Black Monday: Oil price slump, virus spark market meltdown

The closing numbers are displayed on the floor of the New York Stock Exchange. (Reuters)
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Updated 10 March 2020
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Black Monday: Oil price slump, virus spark market meltdown

  • Global stocks in turmoil amid wave of sell-offs
  • $400 billion wiped off regional markets in two days

DUBAI: Financial markets around the world tumbled on Monday as investors took fright at the growing economic risks from the global coronavirus outbreak and the prospect of a prolonged decline in oil prices.

On Wall Street, the world’s biggest financial market, leading shares fell by 7 percent on opening, wiping billions of dollars off investments, after the big markets in Asia and Europe had all experienced sharp declines. New York recovered slightly in later trading, and after a rollercoaster day the Dow Jones Industrial Average closed nearly 8 percent down.

The Middle East was no exception to the wave of selling, with the Tadawul in Riyadh closing 7.75 percent down on the day. UAE markets fell by similar amounts. Regional markets have lost about $400 billion in value over the past two days.

“We are now in a period of true turmoil. Fear is now all-pervasive,” oil historian Daniel Yergin said on US TV.

Global investors, already spooked by the economic fallout from the coronavirus outbreak, were panicked by the prospect of a price war in energy markets after Saudi Aramco, the world’s biggest oil company, offered customers big discounts on crude supplies from next month.

Oil prices fell sharply in global trading. Brent crude, the benchmark for Middle East oil, plunged by nearly 30 percent — its biggest fall on opening in nearly three decades. It recovered significantly in later trading, to stand at $37.27 per barrel, down 17.5 percent.

Independent oil company shares were savaged. BP fell 19 percent, Shell 15 percent and ExxonMobil 8 percent. Tadawul-quoted shares in Saudi Aramco, the world’s largest oil company, were 5.5 percent down at close.

The damage was even worse for oil companies with significant exposure to US shale, potentially the biggest losers from a price war. Occidental Petroleum, a big investor in Texas shale, fell 35 percent at halftime trading in New York.

Nevertheless, investment experts said the carnage in the oil sector would not necessarily lead to a financial crisis. 

“The prospect of heightened instability in energy markets adds to the pessimism created by coronavirus, but the fall in oil prices will not on its own lead to a financial crisis like 2009,” Tarek Fadlallah, chief executive of Nomura Asset Management in Dubai, told Arab News.

Mazen Al-Sudairi, head of research at Al-Rajhi Capital in Riyadh, said the oil sector was “one of the major casualties” of the market volatility prompted by the coronavirus outbreak, and that a “cascading effect” could be expected on the local economy.

However, he also saw potential for optimism. “Upside surprise could be a seasonal fade-out of virus implications, renewed Opec+ agreement, an increase in oil prices as supply reduces, and sharp de-escalation of Chinese situation.”

 


Aoun’s visit to Saudi Arabia revives hope for Lebanon’s economic recovery

Updated 04 March 2025
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Aoun’s visit to Saudi Arabia revives hope for Lebanon’s economic recovery

  • Beirut seeks to further strengthen ties with a key regional ally

RIYADH: Lebanese President Joseph Aoun’s visit to Saudi Arabia has revived hopes for Lebanon’s economic recovery and political stability amid the ongoing financial crisis and governance challenges.

The trip, his first official visit abroad since taking office in January, signals a fresh attempt to strengthen ties with a key regional ally and unlock much-needed investment and diplomatic support. 

With both nations reaffirming their commitment to cooperation and reform, many see this meeting as a crucial step toward Lebanon’s long-overdue recovery. 

The Lebanese Executives Council, a private sector body promoting cross-border professional relations, hailed the visit as a pivotal step in restoring ties between the two countries. 

“This visit stands out as exceptional. Lebanon has a remarkable opportunity to reshape its relations with Arab nations, with Saudi Arabia as the essential gateway,” Rabih El-Amine, chairman of the council, told Arab News.  

“Given Saudi Arabia’s crucial influence both regionally and globally, along with its vibrant economic changes under Vision 2030, this moment marks a pivotal turning point for Lebanon,” he added. 

Economic agreements and Saudi investments 

Aoun’s visit included discussions on 22 agreements spanning trade, agriculture, transport, finance, education, and cultural exchange.

