March 2016 - Al Rajhi Capital
Economic Research March 2016
Research Department ARC Research Team Tel 966 11 211 9370, [email protected]
Saudi Arabian economy
Saudi Arabian Economy The latest OPEC production numbers indicate that Saudi Arabia’s crude oil production stayed flat m-o-m at 10.2mbpd in February 2016 (up 4.1% y-o-y), post the agreement to freeze oil production. Oil prices advanced in February, after declining for three consecutive months, backed by expectations that oversupply of oil might reduce as major oil producers decided to cooperate on stabilizing crude production. The drop in US oil rig counts also boosted oil prices. Foreign reserve assets declined in January as the government continued to withdraw foreign reserves to finance its deficit. Non-oil exports and imports also dropped in December 2015, albeit at a slower pace as compared to last month. Bank deposits grew at a faster rate in January, while credit provided to private sector continued to witness a robust growth during the same period. Money supply (M3) witnessed a slower monthly decline during January, while the consumer indicators improved at a moderate pace during the same month. The non-oil private sector witnessed a strong growth in February, backed by expansion in output, new orders and employment. Inflation in the Kingdom jumped to 4.3% y-o-y in January, registering the highest level since 2011. Meanwhile, the Kingdom’s benchmark index TASI logged a monthly gain of 1.6% in February. Foreign Reserve Assets: Foreign reserve assets continued to decline for the 12th consecutive month in January 2016 (-18% y-o-y, -2.3% m-o-m), primarily as the government continued to draw down foreign reserves in order to cover its fiscal deficit arising on account of low oil prices. The government plans to issue floatingrate bonds for the first time in a decade, in order to support public finances and cover its budget deficit, which should slowdown the decline in foreign reserves. Key indicators: Saudi Arabia’s crude oil production stayed flat m-o-m at 10.2mbpd in February 2016. Brent prices gained 3.5% m-o-m to reach US$35.97/barrel at the end of February 2016. Money supply (M3) increased 3.7% yo-y in January 2016, while inflation increased to 4.3% y-o-y over the same period. Point of sale (POS) and ATM cash withdrawals increased by 5.7% and 8.2% y-o-y respectively. Non-oil exports and imports declined 3.4% and 8.8% y-o-y respectively, in December 2015. Crude price outlook: The US Energy Information Administration (EIA), in its February 2016 report, estimated Brent crude oil prices to average around US$38/barrel in 2016 and US$50/barrel in 2017. Table 1 Key macro indicators Variable
Jan-16
Dec-15
2015
2014
Inflation Rate (2007=100)
4.3%
2.3%
2.2%
2.7%
Average Oil Price (Arab Light) (US$/Barrel)
26.4
33.7
49.9
97.1
Money Supply (M3)
3.7%
2.6%
2.6%
11.9%
Total Banking Sector Claims
10.6
10.5
10.5
11.3
Interbank Interest Rate (3 Month) (BP)
1.641
1.333
0.88
0.936
Repo Rate (BP)
2.00
2.00
2.00
2.00
Reverse Repo Rate (BP)
0.5
0.5
0.25
0.25
Q3 2015*
Q2 2015*
2015*
2014* 3.6%
GDP Rate at Constant Prices (2010=100)
3.6%
4.6%
3.4%
Current Account to GDP Ratio (current prices)
-7.0%
-6.0%
-
9.8%
Total Imports (fob) to GDP Ratio (current prices)
23.9%
24.0%
-
21.0%
Non-oil Exports to GDP Ratio (current prices)
7.9%
7.4%
-
7.7%
Source: SAMA, * Provisional
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
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Economic Research March 2016
Crude oil dynamics Crude oil production rose 4.1% y-o-y in January but remained stable on a monthly basis
The Kingdom pumped out 10.2 mbpd crude oil in February 2016, registering a 4.1% yo-y increase, as compared to 4.9% y-o-y last month. However, on a monthly basis, the oil production remained stable at the January levels (0% m-o-m increase). Crude oil prices rose 3.5% m-o-m in February 2016, on hopes that global oil glut may ease as major oil producers agreed to freeze production. The decrease in the US oil rig count also supported oil prices and outages in Iraq/Nigeria also helped, while stronger consumer spending in US buoyed hopes of increase in demand. Arab light also advanced 5.4% m-o-m in February 2016.
