Stocks stumble, yields jump on rates outlook; oil rallies

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Updated 16 January 2022

Stocks stumble, yields jump on rates outlook; oil rallies

  • Investors worry about how imminent US interest rate hikes would affect economy

Global stock markets stumbled again on Friday and US Treasury yields climbed as cautious investors worried about how imminent US interest rate hikes would affect
 the economy. 
A warning from the largest US bank JPMorgan Chase & Co. that its profitability may fall below a medium-term target cast another pall on Wall Street.
MSCI’s gauge of stocks across the globe had shed 0.36 percent. The pan-European STOXX 600 index closed down 1.01 percent and had its worst week since Nov. 26, weighed in part by declines in technology stocks.
In the US, a spate of bargain hunting toward the end of the day helped stocks to narrow losses. The Dow Jones Industrial Average fell 0.56 percent, the S&P 500 ended flat, and the Nasdaq Composite flipped into the black, rising 0.59 percent.
“We are now entering a period where the Federal Reserve will engage in a never-before-seen experiment: Raising interest rates off zero and reducing the size of its balance sheet in the same year,” said Nicholas Colas, co-founder of DataTrek Research.
“The market is still left wondering what results will come from their decisions,” Colas said.
In line with expectations of rising rates, benchmark 10-year Treasury yields jumped to 1.7859 percent, rebounding toward a two-year high of 1.808 percent struck earlier this week. Two-year Treasury yields hit a high of 0.973 percent, a level last seen in February last 2020.

HIGHLIGHT

Benchmark 10- year Treasury yields jumped to 1.7859 percent, rebounding toward a two- year high of 1.808 percent struck earlier this week. Two- year Treasury yields hit a high of 0.973 percent, a level last seen in February last 2020.

European bond yields also rose in choppy trade as investors focused on monetary policy tightening by central banks, though sharp falls in Germany’s benchmark 10-year yield earlier this week led it to notch its biggest weekly fall in 10 weeks.
Meanwhile, in Asia, the five- year Japanese government bond yield jumped to its highest since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers are debating how soon they can start an eventual interest rate hike.
Such a move could come even before inflation hits the bank’s 2 percent target, sources said.
The dollar, which has been slugged by a three-day selling spree as investors bet that expec- tations of rate rises are already priced into the currency, finally steadied on Friday.
The dollar index, which measures the greenback against a basket of six currencies, bounced 0.34 percent to 95.167, pulling away further from a two-month low hit this week.
A bounce in the dollar dragged on the euro, which lost 0.34 percent to 1.14135.
Sterling also slipped 0.22 percent to 1.36780, taking a breather after this week’s rally that pushed it to a 2-1/2-month high.
GDP data on Friday showed that Britain’s economy grew faster than expected in November and its output finally surpassed its level before the country went into its first COVID-19 lockdown.

Related


NEOM ‘fully under Saudi sovereignty, regulations,’ says government official refuting inaccurate media reports

Updated 16 May 2022

NEOM ‘fully under Saudi sovereignty, regulations,’ says government official refuting inaccurate media reports

RIYADH: NEOM, a project fully owned by Saudi Public Investment Fund, is “completely under Saudi Arabia’s sovereignty and regulations,” the Saudi Press Agency reported early Monday, citing an official source.

The clarification came after NEOM's tourism sector head Andrew McEvoy made comments to media during his participation at Arabian Travel Market in Dubai about demographic status within the megacity, suggesting that residents within NEOM will have a special status, distinguishing them from others.


Read More: NEOM seeks to regenerate the area, offer ‘guilt-free’ vacations


NEOM City will have some special regulations related to investment reflecting its strategy as part of the Kingdom's Vision 2030, to make 'the city of the future' an effective driver in supporting the Saudi economy and the prosperity of the region, according to the company.

Economic legislation specific to the project area will be developed to achieve the best concepts of governance of economic zones in the world, making NEOM one of the most important attractions globally, SPA quoted the source as saying.

The point was underlined by Manar Al-Munif, chief investment officer of NEOM, while speaking at the Saudi-Thai Economic Forum in Riyadh on May 16.

She said the $500-billion future city will have its own regulations based on best practices from around the world that will allow businesses to grow and develop.

Al-Munif revealed that NEOM is the largest Environmental, Social, and Governance initiative in the world, and added that the project will create several investment opportunities for businesses. 

“We have identified a number of investment opportunities across 16 sectors in NEOM. These sectors represent the future, and we have outlined 150 investment initiatives. Each of these initiatives is going to have hundreds of opportunities regardless if it is a direct investment, joint venture, or merging,” Al-Munif added. 

She also said the NEOM project is trying to reinvent and introduce environmental factors, thus ensuring harmony with nature. 


