DFM profits halve as Saudi Arabia soaks up regional liquidity

Saudi stocks have surged so far this year, distracting attention away from the Dubai Financial Market. (Reuters)
Updated 08 May 2018

DFM profits halve as Saudi Arabia soaks up regional liquidity

  • Dubai trading volumes fall 57 percent to 20.4 billion dirhams in the first quarter
  • Rising interest in Saudi stocks exposes lower confidence in big Dubai names

Rising demand for Saudi stocks saw trading volumes on Dubai Financial Market collapse during the first quarter, halving profits of the emirate’s bourse.

Trading volumes on the Dubai Financial Market — the only listed exchange in the region — fell 57 percent year on year to 20.4 billion dirhams (S5.55 billion) during the first quarter. Profits at the bourse fell to 48.9 million dirhams from 102.3 million dirhams in the year ago period, it said in a statement on Tuesday.

“There’s been a rotation (since the start of the year) out of UAE stocks and into Saudi Arabia,” said Julian Bruce, head of institutional trading at EFG Hermes.

“Aside from factors impacting the region, the UAE on it’s own doesn’t have much in the way of catalysts or drivers right now, while there’s a growth story in Saudi Arabia and other regional markets.”

Shares in Saudi Arabia rose by 8.9 percent during the first quarter of the year, on mounting anticipation that the Kingdom’s shares will be included on index provider MSCI’s Emerging Market Index — an influential measure used by international emerging market funds — later this month.

The potential inclusion in MSCI’s index — which follows the announcement of a similar emerging markets inclusion by rival index provider FTSE Russell earlier this year — may attract as much as $45 billion in foreign inflows into Saudi stocks, including about $14 billion of passive investment, according to investment bank EFG Hermes.

“The UAE is lacking any of those catalysts so attention turns to other markets where there’s a bit more of a story,” said Bruce.

Dubai’s headline share index fell 7.8 percent during the first quarter, closing 13.6 percent lower for the year yesterday.

DFM’s revenue halved year-on-year in the first quarter, with trading commission fees falling 56 percent.

The rising attraction of Saudi stocks has also intensified investors’ misgivings about the strength of Dubai-listed stocks.

“Key companies such as Emaar Properties and Damac have lowered their dividends distribution which has given investors cautious opinions on the outlook of the real estate sector in particular,” said Tariq Qaqish, managing director of asset management at Menacorp.

“Investors confidence is at its lowest level right now, as several listed companies on Dubai market specifically are facing challenges due to mismanagement that caused investors to lose their money and forced those entities to restructure capital with no light at the end of the tunnel.”

“Within such a low liquidity environment, companies are continuing to raise capital and suck the remaining liquidity in the market,” he said.

Foreign investors are also increasingly staying away from markets and stocks with corporate governance issues, he said.

PIF-backed Lucid Motors makes trading debut on Nasdaq

Updated 26 July 2021

PIF-backed Lucid Motors makes trading debut on Nasdaq

  • will make itsLucid to make trading debut on New York’s Nasdaq Global Select Market on Monday
  • Lucid merged with special purpose acquisition vehicle Churchill Capital Corp. IV

RIYADH: Lucid Motors, the Californian electric vehicle (EV) carmaker majority-owned by Saudi Arabia’s Public Investment Fund (PIF), will make its trading debut on New York’s Nasdaq Global Select Market on Monday.

Listed under the new ticker symbol “LCID”, the listing came about following the merger of Lucid and Churchill Capital Corp. IV — a special purpose acquisition company — on July 23. The EV firm will begin trading by ringing the Nasdaq opening bell on July 26.

The deal will help Lucid raise $4.4 billion, which will be used to fast track its production growth plans. The firm has over 11,000 paid reservations for its Lucid Air vehicle, which is on scheduled to start deliveries in the second half of this year.

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created,” Peter Rawlinson, CEO and CTO of Lucid Group, said in a press statement.

Michael S. Klein, chairman and CEO of Churchill Capital Corp. IV, said ahead of the merger: “Lucid has industry-leading technology, clear demand for its products, and is on track to deliver revenue-generating cars to customers in the second half of this year. We are excited to support Lucid’s transition into a public company and confident in its ability to address unmet needs in the automotive industry, which is moving toward electrification at a rapid pace and on a global scale.”

PIF announced its investment in Lucid Motors in Sept. 2018. The Lucid Motors CEO told Arab News in January that his team were scrutinizing possible locations in Saudi Arabia to open retail outlets — what Lucid calls “studios” — for their luxury EVs.

“We are already looking,” he said. “My retail team just returned from a scouting trip in the Kingdom, and that is very much on the road there. Hopefully, we can get a retail outlet there right at the tail end of 2021, probably early 2022.”

Earlier this month, the Wall Street Journal reported that Saudi Arabia stands to record a profit of nearly $20 billion on the back of its investment in Lucid.

PIF will own over 60 percent of the company, which is expected to have a market capitalization of about $36 billion.

Lucid’s expected market capitalization is nearly twice the valuation of Nissan Motor Co. and about two-thirds that of Ford Motor Co., which delivered more than 4 million cars last year. Lucid has yet to sell any cars.

Looking at the market for EVs, a report by the Pew Research Center found that 7 percent of respondents said they currently owned an electric or hybrid vehicle, and 39 percent said they were very or somewhat likely to buy an EV when they next came to purchase.

Interest has grown, with 1.8 million EVs registered in the US in 2020, more than three times as many as four years ago, according to the International Energy Agency.

While the US accounts for 17 percent of the world’s 10.2 million EVs, China is the biggest market, with 44 percent of all cars and Europe following with 31 percent.