Figure 1 Saudi crude oil production trend
Figure 2 Crude oil prices trend
mbpd
120
11.0
10.0%
110 8.0%
100
10.5
10.0
9.5
6.0%
90
4.0%
80
2.0%
70
0.0%
60 50
-2.0% 9.0
40 -4.0%
30 8.5
-6.0%
Crude Oil Production
20
YoY growth
Source: Bloomberg, Al Rajhi Capital
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
Non-oil foreign trade The pace of decline in non-oil exports and non-oil imports eased down in December
As per the latest foreign trade data released by the General Authority for Statistics, Saudi Arabia’s non-oil exports dropped at a slow pace of 3.4% y-o-y in December, as compared to annual declines of 12.5% and 16.6% in November and October, respectively. Non-oil exports were mainly driven down by plastics & rubbers (-18.7% y-o-y), which constituted 28.4% of total exports, together with a 8.9% fall in chemical products, which accounted for 30.8% of total exports. Moreover, non-oil imports fell 8.8% y-o-y in December, albeit at a slower pace, as compared to an annual decline of 14.4% in November. The decline in non-oil imports was led by machinery & electricals (-16.6% y-o-y) and ordinary metals (-36.4% y-o-y), which together contributed 32.8% of total non-oil imports. Meanwhile, the UAE maintained its position as the topmost non-oil export destination (14.7% of total exports), while the USA continued to be on the forefront of non-oil imports destination, constituting 15.6% of total imports.
Table 2 Non-Oil Exports
Commodities (SAR mn)
Oct-15
Nov-15
Dec-15
% y-o-y
Plastics & Rubbers
4,779
4,613
4,505
-18.7%
-2.3%
Chemical Products
3,897
4,425
4,880
-8.9%
10.3%
Ordinary Metals
1,132
1,222
1,211
-3.4%
-0.9%
Transport Equipments Others Total
% m-o-m
495
1,436
1,987
21.4%
38.4%
3,535
3,336
3,275
24.5%
-1.8%
13,838
15,032
15,858
-3.4%
5.5%
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 3 Components of non-oil exports
Figure 4 Export Destinations
13.0% 20.7% 28.4%
14.7% 12.5%
4.7%
62.8%
4.9%
7.6% 30.8%
Plastics & Rubbers
Chemical Products
Transport Equipments
Others
Ordinary Metals
China
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Table 3
UAE
Singapore
India
Others
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Non-Oil Imports
Commodities (SAR mn)
Oct-15
Nov-15
Dec-15
% y-o-y
% m-o-m
Machinery & Electricals
14,795
13,112
12,806
-16.6%
-2.3%
Transport Equipments
11,513
10,018
12,330
16.8%
23.1%
Ordinary Metals
5,038
4,123
3,940
-36.4%
-4.4%
Chemical Products
5,114
4,401
4,344
-14.1%
-1.3%
Others
18,349
15,556
17,705
-6.2%
13.8%
Total
54,809
47,210
51,125
-8.8%
8.3%
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Figure 7 Components of non-oil imports
Figure 8 Source countries
11.6%
25.0% 34.6% 15.6%
59.1% 7.0%
24.1%
6.8%
8.5% 7.7% Machinery & Electricals
Transport Equipments
Chemical Products
Others
Ordinary Metals
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
China
USA
Germany
Japan
Others
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
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Economic Research March 2016
Figure 9 Non-oil export trend (y-o-y)
Figure 10 Non-oil import trend (y-o-y)
YoY 80.0%
YoY 60.0% 50.0%
60.0%
40.0% 40.0%
30.0% 20.0%
20.0%
10.0% 0.0%
0.0% -10.0%
-20.0% -20.0% -40.0%
-30.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Monetary and credit indicators Money supply Broader money supply (M3) grew by 3.7% y-o-y in January 2016, to reach SAR1,764bn, as compared to the 2.6% y-o-y growth witnessed in the previous month. However, on a monthly basis, M3 declined by 0.5% in January 2016, although at a slower pace than the previous month’s decline, primarily due to a marginal increase in demand deposits during January 2016.
