KARACHI: “When we woke up in the morning we came to know that the Pak rupee has been depreciated almost by PKR 10 against the dollar in the inter-bank market, it was a big shock,” says Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan.
This weekend, the Pak Rupee plunged to a historical low of PKR 144 before closing at 138.64, losing 3.4 percent, against greenback prior to resumption of talks with International Monetary Fund IMF.
“It was like big tremor for the market because yesterday the finance minister, Asad Umar, in his speech (on completion of PTI government’s 100 days in office) had said that things are normal and there is no emergency,” Paracha told Arab News.
Pakistan’s interbank market was closed at PKR 133.98 against the dollar on Thursday which on Friday witnessed “unexpected movement” and hit low of PKR 144 against the dollar. “Though devaluation was expected but we were not expecting such big depreciation in a single day,” Fahad Irfan, Head of Research at Alfalah Securities, told Arab News.
This is the sixth round of Pak rupee devaluation since December 2017. The government had devalued Pak Rupee from PKR 105 on December 8, 2017, to PKR 135 on October 09, 2018, making the currency 27 percent weaker. Latest devaluation to PKR 138.64 is 32 percent cumulative since the December 2017.
Pakistan is negotiating with the IMF for the bailout program Islamabad needs to steer the economy out of balance of payment crisis. Among conditions of energy prices hike, interest rate hike, the IMF has asked the country to further devalue its currency.
Many expect that the latest devaluation is in line with the directions of IMF. “Most likely it could be IMF prior action,” Muhammad Sohail, CEO of Topline Securities, told Arab News.
“IMF has asked for rupee devaluation upto PKR 145 to PKR 150 against dollar and it seems that the government has taken this step despite the fact that apparently government say they have not availed the program yet,” Malik Bostan, President of Forex Association of Pakistan, commented.
“People are in state of shock because such movement is dangerous for market,” Bostan said adding “since morning only 1 to 2 percent trading in the currency has taken place in the open market” .
Financial experts believe that the devaluation of Pak Rupee will not end here as the country is expected to experience another wave of devaluation against dollar when the government will resume talks with the IMF. ” We can expected further rupee depreciation in January 2019 when the government is expected to resume talks with the fund for bailout program,” Fahad Irfan expected.
Experts believe that the devaluation was much needed as Pakistan’s external current account deficit CAD remained higher than expectations. For the period Jul-Oct 2018, CAD was reported at $4.8 billion, 1.6 percent of GDP.
As a result, Pakistan foreign exchange reserves also declined from $9.8 billion in Jul 2018 to $8 billion as of November 23, 2018, which is less than 2 months of import cover. This is despite the $1 billion inflow from Saudi Arabia which the country received last week, according to Topline Securities research.
Rupees hits historic low ahead of talks with IMF
Rupees hits historic low ahead of talks with IMF
- Pakistan’s rupee has been devalued by 32 percent since December 2017
- The devaluation may be prior action on the condition of IMF to further devalue — analysts
UAE grocery store chain Spinneys to float 25% stake on Dubai Financial Market
RIYADH: UAE-based grocery store operator Spinneys 1961 Holding PLC has announced its intention to proceed with an initial public offering on the Dubai Financial Market.
Al Seer Group, Spinney’s parent company and the selling shareholder, expects to sell 25 percent of the total issued share capital of the firm, equivalent to a total of 900 million shares.
The IPO’s subscription period will begin on April 23 and the DFM listing is set for May 9, the company said in a release.
The offering will be made available to UAE retail investors with 5 percent or 45 million shares in the first tranche, while the second tranche will provide professional stakeholders with 855 million shares.
Dubai’s high-end property sales rise on overseas demand
DUBAI: Sales of homes in Dubai worth $10 million or more rose 6 percent in the first quarter versus last year, an industry report showed on Tuesday, as demand from the international ultra-rich for homes in the emirate showed little sign of abating, according to Reuters.
A total of 105 homes worth an overall $1.73 billion were sold from January to March, up from around $1.6 billion a year earlier, according to property consultancy Knight Frank.
Activity was dominated by cash buyers, with palm tree-shaped artificial island Palm Jumeirah the most sought-after area, accounting for 36.3 percent of sales by total value, followed by Jumeirah Bay Island and Dubai Hills Estate.
Home to the world’s tallest tower, the UAE’s Dubai is seeking to grow its economy through tourism, building a local financial center and by attracting foreign capital, including into property.
The recent property boom has shown signs of fizzling out, however, with developers, investors and brokers worrying whether a painful correction akin to the slump that rocked the emirate in 2008 can be avoided.
Last year, Dubai ranked first globally for number of home sales above $10 million, selling nearly 80 percent more such properties than second-placed London, according to Knight Frank.
The city also bucked the trend of falling luxury prices seen in cities like London and New York last year, posting double-digit gains, Knight Frank said in February.
“The level of deal activity in Dubai continues to strengthen, particularly at the top end of the market, where the near constant stream of international high-net-worth-individuals vying for the city’s most expensive homes persists,” said Faisal Durrani, Knight Frank’s head of research for Middle East and Africa.
Durrani told Reuters Dubai was aided by the relative affordability of its luxury homes, where well-heeled buyers can purchase about 980 sq. feet of residential space for $1 million, “about three or four times more than you would get in most major global gateway cities.”
The strong demand suggests many international investors are acquiring Dubai property for second homes rather than “constant buying to flip,” he said, referring to the past practice of buying in order to sell to others quickly for more money.
Oil Update — prices rise on China growth, Middle East tensions
SINGAPORE: Oil prices rose on Tuesday after data showed China's economy grew faster than expected, while heightened tensions in the Middle East also kept markets on edge after Israel said it would respond to Iran’s weekend missile and drone attack, according to Reuters.
