UK-EU trade slumps in first month of new Brexit rules

A truck drives towards the entrance to the Port of Dover, Britain, following the end of the Brexit transition period on January 15, 2021. (REUTERS/John Sibley//File Photo)
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Updated 13 March 2021
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UK-EU trade slumps in first month of new Brexit rules

  • Goods exports to EU slump by 41% in January; ONS warns data skewed by pandemic, stockpiling

LONDON: Trade between the UK and the EU was hammered in the first month of their new post-Brexit relationship, with record falls in British exports and imports of goods as COVID-19 restrictions continued on both sides.

British goods exports to the EU, excluding non-monetary gold and other precious metals, slumped by 40.7 percent in January compared to December, the Office for National Statistics said on Friday. Imports fell by 28.8 percent — another record.

The ONS said the COVID-19 pandemic, which left Britain under lockdown measures in January, made it hard to quantify the Brexit impact from new customs arrangements, and there were changes in the way data was collected too. But there were still signs of a Brexit hit.

Trade in chemicals was especially weak, reflecting the winding-down of a rush to stockpile pharmaceuticals ahead of the end of the Brexit transition period, the ONS said.

The ONS highlighted a 64 percent fall in exports of food and live animals to the EU — including shellfish and fish.

It pointed to delays caused by red tape reported by the Scottish Seafood Association, with consignment sign-offs reportedly taking six times longer.

FASTFACTS

  • Prime Minister Boris Johnson says Britain’s new independent trade policy means it can focus on deals with faster-growing economies around the world, although many trade analysts are skeptical that this boost will outweigh lost EU trade.
  • Britain’s official budget forecaster says the country’s new trade arrangements with the EU, the world’s biggest single market, will erode its long-run productivity by 4 percent compared with staying in the bloc.
  • Britain’s overall goods trade deficit, including non-EU countries, narrowed to £9.826 billion in January from £14.315 billion in December.

“External evidence suggests some of the slower trade for goods in early January 2021 could be attributable to disruption caused by the end of the transition period,” the ONS said.

Many companies stockpiled goods in late 2020 to avoid any disruption, deepening the fall in trade in January.

The ONS said its separate business survey suggested that trade picked up toward the end of the month.

Britain on Thursday delayed the introduction of a range of post-Brexit import checks on goods from the EU by around six months, saying businesses needed more time to prepare because of the impact of the pandemic.

Prime Minister Boris Johnson says Britain’s new independent trade policy means it can focus on deals with faster-growing economies around the world, although many trade analysts are skeptical that this boost will outweigh lost EU trade.

Britain’s official budget forecaster says the country’s new trade arrangements with the EU, the world’s biggest single market, will erode its long-run productivity by 4 percent compared with staying in the bloc.

“This month’s unique combination of factors made it inevitable that we would see some unusual figures this January,” said David Frost, a senior minister who was Johnson’s chief Brexit negotiator.

Economists say the hit to EU trade — and any benefits from Brexit — will become clearer.

“While some of the non-tariff barriers to trade, such as the increase in red tape and form-filling, will be ironed out in the short term, the combination of COVID-19 and Brexit will ultimately prove to be a long-term drag on growth,” said Ana Boata, head of macroeconomic research at trade credit insurer Euler Hermes.

Britain’s overall goods trade deficit, including non-EU countries, narrowed to £9.826 billion in January from £14.315 billion in December.


Saudi Arabia leads GCC IPO market with $2.1bn in first half: Markaz

Updated 12 sec ago
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Saudi Arabia leads GCC IPO market with $2.1bn in first half: Markaz

RIYADH: Saudi Arabia led the Gulf Cooperation Council’s initial public offering market in the first half of 2024, raising $2.1 billion in what was an annual increase of 141 percent, an analysis has revealed.

In its latest report, Kuwait Financial Center, also known as Markaz, noted that the Kingdom saw 19 offerings in the six months to the end of June. accounting for 59 percent of the total IPO proceeds in the GCC region. These included $1.95 billion listed in its main market and $143 million in the parallel market, also known as Nomu. 

Saudi Arabia’s ambitious privatization and diversification efforts across sectors such as healthcare, technology, and renewable energy have significantly broadened the market’s appeal.  

These initiatives offer investors exposure to high-growth industries, positioning the Kingdom as an attractive destination for investment in sectors poised for substantial development and innovation. 