“These agreements include cooperation in exhibitions, intellectual property, consumer protection, the grain sector, civil aviation, banking, defense, and combating terrorism,” El-Amine said. 

Saudi banks and financial institutions could play a role in stabilizing Lebanon’s financial system, but El-Amine emphasized that this would depend on Lebanon’s implementation of key reforms. 

“Saudi support might take the form of financial assistance, investment, and regional coordination. However, Lebanon’s capability to execute credible economic reforms remains a crucial factor,” he added. 

Long-term goals vs. immediate impact 

While the visit has been hailed as a positive step, El-Amine cautioned that immediate economic relief is unlikely. “This visit will likely be a strategic step toward rebuilding Saudi-Lebanese ties rather than yielding immediate economic relief. Lebanon’s economic recovery depends on reforms, International Monetary Fund negotiations, and restoring investor confidence — factors that require long-term engagement rather than quick diplomatic wins,” he said. 

Discussions also emphasized the necessity of Lebanon regaining control over its political and security landscape. A joint statement highlighted the importance of confining arms to the Lebanese state and reaffirming the Lebanese army’s role as a stabilizing force. 

The way forward 

Despite optimism surrounding the visit, El-Amine warned that internal Lebanese challenges could hinder progress. “The primary concern is whether Lebanon’s political and economic system can genuinely carry out the reforms and commitments necessary to convert diplomatic goodwill into tangible progress,” he said. 

Key obstacles include political gridlock, sectarian divisions, lack of institutional reform, and financial instability. 

“The visit could reopen diplomatic channels and create opportunities for future cooperation, but unless Lebanon’s leadership takes bold steps to reform governance, stabilize the economy, and restore confidence, any potential Saudi support may remain conditional or limited,” El-Amine added. 

Aoun’s visit reaffirmed longstanding ties between Beirut and Riyadh, with both sides expressing their commitment to regional stability and cooperation. 

Following his visit to Saudi Arabia, Aoun and his delegation traveled to Cairo to attend the extraordinary Arab summit. His presidency, which began in January after a prolonged political deadlock, carries significant expectations as Lebanon struggles with an economic crisis and the devastation left by the Hezbollah-Israel war, which left most parts of the country in ruins. 


Closing Bell: Saudi main index closes in red at 11,932

Updated 04 March 2025
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Closing Bell: Saudi main index closes in red at 11,932

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Tuesday, with the main market shedding 192.11 points, or 1.58 percent, to close at 11,931.70. 

The total trading turnover of the benchmark index was SR6.47 billion ($1.73 billion), with 47 of the listed stocks advancing and 202 declining. 

Saudi Arabia’s parallel market Nomu also shed 161.93 points to close at 31,534.04. 

The MSCI Tadawul Index edged down by 1.67 percent to 1,500.46. 

The best-performing stock in the main market was the Power and Water Utility Co. for Jubail and Yanbu. The firm’s share price increased by 6.70 percent to SR49.40. 

The share price of SHL Finance Co. rose by 3.96 percent to SR17.32. 

Malath Cooperative Insurance Co. also saw its share price climb by 3.04 percent to SR14.24. 

Conversely, the share price of Al-Etihad Cooperative Insurance Co. declined by 8.42 percent to SR15.66. 

On the announcements front, Saudi Chemical Co. said that its net profit for 2024 reached SR291.2 million, representing a rise of 59.21 percent compared to 2023.

In a Tadawul statement, the company attributed this growth to higher sales volumes and a rise in operational profit.

Saudi Chemical Co. added that its total revenue for last year stood at SR6.37 billion, marking a 31.32 percent year-on-year rise.

The share price of Saudi Chemical Co. slipped by 3.40 percent to SR8.53.

Nice One Beauty Digital Marketing Co., which debuted on Tadawul in January, revealed that its net profit for 2024 stood at SR71.74 million, marking a rise of 119.91 percent compared to the previous year. 

The company said that the rise in net profit was driven by a mix of customer acquisitions, an expanded product range, and improved customer retention. 

Despite the rise in profit, Nice One’s share price declined by 9.95 percent to SR53.40. 

Modern Mills for Food Products Co. said that its net profit for 2024 increased 3.4 percent year-on-year to SR208.67 million. 

The firm added that its board of directors also recommended a cash dividend at 100 percent of capital or SR1 per share for 2024. 