Brent futures for June delivery rose 20 cents, or 0.2 percent, to $90.30 a barrel by 10:57 a.m. Saudi time. US crude futures for May delivery rose 21 cents, or 0.3 percent, to $85.62 a barrel.
Earlier in the day oil prices had risen nearly 1 percent following the release of official data from China showing gross domestic product in the world’s biggest oil importer grew 5.3 percent in the first quarter, year-on-year, comfortably beating analysts’ expectations.
However, both benchmarks pared some gains as a raft of other Chinese indicators including real estate investment, retail sales and industrial output showed demand remained weak in the face of a protracted property crisis.
Oil prices soared last week to the highest levels since October, but fell on Monday after Iran’s weekend attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict that could displace crude barrels.
“Israel’s response will determine whether the escalation ends or continues. The conflict could still be contained to Israel, Iran and its proxies, with possible involvement of the US,” analysts at ANZ Research said in a note on Tuesday.
Israel’s Prime Minister Benjamin Netanyahu on Monday summoned his war cabinet for the second time in less than 24 hours to weigh how to react to Iran’s first-ever direct attack on Israel.
Iran produces more than 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries.
World Bank raises Saudi Arabia’s 2025 GDP growth forecast to 5.9%
RIYADH: The World Bank has raised its expectations for Saudi Arabia’s economic growth to 5.9 percent in 2025 from 4.2 percent predicted earlier in January.
In its latest report the bank, however, revised its 2024 forecast for the Kingdom’s gross domestic product growth downward to 2.5 percent from an earlier forecast of 4.1 percent.
Concurrently, the overall GDP growth forecast for Gulf Cooperation Council countries in 2024 has been reduced to 2.8 percent, down from 3.6 percent, while the 2025 forecast has been revised to 4.7 percent from 3.8 percent.
The report also adjusted the UAE’s GDP growth forecast to 3.9 percent for 2024, up from the previously projected 3.7 percent, with a further rise to 4.1 percent in 2025, from 3.8 percent.
Kuwait’s economy is expected to expand by 2.8 percent in 2024 and increase further to 3.1 percent in 2025.
Similarly, Bahrain’s economy is likely to grow by 3.5 percent in 2024 and 3.3 percent in 2025, marking an increase from January’s projections.
Meanwhile, Qatar’s economy saw a downward revision for its 2024 forecast from 2.5 percent to 2.1 percent but an upward revision for 2025 from 3.1 percent to 3.2 percent.
Oman’s economy projections for 2024 and 2025 saw a marginal increase of 0.1 percent since the January forecast.
This adjustment reflects the broader economic trends where the surge in oil prices following Russia’s invasion of Ukraine in 2022 bolstered oil-exporting economies in the Middle East and North Africa.
In contrast, economic growth in non-oil-exporting nations — including MENA oil importers like Djibouti, Jordan, Morocco, Tunisia, and the West Bank and Gaza — has slowed.
By 2024, the growth disparity between GCC oil exporters and developing oil importers is expected to narrow to just 0.9 percentage points, marking a significant shift from 2022 when GCC countries grew 5.6 percentage points faster, the report stated.
“Developing oil exporters will grow 2.8 percent in 2024, down from 3.1 percent in 2023 while growth in developing oil importers is forecasted to decrease to 2.5 percent in 2024, down from 3.1 percent in 2023,” the report stated.
Overall, the MENA region is expected to achieve a growth rate of 2.7 percent in 2024, which aligns with pre-COVID levels but still trails the global average.
While other emerging markets and developing economies are also projected to remain below pre-pandemic growth rates, they are expected to surpass the MENA region by 1.2 percentage points in 2024.
GCC oil companies’ capex to grow by 5% to reach $115bn in 2024
RIYADH: The capital expenditures of national oil companies in the Gulf Cooperation Council are likely to grow by 5 percent in 2024 as compared to the previous year and are expected to reach $115 billion, according to a report.
The analysis by S&P’s Global Ratings, however, does not take into account the potential surge in spending from recent expansion plans such as the North Field West Project in Qatar, which it said could significantly boost expenditures.
The report highlighted that while the growth in capital expenditure is modest, Saudi Arabia’s planned output cuts in line with the current policy of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is likely to decrease demand for drilling platforms, operating ratios, average daily production rates, and profitability among regional drilling companies, especially in the Kingdom.
“We stress-tested the effect of a hypothetical 15-20 percent loss of total rig demand in the region on GCC drillers, and we estimate that the debt to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of rated and publicly listed drillers based in GCC countries could increase by about 1x on average,” S&P Global Ratings Credit analyst Rawan Oueidat said.
“At this point, we think that drillers’ rating headroom could shrink, but we don’t expect any short-term rating pressure,” Oueidat added.
The agency also raised concerns about the future of capital expenditure in other oil and gas-producing countries of the GCC, following Saudi Aramco’s decision to suspend its plan to increase the Kingdom’s maximum production capacity.
Despite these concerns, the total oil capital expenditure in the region is expected to remain relatively high due to the ongoing expansion plans in Qatar and the UAE.
However, the pace and magnitude of spending are expected to impact oilfield service companies and the entire value chain, particularly drilling companies whose business models heavily rely on corporate capital expenditures.
The UAE’s Abu Dhabi National Oil Co. is set to increase its oil production capacity to 5 million barrels per day by 2027, up from 4 million bpd as of February 2024, according to the US Energy Information Administration.
Meanwhile, Qatar is aiming to boost its liquefied natural gas production capacity to 142 million tonnes annually by 2030 from the current output of 77 million tonnes.
The report predicted oil prices to average $85 per barrel for the remainder of 2024 and $80 per barrel the following year.
It also suggested that geopolitical tensions and planned production cuts by OPEC+ will support prices and enhance the cash flows of oil companies across the Gulf region.