Led by its pivotal Capital Market Authority advancing Vision 2030 goals, the Saudi capital market is on a journey of expanision, and saw net foreign investment reach SR198 billion ($52.79 billion) in 2023 – a 7.7 percent annual increase, according to CMA’s June report. 

Top IPOs 

Among the top five GCC IPOs by proceeds in the first half of this year, the Markaz report noted that Dr. Soliman Abdulkader Fakeeh Hospital Co., listed on Saudi Arabia’s main market, raised $764 million, making it the largest IPO during that period. 

The healthcare firm offered 49.8 million shares, representing a 21 percent stake, and received an oversubscription of 119 times. The IPO proceeds accounted for 21 percent of the total GCC IPO proceeds during the period. 

Alef Education, listed on the Abu Dhabi Securities Exchange, secured the second spot with its IPO raising $515 million in proceeds.  

The company offered 1.4 billion shares, representing a 20 percent stake, which was oversubscribed 39 times.  

According to Markaz, Alef Education’s proceeds constituted 14 percent of the total GCC IPO proceeds during the period. 

Parkin Co., listed on the Dubai Financial Market, raised $429 million, making it the third-largest listing in the GCC region in the first half of this year.  

The parking facility provider offered 750 million shares, equivalent to a 25 percent stake. The IPO proceeds constituted 12 percent of the total GCC IPO proceeds during the period and were oversubscribed 165 times. 

Meanwhile, Spinneys Co., also listed on DFM, raised $375 million in proceeds. The supermarket chain offered 900 million shares, representing a 25 percent stake, and was oversubscribed 64 times.  

Markaz revealed that Spinneys Co.’s proceeds constituted 11 percent of the total GCC IPO. 

Similarly, Modern Mills Co., listed on Saudi Arabia’s main market, raised $314 million through the sale of 24.5 million shares, or a 30 percent stake, and was oversubscribed 127 times.  

Modern Mills Company's IPO constituted 9 percent of the total GCC IPO proceeds. 

GCC IPO market 

The overall GCC region experienced a decline in IPO activity in terms of value, with total proceeds amounting to $3.1 billion from 23 offerings in the first half. This represents a 32 percent decline compared to the same period of the previous year. 

In the UAE, IPO proceeds totaled $1.3 billion in the first six months of this year, marking a year-on-year decrease of 67 percent. Of this amount, DFM hosted $805 million, constituting 23 percent of the total GCC IPO funds in the first half. 

Similarly, ADX recorded $515 million in IPO capital, accounting for 14 percent of the total GCC IPO funds during the period. 

Meanwhile, Kuwait saw IPO funds totaling $147 million during the same period, accounting for 4 percent of the total GCC IPO value and listed on Boursa Kuwait. 

The report revealed that the healthcare sector accounted for nearly 22 percent of the total funds raised during the first half of this year through three offerings, totaling $788 million. 

In contrast, the technology sector raised over $515 million during the same period, constituting 14 percent of the total GCC IPO proceeds. 

Similarly, new listings from the industrial sector constituted 12 percent of the region’s total funds, followed by the consumer staples industry and the food and beverages sector at 11 percent and 9 percent, respectively. 

Additionally, the commercial and professional services industry contributed 8 percent to the region’s total IPO funds, closely followed by the insurance sector at 6 percent. 

Middle East IPOs  

Overall, IPOs in the Middle East are set for continued positive aftermarket performance this year, following significant gains in the first quarter, as reported by PwC in May. 

It also highlighted that the Saudi Stock Exchange has emerged as a dominant force in the GCC equity market. 

In the same month, Mohammed Al-Rumaih, CEO of the Saudi Exchange, noted that the introduction of ‘Market Making’ and the debut of ‘Single Stock Options’ have enhanced Tadawul's appeal among international investors. 

Earlier this month, another report released by CMA noted that 42 companies listed in Saudi Arabia’s benchmark index and parallel market benefitted from the nominal value split mechanism in 2023.  

This followed the CMA’s execution of the Companies Law and its Executive Regulations on Jan. 19, 2023, permitting listed firms to split stock par values from SR10 to various lower options. 

Under this mechanism, a company divides its existing shares into multiples to enhance trading volume and accessibility for investors, without altering its total market capitalization. 


