Saudi Economic Report - May 2016 - Al Rajhi Capital
Economic Research May 2016
Research Department ARC Research Team Tel 966 11 211 9370, [email protected]
Saudi Arabian economy
Saudi Arabian Economy The Kingdom maintained oil output at an elevated level (~10.3mbpd in April 2016), in-line with its focus on market share. However, oil prices rose in April due to falling US crude output and production disruptions in a few regions. Saudi nonoil PMI fell m-o-m in April to 54.2, but is still robust, indicating continued expansion in the non-oil economy. Inflation in the Kingdom remained at ~4.3% yo-y in March, primarily due to the hike in energy and utility prices, coming into effect from the start of the year. Saudi inter-bank lending rates surged to above 2%, the highest level since 2009. With deposits starting to decline, the banking sector is likely to feel the squeeze (partly offset by relaxed cap on loan-to-deposit ratio to 90% from 85% in February by SAMA). Non-oil exports dropped at a fast pace in January 2016. Non-oil imports also fell in January, albeit at a slower pace compared to December. The recently released Saudi Vision 2030 document comprised proposals which aim to transform the economy away from dependence on oil, by targeting higher private sector involvement, creating additional revenue streams for the government and more efficient utilization of Kingdom’s resources. A cabinet reshuffle was also done to support the reforms. Further details of reforms are to be shared in the National Transformation Plan (NTP), which is likely to be announced next month. On the equity front, the benchmark index TASI logged a monthly gain of 9.4% in April, tracking better than expected Q1 results, rise in crude prices and optimism in the market on reforms. Foreign Reserve Assets: Foreign reserve assets declined for the 14th consecutive month in March 2016, falling to the lowest level since April 2012. The decline in reserves could be attributed to the measures taken by the Kingdom to cover its budget deficit due to lower oil revenue. In order to finance the deficit, the Saudi government is likely to raise US$10 billion from global banks. Key indicators: Saudi Arabia’s crude oil production edged up 0.2% on a yearly basis in April 2016 to reach around 10.3mbpd. Brent crude oil prices advanced 16.2% m-o-m to reach US$ 47.37/barrel at the end of April 2016. Money supply (M3) edged down 0.4% y-o-y in March 2016, while inflation was up by 4.3% y-o-y in the same month. Point of sale transactions (POS) grew 2.0% y-o-y, whereas ATM cash withdrawals fell by 3.0% y-o-y in March 2016. Crude price outlook: The US Energy Information Administration (EIA), in its April 2016 report, estimated Brent crude oil prices to average around US$35/barrel in 2016 and US$41/barrel in 2017. Table 1 Key macro indicators Variable
Mar-16
Feb-16
2015
2014
Inflation Rate (2007=100)
4.3%
4.2%
2.2%
2.7%
Average Oil Price (Arab Light) (US$/Barrel)
34.7
28.8
49.9
97.1
-0.4%
-0.9%
2.6%
11.9%
Money Supply (M3) Total Banking Sector Claims
13.8
12.3
10.5
11.3
Interbank Interest Rate (3 Month) (BP)
1.773
1.734
0.88
0.936
Repo Rate (BP)
2.00
2.00
2.00
2.00
0.5
0.5
0.5
0.25
Q4 2015*
Q3 2015*
2015*
2014*
GDP Rate at Constant Prices (2010=100)
3.64%
3.61%
3.4%
3.6%
Current Account to GDP Ratio (current prices)
-14.7%
-6.7%
-8.2%
9.8%
Total Imports (fob) to GDP Ratio (current prices)
23.8%
23.9%
23.7%
21.0%
7.6%
7.9%
7.6%
7.7%
Reverse Repo Rate (BP)
Non-oil Exports to GDP Ratio (current prices) 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 May 2016
Crude oil dynamics Crude oil production edged up 0.2% y-o-y in April 2016 to reach 10.3mbpd
Saudi Arabian crude oil production stood at 10.3mbpd in April 2016, indicating a 0.2% y-o-y rise. On a sequential basis, crude oil production advanced 0.8% m-o-m (versus a drop of 0.1% in March). Crude oil prices climbed 16.2% m-o-m in April 2016, versus a rise of 7.8% in the previous month. The rise in oil prices was supported by a continuous drop in US crude output, along with a weak US dollar. Oil prices were also boosted by the production disruption in Kuwait (worker strike), Nigeria, and Venezuela. The fall in US oil rig count also supported the jump in oil prices. Meanwhile, Arab light climbed 23.5% m-o-m in April 2016.