The rate of monthly decline in M3 eased down on the back of m-o-m rise in demand deposits during January
Figure 11 Money supply growth (y-o-y)
Figure 12 Deposits break-up SAR bn 1,200
20.0% 18.0%
1,000
16.0% 14.0%
800
12.0% 600
10.0% 8.0%
400
6.0% 4.0%
200
2.0% 0
0.0%
M1
M2
M3
Time and Saving Deposits
Source: SAMA, Al Rajhi Capital
Demand Deposits
Source: SAMA, Al Rajhi Capital
Credit and deposit growth The credit growth rate in the Kingdom continued to increase at a solid pace, while the deposit growth rate also improved in January
Total credit growth (banks’ claim on the private sector) witnessed a 9.9% y-o-y increase in January 2016 versus 9.8% in the previous month. The deposit growth rate improved to 3.4% y-o-y in January 2016, as compared to 1.9% y-o-y last month. On a monthly basis, the credit growth rate increased to 1.1%, whereas deposits declined by 0.5%, leading to an increase in the loan-to-deposit ratio to 83.7%, as compared to 82.4% in December 2015. In February 2016, the SAMA raised the limit on its loan-todeposit ratio to 90% from 85%, in order to boost liquidity and support growth in the country.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 13 Credit and deposit growth
Figure 14 Loans to deposits
YoY
86%
16.0%
84%
14.0%
82%
12.0%
80%
10.0%
78%
8.0%
76%
6.0%
74%
4.0%
72%
2.0%
70%
Deposits
Loans to Deposit ratio
Credit
Source: SAMA, Al Rajhi Capital
Source: SAMA, Al Rajhi Capital
Foreign reserve assets Foreign reserve assets dropped at a faster annual pace in January
Foreign reserve assets declined for the 12th consecutive month in January 2016, depleting at a faster rate than the previous month’s decline. The assets dropped by 18% y-o-y and stood at SAR2,258bn (~US$602bn) at the end of January, mainly due to government’s reliance on foreign reserves to cover its budget deficit. On a monthly basis, the foreign reserves declined by 2.3% in January, versus a fall of 3.0% in the previous month. Meanwhile, foreign deposits abroad dipped by 5.3% m-o-m, versus a rise of 2% m-o-m in December, while investment in foreign securities fell by 0.9% mo-m, as compared to a drop of 5.5% m-o-m in December.
Figure 15 Foreign reserves
Figure 16 Major components of foreign assets
SAR bn
3,000
25.0%
SAR bn 2,500
20.0% 2,500 15.0% 2,000
2,000
10.0% 5.0%
1,500
1,500 0.0% 1,000
-5.0% -10.0%
500
1,000
500
-15.0%
0
-20.0%
Foreign Reserves Assets
YoY
Source: SAMA, Al Rajhi Capital
0
Foreign Currency & Deposits Abroad
Investment in Foreign Assets
Source: SAMA, Al Rajhi Capital
Inflation dynamics Inflation climbed 4.3% y-o-y in January 2016, registering the highest increase since 2011
Inflation in Saudi Arabia jumped to the highest level since 2011, at 4.3% y-o-y in January 2016, as compared to 2.3% y-o-y in December 2015. Inflation surged on the back of a rise in transport and housing, water, electricity & gas prices as the government announced reduction in energy subsidies. Transport prices climbed 12.6% y-o-y, from 1.3% y-o-y last month, while housing, water, electricity & gas prices advanced 8.3% y-o-y, versus 4% y-o-y in December. However, inflation in the furnishings & household segment remained stable at 1.8% y-o-y, whereas that in the food & beverages segment slipped to 1.3% y-o-y from 1.5% y-o-y in December.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 17 Inflation trend (y-o-y)
Figure 18 Inflation drivers (y-o-y)
4.5%
14.0%
4.0%
12.0%
3.5%
10.0% 8.0%
3.0%
6.0%
2.5%
4.0%
2.0%
2.0% 1.5% 0.0% 1.0%
-2.0%
0.5%
-4.0%
0.0%
General Index Source: GAS, Al Rajhi Capital
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
Stock market indicators Benchmark Index TASI rose 1.6% in February, supported by energy, cement, telecom, industrial investment and building & construction sectors
The benchmark index (TASI) logged a monthly gain of 1.6% in February, as compared to a drop of 13.2% in January. The overall index was supported by sectors such as energy, cement, telecom, industrial investment and building & construction, which advanced 9.2%, 6.2%, 5.5%, 4.2%, and 3.0%, respectively. MetLife AIG ANB Cooperative Insurance Co. was the top performer on the index, which jumped 25.8% m-o-m in February.
