Saudi Arabia
KSA Quarterly Monitor
Q2 2016
2
Asiya Research at a glance Francisco Quintana [email protected]
Every month, we provide: 1)
Macroeconomic outlook.
2)
Analysis of all countries in Asia and GCC, and some key industrialized economies.
3)
Trading developments on all major commodities.
Camille Accad [email protected]
Karmen Meneses [email protected]
Mahmoud Galal [email protected]
www.asiyainvestments.com
Jordi Rof [email protected]
Ahmad Al‐Nafisi [email protected]
IMPORTANT DISCLAIMER: The information contained in this report is prepared by the Research Department of Asiya Investments and is believed to be reliable, but its accuracy and completeness are not warranted. Opinions, estimates, and investment strategies and views expressed herein are: 1) based on current market prices, data, and conditions; 2) subject to change without notice; and 3) may differ from the opinions expressed ‐ for other purposes or in other contexts ‐ by other areas of Asiya. Asiya does and seeks to do business in countries covered in its research reports; hence, investors should be aware of potential conflicts of interests that could affect the reports’ objectivity. Research recommendations do not constitute financial advice nor extend offers to participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions.
KSA Quarterly Monitor ‐ Q2 2016
3
Saudi Arabia: increasingly difficult to shield economy from oil shock
Indicator Real GDP Growth (YoY) IP Growth (YoY) Exports* (YoY) Imports* (YoY) Trade Balance* (% of GDP) Money Supply, M2 (YoY) Inflation, CPI (YoY) Current Account (% of GDP) Budget Balance (% of GDP) Government Debt (% of GDP) USD:SAR
2015 2016f 2017f 3.4 1.2 1.7 0.8 0.8 0.8 ‐37.3 ‐21.7 7.8 ‐4.8 ‐3.7 10.6 ‐7.1 ‐14.2 ‐13.6 2.5 ‐4.7 5.8 2.1 3.1 3.1 ‐3.5 ‐4.7 ‐1.9 ‐14.8 ‐14.2 ‐9.5 6.3 18.0 25.3 3.8 3.8 3.8
1. Economy: business cycle in late contraction Growth: fell further in nominal terms as oil prices are harming exports. However, economic growth picked up in real terms.
– •
Consumption: improved, in terms of credit demand and consumer sentiment regarding the next 6 months. However, deteriorating financial conditions may hurt consumer demand going forward.
•
Government: contributed negatively on GDP growth in Q3. Same trend to persist as the government cuts costs, such as subsidies on specific products to tackle ongoing large fiscal deficit.
•
Net exports: contributed to the decline of GDP in nominal terms. Trade balance turned from surplus to deficit due to low oil prices when including services. When excluding services, trade balance remained in surplus.
–
Inflation: spiked in 2016 after the government decided to cut subsidies on energy products such as gasoline and diesel.
–
Labor market: Saudization process is slow.
2. Markets: negative performance. –
Negative market performance in yearly terms, but improving slightly.
3. Risks: global slowdown, social unrest, and falling oil prices. –
Lower oil prices could strain the government’s ability to spend and support the economy.
–
Political instability due to youth unemployment. Sectarian unrest. Spillover effects from conflicts in the region.
–
‘Saudization’ of the labor force is gradually increasing the cost of firms, although the impact has not been large yet.
* Includes goods & services in current USD. Source: Asiya Research on Consensus Economics, Oxford Economics and IMF, 2016. KSA Quarterly Monitor ‐ Q2 2016
4
Saudi Arabia: low oil price is hurting nominal GDP growth Real GDP growth eased, while contracted in nominal terms ... … on sluggish exports and government spending. SA: Real GDP growth %chg, YoY
SA: Contribution to nominal GDP Since 2013
%pt, YoY 20
Since 2013
10
15 5
10 5
0
0 ‐5
‐5
‐10 ‐15
‐10
Real GDP ‐20 Nominal GDP
‐15
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
Nov‐13
Aug‐13
Source: Asiya Research on CDSI, 2016
Consumption Export Nominal GDP
Government Import
Source: Asiya Research on CDSI, 2016 KSA Quarterly Monitor ‐ Q2 2016
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
‐20
Nov‐13
Aug‐13
‐25
Investment Change in stock
5
Saudi Arabia: crude oil production remained around maximum capacity Oil production fell in Q4‐2015.
Saudi’s rig counts exceeds major peers.
SA: Energy production Mb per day 13
SA: Rotary rig count %chg, YoY 13
Since 2013
10 8
10
80
8
70
5 5 3 3 0 0
Number of rigs 90
‐3
Since 2014
60 50 40 30 20
‐3
‐5 10
‐5
KSA Quarterly Monitor ‐ Q2 2016
Saudi Arabia Kuwait
Qatar Dubai
Source: Asiya Research on Baker Hughes, 2016
Feb‐16
Dec‐15
Oct‐15
Aug‐15
Jun‐15
Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Crude oil Natural gas plant liquids Crude oil (rhs) Natural gas plant liquids (rhs) Source: Ministry of Petroleum and Mineral Resources, 2016
0 Feb‐14
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
Dec‐13
‐8
Oman Abu Dhabi
6
Saudi Arabia: slight bounce in price could support nominal GDP
Crude oil prices witnessed a slight recovery this year.