Figure 1 Saudi crude oil production trend
Figure 2 Crude oil prices trend
mbpd
120
10.8
12.0%
10.6
10.0%
10.4
8.0%
110 100 90
10.2
6.0%
10.0
4.0%
9.8 2.0%
9.6
0.0%
9.4 9.2
-2.0%
9.0
-4.0%
8.8
-6.0%
Saudi Crude oil production
80 70 60 50 40 30 20
YoY growth
Source: Bloomberg, Al Rajhi Capital
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
Saudi Interbank Offered Rates Saudi interbank offered rate recorded its highest level in seven years
The three-month Saudi Interbank Offered Rate rose by ~22bps to 2.03% in April 2016, recording its highest peak since January 2009 owing to low oil prices and increasing government borrowings, leading to a tight liquidity scenario in the Kingdom. The Saudi interbank offered rate has witnessed a jump of 46bps in 2016, the highest increase since 2005.
Non-oil foreign trade As per the latest foreign trade data released by the General Authority for Statistics,
The Kingdom’s non-oil exports and nonSaudi Arabia’s non-oil exports plummeted by 22.2% y-o-y in January, as compared to oil imports in January fell by 22.2% and annual declines of 3.4% and 12.5% in December and November, respectively. Non-oil 6.7%, respectively. exports were mainly backed by the fall in exports of chemical products (-40.4% y-o-y), which constituted 24.4% of total exports, together with an 11.1% fall in plastic & rubbers, which accounted for 33.1% of total exports. Moreover, non-oil imports declined by 6.7% y-o-y in January, versus an 8.8% y-o-y decline in December. The non-oil imports were pulled down by ordinary metals (-30.3% y-o-y) and machinery & electrical (-12.2% y-o-y), which together contributed 35.2% of total non-oil imports. Meanwhile, the UAE maintained its position as the topmost non-oil export destination (14.5% of total exports), while the USA continued to be on the forefront of non-oil imports destination, constituting 14.5% of total imports followed closely by China at 14.3% of total imports.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Table 2 Non-Oil Exports
Commodities (SAR mn)
Nov-15
Dec-15
Jan-16
% y-o-y
% m-o-m
Plastics & Rubbers
4,613
4,505
4,141
-11.1%
-8.1%
Chemical Products
4,425
4,880
3,062
-40.4%
-37.3%
Ordinary Metals
1,222
1,211
1,184
-6.6%
-2.2%
Transport Equipments
1,436
1,987
1,338
-24.4%
-32.7%
Others
3,336
3,275
2,803
-14.4%
-14.4%
15,032
15,858
12,528
-22.2%
-21.0%
Total
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Figure 3 Components of non-oil exports
Figure 4 Export Destinations
13.0% 22.4% 33.1%
14.5% 10.7%
0.0% 5.2%
63.9% 9.5%
24.4%
Plastics & Rubbers
Chemical Products
Transport Equipments
Others
Ordinary Metals
China
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Table 3
UAE
Singapore
India
Others
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Non-Oil Imports
Commodities (SAR mn)
Nov-15
Dec-15
Jan-16
% y-o-y
% m-o-m
Machinery & Electricals
13,112
12,806
12,809
-12.2%
0.0%
Transport Equipments
10,018
12,330
9,068
-7.0%
-26.5%
Ordinary Metals
4,123
3,940
4,213
-30.3%
6.9%
Chemical Products
4,401
4,344
4,509
3.1%
3.8%
Others
15,556
17,705
17,776
4.1%
0.4%
Total
47,210
51,125
48,375
-6.7%
-5.4%
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 7 Components of non-oil imports
Figure 8 Source countries
14.3%
26.5% 36.7% 14.5%
58.2% 7.0%
18.7% 6.0%
9.3%
8.7% Machinery & Electricals
Transport Equipments
Chemical Products
Others
Ordinary Metals
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Figure 9 Non-oil export trend (y-o-y)
China
USA
Germany
Japan
Others
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
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% -30.0%