Figure 19 Tadawul index performance
Figure 20 TASI one year historic 12-month forward P/E chart
Index
Million
6200 6100
400
17.0x
350
16.0x
300
15.0x
250
14.0x
200
13.0x
150
12.0x
100
11.0x
50
10.0x
6000 5900 5800 5700
5600 5500 5400 5300 5200
0
9.0x 8.0x
Volume RHS
TASI
Source: Bloomberg, Al Rajhi Capital, Data from 31st January 2016 to 29th February 2016
Disclosures Please refer to the important disclosures at the back of this report.
Source: Bloomberg, Al Rajhi Capital
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Economic Research March 2016
Figure 11 Top 5 Sectors MoM
Figure 22 Bottom 5 sectors MoM
10.0% 9.0% 8.0%
0.0%
7.0%
-2.0%
6.0% -4.0%
5.0%
-6.0%
4.0% 3.0%
-8.0%
2.0% -10.0% 1.0% -12.0%
0.0%
-14.0%
-16.0% -18.0%
Source: Tadawul, Al Rajhi Capital, MoM returns for February
Source: Tadawul, Al Rajhi Capital, MoM returns for February
Figure 4 Top 5 Gainers for the month of February
Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
MetLife AIG ANB Cooperative Insurance Co
25.8%
1.4
0.4
Insurance
Saudi Cable Co.
18.2%
9.5
1.1
Building & Construction
Saudi International Petrochemical Co.
16.1%
4.9
1.1
Petrochemical Industries
Electrical Industries Co.
15.5%
1.2
1.0
Building & Construction
Alandalus Property Co.
15.5%
1.4
12.1
Real Estate Development
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Figure 5 Top 5 Losers for the month of February
Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Altayyar Travel Group
-24.0%
7.5
4.3
Hotel & Tourism
Saudi Research and Marketing Group
-15.6%
3.4
1.5
Media and Publishing
National Medical Care Co.
-13.6%
1.9
1.3
Retail
Saudi Chemical Co.
-9.3%
2.9
0.3
Industrial Investment
Al Abdullatif Industrial Investment Co.
-8.6%
1.4
2.2
Industrial Investment
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Consumer spending indicators Consumer spending in the Kingdom witnessed a steady improvement during January
The Emirates NBD PMI indicated strong growth in the Kingdom’s non-oil private sector as the PMI stood at 54.4 in February, versus 53.9 in January. The growth in non-oil private sector was primarily supported by increase in output, new orders and employment. Meanwhile, consumer indicators grew at a steady pace in January. The point-of-sale transactions grew by 5.7% y-o-y in January 2016, as compared to 6.5% yo-y in the previous month, whereas ATM cash withdrawals registered robust growth of 8.2% y-o-y in January from a 1.3% rise in December 2015.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 23 Point-of-sale transactions (POS) trend
Figure 24 ATM cash withdrawals trend
SAR bn 20.0
50%
18.0 40%
16.0
SAR bn 80.0
50%
70.0
40%
60.0 14.0
30%
12.0
30%
50.0 20%
10.0
20%
40.0 10%
8.0 10%
6.0
30.0 0%
20.0 4.0
0%
2.0 -
-10%
POS
10.0
-10%
-
-20%
YoY
Source: SAMA, Al Rajhi Capital
Figure 25 Emirates NBD Saudi PMI Index
ATM Cash withdrawals
YoY
Source: SAMA, Al Rajhi Capital
Figure 26 Consumer spending trend (POS and ATM cash Withdrawals)
64
SAR bn 80.0
62
70.0
60
60.0
58
50.0 40.0
56 30.0 54 20.0 52 50
10.0 -
48
POS
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
ATM Cash withdrawals
Source: SAMA, Al Rajhi Capital
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Economic Research March 2016
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Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Disclaimer and additional disclosures for Economic Research Disclaimer This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this research document. This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered, duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or which would subject Al Rajhi Capital or any of its affiliates to any registration or licensing requirement within such jurisdiction.