Saudi Arabia refines a large part of its crude. KSA: Output ‐ refined energy products
SA: Exports vs. crude oil prices 1973 = 100 160
USD/barrel 120
Since 2014
Mb per day
Since 2004
2.5
Fuel Gasoline & naphtha Jet fuel Total refined product
140 100 2.0
120
Diesel Asphalt Liquid gas
80
100
1.5
80
60 1.0
60 40 Export unit value (lhs)
40
Brent crude oil prices 20
20
0.5
OPEC oil basket price
Source: Asiya Research on IMF, 2016
Source: Asiya Research on IMF, Thomson Reuters & OPEC, 2016 KSA Quarterly Monitor ‐ Q2 2016
2014
2013
2012
2011
2010
2009
2008
2007
2006
0.0 2005
Mar‐16
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
0
2004
0
7
Saudi Arabia: goods trade balance in surplus, with services in deficit
Deficit widened as exports remained in contraction ... … but trade balance in surplus when excluding services. SA: Foreign trade %chg, YoY
SA: Foreign trade – goods only riyal, bn
Since 2013
30
%chg, YoY 60
200
Since 2013
USD, bn 200
150
20 10
150
40
100
100
50
0
20
0
50
‐50
‐10
0
‐100 ‐20
0
‐150
‐30
Trade balance (rhs)
‐40
Exports
‐200
Source: Asiya Research on Central Department of Statistics, KSA, 2016
Source: Asiya Research on IMF, 2016
KSA Quarterly Monitor ‐ Q2 2016
‐150
Aug‐15
Jun‐15
‐200 Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Feb‐14
Aug‐13
‐60
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
‐400
Dec‐13
‐350
‐60 Nov‐13
Trade balance (rhs) Trade balance ‐ goods & services (rhs) Exports Imports
‐40
Oct‐13
Imports
Aug‐13
‐100
‐250 ‐300
‐50
‐50
‐20
8
Saudi Arabia: goods trade balance in deficit with most countries Exports to the US fell less ...
Imports from China dropped, but rebounded from ASEAN.
SA: Contribution to goods exports
SA: Contribution to goods imports
As of October, 2015
As of October, 2015
Last 3 months
Middle East
Korea
Last 3 months
Previous 3 months
Other
Previous 3 months
US
5‐yr average
5 yr average
Middle East ASEAN ASEAN India
Hong Kong
Japan
Singapore
China
China Other
US
Japan EU
% pt, YoY
NIE
EZ
% pt, YoY
India ‐10
‐5
0
5
Source: Asiya Research on IMF, 2016
‐6
‐4
‐2
Source: Asiya Research on IMF, 2016 KSA Quarterly Monitor ‐ Q2 2016
0
2
4
9
Saudi Arabia: Saudization process is slow Unemployment rate for nationals fell, but still high... SA: Unemployment by Nationality % 14
Since 2012
… while non‐Saudis increased in the labor force. SA: Labor force
person, mn 7
12
6
10
5
%chg, YoY
Since H1‐2013
6
5
4 8
4 3
6
3
4
2
2
1
0
0
2
Total
Saudi
Non‐Saudi
Source: Asiya Research on General Authority for Statistics, 2016 KSA Quarterly Monitor ‐ Q2 2016
1
0
Saudi
Non‐Saudi
Labor force (rhs)
Source: Asiya Research on General Authority for Statistics, 2016
10
Saudi Arabia: inflation rate surged after subsidy cuts Inflation rate spiked in the first quarter of 2016.
Clothing and housing main contributors last year.
SA: Inflation, current quarter
SA: Contribution to inflation, previous quarter
Since 2014
As of Q4 2015
%chg, YoY 5.0
Clothing
4.5
Housing
4.0 Cost of living general index 3.5
Food Last 3 months
3.0
Transport
Previous 3 months
2.5
3‐yr average
Education 2.0 Furnishing
1.5
Other Feb‐16
Dec‐15
Oct‐15
Aug‐15
Jun‐15
Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Feb‐14
1.0
Source: Asiya Research on CDSI, 2016
% pt, YoY 0
0.5
Source: Asiya Research on CDSI, 2016 KSA Quarterly Monitor ‐ Q2 2016
1
1.5
11
Saudi Arabia: financial conditions deteriorating rapidly Interbank rate continued is rising rapidly.