-40.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Monetary and credit indicators Money supply The pace of decline in money supply (M3) was eased in March 2016
Broader money supply (M3) fell for the second straight month by 0.4% y-o-y in March 2016 to reach SAR1,778bn, albeit at a slower pace as compared to 0.9% y-o-y fall in the last month. The annual decline in money supply (M3) eased in March as the fall in demand deposits was partially offset by an increase in time and savings deposits. However, on a monthly basis, M3 rose 1.5% in March 2016, as compared to the previous month’s fall of 0.7%.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 11 Money supply growth (y-o-y)
Figure 12 Deposits break-up
25.0%
SAR bn 1,200
20.0%
1,000
15.0% 800 10.0% 600 5.0% 400 0.0% -5.0%
200
-10.0%
0
M1
M2
M3
Time and Saving Deposits
Source: SAMA, Al Rajhi Capital
Demand Deposits
Source: SAMA, Al Rajhi Capital
Credit and deposit growth Total credit growth continued to be healthy at 10.0% y-o-y in March 2016 (versus 10.0% y-o-y in February 2016). Deposits declined by 0.6% y-o-y in March 2016, versus a drop of 1.0% last month. The growth in deposit rate (+1.6% m-o-m in March versus 0.6% m-o-m in February) was largely due to the increase in deposits from the private and government sectors. The increase in deposits led to a fall in the loans-to-deposit ratio for the first time in five months to 87.5% in March 2016 as compared to 88.1% in the previous month.
Increase in deposit growth on a sequential basis led to lower loan-todeposit ratio
Figure 13 Credit and deposit growth
Figure 14 Loans to deposits
YoY 18.0%
90%
16.0%
88%
14.0%
86%
12.0% 84%
10.0%
8.0%
82%
6.0%
80%
4.0%
78%
2.0% 76%
0.0% -2.0%
74%
Deposits
Credit
Loans to Deposit ratio
Source: SAMA, Al Rajhi Capital
Source: SAMA, Al Rajhi Capital
Foreign reserve assets Foreign reserve assets continued to decline in March although at a slower pace as compared to the previous month
Foreign reserve assets declined for the 14th month in a row. Assets declined ~15.9% yo-y and stood at SAR2,202bn (~US$587bn) at the end of March 2016, since the government continued to utilize foreign reserves to cover its budget deficit. The foreign reserves declined 0.9% (m-o-m) in March, versus a fall of 1.6% (m-o-m) in February. Meanwhile, foreign deposits abroad inched down 0.1% m-o-m, versus a fall of 2.4% in February, while investment in foreign securities dipped 1.4% m-o-m, as compared to a decline of 0.7% m-o-m in February.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 15 Foreign reserves
Figure 16 Major components of foreign assets
SAR bn
3,000
20.0%
SAR bn 2,500
15.0%
2,500
10.0% 2,000
2,000
5.0% 1,500
1,500
0.0% -5.0%
1,000
1,000
-10.0% 500
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 edged up to 4.3% y-o-y in March 2016, primarily on the back of rise in prices of utilities and furnishings & household
Inflation in Saudi Arabia edged up to 4.3% y-o-y in March, as compared to 4.2% in February. The rise in general cost of living index was mainly led by a jump in costs of furnishings & household, which rose 2.8% y-o-y, as compared to 1.5% in the previous month, followed by housing, water, electricity & gas segment, which increased 8.5% yo-y. Annual inflation in the transport segment eased down slightly to 12.4%, versus 12.7%, in the previous month, while food & beverages prices also rose at a slower annual pace of 0.6%, as compared to 1.3% in the past month. On a monthly basis, the overall inflation increased 0.2% in March, up from -0.1% in February.