Saudi banks lead GCC in credit quality with NPL ratio improving to 1.4%

Updated 23 min 3 sec ago
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Saudi banks lead GCC in credit quality with NPL ratio improving to 1.4%

RIYADH: Saudi banks showcased a notable improvement in credit quality in the first three months of the year as the non-performing loan ratio decreased to 1.4 percent, according to data from the Saudi Central Bank. 

The bank, known as SAMA, presented figures that reflect a decline from 1.7 percent in the same period in 2023 and is credited to stronger risk profiles, underscoring the banking sector’s dedication to robust financial practices and effective risk management.

The NPL ratio measures the proportion of a bank’s gross loans that are not generating income because the borrowers have failed to make scheduled payments for a certain period, typically 90 days or more past due.

A lower NPL ratio to gross loans suggests healthier asset quality, suggesting that a smaller percentage of loans are at risk of default. As a percentage of capital, it indicates a more robust capital buffer to absorb potential losses without compromising the overall capital base.

The SAMA data also indicated that Saudi banks have improved their capacity to absorb potential losses from bad loans, as evidenced by the NPL ratio net of provision to capital decreasing from 2.6 percent to 2.2 percent during this period.

In May, Fitch Ratings observed that Saudi banks generally possess the strongest risk profiles among lenders in the key Gulf Cooperation Council markets, supporting their asset quality.

GCC banks’ primary focus on lending underscores the significant role of credit risks, which assess the likelihood of borrowers defaulting, thereby shaping their overall risk profiles.

Saudi banks experienced robust lending growth, approximately double the GCC average from 2022 to 2023, driven by increased government spending and strong non-oil gross domestic product development, the agency noted.

Nevertheless, the Kingdom maintains a healthier loan portfolio with fewer loans at risk of default, which is a result ofeffective risk management strategies, stringent lending standards, and potentially less exposure to high-risk sectors or borrowers.

Globally, Saudi Arabia’s banking system is also recognized for its high levels of capitalization under a strong regulatory framework.

It also stands out as one of the few countries fully compliant with Basel IV regulations, which mandate specific leverage ratios and require banks to maintain designated reserve capital, as reported by the agency in February of 2023.

According to the agency, factors contributing to more robust risk profiles for Saudi banks include SAMA’s reputation as the region’s strictest and most prudent banking regulator.

From 2019 to 2023, the sector cost of risk in the Kingdom averaged 0.6 percent, which is lower than the average costs observed in the UAE, Qatar, and Kuwait, Fitch noted in its February report.

Additionally, the combined ratio of Stage 2 and Stage 3 loans, which indicates potential credit impairments, stood at 7.2 percent, marking the lowest among these four GCC markets. Additionally, they benefit from a larger and more diversified economy and strong retail financing from 2021 to 2023, which reduces borrower concentration.

On average, the 20 largest exposures at Saudi and Kuwaiti banks account for about 20 percent of their loan books, compared to approximately 35 percent at UAE and Qatari banks.

Furthermore, Saudi banks extend lower levels of financing to companies owned or managed by high-net-worth individuals, including royal family members, compared to some UAE and Qatari banks.


Diriyah Club ownership transferred to PIF-owned firm, boosting Saudi sports sector

Updated 57 min 32 sec ago
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Diriyah Club ownership transferred to PIF-owned firm, boosting Saudi sports sector

RIYADH: Saudi Arabia’s sports sector is set for a major boost as ownership of Diriyah Sports Club transfers from the Ministry of Sport to Diriyah Co., a firm owned by the Public Investment Fund. 

Crown Prince Mohammed bin Salman, serving as chairman of the PIF company’s board of directors, has also approved the formation of Diriyah Sports Club’s board, chaired by Prince Khalid bin Saud. Board members include Jerry Inzerillo, Mohammed Al-Khreiji, Ayman Al-Fallaj, and Hamad Al-Bati, according to a statement. 

The moves align with strategic goals to develop and enhance Diriyah as a premier cultural, tourist, entertainment, and sports destination. The initiative also aims to empower the private sector to play a more significant role in the sports field, in line with Saudi Vision 2030 goals. 

Moreover, this initiative is part of the Sports Clubs Investment and Privatization Project, announced by the Crown Prince in June 2023. The project, rolled out in collaboration with the National Privatization Center, aims to accelerate the development of Saudi Arabia’s sports industry by encouraging business sector involvement with clubs. 

