Saudi economy - Al Rajhi Capital
Economic Research Monthly Economic Report July 2017
Research Department ARC Research Team Tel. +966 11 211 9449, [email protected]
Saudi Arabian Economy
Saudi economy: Mixed signals Saudi Arabian Q1 2017 GDP fell by 0.5% y-o-y versus the annual rise of 2.2% in the previous quarter, dragged down by the fall in oil sector. The nonoil sector grew 0.6% supported by the non-oil private sector (+0.9%), while the non-oil government sector contracted marginally (-0.1%). The oil sector contracted by 2.3% due to the drop in crude oil production. Banking sector credit growth slowed down to 0.6% y-o-y (+0.5% m-om). Data till Q1 showed that credit to transport & communication, utilities & health services, commerce and Services sectors increased sequentially, while credit to building & construction, mining, government and misc. sectors decreased. Meanwhile, money supply (M3) grew 0.4% y-o-y in May, compared to +0.7% in the previous month. This was mainly owing to an 11% y-o-y increase in Time and Savings deposits to benefit from higher SAIBOR rates (on a y-o-y basis) while M1 was mostly flat. Deposits grew 0.5% y-o-y in May (-0.8% m-o-m). While time & savings deposits rose 11% y-o-y, demand deposits were mostly stable (+0.8% y-o-y). The proportion of demand deposits stood at 62.3% (from 62.1% in May 2016), while proportion of time & saving deposits increased to 28.5% from 25.7% in the same period last year. Banking sector’s monthly profit rose by 3.4% y-o-y in May 2017 (-2.8% y-o-y in the previous month), recording the first rise four months. Foreign reserve assets declined 0.2% m-o-m in May 2017, versus the monthly drop of 1.7% in April 2017, to stand at SAR 1,871bn (~US$ 498.9bn). Cost of living index prevailed in the deflation territory in May 2017 for the fifth consecutive month, primarily due to falling prices in food and beverages (-2.3%), and transport sectors (-2%). However, prices in communication (+2.1%) and education (+1.8%) sectors increased. Consumer spending growth slowed slightly, rising 6.4% y-o-y, down from the 11.4% y-o-y growth in the previous month. Data showed that spending growth was primarily in restaurant & hotels (+17.3% y-o-y), and food & beverage (+26.8% y-o-y) segments, which can be attributed to Ramadan partially falling in the month of May and vacations. On the other hand, spending on clothing & footwear (-4.6% y-o-y) and transport sectors (6.8% y-o-y) declined. Saudi Arabia’s merchandise balance of trade surplus increased to SAR23.6bn in April 2017, from SAR8.4bn in April 2016, supported by higher crude oil prices. Oil exports increased 35% y-o-y to SAR51.9bn, resulting in total exports of SAR66.4bn in April (+26.1% y-o-y). Imports slipped 3.3% yo-y to SAR44.2bn on the back of lower imports of vehicles and transport equipment (-25.3%). Brent crude August futures dropped 5.6% m-o-m in June 2017 as against the fall of 3.1% m-o-m in May 2017, as investors were concerned over the rise in shale oil output by the US. Non-oil private sector PMI stood at 54.3 in June 2017, down from 55.3 in May 2017, owing to slower rise in output and new orders. Saudi International bond yields with 5 year maturity rose by 12.8 bps mo-m in June 2017 to 2.69%, whereas bond yields with 10 and 30 year maturities fell by 5.0bps and 4.9bps, respectively to 3.322% and 4.37%.
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.
Economic Research Monthly Economic Report July 2017
Crude price outlook: The US Energy Information Administration (EIA) in its June 2017 report estimated Brent crude oil prices to average around US$53/barrel in 2017 and US$56/barrel in 2018.
Figure 1: Key macro indicators Variable
Jun-17
May-17
Apr-17
2016
2015
-
-0.7%
-0.6%
3.5%
2.2%
Jun-17
May-17
Apr-17
2016
2015
45.6
50.5
52.6
41
49.9
Jun-17
May-17
Apr-17
2016
2015
Money Supply (M3)
-
0.4%
0.7%
0.8%
2.5%
Total Banking Sector Claims
-
2.2
3.2
9.1
10.5
1.781
1.726
1.747
2.066
0.88
2.00
2.00
2.00
2.00
2.00
Reverse Repo Rate
1
1
1
0.75
0.5
General Share Price Index (1985=1000)
-
6.6
3.1
4.3
-17.1
Q1 2017*
Q4 2016
2016*
2015
GDP Rate at Constant Prices (2010=100)
-
-0.5%
2.2%
1.7%
4.1%
Q1 2017**
Q4 2016*
2016*
2015
Inflation Rate (2007=100) Average Oil Price (Arab Light) (US$/Barrel)
Interbank Interest Rate (3 Month) Repo Rate
Current Account to GDP Ratio (current prices)
-
3.6%
-1.4%
-4.3%
-8.7%
Total Imports (fob) to GDP Ratio (current prices)
-
17.3%
18.0%
19.8%
24.3%
Non-oil Exports to GDP Ratio (current prices)
-
6.7%
7.4%
7.3%
7.7%
Source: SAMA, * Provisional, **Revised, Arab light and Interbank interest rate data are as on 30 June 2017 and 22 June 2017, respectively.
