Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
Tel: +971 2 6110 127
Angola Holds Historic Election - No Regime Change Expected.
Angola’s President Eduardo dos Santos is set to step down after 38 years of ruling the south-west African state following elections which were held yesterday. While it’s still unlikely his party the MPLA will lose its long grip on power, the race could be a close one with the largest opposition UNITA party having gained a lot of ground in recent months with its promise to combat corruption. However even if the opposition did pull off a surprise victory, the incumbent administration has already taken a number of steps to ensure that the Dos Santos family and other senior MPLA officials will continue to wield significant influence in whatever form the next government will take. For example a series of new laws were passed last month which will prevent the next President from replacing the existing heads of the defence, police and intelligence services, while Eduardo Do Santos daughter Isabel will keep her job as CEO of the state-owned oil company Sonangol, his son Jose will remain chief of Angola’s sovereign wealth fund, (the latter also has a 49% share in Standard Bank Angola), while another son, Tchize, should continue on as a senior official at the state broadcasting company. Preliminary election results are due to be announced by Friday but as mentioned above the smart money predicts that the next President will be the MPLA veteran and current Defence Minister, Joao Lourenco.
Kushner Arrives In The MENA Region.
President Trump’s son-in-law and senior advisor Jared Kushner, together with his deputy National Security Advisor and a senior diplomatic negotiator are currently visiting the MENA region in a fresh push by the US to try and restart the peace process between Israel and the Palestinians. Kushner and his team were in Cairo yesterday where they met with President Sisi and his Foreign Minister, this despite Egypt’s unhappiness over a recent US decision to reduce its current military aid to the North African state by US$100 mio and suspend up to US$200 mio in financing for defence purchases over human rights issues. According to the BBC the Egyptian Foreign Ministry issued a statement in response to the decision which read as follows; "Egypt sees this measure as reflecting poor judgement of the strategic relationship that ties the two countries over long decades, and as adopting a view that lacks an accurate understanding of the importance of supporting Egypt's stability." Egypt currently receives around US$1.5 bio in military and economic aid from Washington.
Qatar’s Banking Sector Faces “Funding Pressures” – FITCH.
Fitch ratings agency published a report on Qatar’s banking sector yesterday in which it analyzed the varying degrees of pressure local banks are under due to the recent outflows of foreign deposits and rising funding costs, both factors which are driven primarily by the ongoing boycott on the country initiated by the Arab quartet. In the study which was also published on Reuters, Fitch suggests that; “The overall impact on each bank will depend on how much it relies on non-domestic sources for its funding. Banks with a greater reliance on non-domestic deposits include Ahli Bank, Al Khaliji, Commercial Bank, Doha Bank, and Qatar Islamic Bank. Banks with less reliance include Barwa Bank, International Bank of Qatar, and Qatar International Islamic Bank. Withdrawal of non-domestic deposits is likely to increase competition among banks for domestic deposits, pushing up funding costs and squeezing margins. Banks that have been more reliant on non-domestic deposits will need to price generously to attract domestic deposits away from other banks as these tend to be fairly stable. Deposits represent 75% of Qatari banks' non-equity funding. At end-May, non-domestic customer deposits accounted for 25% of total deposits, up from 10% two years ago after the Qatari government withdrew substantial deposits as falling oil prices hit revenues. As banks' fast lending growth continued, non-domestic deposits filled the gap, mainly from other GCC countries (particularly Saudi Arabia and the UAE) and Asia, attracted by high yields from well-rated banks. These are less stable than domestic deposits and the boycott of Qatar has brought this into sharp focus. There have been large net outflows of non-domestic customer deposits (June: USD4 billion; July: USD4 billion) and non-domestic interbank deposits and borrowings (June: USD11 billion; July: USD4 billion), according to data from the Qatar Central Bank. GCC creditors account for much of these; we believe Asian depositors have renewed many of their maturing deposits, albeit at slightly higher yields. The outflows are a threat to liquidity given Qatari banks' large asset-liability duration mismatches. At end-April, 90% of deposits had a contractual maturity of up to one year and 60% of up to three months, although domestic deposits tend to roll over. Qatar has ample resources to support domestic banks with funding and liquidity. The government, Qatar Investment Authority (QIA) and other public-sector companies are helping by placing more deposits in the banking system (up USD12 billion in June and USD7 billion in July), and the QCB has increased repo facilities and placements (by USD8 billion in June and USD1 billion in July). This supports our view that the Qatari authorities have a strong ability and propensity to support the country's banks. The QCB governor recently said the QIA had USD300 billion of reserves it could liquidate, which is well in excess of Qatar's external liabilities. We believe a significant proportion is highly liquid. The QCB also had net foreign reserves of about USD24 billion at end-June,” Fitch stated adding however that “All Fitch-rated Qatari banks' Issuer Default Ratings are on Rating Watch Negative, reflecting the RWN on the Qatari sovereign and significant uncertainty around the banking system due to the boycott. The IDRs are driven by potential sovereign support and could be downgraded if the sovereign ability to provide support weakens. If the boycott persists, escalates or significantly affects Qatar's economy, the sovereign could be downgraded. The banks' Viability Ratings are also on RWN, reflecting heightened risks to their operating environment, funding and liquidity, as well as earnings and profitability. Banks with higher reliance on non-domestic deposits have greater pressure on their viability Ratings.”