Top CEO Conference and Awards to recognize industry leaders in GCC

Updated 15 May 2022

Top CEO Conference and Awards to recognize industry leaders in GCC

  • Publicly listed firms in GCC bourses are evaluation on their annual financial performance

DUBAI: Braving the setbacks they had faced during the pandemic, head honchos of top companies will be attending the Top CEO Conference and Awards to be held in the city from May 17-18 to celebrate leadership in the Gulf Cooperation Council.

According to the organizer’s statement, the Top CEO Awards are based on the financial performance, size and corporate governance of GCC-listed companies.

Julien Hawari, organizer of the TOP CEO, Special Edition, said in the statement: “All of the publicly listed companies in the Arabian Gulf stock markets are evaluated on their annual financial performance, and the ranking is not a result of a nomination by a jury relying on undisclosed metrics.”

The statement added that companies are evaluated if they are listed on any of the seven GCC stock markets. Moreover, Hawkamah Institute has provided corporate governance guidelines developed by the Top CEO in partnership with INSEAD Business School.

One of the Big Four has audited the results, and KPMG is auditing the Top CEO ranking for the 2022 awards, the statement said, while adding that Arab News and Al Arabiya News channel were chosen as media partners of the event.

According to Hawari, the awards were created in 2012 to recognize those who created value and boosted the region’s economy while maintaining transparency and good corporate governance.

FASTFACT

One of the Big Four has audited the results, and KPMG is auditing the Top CEO ranking for the 2022 awards.

The statement added that there are 10 categories of companies to be divided into, and the Top 10 CEOs in each category are recognized, totaling 100 awards.

The 10 categories are banking, energy and utility, financial services and investment, insurance, logistics and industrials, malls, real estate and construction, mining, metals and chemicals, retail, FMCG and consumer care, Shariah-compliant banks and financial services and telecom, tech and media.

Commenting on the event, Hawari said: “Global market forces are coming together in the post-pandemic economies to rebuild communities and businesses, and our region is no different.”

Compared to the pause of business in 2020 and slow growth in 2021, the first three months of 2022 saw Arabian Gulf stock markets increase by the most since the global financial meltdown.


Pakistan’s oil, food bill swells to $24.8 billion amid rising commodity prices, rupee depreciation

Updated 15 May 2022

Pakistan’s oil, food bill swells to $24.8 billion amid rising commodity prices, rupee depreciation

  • Petroleum products make up for 26% of Pakistan's overall imports worth $65.53 billion
  • Finance minister says he will talk to the IMF but refuses to withdraw energy subsidies

KARACHI: Pakistan’s oil and food import bills have swelled to $24.8 billion during the current fiscal year due to increasing global commodity prices and weakening national currency, according to official data and analysts. 

The oil and food import bills of the South Asian country, which is struggling with a worsening balance-of-payment crisis in the face of declining foreign exchange reserves, rose by 96 percent and 12.3 percent respectively from July 2021 till April 2022. 

Pakistan imported oil products worth $17.03 billion during this period, compared to imports worth $8.69 billion during the corresponding period last year. It contributed 26 percent to the country’s overall $65.53 billion imports, according to the Pakistan Bureau of Statistics (PBS). 

The food import bill during the period stood at $7.75 billion against the $6.9 billion recorded during the same period last year. The import of palm oil worth over $3 billion alone made up for a major share of the import bill, which surged by 44 percent from July till April. 

“The surging global commodity prices are a major reason behind high oil and food prices, mainly due to the Russia-Ukraine war and revival of COVID-19 that have disrupted the supply and demand balance,” Ahsan Mehanti, chief executive officer of the Arif Habib Commodities investment firm, told Arab News on Sunday. 

“Inflation triggered by the import of energy and food items at higher prices will continue to persist as long as the rupee does not recover.” 

The Pakistani currency continues to hit new lows against the United States (US) dollar as the demand for import payments continues to build pressure on the rupee. On Friday, the rupee hit yet another historic low as the greenback closed at Rs192.53 in the interbank market.    

The US dollar has gained 6 percent or Rs10.98 against the rupee since April 16, when it was trading at Rs181.55.  

Experts believe the Pakistani currency will recoup some of the lost ground after Islamabad and the International Monetary Fund (IMF) sign a deal for the revival of $6 billion loan program. 

“We see the dollar hitting Rs200 mark against the rupee before falling back to around Rs180,” Mehanti said. "We expect the rupee to recover after Pakistan signs a deal with the IMF next week." 

Pakistan and the IMF are currently negotiating the country's seventh review under the $6 billion Extended Fund Facility (EFF), which has so far disbursed $3 billion. Islamabad is expected to receive another $1 billion after the completion of the review.    