Q1 2017 GDP: The Q1 2017 GDP declined by 0.53% y-o-y (+2.17% y-o-y in Q4 2016) where the oil sector fell by 2.3% y-o-y (+4.6% y-o-y in Q4 2016), whereas the non-oil sector rose by 0.61% y-o-y (+0.68% y-o-y in Q4 2016). Figure 2: Quarterly GDP Trend (y-o-y growth) Real GDP by type of economic activity
Share in GDP
Q1 2017
Q4 2016
Q3 2016
Agriculture, Forestry & Fishing
2.5%
0.8%
3.1%
1.4%
0.8%
Mining & Quarrying
38.7%
-2.3%
3.8%
3.4%
-0.5%
Manufacturing
12.7%
2.3%
3.1%
3.6%
3.1%
Electricity, Gas and Water
0.6%
-1.6%
5.8%
6.2%
-5.3%
Construction
4.6%
-3.2%
-2.2%
-3.9%
-4.0%
Wholesale & Retail Trade, Restaurants & hotels
9.1%
0.3%
-2.0%
-1.4%
-1.2%
Transport, Storage & Communication
6.0%
1.0%
4.4%
1.8%
3.5%
Finance, Insurance, Real Estate & Business Services
9.4%
1.1%
3.8%
2.2%
2.4%
Community, Social & Personal Services
2.0%
0.4%
1.9%
1.5%
1.5%
Producers of Government Services
14.7%
-0.4%
0.5%
-3.9%
1.6%
100.0%
-0.5%
2.2%
1.2%
0.9%
Gross Domestic Product
Q2 2016
Source: GAS, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
2
Economic Research Monthly Economic Report July 2017
Figure 3: Real GDP trend at constant prices (y-o-y) 80.0%
8.0%
60.0%
6.0%
40.0%
4.0%
20.0%
2.0%
0.0%
0.0%
-20.0%
-2.0%
-40.0%
-4.0%
-60.0%
-6.0%
-80.0%
-8.0% Q1
Q2
Q3
Q4
Q1
Q2
2014
Q3
Q4
Q1
Q2
2015 Oil Sector
Q3
Q4
Q1
2016
Non-Oil Sector
Import Duties
2017
GDP (RHS)
Source: GAS, Al Rajhi Capital
Figure 4: International Bond Yields 6.0% 5.0% 4.0% 3.0%
2.0% 1.0%
27-Jun-17
19-Jun-17
3-Jun-17
11-Jun-17
26-May-17
18-May-17
2-May-17
10-May-17
24-Apr-17
8-Apr-17
16-Apr-17
31-Mar-17
23-Mar-17
7-Mar-17
10 Yr
15-Mar-17
27-Feb-17
19-Feb-17
3-Feb-17
30 Yr
11-Feb-17
26-Jan-17
18-Jan-17
2-Jan-17
10-Jan-17
25-Dec-16
9-Dec-16
17-Dec-16
1-Dec-16
23-Nov-16
7-Nov-16
15-Nov-16
30-Oct-16
22-Oct-16
0.0%
5 Yr
Source: Bloomberg, Al Rajhi Capital
Figure 5: Saudi crude oil production trend – Crude oil production in June 2017 dropped on yearly basis, for the sixth consecutive month.
Figure 6: Crude oil prices trend – Crude oil prices (Brent August futures contract) declined 5.6% m-o-m in June 2017 compared to the monthly drop of 3.1% in May 2017. 70
10.8
12.0%
10.6
10.0%
10.4
8.0%
65 60 55
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
YoY growth
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
50 45 40 35 30 25 20
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
3
Economic Research Monthly Economic Report July 2017
Figure 7: Non-oil export trend (y-o-y) – Non-oil exports gained 1.9% y-o-y in April 2017 (+2.1% y-o-y in March), due to the rise in plastics & rubbers and ordinary metals which constitute 41.3% of the total exports.
