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Middle East & African Monitor - 15 March 2017

  • Iran’s hardliners seek presidential candidate
  • Russian forces deployed near Libyan border
  • GCC unlikely to abandon currency pegs – Moodys
  • Kuwait conducts successful debut bond issue
  • Saudi Electricity looks to extend 2030 SUKUK
  • USD/EGP edges above 18.00
  • Nigerian CB injects US$150 mio into interbank FX market
  • KIA buys stake in Thames Water

REGIONAL COMMENTARY

Iran’s hardliners seek presidential candidate
Conservative groups within the Iranian regime are still trying to form a coalition and identify one candidate to challenge Hassan Rouhani’s bid for a second term in office in the country’s Presidential elections, which are scheduled to take place on the 19th of May. A controversial former President, Mahmoud Ahmadinejad, who recently publically criticised Rouhani, appears to be preparing to support one of his own previous officials, Hamid Baghaei, who was a senior advisor to Ahmadinejad during his time in office, and who has already announced his plan to run. Ahmadinejad is unlikely to stand himself because Khamenei previously ‘advised’ him not to, although this did not seem to prevent him from appearing to criticise the Supreme Leader in a round-about way recently, when he reportedly stated that; “Everyone has the right to participate in the elections and no one should say who should come and who shouldn’t.” Meanwhile Rouhani has managed to gain important support for his re-election bid from the speaker of the country’s parliament, Ali Larijani, who is historically considered to be a conservative but who has begun to distance himself from this group in recent times and move towards the ‘reformist’ camp.

Russian forces deployed near Libyan border
According to a Reuters report, Russia has allegedly deployed a special forces unit along with other assets at an airbase in Egypt close to the border with Libya. This news, which has thus far been denied by both Cairo and Moscow, comes not long after the US military claimed to have spotted Russian transport aircraft and drones parked in the same area, and a week after General Thomas Waldhauser the head of US Africa Command, had stated during an interview with the Senate Armed Services committee that; "Russia is trying to exert influence on the ultimate decision of who becomes and what entity becomes in charge of the government inside Libya. They're working to influence that decision." Meanwhile the Libyan National Army, led by General Haftar, has reportedly regained control of that country’s main oil export ports, namely Es Sider and Ras Lanuf from a group called the ‘Benghazi Defence Brigades,’ who had seized the facilities following a bout of heavy fighting earlier this month.

GCC unlikely to abandon currency pegs – Moodys
In a new report on the region, Moodys Investors Service concludes that despite external payment pressures, especially on Bahrain and Oman, the GCC states are still relatively well-positioned financially to withstand this stress. Moodys acknowledges that Oman and Bahrain are more exposed to such pressure, due to their larger current account deficits and smaller hard currency reserves compared to their GCC counterparts, but also notes that both countries would most likely receive further financial support from other members if it was required. “If external pressures were to increase or external funding dried up, Moody's would anticipate stronger GCC countries to provide deposits, loans or grants to weaker countries. Moreover, GCC countries have already pledged US$20 billion to Bahrain and Oman in 2011 through a new GCC Fund. Although transfers do not pass through the Bahraini and Omani government budgets, they support their external payments positions,” the report stated. With regards to the region’s five USD pegs, Moodys observed that; “The GCC authorities are unlikely to abandon US dollar pegs as they have bolstered macroeconomic stability and private sector confidence, lowered transaction costs, and helped to avoid the currency volatility experienced by most emerging economies.”

Kuwait conducts successful debut bond issue
There was strong demand for Kuwait’s first international bond issue yesterday especially from Asian investors. The US$8 bio notional attracted a combined order book of over US$29 bio and you can read our more detailed analysis of this issuance including the pricing here: https://www.nbad.com/en-ns/insight-and-features/mena-and-global-markets/big-stories/2017/kuwait-prints-bonds.html

Saudi Electricity looks to extend 2030 SUKUK
Saudi Arabia’s state-owned electricity company has announced that it will begin holding extension discussions with holders of its Islamic bond which is currently set to mature in 2030. The company did highlight however that if an extension agreement is not reached then it would fulfil its obligations on the original maturity date.

USD/EGP edges above 18.00
USD/EGP closed around 18.10 in the interbank market yesterday due to some short-covering, and as hard currency demand by local importers preparing for Ramadan increases. We expect this demand to continue in the near term with the pair likely set to test the 18.50 level soon.

Nigerian CB injects US$150 mio into interbank FX market
The Nigerian Central Bank sold US$150 mio in 2-month FX forwards to the local banks yesterday, it also injected a further US$45 mio in the spot market to help banks fill individual requests for overseas business travel, medical fees etc. Meanwhile the unofficial USD/NGN ‘kerb’ rate remains above 450.00 against the official rate of 305.00.

KIA buys stake in Thames Water
A consortium consisting of Canada’s Borealis and the Kuwait Investment Authority have reportedly agreed to buy a 26% stake in UK based Thames Water.

15-03-2017

AND FINALLY…
“A bite from a lion is better than the look of envy” – Arabic Proverb.

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor – 15 March 2017

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