July Third Week Middle East Finance Newsletter
Kuwait Plans New Sovereign Investment Fund to Boost Growth,BlackRock, KKR Near Sale of Adnoc Oil Pipeline Stake to ADQ, Turkey’s Erdogan Embarks on Gulf Tour to Attract Investment.
BlackRock, KKR Near Sale of Adnoc Oil Pipeline Stake to ADQ
Key Takeaways
BlackRock and KKR are close to selling their combined 40% stake in Abu Dhabi National Oil Co.'s oil pipeline network to ADQ for over $4 billion, showcasing ADQ's interest in long-term investments in domestic infrastructure.
ADQ, chaired by Sheikh Tahnoon bin Zayed Al Nahyan, is a significant player in Abu Dhabi's strategic assets and has been actively expanding its investments both domestically and internationally.
Despite the world's shift towards greener energy, private equity firms like BlackRock and KKR continue to invest in oil and gas assets, highlighting the ongoing interest in the sector.
Saudi Arabia’s PIF Wealth Fund Takes $11 Billion Investment Hit
Key Takeaways
Saudi Arabia's sovereign wealth fund, the Public Investment Fund, suffered an $11 billion loss in 2022 due to global market downturns, impacting its investments.
The fund's net loss for 2022 was 36.6 billion riyals ($9.8 billion), compared to a profit of 81.8 billion riyals in the previous year.
Despite the loss, the Saudi government recorded its first surplus in almost a decade, supported by soaring oil prices and production volumes, allowing continued spending to diversify the economy away from oil.
Saudi Oil Cuts Throw Last Year’s Standout Economy Into Slow Lane
Key Takeaways
Saudi Arabia's decision to extend oil production cuts may lead to an economic contraction and make it one of the slowest-growing economies in the G20.
Despite the oil production cuts, the non-oil economy in Saudi Arabia remains strong, with robust growth in sectors outside of the oil industry.
The decline in petrodollars has pushed Saudi Arabia's budget into a deficit, potentially requiring more borrowing and increasing the government's bond issuances.
Kuwait Plans New Sovereign Investment Fund to Boost Growth
Key Takeaways
Kuwait plans to launch a new sovereign investment vehicle, the Ciyada Development Fund, to boost economic growth and improve the quality of life in the country.
The new fund will work in partnership with the private sector, operating with good governance and transparency.
A feasibility study for the Ciyada Development Fund will be completed within a year to determine its mandate and objectives.
Royal’s Firm Drags Down Abu Dhabi Index After 42,000% Rally
Key Takeaways
Companies controlled by a member of Abu Dhabi's royal family have experienced a significant drop in market value, contributing to the underperformance of Abu Dhabi's benchmark index compared to regional peers.
The decline in market value is attributed to profit booking on companies that had previously seen substantial gains, as well as uncertainties in global markets where these companies have assets.
Despite the drop in stock prices, the conglomerate IHC, chaired by Sheikh Tahnoon, has played a major role in diversifying the UAE economy and has experienced a remarkable stock surge in recent years.
Turkey’s Erdogan Embarks on Gulf Tour to Attract Investment
Key Takeaways
Turkish President Erdogan is seeking foreign investment from Gulf countries, including Saudi Arabia, the UAE, and Qatar, to support Turkey's struggling economy.
Erdogan's visit aims to strengthen economic cooperation and secure investment deals, with a target of attracting $25 billion in investments from the Gulf nations.
The trip comes as Erdogan faces economic challenges, including high inflation and a record current-account deficit, and looks to improve relations with the Arab world's petrostates.
Turkish Mystery Money Flight Topped $7 Billion in Election Month
Key Takeaways
Turkey experienced significant outflows of capital during recent elections, indicating growing economic anxiety and potential challenges to President Erdogan's rule.
The outflows of capital have led to a reliance on central bank reserves to finance the current-account deficit, resulting in a decline in official reserves.
The depreciation of the lira following the elections may help limit risks for the current-account deficit by making Turkish exports more competitive and potentially cooling off imports.
Egypt State Asset Sales Fetch $1.9 Billion in Race for Cash
Key Takeaways
Egypt's agreement to sell $1.9 billion of state assets to local firms and ADQ signals progress in reviving the economy and attracting investors.
The divestments are part of President El-Sisi's plan to replenish state coffers and fulfill terms of a $3 billion deal with the IMF.
The breakthrough deals could help Egypt unlock more financing from abroad and boost its foreign currency reserves, which are currently facing a severe crunch.
Dubai Reprimands Middle East Crypto Exchange BitOasis
Key Takeaways
BitOasis, one of the largest crypto platforms in the Middle East, is facing reprimand from Dubai's regulator for failing to meet mandated conditions.
Dubai's Virtual Assets Regulatory Authority is taking a stricter approach towards license seekers, as seen in their enforcement action against BitOasis.
The reprimand on BitOasis is part of a global trend of increased enforcement activities against crypto companies, with the UAE remaining on the FATF "gray list" for insufficient measures against illicit funds.
India, UAE to Trade in Local Currencies, Link Payments Systems
Key Takeaways
India and the United Arab Emirates have agreed to use their local currencies for cross-border transactions, aiming to boost economic cooperation between the two countries.
The agreements will facilitate seamless transactions and payments, as well as the mutual acceptance of domestic cards, potentially easing financial flows between India and the UAE.
While India's campaign to promote the global use of the rupee has had limited success so far, the agreements with the UAE could provide a significant opportunity for growth in local currency trade volumes.
An ESG Loophole Helps Drive Billions into Gulf Fossil Fuel Giants
Key Takeaways
Saudi Aramco, the world's largest oil company, indirectly benefited from funds earmarked for sustainable investments through a complex financial structure involving special purpose vehicles and bonds with high ESG scores.
The involvement of ESG investors in the capital raise of a fossil-fuel behemoth raises concerns about the effectiveness of ESG funds in ensuring investments in climate-friendly companies.
The existence of opaque and complex financial structures poses a challenge for investors who want to ensure that their money is truly supporting sustainable initiatives.