KUWAIT CITY: Kuwait registered a deficit of 1.6 billion dinars ($5.23 billion) in fiscal year 2023/24 from a surplus of 6.4 billion dinars in the previous year, its finance ministry said in a statement on Wednesday.
Kuwait’s oil revenues fell to 21.528 billion dinars in FY 2023/24, based on an oil price of $86.36 a barrel. This was a fall in revenue from 26.713 billion dinars in the previous year.
The Gulf state has had to comply with production cuts by the OPEC+ producer group amid lower oil prices this year while making slow progress on diversifying revenue sources compared with its Gulf neighbors.
Expenditures reached 25.206 billion dinars compared to 22.370 billion dinars in the previous year. Kuwait’s fiscal year ends on March 31.
Kuwait holds some of the world’s largest oil reserves and has strong fiscal and external balance sheets, but political and institutional gridlock has hampered investment and reforms aimed at reducing its heavy reliance on oil.
Kuwait turns to deficit of $5.23bn in FY 2023/24, finance ministry says
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Kuwait turns to deficit of $5.23bn in FY 2023/24, finance ministry says
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- Kuwait’s oil revenues fell to 21.528 billion dinars in FY 2023/24
Saudi Arabia’s expanding role in global fixed income and derivatives markets highlighted at DMDF 2024
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- Experts at Debt Markets and Derivatives Forum 2024 in Riyadh discussed the Kingdom’s increasing engagement with fixed income, debt, and derivatives
- Saudi markets are focused on traditional debt instruments and capitalizing on the rising global demand for sustainable finance
RIYADH: Saudi Arabia is emerging as a global leader in fixed-income and debt markets, as the Kingdom’s economic transformation accelerates under Vision 2030.
The shift comes due to the rise in ambitious construction projects and infrastructure development, and the need to diversify financial portfolios and manage risks more effectively.
The expansion into these divisions highlights Saudi Arabia’s growing influence in global finance, positioning it to play a significant role in capital markets traditionally dominated by more developed economies.
At the Debt Markets and Derivatives Forum 2024 in Riyadh, experts discussed the Kingdom’s increasing engagement with fixed income, debt, and derivatives, underscoring their importance in driving the country’s financial growth.
Financing Vision 2030: The role of debt markets
Saudi Arabia’s ambitious Vision 2030 plan has brought massive investments in infrastructure and development, primarily financed by debt.
As the world’s largest construction market, the Kingdom now surpasses China in concrete consumption per capita, a sign of the rapid pace of development.
Speaking during a panel at the event, Rob Langrick, the chief product advocate at the US-based Chartered Financial Analyst Institute, said that debt financing is critical in this context, adding: “Construction tends to be financed with debt, and Saudi Arabia is leading the world in both concrete usage and fixed income issuance.”
Saudi Arabia’s rise as a major player in the bond market is also a direct result of Vision 2030 and, since its inception in 2016, the country has seen a surge in bond issuances, especially in dollar-denominated fixed income. Today, it has surpassed China as the leading emerging market issuer of fixed-income securities, a testament to its evolving financial landscape.
A long road ahead for debt issuance and the potential of green bonds
Despite the significant increase in bond issuance, Saudi Arabia retains considerable potential to increase its debt further. The Kingdom’s debt-to-gross domestic product ratio stands at around 30 percent, relatively low compared to other emerging markets.
Langrick said this provides a “long runway” for further debt issuance to finance future projects, particularly those tied to Vision 2030’s transformative goals.
This runway presents opportunities for domestic growth and positions Saudi Arabia as a hub for global fixed-income investors.
The country’s financial markets are focused on traditional debt instruments and capitalizing on the rising global demand for sustainable finance. Green bonds, in particular, are seen as a future growth area, especially with the Kingdom’s vast potential in renewable energy.
The nation is well-positioned to develop large-scale solar and wind projects due to their vast supply, and Langrick said that issuing green bonds could help finance these undertakings, adding a new dimension to the Kingdom’s bond market and aligning with the broader Saudi Green Initiative launched in 2021.
Building the derivatives market: A path to deeper financial integration
While fixed income is an established area of growth, the derivatives market in Saudi Arabia is still in its early stages, having launched in 2020. Over the past four years, the necessary building blocks have been put in place for the sector to grow.
According to the head of custody and securities services at Saudi National Bank, Jalal Faruki, capital and stock lending has been one of the primary drivers of this growth, specifically over the past 18 months.
Faruki said: “Stock lending is a natural activity that drives derivatives markets, and we’ve seen it picking up recently, creating opportunities for further market development.”