Figure 8: Non-oil import trend (y-o-y) – Non-oil imports dropped 3.3% yo-y in April 2017 (-20.1% y-o-y in March), led by machinery & electrical and transport equipment segment which account 37.9% of the total imports.
YoY 70.0%
YoY 60.0%
60.0%
50.0%
50.0%
40.0%
40.0%
30.0%
30.0%
20.0%
20.0%
10.0%
10.0%
0.0%
0.0%
-10.0%
-10.0%
-20.0%
-20.0%
-30.0%
-30.0%
-40.0%
-40.0%
-50.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital
Source: GAS, Al Rajhi Capital
Figure 9: Non-oil exports Commodities (SAR mn)
Feb-17
Mar-17
Apr-17
% y-o-y
% m-o-m
Plastics & Rubbers
3,965
5,550
4,657
6.8%
-16.1%
Chemical Products
3,585
4,267
3,877
-1.8%
-9.1%
Ordinary Metals
1,141
1,287
1,311
9.7%
1.9%
Transport Equipments
1,232
1,825
1,131
-9.8%
-38.0%
Others Total
2,700
3,407
3,488
1.5%
2.4%
12,623
16,336
14,464
1.9%
-11.5%
Source: GAS, Al Rajhi Capital
Figure 10: Non-Oil Imports Commodities (SAR mn)
Feb-17
Mar-17
Apr-17
Machinery & Electricals
9,026
8,534
Transport Equipments
6,302
6,500
Ordinary Metals
3,439
3,474
Chemical Products
% y-o-y
% m-o-m
9,988
-4.4%
17.0%
6,207
-25.3%
-4.5%
3,935
0.3%
13.3%
3,794
3,986
3,571
-8.6%
-10.4%
Others
14,043
16,160
19,055
8.0%
17.9%
Total
36,604
38,654
42,756
-3.3%
10.6%
Source: GAS, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
4
Economic Research Monthly Economic Report July 2017
Figure 11: Money supply growth (y-o-y) – Broader money supply (M3) on an annual basis grew in May 2017 for the second straight month, to stand at SAR 1,768bn (~US$471.5bn).
Figure 12: Deposits break-up – Time & saving deposits rose (on a yearly basis) at a faster pace in May 2017 as against April 2017. Meanwhile, demand deposits grew at a slower rate in May 2017. SAR bn 1,200
25.0% 20.0%
1,000
15.0% 800
10.0%
600
5.0% 0.0%
400
-5.0% 200
-10.0%
0
-15.0%
M1
M2
M3
Source: SAMA, Al Rajhi Capital
Time and Saving Deposits
Demand Deposits
Source: SAMA, Al Rajhi Capital
Figure 13: Credit and deposit growth – Private sector credit declined on Figure 14: Loans to deposits – The loan-to-deposit ratio recorded a a yearly basis, in May 2017 for the third month in a row. reading lower than the 90% mark in May 2017, for the eighth consecutive month. YoY 20.0%
92.0% 90.0%
15.0%
88.0% 86.0%
10.0% 84.0% 82.0%
5.0%
80.0% 0.0%
78.0% 76.0%
-5.0%
74.0% -10.0%
72.0%
Deposits
Credit
Source: SAMA, Al Rajhi Capital
Figure 15: Non-performing loans
Loans to Deposit ratio
Source: SAMA, Al Rajhi Capital
Figure 16: Net Profit for Banks
1.8
SAR mn 5,000
1.7
4,500
1.6
4,000
1.5
3,500
1.4
3,000
1.3
2,500
1.2
2,000
1.1
1,500
1.0
1,000 500 -
Nonperf orming loans to total gross loans
Source: SAMA, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
Source: SAMA, Al Rajhi Capital
5
Economic Research Monthly Economic Report July 2017
Figure 17: Foreign reserves – dropped at the slowest monthly pace in May 2017, in nine months, to stand at SAR 1,871bn (~US$498.9bn).
Figure 18: Major components of foreign assets – Foreign deposits abroad rose on an m-o-m basis in May 2017, at the fastest rate in a year. However, the investments in foreign securities dropped for the seventh month in a row.