Contact us Pritish Devassy, CFA Senior Research Analyst Tel : +966 1 211 9370 Email: [email protected]
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Disclosures Please refer to the important disclosures at the back of this report.
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Research Department ARC Research Team Tel 966 11 211 9370, [email protected]
Saudi Arabian economy
Saudi Arabian Economy The latest OPEC production numbers indicate that Saudi Arabia’s crude oil production stayed flat m-o-m at 10.2mbpd in February 2016 (up 4.1% y-o-y), post the agreement to freeze oil production. Oil prices advanced in February, after declining for three consecutive months, backed by expectations that oversupply of oil might reduce as major oil producers decided to cooperate on stabilizing crude production. The drop in US oil rig counts also boosted oil prices. Foreign reserve assets declined in January as the government continued to withdraw foreign reserves to finance its deficit. Non-oil exports and imports also dropped in December 2015, albeit at a slower pace as compared to last month. Bank deposits grew at a faster rate in January, while credit provided to private sector continued to witness a robust growth during the same period. Money supply (M3) witnessed a slower monthly decline during January, while the consumer indicators improved at a moderate pace during the same month. The non-oil private sector witnessed a strong growth in February, backed by expansion in output, new orders and employment. Inflation in the Kingdom jumped to 4.3% y-o-y in January, registering the highest level since 2011. Meanwhile, the Kingdom’s benchmark index TASI logged a monthly gain of 1.6% in February. Foreign Reserve Assets: Foreign reserve assets continued to decline for the 12th consecutive month in January 2016 (-18% y-o-y, -2.3% m-o-m), primarily as the government continued to draw down foreign reserves in order to cover its fiscal deficit arising on account of low oil prices. The government plans to issue floatingrate bonds for the first time in a decade, in order to support public finances and cover its budget deficit, which should slowdown the decline in foreign reserves. Key indicators: Saudi Arabia’s crude oil production stayed flat m-o-m at 10.2mbpd in February 2016. Brent prices gained 3.5% m-o-m to reach US$35.97/barrel at the end of February 2016. Money supply (M3) increased 3.7% yo-y in January 2016, while inflation increased to 4.3% y-o-y over the same period. Point of sale (POS) and ATM cash withdrawals increased by 5.7% and 8.2% y-o-y respectively. Non-oil exports and imports declined 3.4% and 8.8% y-o-y respectively, in December 2015. Crude price outlook: The US Energy Information Administration (EIA), in its February 2016 report, estimated Brent crude oil prices to average around US$38/barrel in 2016 and US$50/barrel in 2017. Table 1 Key macro indicators Variable
Jan-16
Dec-15
2015
2014
Inflation Rate (2007=100)
4.3%
2.3%
2.2%
2.7%
Average Oil Price (Arab Light) (US$/Barrel)
26.4
33.7
49.9
97.1
Money Supply (M3)
3.7%
2.6%
2.6%
11.9%
Total Banking Sector Claims
10.6
10.5
10.5
11.3
Interbank Interest Rate (3 Month) (BP)
1.641
1.333
0.88
0.936
Repo Rate (BP)
2.00
2.00
2.00
2.00
Reverse Repo Rate (BP)
0.5
0.5
0.25
0.25
Q3 2015*
Q2 2015*
2015*
2014* 3.6%
GDP Rate at Constant Prices (2010=100)
3.6%
4.6%
3.4%
Current Account to GDP Ratio (current prices)
-7.0%
-6.0%
-
9.8%
Total Imports (fob) to GDP Ratio (current prices)
23.9%
24.0%
-
21.0%
Non-oil Exports to GDP Ratio (current prices)
7.9%
7.4%
-
7.7%
Source: SAMA, * Provisional
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
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Economic Research March 2016
Crude oil dynamics Crude oil production rose 4.1% y-o-y in January but remained stable on a monthly basis
The Kingdom pumped out 10.2 mbpd crude oil in February 2016, registering a 4.1% yo-y increase, as compared to 4.9% y-o-y last month. However, on a monthly basis, the oil production remained stable at the January levels (0% m-o-m increase). Crude oil prices rose 3.5% m-o-m in February 2016, on hopes that global oil glut may ease as major oil producers agreed to freeze production. The decrease in the US oil rig count also supported oil prices and outages in Iraq/Nigeria also helped, while stronger consumer spending in US buoyed hopes of increase in demand. Arab light also advanced 5.4% m-o-m in February 2016.
