Q4 2019 - $1m raised
Funders: Oman Technology Fund, 500 Startups, Vision Ventures, Seedstars, Mindshift Capital, Delta Partners Ventures, with support from the OQAL Angel Investor Network and UAE Business Angels
Company Profile
Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government
The more serious side of specialty coffee
While the taste of beans and freshness of roast is paramount to the specialty coffee scene, so is sustainability and workers’ rights.
The bulk of genuine specialty coffee companies aim to improve on these elements in every stage of production via direct relationships with farmers. For instance, Mokha 1450 on Al Wasl Road strives to work predominantly with women-owned and -operated coffee organisations, including female farmers in the Sabree mountains of Yemen.
Because, as the boutique’s owner, Garfield Kerr, points out: “women represent over 90 per cent of the coffee value chain, but are woefully underrepresented in less than 10 per cent of ownership and management throughout the global coffee industry.”
One of the UAE’s largest suppliers of green (meaning not-yet-roasted) beans, Raw Coffee, is a founding member of the Partnership of Gender Equity, which aims to empower female coffee farmers and harvesters.
Also, globally, many companies have found the perfect way to recycle old coffee grounds: they create the perfect fertile soil in which to grow mushrooms.
Naga
Director: Meshal Al Jaser
Starring: Adwa Bader, Yazeed Almajyul, Khalid Bin Shaddad
Rating: 4/5
Results:
6.30pm: Al Maktoum Challenge Round-2 (PA) | Group 1 US$75,000 (Dirt) | 2,200 metres
Winner: Goshawke, Fernando Jara (jockey), Ali Rashid Al Raihe (trainer)
7.05pm: UAE 1000 Guineas (TB) | Listed $250,000 (D) | 1,600m
Winner: Silva, Oisin Murphy, Pia Brendt
7.40pm: Meydan Classic Trial (TB) | Conditions $100,000 (Turf) | 1,400m
Winner: Golden Jaguar, Connor Beasley, Ahmad bin Harmash
8.15pm: Al Shindagha Sprint (TB) | Group 3 $200,000 (D) | 1,200m
Winner: Drafted, Pat Dobbs, Doug Watson
8.50pm: Handicap (TB) | $175,000 (D) | 1,600m
Winner: Capezzano, Mickael Barzalona, Sandeep Jadhav
9.25pm: Handicap (TB) | $175,000 (T) | 2,000m
Winner: Oasis Charm, William Buick, Charlie Appleby
10pm: Handicap (TB) | $135,000 (T) | 1,600m
Winner: Escalator, Christopher Hayes, Charlie Fellowes
RESULTS
Men – semi-finals
57kg – Tak Chuen Suen (MAC) beat Phuong Xuan Nguyen (VIE) 29-28; Almaz Sarsembekov (KAZ) beat Zakaria Eljamari (UAE) by points 30-27.
67kg – Mohammed Mardi (UAE) beat Huong The Nguyen (VIE) by points 30-27; Narin Wonglakhon (THA) v Mojtaba Taravati Aram (IRI) by points 29-28.
60kg – Yerkanat Ospan (KAZ) beat Amir Hosein Kaviani (IRI) 30-27; Long Doan Nguyen (VIE) beat Ibrahim Bilal (UAE) 29-28
63.5kg – Abil Galiyev (KAZ) beat Truong Cao Phat (VIE) 30-27; Nouredine Samir (UAE) beat Norapat Khundam (THA) RSC round 3.
71kg – Shaker Al Tekreeti (IRQ) beat Fawzi Baltagi (LBN) 30-27; Amine El Moatassime (UAE) beat Man Kongsib (THA) 29-28
81kg – Ilyass Hbibali (UAE) beat Alexandr Tsarikov (KAZ) 29-28; Khaled Tarraf (LBN) beat Mustafa Al Tekreeti (IRQ) 30-27
86kg – Ali Takaloo (IRI) beat Mohammed Al Qahtani (KSA) RSC round 1; Emil Umayev (KAZ) beat Ahmad Bahman (UAE) TKO round
All The Light We Cannot See
Creator: Steven Knight
Stars: Mark Ruffalo, Hugh Laurie, Aria Mia Loberti
Rating: 1/5
FIXTURES
Monday, January 28
Iran v Japan, Hazza bin Zayed Stadium (6pm)
Tuesday, January 29
UAEv Qatar, Mohamed Bin Zayed Stadium (6pm)
Friday, February 1
Final, Zayed Sports City Stadium (6pm)
SERIES INFO
Cricket World Cup League Two
Nepal, Oman, United States tri-series
Tribhuvan University, Kathmandu
Fixtures
Wednesday February 5, Oman v Nepal
Thursday, February 6, Oman v United States
Saturday, February 8, United States v Nepal
Sunday, February 9, Oman v Nepal
Tuesday, February 11, Oman v United States
Wednesday, February 12, United States v Nepal
Table
The top three sides advance to the 2022 World Cup Qualifier.
The bottom four sides are relegated to the 2022 World Cup playoff
1 United States 8 6 2 0 0 12 +0.412
2 Scotland 8 4 3 0 1 9 +0.139
3 Namibia 7 4 3 0 0 8 +0.008
4 Oman 6 4 2 0 0 8 -0.139
5 UAE 7 3 3 0 1 7 -0.004
6 Nepal 0 0 0 0 0 0 0
7 PNG 8 0 8 0 0 0 -0.458
India cancels school-leaving examinations
MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich v Real Madrid
When: April 25, 10.45pm kick-off (UAE)
Where: Allianz Arena, Munich
Live: BeIN Sports HD
Second leg: May 1, Santiago Bernabeu, Madrid
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 178hp at 5,500rpm
Torque: 280Nm at 1,350-4,200rpm
Transmission: seven-speed dual-clutch auto
Price: from Dh209,000
On sale: now
The Last White Man
Author: Mohsin Hamid
192 pages
Published by: Hamish Hamilton (UK), Riverhead Books (US)
Release date: out now in the US, August 11 (UK)
Company Profile
Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000