The share price of the food production firm edged up by 1.01 percent to SR39.85. 

Herfy Food Services Co. swung to an SR116.52 million loss in 2024 compared to a profit of SR8.38 million in the year-ago period. 

In a Tadawul statement, the company attributed the loss to a decrease in sales volumes, as well as higher selling, marketing, general, and administration expenses.

Herfy Food’s share price edged down by 4.09 percent to SR23. 


Saudi Arabia’s private equity deals soar with $2.8bn in investments in 2024

Updated 8 min 4 sec ago
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Saudi Arabia’s private equity deals soar with $2.8bn in investments in 2024

RIYADH: Saudi Arabia’s private equity market reached $2.8 billion in total investments across 15 transactions in 2024, maintaining its billion-dollar scale despite a slowdown, according to MAGNiTT’s latest report.

This represents a 27 percent year-on-year decrease from $3.9 billion in 2023, signaling a shift in capital allocation amid evolving economic conditions. The number of private equity deals also dropped significantly, falling 60 percent from 37 transactions in the previous year.

This decline follows three consecutive years of growth from 2020 to 2023, during which the market saw a compound annual growth rate of 67 percent. Factors such as higher interest rates, inflationary pressures, oil price fluctuations, and regional geopolitical tensions played a role in the slowdown observed in 2024.

Philip Bahoshy, CEO of MAGNiTT, told Arab News that the Saudi private equity market had experienced “significant growth” between 2020 and 2024, with investment value surging from $215 million in 2020 to a peak of $3.9 billion in 2023.

“2024 saw a 27 percent year-on-year decline in investment value and a 60 percent drop in transaction volume, driven by a market recalibration toward higher-quality, mid-market growth opportunities over large-scale buyouts,” he said.

Despite the overall market contraction, growth-stage private equity transactions emerged as the most active segment, accounting for 67 percent of total deals in 2024, up from 43 percent in the previous year. In contrast, buyout transactions, which dominated in 2023, experienced a sharp 76 percent decline, with their share of total private equity deals dropping from 57 percent to 33 percent.

This shift reflects a growing investor preference for expansion-stage companies with strong scaling potential, rather than control-focused buyouts. Investment value trends further underscore this transition.

While buyouts still represented the largest share of private equity capital at 82 percent in 2024, they saw a significant 39 percent year-on-year decline, totaling $2.3 billion. Conversely, growth-stage investments, though representing a smaller 18 percent of total private equity investment value, experienced a notable surge from just 1 percent in 2023. This suggests a shift toward minority and expansion-stage investments in the deal mix.

Philip Bahoshy, CEO of MAGNiTT, forecasts that Saudi Arabia’s private equity market will stabilize over the next five years, evolving from the extreme volatility of 2020-24 into a more mature and steady investment landscape.

“In a forward look, several factors will impact the private equity landscape, like increased institutional participation, as sovereign wealth funds like PIF will continue to anchor private equity investments alongside a growing number of regional and international LPs (limited partners),” he said.   

Sectoral breakdown  

Saudi Arabia’s private equity market in 2024 was significantly driven by sector-specific trends, with the telecom and communications industry capturing the largest share of total investment value. The sector attracted $2.3 billion in private equity investments, accounting for 81.8 percent of total private equity funding.

This surge was largely fueled by a major buyout transaction involving Telecom Towers Co., underscoring continued investor confidence in the Kingdom’s telecommunications infrastructure.

Beyond telecom, the sustainability sector emerged as the second-largest recipient of private equity investments, securing $225 million, or 8 percent of total private equity funding.

Healthcare followed with $190 million, representing 6.7 percent of the total, benefiting from both private equity growth transactions and buyouts, with $188 million specifically allocated to private equity growth investments. Transport and logistics secured $83 million, or 2.9 percent, while financial services saw the least investment activity among the top five sectors, attracting $17 million, or 0.6 percent.

Despite telecom leading in total investment value, the industry transaction volume told a different story. The food and beverage sector was the most active in terms of deal count, registering three transactions, all of which were buyouts. Healthcare also recorded three transactions, split between two private equity growth deals and one buyout. Financial services and transport and logistics each saw two transactions, representing 13.3 percent of total private equity activity. Education, though smaller in terms of funding, accounted for one transaction, making up 6.7 percent of total private equity deals.