Money supply growth dropped by the end of 2015. SA: Money supply growth
%chg, YoY
SA: Interest rate
%
Since 2014
Since 2014
18
1.8
16
1.6
14
1.4
12
1.2
10
1.0
8 0.8 6 0.6
M1
4
M2
2
1 month interbank rate
0.4
5yr average
0.2
0
Source: Asiya Research on SAMA, 2016 KSA Quarterly Monitor ‐ Q2 2016
Mar‐16
Jan‐16
Nov‐15
Sep‐15
Jul‐15
May‐15
Mar‐15
Jan‐15
Nov‐14
Sep‐14
Jul‐14
May‐14
Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
Source: Asiya Research on SAMA, 2016
Mar‐14
0.0
‐2
12
Saudi Arabia: consumer credit growth bottomed out Investors expect better outlook. Diffusion index
Consumer credit growth improved despite falling car credit. SA: Consumer & credit card loans
SA: Investor confidence
%pt, YoY 20 Others*
Since 2013
7
6
Since 2013
Education, healthcare and tourism Furniture & durable goods Cars & equipment Real estate finance Consumer loan growth Credit card loan growth
15
5 10 4 5
3 Investor confidence (next 6 months) Investor confidence (current)
2
0
1
Source: Asiya Research IFO World Economic Survey, 2016. KSA Quarterly Monitor ‐ Q2 2016
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
Feb‐16
Aug‐15
Feb‐15
Aug‐14
Feb‐14
Aug‐13
Feb‐13
0
Dec‐13
‐5
Note: ‘Others’ component includes education and furniture components before Q3‐2015. Source: Asiya Research on SAMA, 2016.
13
Saudi Arabia: demand deposits falling fast as uncertainty hurts economy Time deposit growth on the rise …
… while demand deposit growth fell.
SA: Time deposits
SA: Demand deposits
30
250
25
200
20
150
15
100
10
50
5
0
0
‐50 Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
‐5
Source: Asiya Research on SAMA, 2016.
25
800
20
600
15
400
10
200
5
0
0 ‐5
‐200
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
300
1,000
Oct‐15
35
Jul‐15
350
Apr‐15
40
Jan‐15
400
30
Demand deposits YoY growth (rhs)
Oct‐14
45
YoY growth (rhs)
%chg, YoY
Since 2014
Jul‐14
Time deposits
SAR, bn 1,200
Apr‐14
450
%chg, YoY
Jan‐14
Since 2014
SAR, bn
14
Saudi Arabia: central bank’s foreign security holdings coming down Letters of credit growth rose.
Central bank’s foreign assets are shrinking.
SA: Trade deposits
% chg, YoY
Since 2014
400
35
30
300
25
250
20
200
15
150
10
100
5
50
0
0 Deposits for letter of credit
10
10
0
0
‐10
‐10
‐20
‐20
‐30
‐30
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Source: Asiya Research on SAMA, 2016.
Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jul‐14
Apr‐14
Jan‐16
Oct‐15
Jul‐15
Apr‐15
‐100 Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
20
‐50
YoY Growth (rhs)
‐10
Deposits with banks abroad (rhs) 20
Jan‐14
‐5
30
Investment in foreign securities
350
30
%chg, YoY
Since 2014
Jan‐15
40
SA: Central bank assets
%chg, YoY
Oct‐14
SAR, bn
15
Saudi Arabia: international reserves falling rapidly Central bank’s assets, mostly foreign, falling ...
… translated into lower international reserves. SA: International reserves
SA: Central bank balance sheet assets SAR, bn
Deposits w banks abroad
Gold
Inv. in foreign securities
Cash
Source: Asiya Research on SAMA, 2016.
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
Oct‐15
Jul‐15
Apr‐15
0 Jan‐15
0
Since 2013
Oct‐14
500
Jan‐14
500
Jan‐16
1,000
Oct‐15
1,000
Jul‐15
1,500
Apr‐15
1,500
Jan‐15
2,000
Oct‐14
2,000
Jul‐14
2,500
Apr‐14
2,500
Jan‐14
3,000
Jul‐14
Since 2014
3,000
Apr‐14
SAR, bn
16
Saudi Arabia: SAR relatively unchanged against the US dollar
SAR remained pegged to the USD.
SAR strengthened in real terms.
SA: Foreign exchange
SA: Foreign exchange
per USD 3.80
Since 2014
1970 = 50 130
Since 2014
3.79
125
3.78
120 REER
115
3.77 USD:SAD
3.76
110 105
3.75
100
3.74
95 90
Source: Asiya Research on Thomson Reuters, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
Jul‐15
Oct‐15
Feb‐16
Nov‐15
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
3.70
Apr‐15
80 Jan‐15
3.71
Oct‐14
85 Jan‐14
3.72
Appreciation
Jul‐14
Appreciation
Apr‐14
3.73
Note: The REER is derived from the Trade Weighted USD Index, and calculated as a weighted average of the price of various currencies relative to the USD. Source: Asiya Research on J.P. Morgan, 2016.