SAR bn 3,000
SAR bn 2,500
20.0% 15.0%
2,500
2,000
10.0% 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%
Reserves Assets
0
YoY (RHS)
Foreign Currency & Deposits Abroad
Source: SAMA, Al Rajhi Capital
Investment in Foreign Assets
Source: SAMA, Al Rajhi Capital
Figure 19: Inflation trend (y-o-y) – Kingdom continued to be in the deflation territory for the fifth consecutive month in May 2017 (-0.7% yo-y) compared to -0.6% y-o-y in April 2017. 5.0%
Figure 20: Inflation drivers (y-o-y) – Food & beverages prices dropped 2.3% y-o-y in May 2017 (-2.6%y-o-y in April), while the transport prices fell by 2.0% y-o-y in May 2017 (-2.2% y-o-y in April). 14.0% 12.0%
4.0%
10.0% 8.0%
3.0%
6.0% 4.0%
2.0%
2.0% 0.0%
1.0%
-2.0% -4.0%
0.0%
-6.0% -1.0%
General Index
Source: GAS, Al Rajhi Capital
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
Figure 21: Tadawul index performance
Figure 22: TASI one year historic 12-month forward P/E chart
Index
Million
7500
400
7400
350
7300
15.0x 14.0x
300 7200
13.0x 250
7100 7000 6900
200
12.0x
150
11.0x
6800 100 6700
10.0x 50
6600 6500
0
9.0x 8.0x
Volume RHS
TASI
Source: Bloomberg, Al Rajhi Capital, Data from 31st May 2017 to 22nd June 2017.
Disclosures Please refer to the important disclosures at the back of this report.
Source: Bloomberg, Al Rajhi Capital
6
Economic Research Monthly Economic Report July 2017
Figure 23: Top 5 Sectors MoM
Figure 24: Bottom 5 sectors MoM
18.0%
0.0%
16.0%
-1.0%
14.0% -2.0%
12.0% 10.0%
-3.0%
8.0% -4.0%
6.0% 4.0%
-5.0%
2.0% -6.0%
0.0%
-7.0%
Source: Tadawul, Al Rajhi Capital
Source: Tadawul, Al Rajhi Capital
Figure 25: Top 5 Gainers for the month of June Name Monthly Return Market Cap (SAR bn) Avg Volume (mn) Sector National Commercial Bank
30.8%
106.22
2.56
Financials
Savola Group/The
22.6%
26.90
0.79
Consumer Staples
Saudi British Bank/The
19.8%
40.23
0.61
Financials
Almarai Co
18.6%
77.16
0.93
Consumer Staples
Saudi Arabian Mining Co
18.5%
57.20
1.34
Materials
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn.
Figure 26: Top 5 Losers for the month of June Name Monthly Return Market Cap (SAR bn) Avg Volume (mn) Sector Alujain Corp
-15.3%
1.52
0.72
Materials
Red Sea Housing Services Co
-15.2%
1.17
0.13
Real Estate
United International Transportation Co
-8.9%
1.47
0.43
Industrials
Eastern Province Cement Co
-5.1%
2.08
0.10
Materials
Rabigh Refining & Petrochemical Co
-4.4%
10.01
1.21
Energy
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn.
Figure 27: Point-of-sale transactions (POS) trend – Point-of-sale (POS) transactions in May 2017 grew on a yearly basis, for the tenth consecutive month. SAR bn 20.0
40%
18.0 30%
16.0 14.0
20%
12.0 10.0
10%
8.0 0%
6.0 4.0
-10%
2.0 -
-20%
POS
Figure 28: ATM cash withdrawals trend – ATM cash withdrawals declined by 3.8% y-o-y in May 2017, compared to the yearly drop of 2.8% in April 2017. SAR bn 80.0
50%
70.0
40%
60.0
30%
50.0
20%
40.0
10%
30.0
0%
20.0
-10%
10.0
-20%
-
YoY
Source: SAMA, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
-30%
ATM Cash withdrawals
YoY
Source: SAMA, Al Rajhi Capital
7
Economic Research Monthly Economic Report July 2017
Figure 29: Emirates NBD Saudi PMI Index: Saudi’s non-oil private Figure 30: Consumer spending trend (POS and ATM cash Withdrawals) sector PMI expanded to 54.3 in June 2017, down from 55.3 in May 2017, owing to the slower rise in output and new orders. 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
8
Economic Research Monthly Economic Report July 2017
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Disclosures Please refer to the important disclosures at the back of this report.
9
Economic Research Monthly Economic Report July 2017
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Disclosures Please refer to the important disclosures at the back of this report.