Figure 1 Saudi crude oil production trend
Figure 2 Crude oil prices trend
mbpd
120
11.0
10.0%
110 8.0%
100
10.5
10.0
9.5
6.0%
90
4.0%
80
2.0%
70
0.0%
60 50
-2.0% 9.0
40 -4.0%
30 8.5
-6.0%
Crude Oil Production
20
YoY growth
Source: Bloomberg, Al Rajhi Capital
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
Non-oil foreign trade The pace of decline in non-oil exports and non-oil imports eased down in December
As per the latest foreign trade data released by the General Authority for Statistics, Saudi Arabia’s non-oil exports dropped at a slow pace of 3.4% y-o-y in December, as compared to annual declines of 12.5% and 16.6% in November and October, respectively. Non-oil exports were mainly driven down by plastics & rubbers (-18.7% y-o-y), which constituted 28.4% of total exports, together with a 8.9% fall in chemical products, which accounted for 30.8% of total exports. Moreover, non-oil imports fell 8.8% y-o-y in December, albeit at a slower pace, as compared to an annual decline of 14.4% in November. The decline in non-oil imports was led by machinery & electricals (-16.6% y-o-y) and ordinary metals (-36.4% y-o-y), which together contributed 32.8% of total non-oil imports. Meanwhile, the UAE maintained its position as the topmost non-oil export destination (14.7% of total exports), while the USA continued to be on the forefront of non-oil imports destination, constituting 15.6% of total imports.
Table 2 Non-Oil Exports
Commodities (SAR mn)
Oct-15
Nov-15
Dec-15
% y-o-y
Plastics & Rubbers
4,779
4,613
4,505
-18.7%
-2.3%
Chemical Products
3,897
4,425
4,880
-8.9%
10.3%
Ordinary Metals
1,132
1,222
1,211
-3.4%
-0.9%
Transport Equipments Others Total
% m-o-m
495
1,436
1,987
21.4%
38.4%
3,535
3,336
3,275
24.5%
-1.8%
13,838
15,032
15,858
-3.4%
5.5%
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 3 Components of non-oil exports
Figure 4 Export Destinations
13.0% 20.7% 28.4%
14.7% 12.5%
4.7%
62.8%
4.9%
7.6% 30.8%
Plastics & Rubbers
Chemical Products
Transport Equipments
Others
Ordinary Metals
China
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Table 3
UAE
Singapore
India
Others
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Non-Oil Imports
Commodities (SAR mn)
Oct-15
Nov-15
Dec-15
% y-o-y
% m-o-m
Machinery & Electricals
14,795
13,112
12,806
-16.6%
-2.3%
Transport Equipments
11,513
10,018
12,330
16.8%
23.1%
Ordinary Metals
5,038
4,123
3,940
-36.4%
-4.4%
Chemical Products
5,114
4,401
4,344
-14.1%
-1.3%
Others
18,349
15,556
17,705
-6.2%
13.8%
Total
54,809
47,210
51,125
-8.8%
8.3%
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Figure 7 Components of non-oil imports
Figure 8 Source countries
11.6%
25.0% 34.6% 15.6%
59.1% 7.0%
24.1%
6.8%
8.5% 7.7% Machinery & Electricals
Transport Equipments
Chemical Products
Others
Ordinary Metals
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
China
USA
Germany
Japan
Others
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
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Economic Research March 2016
Figure 9 Non-oil export trend (y-o-y)
Figure 10 Non-oil import trend (y-o-y)
YoY 80.0%
YoY 60.0% 50.0%
60.0%
40.0% 40.0%
30.0% 20.0%
20.0%
10.0% 0.0%
0.0% -10.0%
-20.0% -20.0% -40.0%
-30.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Source: GAS, Al Rajhi Capital, Data for January 2016 is not yet released
Monetary and credit indicators Money supply Broader money supply (M3) grew by 3.7% y-o-y in January 2016, to reach SAR1,764bn, as compared to the 2.6% y-o-y growth witnessed in the previous month. However, on a monthly basis, M3 declined by 0.5% in January 2016, although at a slower pace than the previous month’s decline, primarily due to a marginal increase in demand deposits during January 2016.