17
Saudi Arabia: stock market performance following oil price trend Stock market recovered in 2016 … SA: Stock market
Index
… on media stocks mostly. SA: Market return by sector
%chg, YoY
As of March, 2015
Since 2015 50
10,000 Tadawul YoY Change (rhs)
9,500
40
Media Energy Telecom
9,000
30
8,500
20
8,000
10
7,500
0
7,000
‐10
6,500
‐20
6,000
‐30
5,500
‐40
Construction
5,000
‐50
Tourism
Transport Real Estate Insurance Industrials
Last 3 months Previous 3 months 5 yr average
Financials Multi Inv. Petrochem Food Cement
Mar‐16
Feb‐16
Jan‐16
Dec‐15
Nov‐15
Oct‐15
Sep‐15
Aug‐15
Jul‐15
Jun‐15
May‐15
Apr‐15
Mar‐15
Retail
Source: Asiya Research on Thomson Reuters, 2016. KSA Quarterly Monitor ‐ Q2 2016
% pt, YoY ‐60
‐40
‐20
0
20
Source: Asiya Research on Thomson Reuters, 2015.
40
60
18
Asiya Research ‐ Contact Information Asiya Research ‐ Asiya Investments KIPCO Tower, floor 31 Khalid Bin Al Waleed Street, Sharq Kuwait Tel: + 965 2297 1300 Fax: + 965 2297 1310 @AsiyaInvest [email protected] www.asiyainvestments.com
Disclaimer Throughout this presentation (“Presentation”) “Asiya Investments”, “our”, “we” or “us” refers to the Asiya Group, comprising of a number of group entities including Asiya Capital Investments Company K.S.C.P. (“ACIC”), Asiya Asset Management (Cayman) Ltd. (“AAMC”), Asiya Investments Hong Kong Limited (“AIHK”) and Asiya Investments (Dubai) Limited (“AID”). Asiya Investments does not make any representations or give any warranties in relation to this report or presentation and disclaims all responsibility in relation thereto and for any consequences arising from the recipient investing in preferred shares of the proposed Fund (“Fund”) as a result of matters disclosed hereby. Investment involves risks and possible loss of principal. The value and income derived from investments may go down as well as up. The Fund may utilize short selling, which can result in substantial and possibly unlimited losses. The Fund may employ derivatives and leverage, which involve special risks. The Fund’s shares may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on the Fund. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. The recipient should seek independent professional advice before investing in the proposed Fund as the presentation does not purport to provide all of the information the recipient may require to evaluate an investment in the proposed Fund. The information in this presentation is provided “as is” and “as available” and the accuracy or completeness of the statements, opinions and views have not been assured or warranted. Actual results could also differ materially. The past investment performance is not indicative of future results of an investment. Neither Asiya Investments, nor their related entities, affiliates or officers guarantee or make any representations as to the success of the proposed investment programme, nor as to the economic return or target return mentioned in this presentation. This presentation shall not constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for any preferred shares. Any further distribution or reproduction of this document, in whole or in part, or the divulgence of any of its contents, is prohibited. ACIC is an Investment Company regulated by the Capital Markets Authority (“CMA”) and Central Bank of Kuwait (“CBK”) in Kuwait; AAMC is licensed as a Securities Manager and Securities Advisor under Section 6(2) of the Securities Investment Business Law (2011 Revision) and regulated by the Cayman Islands Monetary Authority (“CIMA”), AID is regulated by the Dubai Financial Services Authority (“DFSA”) and AIHK is a Licensed Corporation (CE Number: AZD395) under Section 116 of the Hong Kong Securities and Futures Ordinance (Cap. 571) ("SFO") for carrying on Type 4 "Advising on Securities" and Type 9 "Asset Management" regulated activities and is regulated by the Securities and Futures Commission in Hong Kong ("SFC"). Pursuant to its license, AIHK provides services to Professional Investors solely and does not hold client assets (both defined under the SFO). AIHK is also a registered investment adviser (CRD Number: 171241) with the US Securities and Exchange Commission (“SEC”). The CMA, CBK, CIMA, SFC, SEC and DFSA have not reviewed and approved this or any other of our marketing documents. The risk factors associated with the Fund are set out in the relevant Fund Prospectus and these should be read and understood before making any investment decisions. A copy of the relevant Fund Prospectus can be obtained from us upon request. If you do not understand the contents of this document you should consult an authorized financial advisor. This Investor Presentation is intended for and is accessible to only eligible investors as defined in the Fund’s Prospectus. As such, this Presentation is intended for Professional and Market Counterparty Clients, as defined in the DFSA’s Conduct of Business Rules (“COB”) and Professional Investors as defined under the SFO and subsidiary legislation in Hong Kong and therefore is not directed at, and must not, be delivered or relied upon by, a retail client.
KSA Quarterly Monitor ‐ Q2 2016
Q2 2016
2
Asiya Research at a glance Francisco Quintana [email protected]
Every month, we provide: 1)
Macroeconomic outlook.
2)
Analysis of all countries in Asia and GCC, and some key industrialized economies.