Chad Orders Closure Of Qatari Embassy.
The Chadian government has ordered the closure of Qatar’s embassy in the Central-African country’s capital and given its diplomats 10 days to leave. "In order to safeguard peace and security in the region, Chad calls on Qatar to cease all actions that could undermine its security as well as those of the countries of the Lake Chad basin and the Sahel," a statement by Chad’s Foreign Ministry read. Chad recalled its own ambassador from Doha back in June this year.
US Crude Inventories Fall Again.
According to yesterday’s latest EIA report, US crude stocks fell by 3.3 mio barrels to 463.17 mio last week, the 8th weekly drop in a row. Petrol stocks were also down by 1.2 mio barrels against expectations of a 643,000 draw. The market is now focusing on a storm approaching the Gulf of Mexico which may become hurricane force and thus could temporarily disrupt oil production operations in the area. Meanwhile output from Libya’s large Sharara oil field was, according to a Reuters report, still at a standstill as of late yesterday despite separate media reports to the contrary.
UK Lifts Tunisian Travel Ban.
The UK’s Foreign Office has lifted its travel restrictions on Tunisia which had been in place for the past two years. This move will likely provide a fresh boost for the North African state’s important tourism sector, which has suffered from a sharp drop in foreign visitors since the terror attacks on the resort town of Sousse and in Tunis in 2015, but that has also begun to display somewhat of a recovery since last year. Meanwhile an official at the World Travel and Tourism Council was quoted by CNN as saying earlier this month that; "The Tunisians deserve credit for implementing extra security and training to make sure it is a safe destination. Tunisia is actually more peaceful than many countries we wouldn't hesitate to visit, but they have helped the recovery by addressing any weaknesses there may have been." Following the UK decision Thomas Cook has announced that it has resumed offering holiday packages to Tunisia for dates from February 2018.
Nigeria Needs A “Unified Exchange Rate” – JPM.
USD/NGN was being quoted at 370.00 in the unofficial FX market yesterday which was slightly higher compared against Tuesday’s levels and despite the injections of hard currency liquidity by the CB this week, one of which was specifically aimed at clearing a backlog due to airlines and certain importers. Demand for US dollars from individuals has reportedly increased in recent days ahead of the Haj pilgrimage. Meanwhile offshore investors, whilst acknowledging some improvement in transparency following the introduction of NAFEX, are still calling for Nigeria to create a single FX regime instead of the current and confusing multiple window exchange rate system. Nigeria is currently “Less compelling as a frontier market. Ideally, the central bank needs to move to a unified exchange system and let the currency levels settle at the point where there is a clearing up of the foreign currency backlog,” a co-manager of JPMorgan Asset Management’s US$2.8 billion EM local-currency debt fund was quoted as saying recently by the Nigerian news website ‘Naija247’.
Pakistan Ponders Fresh Bond Issue.
Pakistan is considering conducting an Islamic or conventional Eurobond issuance in Q4 of this year according to a Reuters article. The government had stated in its annual budget earlier this year that it wanted to raise up to US$1 bio via a bond issue during the 2017/18 financial year. Pakistan previously raised US$1 bio via a 5 year Sukuk issuance in October last year which had a yield of 5.50%.
Ghana’s PPI Rate Falls.
Producer price-inflation in Ghana fell to 2.00% y/y last month from 3.20% in June according to the latest official data. The government is seeking to lower its overall inflation rate to 8% from its current level of 11.90% by the end of this year.
Saudi British Bank To Acquire Additional Stake In SABB Takaful.
Saudi British Bank has reportedly agreed to purchase a combined 32.50% stake in the SABB Takaful Company from HSBC Asia for around US$31 mio.
Did you know that one of the founders of chemistry, Jabir Ibn Haiyan, was a doctor and alchemist who lived in Iraq during the Middle Ages ?
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