The SNB head also emphasized the importance of educating retail investors, who still dominate the Kingdom’s market, on the intricacies of derivatives. The challenge lies in helping these backers understand the potential of these financial instruments to hedge risks and enhance returns, specifically as the market matures.
Fixed income and derivatives: Critical for sovereign wealth funds
As Saudi Arabia’s Public Investment Fund continues its trajectory to becoming the world’s largest sovereign wealth backing by 2030, learning to manage fixed income and derivatives becomes even more crucial.
Fixed income markets provide a stable, uncorrelated asset class that can generate consistent returns, which is vital for long-term financial sustainability, according to Langrick.
Derivatives, on the other hand, offer sophisticated tools for hedging risks, including currency mismatches that could arise as Saudi Arabia increasingly imports goods for its infrastructure projects.
Langrick stressed the importance of mastering these markets, saying: “Fixed income is always a feature of sovereign wealth funds.”
By developing expertise in these areas, the Kingdom’s financial institutions can better navigate the complexities of international markets, ensuring sustainable growth and economic stability.
Saudi debt market liquidity soars to $666m in 2023
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RIYADH: The liquidity of Saudi Arabia’s debt market surged to SR2.5 billion ($665.9 million) in 2023, a significant increase from SR800 million in 2019, according to Mohammed El-Kuwaiz, chairman of the Capital Market Authority.
El-Kuwaiz made these remarks during a panel session at the Derivative Market and Derivatives Forum 2024 in Riyadh.
He said this growth reflects the sector’s expansion and its progress toward aligning with the scale of comparable global economies.
“Regarding liquidity, in 2019, the annual liquidity and trading volume in the debt market was approximately SR800 million. By 2023, this figure has grown to around SR2.5 billion, more than tripling despite a decrease from previous years due to rising interest rates,” El-Kuwaiz said.
He continued: “Currently, the debt market’s size relative to the Kingdom’s economy is less than 20 percent, specifically around 18-19 percent. In comparison, similar countries have debt markets that represent 30 percent or more of their economies.”
El-Kuwaiz said that, given the expected growth of the Saudi economy, the debt market has already experienced substantial expansion over the past four years.
To align with international markets and address the growing financial demands of the economy, the Saudi debt market is expected to at least double, if not more, over the next five years. This expansion is crucial for maintaining the market's competitiveness and supporting the country’s economic development.
El-Kuwaiz mentioned: “We anticipate releasing the final version of the new regulations next month. This will be the most significant update concerning issuance and offerings in the debt market. While we have made considerable progress, there is still much work ahead.”
He added that the Saudi debt market is more accessible to foreign investors compared to the stock market, which often requires specialized knowledge.
“Previously, Saudi issuers had to conduct debt issuances outside the Kingdom, often in foreign currencies. More than 80 percent of debt issuances by Saudi issuers were conducted abroad before 2019,” he explained.
However, following recent improvements in the system, the proportion of debt issuances occurring within Saudi Arabia has nearly doubled from about 20 percent to almost 40 percent. This shift indicates the increasing attractiveness and competitiveness of the local debt market. Additionally, for the first time in the past two years, bank ownership in the market has fallen below 50 percent, highlighting the entry of new investor categories.
El-Kuwaiz also pointed out that the global debt market is significantly larger than the global equity market. At the end of 2023, the total value of global stock markets was approximately $115 trillion, while the value of global debt markets ranged between $140 and $150 trillion. This disparity reflects the fundamental nature of debt markets.
El-Kuwaiz highlighted that the current conditions are ripe for advancing the debt market, thanks to recent developments such as the issuance of the bankruptcy law, the integration of the local market with international depositories to attract foreign investors, and reforms to the tax system for sukuk issuers, investors, and funds.
“We have embarked on the third wave of development for the Saudi financial market by activating debt instruments. The introduction of bankruptcy laws was crucial for energizing the debt markets,” he said.
International issuances planned
Majeed Al-Abduljabbar, CEO of the Saudi Real Estate Refinance Co., shared that in the past three years, his company has become the second-largest issuer in the Kingdom, following the Saudi government.
“In the last three years, we have issued approximately SR20 billion. This year, we plan to execute our first issuance in dollars, aiming to diversify our issuances between riyals and dollars,” Al-Abduljabbar said during the second panel session.
He added: “Our ambition is to significantly increase international issuances. We have made considerable progress in securitization and are focusing on ensuring that supply and demand are established from the outset.”
Al-Abduljabbar noted that to ensure the success of securitization in the Kingdom, it is essential to coordinate with banks and mortgage finance companies to create a robust supply. “We are collaborating with our partners to provide a supply that can be effectively utilized,” he said.