Figure 17 Inflation trend (y-o-y)
Figure 18 Inflation drivers (y-o-y)
5.0%
14.0%
4.5%
12.0%
4.0%
10.0%
3.5%
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
Disclosures Please refer to the important disclosures at the back of this report.
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
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Economic Research May 2016
Stock market indicators Benchmark Index TASI advanced 9.4% (m-o-m) in April 2016.
The benchmark index (TASI) surged 9.4% m-o-m in April 2016, versus a monthly gain of 2.1% in March. The overall index was supported by sectors such as Industrial Investments, Hotel & Tourism, Petrochemical, Transport and Building & Construction, which rose 19.9%, 18.9%, 14.2%, 13.1%, and 12.9%, respectively. Saudi Kayan Petrochemical Co. was the top performer on the index, delivering a return of 39.3% in April 2016.
Figure 19 Tadawul index performance
Figure 20 TASI one year historic 12-month forward P/E chart
Index
Million
7000
600
6800
500
18.0x 17.0x
16.0x 6600 400
15.0x
6400
14.0x 300 13.0x
6200 200
12.0x
6000 5800
100
5600
0
11.0x 10.0x 9.0x 8.0x
Volume RHS
TASI
st
Source: Bloomberg, Al Rajhi Capital, Data from 31 March 2016 to 29th April 2016
Figure 11 Top 5 Sectors MoM
Source: Bloomberg, Al Rajhi Capital
Figure 22 Bottom 5 sectors MoM
25.0%
20.0%
8.0%
15.0%
6.0% 4.0%
10.0%
2.0% 5.0% 0.0% 0.0% -2.0% -4.0% -6.0%
Source: Tadawul, Al Rajhi Capital, MoM returns for April
Source: Tadawul, Al Rajhi Capital, MoM returns for April
Figure 4 Top 5 Gainers for the month of April Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Saudi Kayan Petrochemical Co
39.3%
10.6
26.2
Petrochemical Industries
United Wire Factories Co
37.2%
1.1
11.5
Building & Construction
Bawan Co
32.8%
1.4
23.6
Building & Construction
National Industrialization Co
31.4%
8.0
75.4
Petrochemical Industries
Saudi Arabian Mining Co
28.7%
42.7
41.0
Industral Investment
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 5 Top 5 Losers for the month of April Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Fawaz Abdulaziz Al Hokair & Co
-7.0%
8.1
19.0
Retail
Saudi Investment Bank/The
-6.3%
9.1
10.7
Banking & Financial Services
Al Khaleej Training and Education Co
-4.4%
1.1
7.5
Retail
Savola Group/The
-2.4%
21.4
13.7
Agriculture & Food Industries
Aldrees Petroleum and Transport Services
-1.7%
1.4
9.1
Retail
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Consumer spending indicators The Emirates NBD PMI reading edged down to 54.2 in April 2016 (54.5 in the previous month), mainly due to slow growth in business activity. According to an Emirates NBD PMI report, the non-oil private sector slowed as decline in exports for the first time since 2009 negatively impacted the total new work. Point-of-sale (POS) transactions were up 2.0% y-o-y in March as compared to a fall of 9.0% y-o-y in February. On the other hand, ATM cash withdrawals were down 3.0% y-o-y in March, versus a fall of 16.6% y-o-y in February.
PMI edged down in April, while POS witnessed improvement in March 2016.