The review has been stalled since the previous government announced in February around $1.7 billion relief in energy prices while deviating from the objectives of the IMF program.  

“I am going to talk to the IMF and will find out the solution to the issue amicably,” Miftah Ismail, the Pakistani finance minister, said at a press conference in Islamabad on Sunday. 

“The government has no intention to further increase the petroleum prices. The prime minister has refused to burden the people further.” 

Pakistan’s imports of machinery also posted an increase by 20.5 percent to $9.5 billion from July till April as compared to $7.9 billion during the same period last year. Imports of telecom equipment jumped by 14 percent to $2.4 billion, while mobile phone imports rose by 7.4 percent to $1.8 billion.   

The South Asian nation imported vehicles worth $3.7 billion, which shows over 60 percent growth in 10 months of the current fiscal year.   

Pakistan suffered $39.3 billion trade deficit from July till April due to the highest ever imports of $65.53 billion. Experts call for addressing the situation by restricting the import of non-essential and luxurious goods.


SAEI’s new MRO village in Jeddah projected to bring $2.7bn in revenues in 10 years

Updated 15 May 2022

SAEI’s new MRO village in Jeddah projected to bring $2.7bn in revenues in 10 years

  • SAEI, the MRO arm of Saudi Arabian Airlines, will establish 11 hangars large enough to service four wide-bodied aircraft simultaneously

RIYADH: Saudia Aerospace Engineering Industries is setting up a massive MRO village to fulfill Saudi Arabia’s growing demand for maintenance, repair and operations in the aviation space and to match pace with its expanding fleet of airlines.

In an interview with Arab News, Fahd Cynndy, CEO of SAEI, said that the village, measuring 1 million square meters, is set to be built at the King Abdulaziz International Airport in Jeddah and hopes to earn SR10 billion ($2.66 billion) in topline revenue within the next decade.

SAEI, the MRO arm of Saudi Arabian Airlines, will establish 11 hangars large enough to service four wide-bodied aircraft simultaneously.

This new arm in Jeddah’s airport has also spurred demand for maintenance engineers in the region, with the company sourcing trained mechanics from Prince Sultan Aviation academy to be later employed at the MRO village.

“We’ve been averaging 30 to 35 new mechanics that we train a year through Prince Sultan Aviation Academy training center. That number is now more than eightfold; we’re looking at 220 mechanics a year,” Cynndy told Arab News.

The company is also working on multiple agreements with aviation pioneers such as Airbus, who will soon be opening its business and service center in the Middle East, pointed out Cynndy.

The company plans to capture a sizeable share of the aviation market in the Middle East and North Africa once the MRO village is operational.

According to Cynndy, aviation specialists worldwide described this village as an “enclosed end-to-end solution that has not been seen before in the world.”


Saudia Aerospace Engineering Industries’ MRO facility to get off the ground by 2025, says VP

Updated 15 May 2022

Saudia Aerospace Engineering Industries’ MRO facility to get off the ground by 2025, says VP

RIYADH: Saudia Aerospace Engineering Industries’ new maintenance, repair and operations village is expected to be fully operational in 2025. The facility is 50 percent complete and will be ready by the first quarter of 2024.

Speaking to Arab News at the Future Aviation Forum in Riyadh, Majed Sabbagh, VP of transformation and shared services at SAEI, described the growth of opportunities stemming from the new MRO village as massive.

He said that the engineering facility is looking at hiring roughly 7,000 employees to manage its 11 hangars, which is more than double the number of employees they initially had. The headcount could grow even further when it scales up an additional six hangars in the future.

SPEEDREAD

The engineering facility is looking at hiring roughly 7,000 employees to manage its 11 hangars, which is more than double the number of employees they initially had.

The headcount could grow even further when it scales up an additional six hangars in the future.

MRO village is all geared up to offer a wide range of offerings beyond the line maintenance tasks that could simultaneously serve 40 different clients.

MRO village is all geared up to offer a wide range of offerings beyond the line maintenance tasks that could simultaneously serve 40 different clients.

“Base maintenance, or a more thorough checkup for aircraft that require additional time, will also be provided at the new MRO village,” added Sabbagh.

The move assumes significance as the Saudi aviation sector plans to increase its international connectivity to 250 destinations and welcome over 300 million air  passengers by 2030. SAEI has also been signing strategic partnerships to fuel the technology rigors of the MRO facility. For example, it recently tied up with King Abdullah University of Science and Technology as an innovation partner to test new technologies and innovations in the aviation industry.

At the Future Aviation Forum, the company also inked a deal with Saudi Investment Recycling Company.

“We want them to assess potential business opportunities of components we usually scrap such as copper, plastic, synthetic leather, carpet, etc.,” he said while emphasizing the need to make the best of anything worth recycling.