Saudi Arabia to introduce insurance on domestic labor contracts in 2022

Updated 26 July 2021

Saudi Arabia to introduce insurance on domestic labor contracts in 2022

  • Move aims to increase attractiveness of Saudi labor market
  • Recruiters must carry the cost of insuring contracts for first two years

RIYADH: Saudi Ministry of Human Resource and Social Development is expected to start implementing insurance on the domestic labor contract early in 2022 in cooperation with the Saudi Central Bank (SAMA), Al Eqtisadia paper reported.

This decision guarantees the rights and benefits of the employer and the worker, including compensating the employer for the expense of bringing in a replacement domestic worker in the event of death, inability to work, or suffering from chronic or critical diseases, according to the ministry.

The move aims to increase the attractiveness of the Saudi labor market, improve the contractual relationship between workers and employers, and reduce risks in the domestic labor recruitment market, helping to cut costs.

“Recruitment companies and agencies used to provide a 3-month trial period for the worker, compensating families for any potential damage, but once the trial period ends, the two parties are not protected, causing lot of losses to Saudi families,” Saudi development and localization specialist Saleh Al-Anzi told Arab news.

“The insurance contract protects both the worker and the employer,” he said.

The insurance will be technically linked to the mediation contract for the recruitment of domestic workers through the Musaned platform, and the ministry will issue the implementation mechanism later in cooperation with the relevant authorities, including SAMA and the Ministry of Interior, sources familiar with the matter told the paper.

Recruitment companies must carry the cost of insuring the contracts of domestic workers they bring into the country for the first two years, the Saudi Council of Ministers decreed in May.

Saudi car rental facilities to issue e-contracts starting July 25

Updated 26 July 2021

Saudi car rental facilities to issue e-contracts starting July 25

  • Car rental facilities to issue all car rental contracts on the Naql portal

RIYADH: The Saudi Transport General Authority (TGA) started implementing the first phase of the unified electronic contract for car rental starting July 25, TGA announced on its Twitter account.
The unified electronic contract obliges car rental facilities to issue all car rental contracts on the Naql portal through the rental contracts service.
This service will enable the licensed establishments to issue a unified contract with complete statutory requirements and clauses, and will contribute to preserving the rights of the lessor and the lessee, enhancing the confidence in the services provided, and raising the level of quality of services, TGA said.
The unified electronic car contract will reduce disputes and the burden on the relevant authorities and will stimulate investment in the sector, according to the TGA.
TGA launched its Distinguished Transport Partner program in May to strengthen public-private partnerships in the sector.

Saudi PIF invests in Indian healthtech platform

Updated 26 July 2021

Saudi PIF invests in Indian healthtech platform

  • Healthifyme raises $75 million in Series C funding round
  • Khosla Ventures, LeapFrog Investment, HealthQuad and Unilever Ventures also invested in the round

RIYADH: The Saudi Public Investment Fund has invested in India-based healthtech Healthifyme’s $75 million Series C funding round, led by Khosla Ventures and LeapFrog Investment, Livemint reported.
HealthQuad and Unilever Ventures also participated in the round, along with existing investors Chiratae Ventures, Inventus Capital and Sistema Asia Capital, taking total investment in the startup to $100 million.
PIF assets have grown to about SR1.6 trillion ($426.6 billion) and it aims to expand this to SR4 trillion by the end of 2025, Deputy Governor Yazeed Al-Hamid said earlier this month.
The sovereign wealth fund aims to boost its local investments to account for 75-80 percent of the total, he said.
The Saudi sovereign fund has established 35 strategic companies since 2018, it announced on its Twitter account, on Sunday.
The companies are working to promote private sector growth and the diversification of the Kingdom’s economy, by launching new sectors and creating 366,000 direct and indirect jobs.
The Kingdom’s sovereign fund aims to generate approximately 1.8 million direct and indirect jobs by 2025.
The fund is focused on 13 strategic sectors including service utilities, renewable energy, aviation and defense, vehicles, transport and logistics, minerals and mining, financial services, health care, communications, media and technology, food and agriculture, and others.

Saudi Arabia increased support for housing sector in July

Updated 26 July 2021

Saudi Arabia increased support for housing sector in July

  • Sakani housing program beneficiaries received SR734 million in July
  • Figure compares with SR587 million a year earlier

RIYADH: Saudi Arabia’s Sakani housing program beneficiaries received SR734 million ($195.7 million) from the Ministry of Municipal and Rural Affairs and Housing and The Real Estate Development Fund (REDF) in July, up from SR587 million a year earlier, SPA reported.
This steady increase will continue for the next few years, Mohamed AlKhars, a member of the housing program advisory board and the chairman of Innovest Property Co. told Arab news.
Support for citizen’s first homes will be a policy that remains in places for many years in the Kingdom, he said.
However, the cost of support has fallen, he said. “There has been a drop in the interest on loans during the last three years, after negotiations with financiers, which are paid by the REDF,” said AlKhars.
The total amount deposited in the accounts of Sakani beneficiaries since the announcement of the transformation program in June 2017 until this July exceeded SR29.6 billion, said Mansour bin Madi, CEO of REDF.
In another Saudi step toward developing the housing sector, the Developers Services Center (ETMAM) approved nine housing schemes during the first half of this year, with a total area of more than 16.1 million square meters.
The approved plans included Riyadh, Makkah, Al-Qassim, the Eastern Province, Asir, Tabuk, and the northern border, Al Eqtisadiah reported.
ETMAM completed during the first half of this year building permit applications for 8,131 housing units, and the issuance of 119 real estate developer qualification certificates for sales projects.
“Those numbers will increase in the coming phase,” AlKhars said.
The center also contributed to the issuance of 45 sales licenses for off-plan sales projects, and 2,171 real estate developers were qualified in cooperation with the competent authorities to provide real estate development services.