Figure 23 Point-of-sale transactions (POS) trend
Figure 24 ATM cash withdrawals trend 50%
SAR bn 80.0
50%
40%
70.0
40%
SAR bn 20.0 18.0 16.0 30%
14.0
60.0
30%
50.0
12.0
20%
10.0
20% 40.0
10%
8.0
10% 30.0
6.0
0%
0%
20.0
4.0 2.0 -
POS
-10%
10.0
-10%
-20%
-
-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
10.0
50
-
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 May 2016
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Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
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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 Kingdom maintained oil output at an elevated level (~10.3mbpd in April 2016), in-line with its focus on market share. However, oil prices rose in April due to falling US crude output and production disruptions in a few regions. Saudi nonoil PMI fell m-o-m in April to 54.2, but is still robust, indicating continued expansion in the non-oil economy. Inflation in the Kingdom remained at ~4.3% yo-y in March, primarily due to the hike in energy and utility prices, coming into effect from the start of the year. Saudi inter-bank lending rates surged to above 2%, the highest level since 2009. With deposits starting to decline, the banking sector is likely to feel the squeeze (partly offset by relaxed cap on loan-to-deposit ratio to 90% from 85% in February by SAMA). Non-oil exports dropped at a fast pace in January 2016. Non-oil imports also fell in January, albeit at a slower pace compared to December. The recently released Saudi Vision 2030 document comprised proposals which aim to transform the economy away from dependence on oil, by targeting higher private sector involvement, creating additional revenue streams for the government and more efficient utilization of Kingdom’s resources. A cabinet reshuffle was also done to support the reforms. Further details of reforms are to be shared in the National Transformation Plan (NTP), which is likely to be announced next month. On the equity front, the benchmark index TASI logged a monthly gain of 9.4% in April, tracking better than expected Q1 results, rise in crude prices and optimism in the market on reforms. Foreign Reserve Assets: Foreign reserve assets declined for the 14th consecutive month in March 2016, falling to the lowest level since April 2012. The decline in reserves could be attributed to the measures taken by the Kingdom to cover its budget deficit due to lower oil revenue. In order to finance the deficit, the Saudi government is likely to raise US$10 billion from global banks. Key indicators: Saudi Arabia’s crude oil production edged up 0.2% on a yearly basis in April 2016 to reach around 10.3mbpd. Brent crude oil prices advanced 16.2% m-o-m to reach US$ 47.37/barrel at the end of April 2016. Money supply (M3) edged down 0.4% y-o-y in March 2016, while inflation was up by 4.3% y-o-y in the same month. Point of sale transactions (POS) grew 2.0% y-o-y, whereas ATM cash withdrawals fell by 3.0% y-o-y in March 2016. Crude price outlook: The US Energy Information Administration (EIA), in its April 2016 report, estimated Brent crude oil prices to average around US$35/barrel in 2016 and US$41/barrel in 2017. Table 1 Key macro indicators Variable
Mar-16
Feb-16
2015
2014
Inflation Rate (2007=100)
4.3%
4.2%
2.2%
2.7%
Average Oil Price (Arab Light) (US$/Barrel)
34.7
28.8
49.9
97.1
-0.4%
-0.9%
2.6%
11.9%
Money Supply (M3) Total Banking Sector Claims
13.8
12.3
10.5
11.3
Interbank Interest Rate (3 Month) (BP)
1.773
1.734
0.88
0.936
Repo Rate (BP)
2.00
2.00
2.00
2.00
0.5
0.5
0.5
0.25
Q4 2015*
Q3 2015*
2015*
2014*
GDP Rate at Constant Prices (2010=100)
3.64%
3.61%
3.4%
3.6%
Current Account to GDP Ratio (current prices)
-14.7%
-6.7%
-8.2%
9.8%
Total Imports (fob) to GDP Ratio (current prices)
23.8%
23.9%
23.7%
21.0%
7.6%
7.9%
7.6%
7.7%
Reverse Repo Rate (BP)
Non-oil Exports to GDP Ratio (current prices) 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 May 2016
Crude oil dynamics Crude oil production edged up 0.2% y-o-y in April 2016 to reach 10.3mbpd
Saudi Arabian crude oil production stood at 10.3mbpd in April 2016, indicating a 0.2% y-o-y rise. On a sequential basis, crude oil production advanced 0.8% m-o-m (versus a drop of 0.1% in March). Crude oil prices climbed 16.2% m-o-m in April 2016, versus a rise of 7.8% in the previous month. The rise in oil prices was supported by a continuous drop in US crude output, along with a weak US dollar. Oil prices were also boosted by the production disruption in Kuwait (worker strike), Nigeria, and Venezuela. The fall in US oil rig count also supported the jump in oil prices. Meanwhile, Arab light climbed 23.5% m-o-m in April 2016.