10
Research Department ARC Research Team Tel. +966 11 211 9449, [email protected]
Saudi Arabian Economy
Saudi economy: Mixed signals Saudi Arabian Q1 2017 GDP fell by 0.5% y-o-y versus the annual rise of 2.2% in the previous quarter, dragged down by the fall in oil sector. The nonoil sector grew 0.6% supported by the non-oil private sector (+0.9%), while the non-oil government sector contracted marginally (-0.1%). The oil sector contracted by 2.3% due to the drop in crude oil production. Banking sector credit growth slowed down to 0.6% y-o-y (+0.5% m-om). Data till Q1 showed that credit to transport & communication, utilities & health services, commerce and Services sectors increased sequentially, while credit to building & construction, mining, government and misc. sectors decreased. Meanwhile, money supply (M3) grew 0.4% y-o-y in May, compared to +0.7% in the previous month. This was mainly owing to an 11% y-o-y increase in Time and Savings deposits to benefit from higher SAIBOR rates (on a y-o-y basis) while M1 was mostly flat. Deposits grew 0.5% y-o-y in May (-0.8% m-o-m). While time & savings deposits rose 11% y-o-y, demand deposits were mostly stable (+0.8% y-o-y). The proportion of demand deposits stood at 62.3% (from 62.1% in May 2016), while proportion of time & saving deposits increased to 28.5% from 25.7% in the same period last year. Banking sector’s monthly profit rose by 3.4% y-o-y in May 2017 (-2.8% y-o-y in the previous month), recording the first rise four months. Foreign reserve assets declined 0.2% m-o-m in May 2017, versus the monthly drop of 1.7% in April 2017, to stand at SAR 1,871bn (~US$ 498.9bn). Cost of living index prevailed in the deflation territory in May 2017 for the fifth consecutive month, primarily due to falling prices in food and beverages (-2.3%), and transport sectors (-2%). However, prices in communication (+2.1%) and education (+1.8%) sectors increased. Consumer spending growth slowed slightly, rising 6.4% y-o-y, down from the 11.4% y-o-y growth in the previous month. Data showed that spending growth was primarily in restaurant & hotels (+17.3% y-o-y), and food & beverage (+26.8% y-o-y) segments, which can be attributed to Ramadan partially falling in the month of May and vacations. On the other hand, spending on clothing & footwear (-4.6% y-o-y) and transport sectors (6.8% y-o-y) declined. Saudi Arabia’s merchandise balance of trade surplus increased to SAR23.6bn in April 2017, from SAR8.4bn in April 2016, supported by higher crude oil prices. Oil exports increased 35% y-o-y to SAR51.9bn, resulting in total exports of SAR66.4bn in April (+26.1% y-o-y). Imports slipped 3.3% yo-y to SAR44.2bn on the back of lower imports of vehicles and transport equipment (-25.3%). Brent crude August futures dropped 5.6% m-o-m in June 2017 as against the fall of 3.1% m-o-m in May 2017, as investors were concerned over the rise in shale oil output by the US. Non-oil private sector PMI stood at 54.3 in June 2017, down from 55.3 in May 2017, owing to slower rise in output and new orders. Saudi International bond yields with 5 year maturity rose by 12.8 bps mo-m in June 2017 to 2.69%, whereas bond yields with 10 and 30 year maturities fell by 5.0bps and 4.9bps, respectively to 3.322% and 4.37%.
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.
Economic Research Monthly Economic Report July 2017
Crude price outlook: The US Energy Information Administration (EIA) in its June 2017 report estimated Brent crude oil prices to average around US$53/barrel in 2017 and US$56/barrel in 2018.
Figure 1: Key macro indicators Variable
Jun-17
May-17
Apr-17
2016
2015
-
-0.7%
-0.6%
3.5%
2.2%
Jun-17
May-17
Apr-17
2016
2015
45.6
50.5
52.6
41
49.9
Jun-17
May-17
Apr-17
2016
2015
Money Supply (M3)
-
0.4%
0.7%
0.8%
2.5%
Total Banking Sector Claims
-
2.2
3.2
9.1
10.5
1.781
1.726
1.747
2.066
0.88
2.00
2.00
2.00
2.00
2.00
Reverse Repo Rate
1
1
1
0.75
0.5
General Share Price Index (1985=1000)
-
6.6
3.1
4.3
-17.1
Q1 2017*
Q4 2016
2016*
2015
GDP Rate at Constant Prices (2010=100)
-
-0.5%
2.2%
1.7%
4.1%
Q1 2017**
Q4 2016*
2016*
2015
Inflation Rate (2007=100) Average Oil Price (Arab Light) (US$/Barrel)
Interbank Interest Rate (3 Month) Repo Rate
Current Account to GDP Ratio (current prices)
-
3.6%
-1.4%
-4.3%
-8.7%
Total Imports (fob) to GDP Ratio (current prices)
-
17.3%
18.0%
19.8%
24.3%
Non-oil Exports to GDP Ratio (current prices)
-
6.7%
7.4%
7.3%
7.7%
Source: SAMA, * Provisional, **Revised, Arab light and Interbank interest rate data are as on 30 June 2017 and 22 June 2017, respectively.