3)
Trading developments on all major commodities.
Camille Accad [email protected]
Karmen Meneses [email protected]
Mahmoud Galal [email protected]
www.asiyainvestments.com
Jordi Rof [email protected]
Ahmad Al‐Nafisi [email protected]
IMPORTANT DISCLAIMER: The information contained in this report is prepared by the Research Department of Asiya Investments and is believed to be reliable, but its accuracy and completeness are not warranted. Opinions, estimates, and investment strategies and views expressed herein are: 1) based on current market prices, data, and conditions; 2) subject to change without notice; and 3) may differ from the opinions expressed ‐ for other purposes or in other contexts ‐ by other areas of Asiya. Asiya does and seeks to do business in countries covered in its research reports; hence, investors should be aware of potential conflicts of interests that could affect the reports’ objectivity. Research recommendations do not constitute financial advice nor extend offers to participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions.
KSA Quarterly Monitor ‐ Q2 2016
3
Saudi Arabia: increasingly difficult to shield economy from oil shock
Indicator Real GDP Growth (YoY) IP Growth (YoY) Exports* (YoY) Imports* (YoY) Trade Balance* (% of GDP) Money Supply, M2 (YoY) Inflation, CPI (YoY) Current Account (% of GDP) Budget Balance (% of GDP) Government Debt (% of GDP) USD:SAR
2015 2016f 2017f 3.4 1.2 1.7 0.8 0.8 0.8 ‐37.3 ‐21.7 7.8 ‐4.8 ‐3.7 10.6 ‐7.1 ‐14.2 ‐13.6 2.5 ‐4.7 5.8 2.1 3.1 3.1 ‐3.5 ‐4.7 ‐1.9 ‐14.8 ‐14.2 ‐9.5 6.3 18.0 25.3 3.8 3.8 3.8
1. Economy: business cycle in late contraction Growth: fell further in nominal terms as oil prices are harming exports. However, economic growth picked up in real terms.
– •
Consumption: improved, in terms of credit demand and consumer sentiment regarding the next 6 months. However, deteriorating financial conditions may hurt consumer demand going forward.
•
Government: contributed negatively on GDP growth in Q3. Same trend to persist as the government cuts costs, such as subsidies on specific products to tackle ongoing large fiscal deficit.
•
Net exports: contributed to the decline of GDP in nominal terms. Trade balance turned from surplus to deficit due to low oil prices when including services. When excluding services, trade balance remained in surplus.
–
Inflation: spiked in 2016 after the government decided to cut subsidies on energy products such as gasoline and diesel.
–
Labor market: Saudization process is slow.
2. Markets: negative performance. –
Negative market performance in yearly terms, but improving slightly.
3. Risks: global slowdown, social unrest, and falling oil prices. –
Lower oil prices could strain the government’s ability to spend and support the economy.
–
Political instability due to youth unemployment. Sectarian unrest. Spillover effects from conflicts in the region.
–
‘Saudization’ of the labor force is gradually increasing the cost of firms, although the impact has not been large yet.
* Includes goods & services in current USD. Source: Asiya Research on Consensus Economics, Oxford Economics and IMF, 2016. KSA Quarterly Monitor ‐ Q2 2016
4
Saudi Arabia: low oil price is hurting nominal GDP growth Real GDP growth eased, while contracted in nominal terms ... … on sluggish exports and government spending. SA: Real GDP growth %chg, YoY
SA: Contribution to nominal GDP Since 2013
%pt, YoY 20
Since 2013
10
15 5
10 5
0
0 ‐5
‐5
‐10 ‐15
‐10
Real GDP ‐20 Nominal GDP
‐15
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
Nov‐13
Aug‐13
Source: Asiya Research on CDSI, 2016
Consumption Export Nominal GDP
Government Import
Source: Asiya Research on CDSI, 2016 KSA Quarterly Monitor ‐ Q2 2016
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
‐20
Nov‐13
Aug‐13
‐25
Investment Change in stock
5
Saudi Arabia: crude oil production remained around maximum capacity Oil production fell in Q4‐2015.
Saudi’s rig counts exceeds major peers.
SA: Energy production Mb per day 13
SA: Rotary rig count %chg, YoY 13
Since 2013
10 8
10
80
8
70
5 5 3 3 0 0
Number of rigs 90
‐3
Since 2014
60 50 40 30 20
‐3
‐5 10
‐5
KSA Quarterly Monitor ‐ Q2 2016
Saudi Arabia Kuwait
Qatar Dubai
Source: Asiya Research on Baker Hughes, 2016
Feb‐16
Dec‐15
Oct‐15
Aug‐15
Jun‐15
Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Crude oil Natural gas plant liquids Crude oil (rhs) Natural gas plant liquids (rhs) Source: Ministry of Petroleum and Mineral Resources, 2016
0 Feb‐14
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
Dec‐13
‐8
Oman Abu Dhabi
6
Saudi Arabia: slight bounce in price could support nominal GDP
Crude oil prices witnessed a slight recovery this year.