Founded in 1976, Diriyah Club is gearing up to compete in the Saudi Second Division League for the upcoming 2024/2025 sports season, having been assigned to Group 2 by the Saudi Arabian Football Federation. 


Egypt to invest $1.2bn in drilling 110 exploratory wells in 2024/2025

Updated 15 July 2024
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Egypt to invest $1.2bn in drilling 110 exploratory wells in 2024/2025

RIYADH: Egypt is planning to drill 110 exploratory wells with a $1.2 billion investment in the fiscal year 2024/2025 to enhance the country’s oil and gas production capabilities, according to a top official.

In a meeting with a parliamentary committee reviewing the new government’s program, Egypt’s Minister of Petroleum and Mineral Resources Karim Badawi stated the country plans to drill 586 exploratory wells for gas and oil with an investment of $7.2 billion until 2030.

He noted that there are currently 145 active exploration agreements in oil and gas with 40 partners.

As of 2023, Egypt is among the five countries with the highest primary energy production and supply on the African continent, with an output of 29.8 million tonnes, according to Statista.

“I would like to emphasize that my top priority and that of all sector employees is to continue coordination and cooperation with the Ministry of Electricity and Renewable Energy to ensure the necessary fuel supplies for power plants,” Badawi said.

He added: “We will coordinate with foreign partners to schedule and settle outstanding dues to encourage them to invest more in increasing oil and gas production as quickly as possible. We aim to establish incentive mechanisms to enhance production programs and expedite exploration programs, benefiting both parties.”


Saudi Arabia to bolster food security with 5 new investment projects in Al-Baha region 

Updated 55 min 35 sec ago
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Saudi Arabia to bolster food security with 5 new investment projects in Al-Baha region 

RIYADH: Saudi Arabia’s food security is set to strengthen with five new investments in the agriculture sector of the Al-Baha region, aimed at achieving self-sufficiency under Vision 2030.

The Ministry of Environment, Water, and Agriculture announced these opportunities through its FURAS portal, as reported by the Saudi Press Agency. The projects include cultivating orchards, coffee, palm trees, and producing flowers and wild plants.

This comes as Saudi Arabia, despite about 90 percent of its territory being desert, is leading an agricultural boom aimed at boosting domestic crop production and reducing dependence on imported food.

The Kingdom has already achieved complete self-sufficiency in dates, fresh dairy products, and table eggs, according to the General Authority for Statistics’ Agricultural Statistics Publication.

The new investment opportunities feature a coffee city project aiming to cultivate more than 150,000 trees across an area exceeding 2.29 million sq. m., with a production capacity surpassing 15,000 tonnes. 

The ministry has set a submission deadline of Sept. 10, with bid envelopes scheduled to be opened the following day.

Another initiative is the Al-Ennab Village project, situated near Al-Janabeen Dam, focusing on cultivating palm and fruit trees over an area of more than 4.6 million sq. m. The deadline for bids for this project is Sept. 24, with the envelopes scheduled to be opened the following day.

The Ministry of Environment, Water, and Agriculture emphasized the strategic importance of these projects in enhancing agricultural productivity and ensuring long-term food security for the Kingdom.

Meanwhile, the ministry said that the lavender fields project opportunity aims to plant over 2,500 lavender seedlings annually and set up a fence and shades made of agricultural mesh, mother fields, and irrigation networks in an area that will exceed 11,710 sq. meters.

The deadline for submitting bids is Sept. 2, and the envelopes will be opened on Sept. 3.

Additionally, there is a fruit nursery project in the Qilwah governorate aimed at cultivating 100,000 seedlings annually for all types of fruits, covering an area exceeding 33,370 sq. meters.

Moreover, a flower nursery project in the same district has been included among the investment opportunities. This initiative aims to produce 500,000 seedlings annually for various flowers and wild trees, covering an area exceeding 34,790 sq. meters. 

Bids are scheduled to be submitted by the end of Sept. 3, with the envelopes set to be opened the following day.

MEWA announced the launch of the first Saudi AgriFood Tech Alliance earlier this month, with founding partners including the Research, Development, and Innovation Authority, King Abdullah University of Science and Technology, and Topian, NEOM’s food company.

According to the ministry, the alliance aims to provide a platform to unite and mobilize a complementary network of food and agriculture stakeholders, catalyzing the national-scale deployment of AgriFood technological solutions.

The alliance includes around 40 entities from the public and private sectors, research and academia, and nonprofit organizations.