The rate of monthly decline in M3 eased down on the back of m-o-m rise in demand deposits during January
Figure 11 Money supply growth (y-o-y)
Figure 12 Deposits break-up SAR bn 1,200
20.0% 18.0%
1,000
16.0% 14.0%
800
12.0% 600
10.0% 8.0%
400
6.0% 4.0%
200
2.0% 0
0.0%
M1
M2
M3
Time and Saving Deposits
Source: SAMA, Al Rajhi Capital
Demand Deposits
Source: SAMA, Al Rajhi Capital
Credit and deposit growth The credit growth rate in the Kingdom continued to increase at a solid pace, while the deposit growth rate also improved in January
Total credit growth (banks’ claim on the private sector) witnessed a 9.9% y-o-y increase in January 2016 versus 9.8% in the previous month. The deposit growth rate improved to 3.4% y-o-y in January 2016, as compared to 1.9% y-o-y last month. On a monthly basis, the credit growth rate increased to 1.1%, whereas deposits declined by 0.5%, leading to an increase in the loan-to-deposit ratio to 83.7%, as compared to 82.4% in December 2015. In February 2016, the SAMA raised the limit on its loan-todeposit ratio to 90% from 85%, in order to boost liquidity and support growth in the country.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 13 Credit and deposit growth
Figure 14 Loans to deposits
YoY
86%
16.0%
84%
14.0%
82%
12.0%
80%
10.0%
78%
8.0%
76%
6.0%
74%
4.0%
72%
2.0%
70%
Deposits
Loans to Deposit ratio
Credit
Source: SAMA, Al Rajhi Capital
Source: SAMA, Al Rajhi Capital
Foreign reserve assets Foreign reserve assets dropped at a faster annual pace in January
Foreign reserve assets declined for the 12th consecutive month in January 2016, depleting at a faster rate than the previous month’s decline. The assets dropped by 18% y-o-y and stood at SAR2,258bn (~US$602bn) at the end of January, mainly due to government’s reliance on foreign reserves to cover its budget deficit. On a monthly basis, the foreign reserves declined by 2.3% in January, versus a fall of 3.0% in the previous month. Meanwhile, foreign deposits abroad dipped by 5.3% m-o-m, versus a rise of 2% m-o-m in December, while investment in foreign securities fell by 0.9% mo-m, as compared to a drop of 5.5% m-o-m in December.
Figure 15 Foreign reserves
Figure 16 Major components of foreign assets
SAR bn
3,000
25.0%
SAR bn 2,500
20.0% 2,500 15.0% 2,000
2,000
10.0% 5.0%
1,500
1,500 0.0% 1,000
-5.0% -10.0%
500
1,000
500
-15.0%
0
-20.0%
Foreign Reserves Assets
YoY
Source: SAMA, Al Rajhi Capital
0
Foreign Currency & Deposits Abroad
Investment in Foreign Assets
Source: SAMA, Al Rajhi Capital
Inflation dynamics Inflation climbed 4.3% y-o-y in January 2016, registering the highest increase since 2011
Inflation in Saudi Arabia jumped to the highest level since 2011, at 4.3% y-o-y in January 2016, as compared to 2.3% y-o-y in December 2015. Inflation surged on the back of a rise in transport and housing, water, electricity & gas prices as the government announced reduction in energy subsidies. Transport prices climbed 12.6% y-o-y, from 1.3% y-o-y last month, while housing, water, electricity & gas prices advanced 8.3% y-o-y, versus 4% y-o-y in December. However, inflation in the furnishings & household segment remained stable at 1.8% y-o-y, whereas that in the food & beverages segment slipped to 1.3% y-o-y from 1.5% y-o-y in December.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 17 Inflation trend (y-o-y)
Figure 18 Inflation drivers (y-o-y)
4.5%
14.0%
4.0%
12.0%
3.5%
10.0% 8.0%
3.0%
6.0%
2.5%
4.0%
2.0%
2.0% 1.5% 0.0% 1.0%
-2.0%
0.5%
-4.0%
0.0%
General Index Source: GAS, Al Rajhi Capital
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
Stock market indicators Benchmark Index TASI rose 1.6% in February, supported by energy, cement, telecom, industrial investment and building & construction sectors
The benchmark index (TASI) logged a monthly gain of 1.6% in February, as compared to a drop of 13.2% in January. The overall index was supported by sectors such as energy, cement, telecom, industrial investment and building & construction, which advanced 9.2%, 6.2%, 5.5%, 4.2%, and 3.0%, respectively. MetLife AIG ANB Cooperative Insurance Co. was the top performer on the index, which jumped 25.8% m-o-m in February.