Figure 1 Saudi crude oil production trend
Figure 2 Crude oil prices trend
mbpd
120
10.8
12.0%
10.6
10.0%
10.4
8.0%
110 100 90
10.2
6.0%
10.0
4.0%
9.8 2.0%
9.6
0.0%
9.4 9.2
-2.0%
9.0
-4.0%
8.8
-6.0%
Saudi Crude oil production
80 70 60 50 40 30 20
YoY growth
Source: Bloomberg, Al Rajhi Capital
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
Saudi Interbank Offered Rates Saudi interbank offered rate recorded its highest level in seven years
The three-month Saudi Interbank Offered Rate rose by ~22bps to 2.03% in April 2016, recording its highest peak since January 2009 owing to low oil prices and increasing government borrowings, leading to a tight liquidity scenario in the Kingdom. The Saudi interbank offered rate has witnessed a jump of 46bps in 2016, the highest increase since 2005.
Non-oil foreign trade As per the latest foreign trade data released by the General Authority for Statistics,
The Kingdom’s non-oil exports and nonSaudi Arabia’s non-oil exports plummeted by 22.2% y-o-y in January, as compared to oil imports in January fell by 22.2% and annual declines of 3.4% and 12.5% in December and November, respectively. Non-oil 6.7%, respectively. exports were mainly backed by the fall in exports of chemical products (-40.4% y-o-y), which constituted 24.4% of total exports, together with an 11.1% fall in plastic & rubbers, which accounted for 33.1% of total exports. Moreover, non-oil imports declined by 6.7% y-o-y in January, versus an 8.8% y-o-y decline in December. The non-oil imports were pulled down by ordinary metals (-30.3% y-o-y) and machinery & electrical (-12.2% y-o-y), which together contributed 35.2% of total non-oil imports. Meanwhile, the UAE maintained its position as the topmost non-oil export destination (14.5% of total exports), while the USA continued to be on the forefront of non-oil imports destination, constituting 14.5% of total imports followed closely by China at 14.3% of total imports.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Table 2 Non-Oil Exports
Commodities (SAR mn)
Nov-15
Dec-15
Jan-16
% y-o-y
% m-o-m
Plastics & Rubbers
4,613
4,505
4,141
-11.1%
-8.1%
Chemical Products
4,425
4,880
3,062
-40.4%
-37.3%
Ordinary Metals
1,222
1,211
1,184
-6.6%
-2.2%
Transport Equipments
1,436
1,987
1,338
-24.4%
-32.7%
Others
3,336
3,275
2,803
-14.4%
-14.4%
15,032
15,858
12,528
-22.2%
-21.0%
Total
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Figure 3 Components of non-oil exports
Figure 4 Export Destinations
13.0% 22.4% 33.1%
14.5% 10.7%
0.0% 5.2%
63.9% 9.5%
24.4%
Plastics & Rubbers
Chemical Products
Transport Equipments
Others
Ordinary Metals
China
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Table 3
UAE
Singapore
India
Others
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Non-Oil Imports
Commodities (SAR mn)
Nov-15
Dec-15
Jan-16
% y-o-y
% m-o-m
Machinery & Electricals
13,112
12,806
12,809
-12.2%
0.0%
Transport Equipments
10,018
12,330
9,068
-7.0%
-26.5%
Ordinary Metals
4,123
3,940
4,213
-30.3%
6.9%
Chemical Products
4,401
4,344
4,509
3.1%
3.8%
Others
15,556
17,705
17,776
4.1%
0.4%
Total
47,210
51,125
48,375
-6.7%
-5.4%
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 7 Components of non-oil imports
Figure 8 Source countries
14.3%
26.5% 36.7% 14.5%
58.2% 7.0%
18.7% 6.0%
9.3%
8.7% Machinery & Electricals
Transport Equipments
Chemical Products
Others
Ordinary Metals
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Figure 9 Non-oil export trend (y-o-y)
China
USA
Germany
Japan
Others
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
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% -30.0%