The overall distribution of private equity transactions in 2024 reflected a strategic shift toward sectors aligned with Saudi Arabia’s Vision 2030 goals. While buyout investments dominated in terms of capital allocation — capturing 82 percent of total private equity funding — private equity growth transactions accounted for nearly half, or 47 percent, of overall deal activity across key industries.

This trend suggests a growing investor appetite for mid-market and expansion-stage companies, particularly in sectors such as sustainability, healthcare, and financial services.

Philip Bahoshy emphasized that sectoral diversification will play a pivotal role in shaping the future of Saudi Arabia’s private equity market.

“Telecom, healthcare, and financial services remain dominant, while emerging industries like sustainability and logistics will likely attract increased capital,” he said.    

The continued participation of sovereign funds, regulatory enhancements, and foreign investment are expected to further solidify these trends, paving the way for a more stable and mature private equity landscape in the coming years, he added.   

“Furthermore, regulatory maturity and market depth, whereby reforms and Vision 2030 initiatives drive transparency and foreign investment, will enable the ecosystem to allow smoother exits and secondary markets,” he said.  

Deal sizes    

Transaction sizes also reflected this changing landscape. Deals in the $10 million–$200 million range remained the primary driver of Saudi Arabia’s private equity market, although their share fell from 72 percent in 2023 to 58 percent in 2024.    

Meanwhile, the proportion of transactions over $200 million rebounded to 29 percent in 2024, from 14 percent in 2023.  

Investment landscape  

“Saudi Arabia’s investment ecosystem is transforming strategically, driven by Vision 2030, regulatory enhancements, and increasing institutional participation,” Bahoshy said.    

He noted that private capital, spanning private equity, venture capital, and venture debt, is playing a complementary role in shaping the investment landscape.    

While private equity focuses on scaling mature businesses, VC remains a critical driver of early-stage innovation, particularly in fintech and e-commerce.    

Saudi VC funding peaked at $1.3 billion in 2023 before moderating to $750 million in 2024, while venture debt is emerging as an alternative financing tool for startups.     

As Saudi Arabia’s investment ecosystem matures, the interplay between private equity, VC, and alternative investment vehicles will be key in sustaining long-term economic diversification and capital efficiency.    

“As PE matures and M&A activity rises, VC-backed startups will have better liquidity options, strengthening the investment cycle,” Bahoshy said.   

The country’s recalibrated approach to private equity signals a shift toward a more measured and strategic capital deployment strategy, positioning the market for long-term stability and growth.   

“Saudi Arabia’s investment landscape is evolving into a multi-layered ecosystem where private equity drives scale, VC fosters innovation, and alternative investment vehicles provide liquidity and diversification,” Bahoshy said.   

“The interplay between these verticals will be essential in sustaining long-term economic diversification, capital efficiency, and investor confidence,” he added.  


PIF’s Saudi Jordanian Investment Co. to indirectly invest in Alyoum Bakery to propel growth strategy

Updated 04 March 2025
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PIF’s Saudi Jordanian Investment Co. to indirectly invest in Alyoum Bakery to propel growth strategy

RIYADH: Jordan’s Alyoum Bakery is set to scale operations and introduce additional product categories following an agreement with the Saudi Jordanian Investment Co.

The wholly owned Public Investment Fund firm will indirectly invest in the industrial-scale baked goods producer to help it augment existing operations and support a longer-term growth strategy, according to a statement.

This falls in line with SJIC’s strategy to identify new investment opportunities in Jordan that foster long-term economic partnerships and sustainable returns.

It also aligns with the growth in trade between Jordan and Saudi Arabia, which reached $29.7 billion from 2018 to 2024, according to the Amman Chamber of Commerce. In 2018, the total trade volume stood at 2.89 billion Jordanian dinars ($4.07 billion). By the first 11 months of 2024, this figure grew to 3.74 billion dinars.

“We are delighted to mark this milestone cooperation with this well-established firm, and we look forward to working with Alyoum Bakery and contributing to the company’s growth. This transaction is part of SJIC’s strategy to focus on key promising sectors which are important for economic development,” Muteb Al-Shathri, acting CEO of SJIC, said.

“The partnerships that SJIC is establishing with leading Jordanian companies are fundamental elements of success for the future,” Al-Shathri added.