Saudi Arabia refines a large part of its crude. KSA: Output ‐ refined energy products
SA: Exports vs. crude oil prices 1973 = 100 160
USD/barrel 120
Since 2014
Mb per day
Since 2004
2.5
Fuel Gasoline & naphtha Jet fuel Total refined product
140 100 2.0
120
Diesel Asphalt Liquid gas
80
100
1.5
80
60 1.0
60 40 Export unit value (lhs)
40
Brent crude oil prices 20
20
0.5
OPEC oil basket price
Source: Asiya Research on IMF, 2016
Source: Asiya Research on IMF, Thomson Reuters & OPEC, 2016 KSA Quarterly Monitor ‐ Q2 2016
2014
2013
2012
2011
2010
2009
2008
2007
2006
0.0 2005
Mar‐16
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
0
2004
0
7
Saudi Arabia: goods trade balance in surplus, with services in deficit
Deficit widened as exports remained in contraction ... … but trade balance in surplus when excluding services. SA: Foreign trade %chg, YoY
SA: Foreign trade – goods only riyal, bn
Since 2013
30
%chg, YoY 60
200
Since 2013
USD, bn 200
150
20 10
150
40
100
100
50
0
20
0
50
‐50
‐10
0
‐100 ‐20
0
‐150
‐30
Trade balance (rhs)
‐40
Exports
‐200
Source: Asiya Research on Central Department of Statistics, KSA, 2016
Source: Asiya Research on IMF, 2016
KSA Quarterly Monitor ‐ Q2 2016
‐150
Aug‐15
Jun‐15
‐200 Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Feb‐14
Aug‐13
‐60
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
‐400
Dec‐13
‐350
‐60 Nov‐13
Trade balance (rhs) Trade balance ‐ goods & services (rhs) Exports Imports
‐40
Oct‐13
Imports
Aug‐13
‐100
‐250 ‐300
‐50
‐50
‐20
8
Saudi Arabia: goods trade balance in deficit with most countries Exports to the US fell less ...
Imports from China dropped, but rebounded from ASEAN.
SA: Contribution to goods exports
SA: Contribution to goods imports
As of October, 2015
As of October, 2015
Last 3 months
Middle East
Korea
Last 3 months
Previous 3 months
Other
Previous 3 months
US
5‐yr average
5 yr average
Middle East ASEAN ASEAN India
Hong Kong
Japan
Singapore
China
China Other
US
Japan EU
% pt, YoY
NIE
EZ
% pt, YoY
India ‐10
‐5
0
5
Source: Asiya Research on IMF, 2016
‐6
‐4
‐2
Source: Asiya Research on IMF, 2016 KSA Quarterly Monitor ‐ Q2 2016
0
2
4
9
Saudi Arabia: Saudization process is slow Unemployment rate for nationals fell, but still high... SA: Unemployment by Nationality % 14
Since 2012
… while non‐Saudis increased in the labor force. SA: Labor force
person, mn 7
12
6
10
5
%chg, YoY
Since H1‐2013
6
5
4 8
4 3
6
3
4
2
2
1
0
0
2
Total
Saudi
Non‐Saudi
Source: Asiya Research on General Authority for Statistics, 2016 KSA Quarterly Monitor ‐ Q2 2016
1
0
Saudi
Non‐Saudi
Labor force (rhs)
Source: Asiya Research on General Authority for Statistics, 2016
10
Saudi Arabia: inflation rate surged after subsidy cuts Inflation rate spiked in the first quarter of 2016.
Clothing and housing main contributors last year.
SA: Inflation, current quarter
SA: Contribution to inflation, previous quarter
Since 2014
As of Q4 2015
%chg, YoY 5.0
Clothing
4.5
Housing
4.0 Cost of living general index 3.5
Food Last 3 months
3.0
Transport
Previous 3 months
2.5
3‐yr average
Education 2.0 Furnishing
1.5
Other Feb‐16
Dec‐15
Oct‐15
Aug‐15
Jun‐15
Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
Jun‐14
Apr‐14
Feb‐14
1.0
Source: Asiya Research on CDSI, 2016
% pt, YoY 0
0.5
Source: Asiya Research on CDSI, 2016 KSA Quarterly Monitor ‐ Q2 2016
1
1.5
11
Saudi Arabia: financial conditions deteriorating rapidly Interbank rate continued is rising rapidly.