Figure 19 Tadawul index performance
Figure 20 TASI one year historic 12-month forward P/E chart
Index
Million
6200 6100
400
17.0x
350
16.0x
300
15.0x
250
14.0x
200
13.0x
150
12.0x
100
11.0x
50
10.0x
6000 5900 5800 5700
5600 5500 5400 5300 5200
0
9.0x 8.0x
Volume RHS
TASI
Source: Bloomberg, Al Rajhi Capital, Data from 31st January 2016 to 29th February 2016
Disclosures Please refer to the important disclosures at the back of this report.
Source: Bloomberg, Al Rajhi Capital
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Economic Research March 2016
Figure 11 Top 5 Sectors MoM
Figure 22 Bottom 5 sectors MoM
10.0% 9.0% 8.0%
0.0%
7.0%
-2.0%
6.0% -4.0%
5.0%
-6.0%
4.0% 3.0%
-8.0%
2.0% -10.0% 1.0% -12.0%
0.0%
-14.0%
-16.0% -18.0%
Source: Tadawul, Al Rajhi Capital, MoM returns for February
Source: Tadawul, Al Rajhi Capital, MoM returns for February
Figure 4 Top 5 Gainers for the month of February
Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
MetLife AIG ANB Cooperative Insurance Co
25.8%
1.4
0.4
Insurance
Saudi Cable Co.
18.2%
9.5
1.1
Building & Construction
Saudi International Petrochemical Co.
16.1%
4.9
1.1
Petrochemical Industries
Electrical Industries Co.
15.5%
1.2
1.0
Building & Construction
Alandalus Property Co.
15.5%
1.4
12.1
Real Estate Development
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Figure 5 Top 5 Losers for the month of February
Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Altayyar Travel Group
-24.0%
7.5
4.3
Hotel & Tourism
Saudi Research and Marketing Group
-15.6%
3.4
1.5
Media and Publishing
National Medical Care Co.
-13.6%
1.9
1.3
Retail
Saudi Chemical Co.
-9.3%
2.9
0.3
Industrial Investment
Al Abdullatif Industrial Investment Co.
-8.6%
1.4
2.2
Industrial Investment
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Consumer spending indicators Consumer spending in the Kingdom witnessed a steady improvement during January
The Emirates NBD PMI indicated strong growth in the Kingdom’s non-oil private sector as the PMI stood at 54.4 in February, versus 53.9 in January. The growth in non-oil private sector was primarily supported by increase in output, new orders and employment. Meanwhile, consumer indicators grew at a steady pace in January. The point-of-sale transactions grew by 5.7% y-o-y in January 2016, as compared to 6.5% yo-y in the previous month, whereas ATM cash withdrawals registered robust growth of 8.2% y-o-y in January from a 1.3% rise in December 2015.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
Figure 23 Point-of-sale transactions (POS) trend
Figure 24 ATM cash withdrawals trend
SAR bn 20.0
50%
18.0 40%
16.0
SAR bn 80.0
50%
70.0
40%
60.0 14.0
30%
12.0
30%
50.0 20%
10.0
20%
40.0 10%
8.0 10%
6.0
30.0 0%
20.0 4.0
0%
2.0 -
-10%
POS
10.0
-10%
-
-20%
YoY
Source: SAMA, Al Rajhi Capital
Figure 25 Emirates NBD Saudi PMI Index
ATM Cash withdrawals
YoY
Source: SAMA, Al Rajhi Capital
Figure 26 Consumer spending trend (POS and ATM cash Withdrawals)
64
SAR bn 80.0
62
70.0
60
60.0
58
50.0 40.0
56 30.0 54 20.0 52 50
10.0 -
48
POS
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
ATM Cash withdrawals
Source: SAMA, Al Rajhi Capital
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Economic Research March 2016
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Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research March 2016
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Disclosures Please refer to the important disclosures at the back of this report.
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