From his side, Mahmoud Khalil, co-founder of Alyoum Bakery, said: “Today marks a significant milestone for Alyoum Bakery and the beginning of a new phase in the company’s journey.”

He added: “We are very excited by SJIC’s investment into the company, reflecting a commitment that will enable us to implement the key pillars of our organic strategy, which centers around enhancing production efficiency and product availability, in addition to expanding the distribution network both within Jordan and across neighboring markets.”

Established in 2017, the Saudi Jordanian Investment Fund is a public limited firm wholly owned by SJIC, specializing in investing in Jordan’s infrastructure and high-growth sectors.

With a capital commitment of $3 billion, SJIF focuses on strategic, sustainable, and economically viable investments in Jordan’s key sectors.

The fund aims to invest in long-term projects that generate a significant socio-economic impact in Jordan while aligning its goals with the strategic investment direction of the Kingdom’s PIF.

In February, the Saudi-Jordanian Business Council discussed expediting customs procedures and simplifying trade transactions. The body also discussed enhancing cooperation in logistics infrastructure, renewable energy, and food security, the Saudi Press Agency reported at the time.


Housing demand in Saudi Arabia surges as 72% look to own homes: report 

Updated 04 March 2025
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Housing demand in Saudi Arabia surges as 72% look to own homes: report 

RIYADH: Saudi Arabia’s housing market is witnessing a surge in demand, with 72 percent of Saudis and expatriates expressing interest in homeownership, according to a new report.  

Knight Frank’s Saudi Report 2025 found that demand is particularly strong among high-income nationals earning over SR50,000 ($13,300) per month, with 93 percent looking to buy property. 

The survey of 1,037 respondents — 835 Saudis and 100 expatriates — also revealed growing interest among expatriates, with 77 percent aspiring to own homes in the Kingdom. 

Homeownership in Saudi Arabia reached 63.7 percent by the end of 2023, nearing the government’s Vision 2030 target of 70 percent. However, affordability remains a challenge, prompting some buyers to explore rental options. 

The total value of housing transactions in 2024 stood at SR267.8 billion across 236,690 sales, marking a 37 percent increase in transaction volume and a 27 percent rise in value compared to the previous year. 

The desire for homeownership is largely driven by investment opportunities, family-friendly communities, and access to high-quality housing. 

According to the survey, 48 percent of respondents cited the need for a primary residence, while 31 percent were looking for a home for their children or extended family. 

Saudi Arabia’s residential property market has experienced significant price growth, particularly in major cities. 

In Riyadh, apartment prices have surged 75 percent since 2019, while villa prices have risen 40 percent. In Jeddah, residential transactions jumped 53 percent in 2024, with total property values increasing by 43 percent. 

Dammam also saw a notable rise, with residential transactions up 49 percent and apartment prices increasing by 6.2 percent. 

Despite government efforts to boost supply, affordability remains a challenge, particularly for middle-income buyers. 

The report highlights a growing supply of premium and luxury housing, yet many buyers struggle to find homes within their budgets. 

According to Knight Frank’s survey, most homebuyers plan to spend between SR750,000 and SR2.5 million. However, the report highlights a mismatch between market pricing and buyers’ budgets, with the average price of a four-bedroom villa in Riyadh standing at SR2.8 million. 

In terms of financing, 58 percent of Saudi buyers rely on family support to fund their home purchases, while 40 percent opt for self-sought financing solutions. 

Mortgage-backed transactions are also rising, driven by government-backed programs such as Sakani and Dhamanat, which continue to improve access to home loans. 

The report also identifies a shift in housing preferences among Saudi nationals and expatriates. More than half of the respondents prefer villas, with higher-income Saudis favoring larger homes. 

Townhouses and apartments are growing in popularity among younger buyers and middle-income families. Riyadh and Jeddah remain the top choices, with 54 percent of respondents favoring the capital. 

While demand for property ownership remains strong, rental demand is also increasing, particularly among younger Saudis and expatriates who are exploring flexible living options due to rising property prices. 

With the Kingdom investing heavily in its real estate sector as part of Vision 2030, homeownership and rental markets continue to evolve. 

As Saudi Arabia nears its 70 percent homeownership target, affordability challenges, rising prices, and shifting consumer preferences will shape the housing sector’s trajectory in the coming years.