-40.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Source: GAS, Al Rajhi Capital, Data for February 2016 is not yet released
Monetary and credit indicators Money supply The pace of decline in money supply (M3) was eased in March 2016
Broader money supply (M3) fell for the second straight month by 0.4% y-o-y in March 2016 to reach SAR1,778bn, albeit at a slower pace as compared to 0.9% y-o-y fall in the last month. The annual decline in money supply (M3) eased in March as the fall in demand deposits was partially offset by an increase in time and savings deposits. However, on a monthly basis, M3 rose 1.5% in March 2016, as compared to the previous month’s fall of 0.7%.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 11 Money supply growth (y-o-y)
Figure 12 Deposits break-up
25.0%
SAR bn 1,200
20.0%
1,000
15.0% 800 10.0% 600 5.0% 400 0.0% -5.0%
200
-10.0%
0
M1
M2
M3
Time and Saving Deposits
Source: SAMA, Al Rajhi Capital
Demand Deposits
Source: SAMA, Al Rajhi Capital
Credit and deposit growth Total credit growth continued to be healthy at 10.0% y-o-y in March 2016 (versus 10.0% y-o-y in February 2016). Deposits declined by 0.6% y-o-y in March 2016, versus a drop of 1.0% last month. The growth in deposit rate (+1.6% m-o-m in March versus 0.6% m-o-m in February) was largely due to the increase in deposits from the private and government sectors. The increase in deposits led to a fall in the loans-to-deposit ratio for the first time in five months to 87.5% in March 2016 as compared to 88.1% in the previous month.
Increase in deposit growth on a sequential basis led to lower loan-todeposit ratio
Figure 13 Credit and deposit growth
Figure 14 Loans to deposits
YoY 18.0%
90%
16.0%
88%
14.0%
86%
12.0% 84%
10.0%
8.0%
82%
6.0%
80%
4.0%
78%
2.0% 76%
0.0% -2.0%
74%
Deposits
Credit
Loans to Deposit ratio
Source: SAMA, Al Rajhi Capital
Source: SAMA, Al Rajhi Capital
Foreign reserve assets Foreign reserve assets continued to decline in March although at a slower pace as compared to the previous month
Foreign reserve assets declined for the 14th month in a row. Assets declined ~15.9% yo-y and stood at SAR2,202bn (~US$587bn) at the end of March 2016, since the government continued to utilize foreign reserves to cover its budget deficit. The foreign reserves declined 0.9% (m-o-m) in March, versus a fall of 1.6% (m-o-m) in February. Meanwhile, foreign deposits abroad inched down 0.1% m-o-m, versus a fall of 2.4% in February, while investment in foreign securities dipped 1.4% m-o-m, as compared to a decline of 0.7% m-o-m in February.
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 15 Foreign reserves
Figure 16 Major components of foreign assets
SAR bn
3,000
20.0%
SAR bn 2,500
15.0%
2,500
10.0% 2,000
2,000
5.0% 1,500
1,500
0.0% -5.0%
1,000
1,000
-10.0% 500
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 edged up to 4.3% y-o-y in March 2016, primarily on the back of rise in prices of utilities and furnishings & household
Inflation in Saudi Arabia edged up to 4.3% y-o-y in March, as compared to 4.2% in February. The rise in general cost of living index was mainly led by a jump in costs of furnishings & household, which rose 2.8% y-o-y, as compared to 1.5% in the previous month, followed by housing, water, electricity & gas segment, which increased 8.5% yo-y. Annual inflation in the transport segment eased down slightly to 12.4%, versus 12.7%, in the previous month, while food & beverages prices also rose at a slower annual pace of 0.6%, as compared to 1.3% in the past month. On a monthly basis, the overall inflation increased 0.2% in March, up from -0.1% in February.