Q1 2017 GDP: The Q1 2017 GDP declined by 0.53% y-o-y (+2.17% y-o-y in Q4 2016) where the oil sector fell by 2.3% y-o-y (+4.6% y-o-y in Q4 2016), whereas the non-oil sector rose by 0.61% y-o-y (+0.68% y-o-y in Q4 2016). Figure 2: Quarterly GDP Trend (y-o-y growth) Real GDP by type of economic activity
Share in GDP
Q1 2017
Q4 2016
Q3 2016
Agriculture, Forestry & Fishing
2.5%
0.8%
3.1%
1.4%
0.8%
Mining & Quarrying
38.7%
-2.3%
3.8%
3.4%
-0.5%
Manufacturing
12.7%
2.3%
3.1%
3.6%
3.1%
Electricity, Gas and Water
0.6%
-1.6%
5.8%
6.2%
-5.3%
Construction
4.6%
-3.2%
-2.2%
-3.9%
-4.0%
Wholesale & Retail Trade, Restaurants & hotels
9.1%
0.3%
-2.0%
-1.4%
-1.2%
Transport, Storage & Communication
6.0%
1.0%
4.4%
1.8%
3.5%
Finance, Insurance, Real Estate & Business Services
9.4%
1.1%
3.8%
2.2%
2.4%
Community, Social & Personal Services
2.0%
0.4%
1.9%
1.5%
1.5%
Producers of Government Services
14.7%
-0.4%
0.5%
-3.9%
1.6%
100.0%
-0.5%
2.2%
1.2%
0.9%
Gross Domestic Product
Q2 2016
Source: GAS, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
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Economic Research Monthly Economic Report July 2017
Figure 3: Real GDP trend at constant prices (y-o-y) 80.0%
8.0%
60.0%
6.0%
40.0%
4.0%
20.0%
2.0%
0.0%
0.0%
-20.0%
-2.0%
-40.0%
-4.0%
-60.0%
-6.0%
-80.0%
-8.0% Q1
Q2
Q3
Q4
Q1
Q2
2014
Q3
Q4
Q1
Q2
2015 Oil Sector
Q3
Q4
Q1
2016
Non-Oil Sector
Import Duties
2017
GDP (RHS)
Source: GAS, Al Rajhi Capital
Figure 4: International Bond Yields 6.0% 5.0% 4.0% 3.0%
2.0% 1.0%
27-Jun-17
19-Jun-17
3-Jun-17
11-Jun-17
26-May-17
18-May-17
2-May-17
10-May-17
24-Apr-17
8-Apr-17
16-Apr-17
31-Mar-17
23-Mar-17
7-Mar-17
10 Yr
15-Mar-17
27-Feb-17
19-Feb-17
3-Feb-17
30 Yr
11-Feb-17
26-Jan-17
18-Jan-17
2-Jan-17
10-Jan-17
25-Dec-16
9-Dec-16
17-Dec-16
1-Dec-16
23-Nov-16
7-Nov-16
15-Nov-16
30-Oct-16
22-Oct-16
0.0%
5 Yr
Source: Bloomberg, Al Rajhi Capital
Figure 5: Saudi crude oil production trend – Crude oil production in June 2017 dropped on yearly basis, for the sixth consecutive month.
Figure 6: Crude oil prices trend – Crude oil prices (Brent August futures contract) declined 5.6% m-o-m in June 2017 compared to the monthly drop of 3.1% in May 2017. 70
10.8
12.0%
10.6
10.0%
10.4
8.0%
65 60 55
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
YoY growth
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
50 45 40 35 30 25 20
Brent
WTI
Arab Light
Source: Bloomberg, Al Rajhi Capital
3
Economic Research Monthly Economic Report July 2017
Figure 7: Non-oil export trend (y-o-y) – Non-oil exports gained 1.9% y-o-y in April 2017 (+2.1% y-o-y in March), due to the rise in plastics & rubbers and ordinary metals which constitute 41.3% of the total exports.