In the past two weeks, Al-Abduljabbar mentioned that agreements have been signed with major global firms, including BlackRock and King Street. He also hinted at forthcoming agreements with other companies to guarantee strong global demand rather than relying solely on local interest.
“Demand in Saudi Arabia is typically limited, often confined to commercial banks. Our issuances are predominantly within commercial banks or the private sector, with 70 to 80 percent of the market share. The number of regular issuers is not extensive, and there are insufficient issuances,” Al-Abduljabbar explained.
He emphasized the need for mandatory valuation processes in Saudi Arabia to ensure transparency and provide accurate pricing of financial products. By making valuation compulsory, the market can enhance pricing accuracy, boost investor confidence, and improve overall market liquidity.
Facilitating foreign investors
Hanan Al-Shehri, CEO of Edaa, highlighted that over the past four years, the volume of issuances in the debt market has surpassed that in the equity markets by more than six times, with the number of outstanding private issuances also doubling.
“Upcoming developments, such as the introduction of a market maker for debt instruments, are expected to have a significantly positive impact,” Al-Shehri said.
She elaborated: “The successful implementation of market makers in the stock market is being adapted for the debt instruments market. This crucial tool for increasing liquidity is anticipated to be operational before the end of the year.”
Al-Shehri also emphasized that the company is working on a project to facilitate private transactions outside of regular trading hours. “This is especially important for foreign investors and institutions who wish to trade outside official hours due to time differences,” she added.
Positive financial outlook
Waleed Al-Rashed Al-Humaid, CEO of Al-Rajhi Capital, reported that in 2024, their total value of issuances exceeded SR100 billion, whether in riyals or US dollars. “This achievement has positioned us as the leading issuer in the local market and the second globally in sukuk issuances, according to Bloomberg rankings,” Al-Humaid added.
From an international perspective, Luke Negal, head of Sovereign Bonds at CME Group, praised Saudi Arabia’s fiscal responsibility and positive financial outlook. “Saudi Arabia is well-positioned to reaffirm its role in international portfolios as a core and attractive holding. The current and upcoming five years present an ideal opportunity for the Kingdom to expand its presence in the global market,” Negal said.
Closing Bell: Saudi main index slips to close at 11,982
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- Parallel market Nomu slipped 27.72 points, or 0.11%, to close at 25,740.79
- MSCI Tadawul Index lost 16.44 points, or 1.09%, to close at 1,494.11
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday, losing 117.19 points, or 0.97 percent, to close at 11,982.30.
The total trading turnover of the benchmark index was SR5.01 billion ($1.33 billion), as 61 of the stocks advanced and 166 retreated.
The Kingdom’s parallel market Nomu slipped 27.72 points, or 0.11 percent, to close at 25,740.79. This comes as 30 of the listed stocks advanced while 42 retreated.
The MSCI Tadawul Index also lost 16.44 points, or 1.09 percent, to close at 1,494.11.
The best-performing stock of the day was Nayifat Finance Co., whose share price surged 9.98 percent to SR14.54.
Other top performers were Red Sea International Co. and Saudi Industrial Export Co.
The worst performer was Alistithmar AREIC Diversified REIT Fund, whose share price dropped by 3.72 percent to SR8.80.
Other worst performers were Arriyadh Development Co. and BinDawood Holding Co.
Mayar Holding Co. has announced that it submitted to the Capital Market Authority on Sept. 7 seeking approval for issuing a Saudi riyal-denominated convertible sukuk program valued at SR500 million, set to span 24 months.
This comes following a previous statement where the company announced the recommendation of its board of directors to issue the convertible sukuk denominated to finance the company’s working capital and capital expansions, according to a Tadawul statement.
Bawan Co. has announced it signed a binding memorandum of understanding with Petronash Global Limited, or the seller, to acquire all of the latter’s outstanding shares.
A bourse filing revealed that Bawan would pay the seller an initial amount of $80 million in exchange for 80 percent of the company’s shares.
Under the terms of the agreement, Bawan will also pay the seller a maximum of $60 million, subject to the company achieving set financial targets over the next three years.
Bawan will purchase the remaining 20 percent of the company’s shares after the audited financial statements for 2027 or 2028 are issued, with an agreed valuation method and specified mechanism.
The firm’s entire shares are valued at $175 million, subject to it achieving set financial targets over the next three years.
Established in 2000 in the UAE, Petronash is recognized as a prominent worldwide producer of custom-engineered solutions for the oil and gas industry.