Figure 17 Inflation trend (y-o-y)
Figure 18 Inflation drivers (y-o-y)
5.0%
14.0%
4.5%
12.0%
4.0%
10.0%
3.5%
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
Disclosures Please refer to the important disclosures at the back of this report.
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
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Economic Research May 2016
Stock market indicators Benchmark Index TASI advanced 9.4% (m-o-m) in April 2016.
The benchmark index (TASI) surged 9.4% m-o-m in April 2016, versus a monthly gain of 2.1% in March. The overall index was supported by sectors such as Industrial Investments, Hotel & Tourism, Petrochemical, Transport and Building & Construction, which rose 19.9%, 18.9%, 14.2%, 13.1%, and 12.9%, respectively. Saudi Kayan Petrochemical Co. was the top performer on the index, delivering a return of 39.3% in April 2016.
Figure 19 Tadawul index performance
Figure 20 TASI one year historic 12-month forward P/E chart
Index
Million
7000
600
6800
500
18.0x 17.0x
16.0x 6600 400
15.0x
6400
14.0x 300 13.0x
6200 200
12.0x
6000 5800
100
5600
0
11.0x 10.0x 9.0x 8.0x
Volume RHS
TASI
st
Source: Bloomberg, Al Rajhi Capital, Data from 31 March 2016 to 29th April 2016
Figure 11 Top 5 Sectors MoM
Source: Bloomberg, Al Rajhi Capital
Figure 22 Bottom 5 sectors MoM
25.0%
20.0%
8.0%
15.0%
6.0% 4.0%
10.0%
2.0% 5.0% 0.0% 0.0% -2.0% -4.0% -6.0%
Source: Tadawul, Al Rajhi Capital, MoM returns for April
Source: Tadawul, Al Rajhi Capital, MoM returns for April
Figure 4 Top 5 Gainers for the month of April Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Saudi Kayan Petrochemical Co
39.3%
10.6
26.2
Petrochemical Industries
United Wire Factories Co
37.2%
1.1
11.5
Building & Construction
Bawan Co
32.8%
1.4
23.6
Building & Construction
National Industrialization Co
31.4%
8.0
75.4
Petrochemical Industries
Saudi Arabian Mining Co
28.7%
42.7
41.0
Industral Investment
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 2016
Figure 5 Top 5 Losers for the month of April Name
Monthly Return Market cap (SAR bn) Avg volume (mn)
Sectors
Fawaz Abdulaziz Al Hokair & Co
-7.0%
8.1
19.0
Retail
Saudi Investment Bank/The
-6.3%
9.1
10.7
Banking & Financial Services
Al Khaleej Training and Education Co
-4.4%
1.1
7.5
Retail
Savola Group/The
-2.4%
21.4
13.7
Agriculture & Food Industries
Aldrees Petroleum and Transport Services
-1.7%
1.4
9.1
Retail
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn
Consumer spending indicators The Emirates NBD PMI reading edged down to 54.2 in April 2016 (54.5 in the previous month), mainly due to slow growth in business activity. According to an Emirates NBD PMI report, the non-oil private sector slowed as decline in exports for the first time since 2009 negatively impacted the total new work. Point-of-sale (POS) transactions were up 2.0% y-o-y in March as compared to a fall of 9.0% y-o-y in February. On the other hand, ATM cash withdrawals were down 3.0% y-o-y in March, versus a fall of 16.6% y-o-y in February.
PMI edged down in April, while POS witnessed improvement in March 2016.
Figure 23 Point-of-sale transactions (POS) trend
Figure 24 ATM cash withdrawals trend 50%
SAR bn 80.0
50%
40%
70.0
40%
SAR bn 20.0 18.0 16.0 30%
14.0
60.0
30%
50.0
12.0
20%
10.0
20% 40.0
10%
8.0
10% 30.0
6.0
0%
0%
20.0
4.0 2.0 -
POS
-10%
10.0
-10%
-20%
-
-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
10.0
50
-
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 May 2016
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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. 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Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research May 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 speci fic 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.
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Disclosures Please refer to the important disclosures at the back of this report.
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