Money supply growth dropped by the end of 2015. SA: Money supply growth
%chg, YoY
SA: Interest rate
%
Since 2014
Since 2014
18
1.8
16
1.6
14
1.4
12
1.2
10
1.0
8 0.8 6 0.6
M1
4
M2
2
1 month interbank rate
0.4
5yr average
0.2
0
Source: Asiya Research on SAMA, 2016 KSA Quarterly Monitor ‐ Q2 2016
Mar‐16
Jan‐16
Nov‐15
Sep‐15
Jul‐15
May‐15
Mar‐15
Jan‐15
Nov‐14
Sep‐14
Jul‐14
May‐14
Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
Source: Asiya Research on SAMA, 2016
Mar‐14
0.0
‐2
12
Saudi Arabia: consumer credit growth bottomed out Investors expect better outlook. Diffusion index
Consumer credit growth improved despite falling car credit. SA: Consumer & credit card loans
SA: Investor confidence
%pt, YoY 20 Others*
Since 2013
7
6
Since 2013
Education, healthcare and tourism Furniture & durable goods Cars & equipment Real estate finance Consumer loan growth Credit card loan growth
15
5 10 4 5
3 Investor confidence (next 6 months) Investor confidence (current)
2
0
1
Source: Asiya Research IFO World Economic Survey, 2016. KSA Quarterly Monitor ‐ Q2 2016
Dec‐15
Sep‐15
Jun‐15
Mar‐15
Dec‐14
Sep‐14
Jun‐14
Mar‐14
Feb‐16
Aug‐15
Feb‐15
Aug‐14
Feb‐14
Aug‐13
Feb‐13
0
Dec‐13
‐5
Note: ‘Others’ component includes education and furniture components before Q3‐2015. Source: Asiya Research on SAMA, 2016.
13
Saudi Arabia: demand deposits falling fast as uncertainty hurts economy Time deposit growth on the rise …
… while demand deposit growth fell.
SA: Time deposits
SA: Demand deposits
30
250
25
200
20
150
15
100
10
50
5
0
0
‐50 Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
‐5
Source: Asiya Research on SAMA, 2016.
25
800
20
600
15
400
10
200
5
0
0 ‐5
‐200
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
300
1,000
Oct‐15
35
Jul‐15
350
Apr‐15
40
Jan‐15
400
30
Demand deposits YoY growth (rhs)
Oct‐14
45
YoY growth (rhs)
%chg, YoY
Since 2014
Jul‐14
Time deposits
SAR, bn 1,200
Apr‐14
450
%chg, YoY
Jan‐14
Since 2014
SAR, bn
14
Saudi Arabia: central bank’s foreign security holdings coming down Letters of credit growth rose.
Central bank’s foreign assets are shrinking.
SA: Trade deposits
% chg, YoY
Since 2014
400
35
30
300
25
250
20
200
15
150
10
100
5
50
0
0 Deposits for letter of credit
10
10
0
0
‐10
‐10
‐20
‐20
‐30
‐30
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Source: Asiya Research on SAMA, 2016.
Jan‐16
Oct‐15
Jul‐15
Apr‐15
Jul‐14
Apr‐14
Jan‐16
Oct‐15
Jul‐15
Apr‐15
‐100 Jan‐15
Oct‐14
Jul‐14
Apr‐14
Jan‐14
20
‐50
YoY Growth (rhs)
‐10
Deposits with banks abroad (rhs) 20
Jan‐14
‐5
30
Investment in foreign securities
350
30
%chg, YoY
Since 2014
Jan‐15
40
SA: Central bank assets
%chg, YoY
Oct‐14
SAR, bn
15
Saudi Arabia: international reserves falling rapidly Central bank’s assets, mostly foreign, falling ...
… translated into lower international reserves. SA: International reserves
SA: Central bank balance sheet assets SAR, bn
Deposits w banks abroad
Gold
Inv. in foreign securities
Cash
Source: Asiya Research on SAMA, 2016.
Source: Asiya Research on SAMA, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
Oct‐15
Jul‐15
Apr‐15
0 Jan‐15
0
Since 2013
Oct‐14
500
Jan‐14
500
Jan‐16
1,000
Oct‐15
1,000
Jul‐15
1,500
Apr‐15
1,500
Jan‐15
2,000
Oct‐14
2,000
Jul‐14
2,500
Apr‐14
2,500
Jan‐14
3,000
Jul‐14
Since 2014
3,000
Apr‐14
SAR, bn
16
Saudi Arabia: SAR relatively unchanged against the US dollar
SAR remained pegged to the USD.
SAR strengthened in real terms.
SA: Foreign exchange
SA: Foreign exchange
per USD 3.80
Since 2014
1970 = 50 130
Since 2014
3.79
125
3.78
120 REER
115
3.77 USD:SAD
3.76
110 105
3.75
100
3.74
95 90
Source: Asiya Research on Thomson Reuters, 2016. KSA Quarterly Monitor ‐ Q2 2016
Jan‐16
Jul‐15
Oct‐15
Feb‐16
Nov‐15
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
3.70
Apr‐15
80 Jan‐15
3.71
Oct‐14
85 Jan‐14
3.72
Appreciation
Jul‐14
Appreciation
Apr‐14
3.73
Note: The REER is derived from the Trade Weighted USD Index, and calculated as a weighted average of the price of various currencies relative to the USD. Source: Asiya Research on J.P. Morgan, 2016.