Operating predominantly in the Saudi market, the company boasts around 1,000 employees and a network of factories in Dammam in Saudi Arabia, Dubai and Abu Dhabi in the UAE, the Qatari capital Doha, and Chennai in India, encompassing a total manufacturing space of approximately 120,000 sq. meters.
Catering mainly to national oil and gas firms in the GCC countries, Petronash also exports its offerings to regions in the Far East, Africa, and the Americas.
GCC, Indonesia begin free trade agreement negotiations
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- Deal is expected to strengthen economic ties by creating new opportunities for trade and investment
- Saudi delegation will be led by the General Authority of Foreign Trade
RIYADH: The Gulf Cooperation Council and Indonesia are set to begin the first round of negotiations for a free trade agreement in Jakarta, the Saudi Press Agency reported.
The talks, being held from Sept. 9-13, aim to lay the groundwork for a comprehensive trade agreement, focusing on enhancing economic cooperation between the bloc and the Southeast Asia nation.
Key areas of discussion will include trade in goods and services, investment, and customs procedures, as well as rules of origin, technical barriers, sanitary and phytosanitary measures, digital trade, and trade remedies.
The initial round seeks to set the principles for the agreement and then finalize it within 24 months. The negotiations will also address trade challenges, facilitate information exchange, and build mutual trust to pave the way for further discussions.
The discussions follow a joint statement signed in July by the GCC Secretariat and the Indonesian government, marking the formal start of the talks.
The potential agreement is expected to grant Gulf goods and services preferential access to the Indonesian market through tariff reductions, simplified customs processes, and streamlined regulations.
The Saudi delegation, led by the General Authority of Foreign Trade, includes representatives from the Ministries of Commerce, Energy, Investment, Environment, Water and Agriculture, and Industry and Mineral Resources. This team will ensure the negotiations align with Saudi trade objectives and policies.
The Saudi team is tasked with supervising the negotiations to ensure they align with the Kingdom’s trade objectives and policies while coordinating with countries that share similar trade interests.
This agreement is expected to strengthen economic ties between the GCC and Indonesia by creating new opportunities for trade and investment.
Saudi telecom firm Mobily signs 6-year deal to boost operational efficiency
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- Agreement, signed with Red Bull MOBILE, is expected to positively impact Mobily’s finances next year
- New contract provides Mobily with opportunities to expand its market reach and boost productivity
RIYADH: Saudi Arabia’s telecommunication company, Mobily, is set to enhance its operational efficiency with a new six-year contract, which represents over 5 percent of its total revenues for 2023.
The agreement, signed with Jeddah-based Red Bull MOBILE, a future networks communications firm, is expected to positively impact Mobily’s finances starting from the fourth quarter of 2025, according to a statement on Tadawul.
Mobily, listed on Saudi Arabia’s Tadawul stock exchange since 2004, has a share capital of SR7.7 billion ($2.05 billion), consisting of 770 million shares valued at SR10 each, fully paid as of Dec. 31, 2020.
This strategic move aligns with Mobily’s vision of evolving into a leading technology, media, and telecommunications company. It aims to transform customer and community experiences through innovative products and services. The new contract also provides Mobily with opportunities to expand its market reach and boost productivity by utilizing its network infrastructure to support mobile virtual network operators.
In March, Mobily was recognized by Brand Finance as the fastest-growing telecommunications company in the Middle East for 2024. The company’s value increased by approximately 18 percent from the previous year, reinforcing its position as a major player in the region’s telecom sector. This growth reflects Saudi Arabia’s broader objectives of advancing digital transformation and enhancing ICT services within the Kingdom.
Brand Finance also ranked Mobily’s CEO, Salman bin Abdulaziz Al-Badran, among the top 10 global business leaders in brand protection. This recognition highlights the impact of various initiatives he has implemented since joining Mobily, also known as Etihad Etisalat Co., in 2019, and his significant contribution to the company’s growth.
Brand Finance evaluates companies based on several key criteria, including the Brand Strength Index, revenue and profit impact, and future growth prospects.
Founded in 2004, Mobily’s major shareholders include Etisalat Emirates Group with 27.99 percent and the General Organization for Social Insurance with 6.9 percent, while the remaining shares are held by institutional and retail investors. The company offers integrated services across three main sectors: individuals, businesses, and carriers.
Mobily boasts one of the largest wireless networks in Saudi Arabia and the region, an extensive fiber-to-the-home network, and a comprehensive global data center system.
Red Bull MOBILE, established in 2008, provides 5G telecommunication services in the Kingdom, offering unique services and unmatched benefits.