Figure 8: Non-oil import trend (y-o-y) – Non-oil imports dropped 3.3% yo-y in April 2017 (-20.1% y-o-y in March), led by machinery & electrical and transport equipment segment which account 37.9% of the total imports.
YoY 70.0%
YoY 60.0%
60.0%
50.0%
50.0%
40.0%
40.0%
30.0%
30.0%
20.0%
20.0%
10.0%
10.0%
0.0%
0.0%
-10.0%
-10.0%
-20.0%
-20.0%
-30.0%
-30.0%
-40.0%
-40.0%
-50.0%
Non-oil Export
Non-oil Import
Source: GAS, Al Rajhi Capital
Source: GAS, Al Rajhi Capital
Figure 9: Non-oil exports Commodities (SAR mn)
Feb-17
Mar-17
Apr-17
% y-o-y
% m-o-m
Plastics & Rubbers
3,965
5,550
4,657
6.8%
-16.1%
Chemical Products
3,585
4,267
3,877
-1.8%
-9.1%
Ordinary Metals
1,141
1,287
1,311
9.7%
1.9%
Transport Equipments
1,232
1,825
1,131
-9.8%
-38.0%
Others Total
2,700
3,407
3,488
1.5%
2.4%
12,623
16,336
14,464
1.9%
-11.5%
Source: GAS, Al Rajhi Capital
Figure 10: Non-Oil Imports Commodities (SAR mn)
Feb-17
Mar-17
Apr-17
Machinery & Electricals
9,026
8,534
Transport Equipments
6,302
6,500
Ordinary Metals
3,439
3,474
Chemical Products
% y-o-y
% m-o-m
9,988
-4.4%
17.0%
6,207
-25.3%
-4.5%
3,935
0.3%
13.3%
3,794
3,986
3,571
-8.6%
-10.4%
Others
14,043
16,160
19,055
8.0%
17.9%
Total
36,604
38,654
42,756
-3.3%
10.6%
Source: GAS, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
4
Economic Research Monthly Economic Report July 2017
Figure 11: Money supply growth (y-o-y) – Broader money supply (M3) on an annual basis grew in May 2017 for the second straight month, to stand at SAR 1,768bn (~US$471.5bn).
Figure 12: Deposits break-up – Time & saving deposits rose (on a yearly basis) at a faster pace in May 2017 as against April 2017. Meanwhile, demand deposits grew at a slower rate in May 2017. SAR bn 1,200
25.0% 20.0%
1,000
15.0% 800
10.0%
600
5.0% 0.0%
400
-5.0% 200
-10.0%
0
-15.0%
M1
M2
M3
Source: SAMA, Al Rajhi Capital
Time and Saving Deposits
Demand Deposits
Source: SAMA, Al Rajhi Capital
Figure 13: Credit and deposit growth – Private sector credit declined on Figure 14: Loans to deposits – The loan-to-deposit ratio recorded a a yearly basis, in May 2017 for the third month in a row. reading lower than the 90% mark in May 2017, for the eighth consecutive month. YoY 20.0%
92.0% 90.0%
15.0%
88.0% 86.0%
10.0% 84.0% 82.0%
5.0%
80.0% 0.0%
78.0% 76.0%
-5.0%
74.0% -10.0%
72.0%
Deposits
Credit
Source: SAMA, Al Rajhi Capital
Figure 15: Non-performing loans
Loans to Deposit ratio
Source: SAMA, Al Rajhi Capital
Figure 16: Net Profit for Banks
1.8
SAR mn 5,000
1.7
4,500
1.6
4,000
1.5
3,500
1.4
3,000
1.3
2,500
1.2
2,000
1.1
1,500
1.0
1,000 500 -
Nonperf orming loans to total gross loans
Source: SAMA, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
Source: SAMA, Al Rajhi Capital
5
Economic Research Monthly Economic Report July 2017
Figure 17: Foreign reserves – dropped at the slowest monthly pace in May 2017, in nine months, to stand at SAR 1,871bn (~US$498.9bn).
Figure 18: Major components of foreign assets – Foreign deposits abroad rose on an m-o-m basis in May 2017, at the fastest rate in a year. However, the investments in foreign securities dropped for the seventh month in a row.