17
Saudi Arabia: stock market performance following oil price trend Stock market recovered in 2016 … SA: Stock market
Index
… on media stocks mostly. SA: Market return by sector
%chg, YoY
As of March, 2015
Since 2015 50
10,000 Tadawul YoY Change (rhs)
9,500
40
Media Energy Telecom
9,000
30
8,500
20
8,000
10
7,500
0
7,000
‐10
6,500
‐20
6,000
‐30
5,500
‐40
Construction
5,000
‐50
Tourism
Transport Real Estate Insurance Industrials
Last 3 months Previous 3 months 5 yr average
Financials Multi Inv. Petrochem Food Cement
Mar‐16
Feb‐16
Jan‐16
Dec‐15
Nov‐15
Oct‐15
Sep‐15
Aug‐15
Jul‐15
Jun‐15
May‐15
Apr‐15
Mar‐15
Retail
Source: Asiya Research on Thomson Reuters, 2016. KSA Quarterly Monitor ‐ Q2 2016
% pt, YoY ‐60
‐40
‐20
0
20
Source: Asiya Research on Thomson Reuters, 2015.
40
60
18
Asiya Research ‐ Contact Information Asiya Research ‐ Asiya Investments KIPCO Tower, floor 31 Khalid Bin Al Waleed Street, Sharq Kuwait Tel: + 965 2297 1300 Fax: + 965 2297 1310 @AsiyaInvest [email protected] www.asiyainvestments.com
Disclaimer Throughout this presentation (“Presentation”) “Asiya Investments”, “our”, “we” or “us” refers to the Asiya Group, comprising of a number of group entities including Asiya Capital Investments Company K.S.C.P. (“ACIC”), Asiya Asset Management (Cayman) Ltd. (“AAMC”), Asiya Investments Hong Kong Limited (“AIHK”) and Asiya Investments (Dubai) Limited (“AID”). Asiya Investments does not make any representations or give any warranties in relation to this report or presentation and disclaims all responsibility in relation thereto and for any consequences arising from the recipient investing in preferred shares of the proposed Fund (“Fund”) as a result of matters disclosed hereby. Investment involves risks and possible loss of principal. The value and income derived from investments may go down as well as up. The Fund may utilize short selling, which can result in substantial and possibly unlimited losses. The Fund may employ derivatives and leverage, which involve special risks. The Fund’s shares may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on the Fund. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. The recipient should seek independent professional advice before investing in the proposed Fund as the presentation does not purport to provide all of the information the recipient may require to evaluate an investment in the proposed Fund. The information in this presentation is provided “as is” and “as available” and the accuracy or completeness of the statements, opinions and views have not been assured or warranted. Actual results could also differ materially. The past investment performance is not indicative of future results of an investment. Neither Asiya Investments, nor their related entities, affiliates or officers guarantee or make any representations as to the success of the proposed investment programme, nor as to the economic return or target return mentioned in this presentation. This presentation shall not constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for any preferred shares. Any further distribution or reproduction of this document, in whole or in part, or the divulgence of any of its contents, is prohibited. ACIC is an Investment Company regulated by the Capital Markets Authority (“CMA”) and Central Bank of Kuwait (“CBK”) in Kuwait; AAMC is licensed as a Securities Manager and Securities Advisor under Section 6(2) of the Securities Investment Business Law (2011 Revision) and regulated by the Cayman Islands Monetary Authority (“CIMA”), AID is regulated by the Dubai Financial Services Authority (“DFSA”) and AIHK is a Licensed Corporation (CE Number: AZD395) under Section 116 of the Hong Kong Securities and Futures Ordinance (Cap. 571) ("SFO") for carrying on Type 4 "Advising on Securities" and Type 9 "Asset Management" regulated activities and is regulated by the Securities and Futures Commission in Hong Kong ("SFC"). Pursuant to its license, AIHK provides services to Professional Investors solely and does not hold client assets (both defined under the SFO). AIHK is also a registered investment adviser (CRD Number: 171241) with the US Securities and Exchange Commission (“SEC”). The CMA, CBK, CIMA, SFC, SEC and DFSA have not reviewed and approved this or any other of our marketing documents. The risk factors associated with the Fund are set out in the relevant Fund Prospectus and these should be read and understood before making any investment decisions. A copy of the relevant Fund Prospectus can be obtained from us upon request. If you do not understand the contents of this document you should consult an authorized financial advisor. This Investor Presentation is intended for and is accessible to only eligible investors as defined in the Fund’s Prospectus. As such, this Presentation is intended for Professional and Market Counterparty Clients, as defined in the DFSA’s Conduct of Business Rules (“COB”) and Professional Investors as defined under the SFO and subsidiary legislation in Hong Kong and therefore is not directed at, and must not, be delivered or relied upon by, a retail client.
KSA Quarterly Monitor ‐ Q2 2016