SAR bn 3,000
SAR bn 2,500
20.0% 15.0%
2,500
2,000
10.0% 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%
Reserves Assets
0
YoY (RHS)
Foreign Currency & Deposits Abroad
Source: SAMA, Al Rajhi Capital
Investment in Foreign Assets
Source: SAMA, Al Rajhi Capital
Figure 19: Inflation trend (y-o-y) – Kingdom continued to be in the deflation territory for the fifth consecutive month in May 2017 (-0.7% yo-y) compared to -0.6% y-o-y in April 2017. 5.0%
Figure 20: Inflation drivers (y-o-y) – Food & beverages prices dropped 2.3% y-o-y in May 2017 (-2.6%y-o-y in April), while the transport prices fell by 2.0% y-o-y in May 2017 (-2.2% y-o-y in April). 14.0% 12.0%
4.0%
10.0% 8.0%
3.0%
6.0% 4.0%
2.0%
2.0% 0.0%
1.0%
-2.0% -4.0%
0.0%
-6.0% -1.0%
General Index
Source: GAS, Al Rajhi Capital
Food And Beverages
Furnishings, Household
Transport
Housing, Water, Electricity, Gas
Source: GAS, Al Rajhi Capital
Figure 21: Tadawul index performance
Figure 22: TASI one year historic 12-month forward P/E chart
Index
Million
7500
400
7400
350
7300
15.0x 14.0x
300 7200
13.0x 250
7100 7000 6900
200
12.0x
150
11.0x
6800 100 6700
10.0x 50
6600 6500
0
9.0x 8.0x
Volume RHS
TASI
Source: Bloomberg, Al Rajhi Capital, Data from 31st May 2017 to 22nd June 2017.
Disclosures Please refer to the important disclosures at the back of this report.
Source: Bloomberg, Al Rajhi Capital
6
Economic Research Monthly Economic Report July 2017
Figure 23: Top 5 Sectors MoM
Figure 24: Bottom 5 sectors MoM
18.0%
0.0%
16.0%
-1.0%
14.0% -2.0%
12.0% 10.0%
-3.0%
8.0% -4.0%
6.0% 4.0%
-5.0%
2.0% -6.0%
0.0%
-7.0%
Source: Tadawul, Al Rajhi Capital
Source: Tadawul, Al Rajhi Capital
Figure 25: Top 5 Gainers for the month of June Name Monthly Return Market Cap (SAR bn) Avg Volume (mn) Sector National Commercial Bank
30.8%
106.22
2.56
Financials
Savola Group/The
22.6%
26.90
0.79
Consumer Staples
Saudi British Bank/The
19.8%
40.23
0.61
Financials
Almarai Co
18.6%
77.16
0.93
Consumer Staples
Saudi Arabian Mining Co
18.5%
57.20
1.34
Materials
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn.
Figure 26: Top 5 Losers for the month of June Name Monthly Return Market Cap (SAR bn) Avg Volume (mn) Sector Alujain Corp
-15.3%
1.52
0.72
Materials
Red Sea Housing Services Co
-15.2%
1.17
0.13
Real Estate
United International Transportation Co
-8.9%
1.47
0.43
Industrials
Eastern Province Cement Co
-5.1%
2.08
0.10
Materials
Rabigh Refining & Petrochemical Co
-4.4%
10.01
1.21
Energy
Source: Bloomberg, Al Rajhi Capital, Companies with market cap more than SAR 1bn.
Figure 27: Point-of-sale transactions (POS) trend – Point-of-sale (POS) transactions in May 2017 grew on a yearly basis, for the tenth consecutive month. SAR bn 20.0
40%
18.0 30%
16.0 14.0
20%
12.0 10.0
10%
8.0 0%
6.0 4.0
-10%
2.0 -
-20%
POS
Figure 28: ATM cash withdrawals trend – ATM cash withdrawals declined by 3.8% y-o-y in May 2017, compared to the yearly drop of 2.8% in April 2017. SAR bn 80.0
50%
70.0
40%
60.0
30%
50.0
20%
40.0
10%
30.0
0%
20.0
-10%
10.0
-20%
-
YoY
Source: SAMA, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
-30%
ATM Cash withdrawals
YoY
Source: SAMA, Al Rajhi Capital
7
Economic Research Monthly Economic Report July 2017
Figure 29: Emirates NBD Saudi PMI Index: Saudi’s non-oil private Figure 30: Consumer spending trend (POS and ATM cash Withdrawals) sector PMI expanded to 54.3 in June 2017, down from 55.3 in May 2017, owing to the slower rise in output and new orders. 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
8
Economic Research Monthly Economic Report July 2017
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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 Monthly Economic Report July 2017
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.
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Disclosures Please refer to the important disclosures at the back of this report.
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