KUWAIT PLANS TO MANAGE ITS OWN ASSETS AS WORLD’S FIFTH LARGEST SOVERIGHT WEALTH
Davos, Dubai: Kuwait Investment Authority is planning to manage more of its own assets as the world’s fifth-largest sovereign wealth fund seeks to take more risk to boost returns. The KIA, as the fund is known, wants to increase the allocation of funds managed in-house to as much as 8 per cent from 1 or 2 per cent at present, Managing Director Bader Al Sa’ad said in an interview with Bloomberg Television on Wednesday at the World Economic Forum in Davos, Switzerland.
The KIA has $592 billion (Dh2.17 trillion) of assets, according to the Sovereign Wealth Fund Institute — meaning $35 billion could be withdrawn from external managers. “Why do I have to pay extra fees for less return?” he said. The shift translates into “a big lump sum but it’s small compared to the core portfolio,” Al Sa’ad said. The KIA joins other wealth funds and institutional investors seeking to manage more assets internally.
The California Public Employees’ Retirement System (Calpers), the largest US pension, said last week it was developing plans to shift as much as $30 billion from external to internal managers. The Abu Dhabi Investment Authority (ADIA), the world’s second-biggest wealth fund, is investing in areas such as real estate and private equity, reducing its reliance on outside managers each year.
The KIA is taking a similar approach. Al Sa’ad said the KIA is investing more in private assets and global infrastructure projects, arguing that “we need to take more risk in order to maintain the returns.” Al Sa’ad said he doesn’t think the fund can match the returns of the past decade over the next 10 years. “That’s why we want to do something different. That’s why we are expanding in infrastructure, in credit.” The KIA started as a Bank of England account dedicated to receiving oil money in 1953, according to its website. It has investments in areas including equities, bonds, real-estate and infrastructure.
EU LIFTS BANK ON THREE IRANIAN COMPANIES
TEHRAN- In an amendment to its previous decisions, the council of the European Union removed its restrictive measures against three Iranian companies as well as a branch of an Iranian bank. The amendment published on the Official Journal of the European Union on Tuesday mentioned Oil Industry Pension Fund Investment Company (OPIC), Neka Novin (a.k.a. Niksa Nirou), West Sun Trade GMBH, and Bank Saderat PLC (London) as the Iranian entities against them the sanctions are lifted.
One year has passed since the implementation of Iran’s nuclear deal with the 5+1 group of countries in January 2016. EU foreign policy chief Federica Mogherini has said that nuclear agreement is working. “We can clearly say that the Iran deal is working and we need to maintain it,” she wrote in an article published by the Guardian on Tuesday.
Also at the start of his final week in the White House, Barack Obama issued a warning to the incoming Trump administration about the value of the nuclear deal with Iran. “The United States must remember that this agreement was the result of years of work,” read a statement released by the White House. The deal, the statement said, “represents an agreement between the world’s major powers – not simply the United States and Iran.”
IRAN TO HOLD SOLO COUNTRY EXHIBITION IN OMAN
The third Iran Solo Country Exhibition will kick off at Oman Convention and Exhibition Centre on January 23. Ali bin Masoud bin Ali al Sunaidy, Minister of Commerce and Industry, and Mohammad Reza Nematzadeh, Minister of Industry, Mine and Trade in Iran, will grace the opening ceremony.
The exhibition will be organized by Omanexpo, in conjunction with the Iranian Embassy in the sultanate. The five-day exhibition comes this year to boost commerce between the sultanate and Iran, facilitate the development of business and investment prospects, and strengthen economic relations between the two countries.It is a platform for more than 100 Iranian companies to showcase high-quality products.
MODEST GROWTH IN GCC BANKS
Dubai: The first three quarters of 2016 saw the UAE banks reporting a general decline in earnings growth driven by rising funding costs, somewhat elevated non-performing loans (NPLs) and slowing private sector loan growth and rising provisions dragging down profits.
With the full year results of banks to be announced starting this week, bankers and analysts expect UAE banks to report single digit loan growth and anaemic profit growth compared to previous years.
Amid the overall subdued trend in credit growth and profitability, banks continue to remain resilient to difficult operating environment resulting from prolonged low oil prices and a slowdown in the UAE’s economic growth from 4 per cent last year to a projected 2.3 per cent in 2016.
CASH CRUNCH THAT SQUEZED COMMERCIAL LENDERS IS OVER–GOVERNOR SAUDI ARABIA CENTRAL BANK
Riyadh: Saudi Arabia central bank Governor Ahmad Al Kholifey said a cash crunch that squeezed commercial lenders last year is over and that he’s open to more foreign banks operating in the biggest Arab economy. The Saudi Arabian Monetary Authority sees no need for further steps to boost banking liquidity, Al Kholifey said in an interview with Bloomberg Television in Davos on Thursday, his first with an international news organisation since taking office last year.
Al Kholifey, a former deputy governor, was appointed in May as the world’s biggest oil exporter grappled with the impact of low crude prices on the economy. With falling oil revenue, the government drew down on its deposits in the banking system, causing a cash squeeze that sent a key measure used to price loans to the highest level since 2008.
Policymakers responded by injecting billions of riyals into the banking system and deploying other monetary policy tools to ease the strain. Authorities also sold the biggest ever bond from an emerging market in October and cut weekly domestic debt issuance. Interbank rates have fallen 15 per cent since peaking at 2.386 in October.
“We had to intervene,” Al Kholifey said. The central bank is now comfortable with current liquidity levels “and I don’t think we need to intervene anymore,” he said. “Further foreign borrowing by the government in the first quarter of 2017 will be important for domestic liquidity, reducing the need for the government to borrow internally,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
DEVA INVITES BIDDERS FOR 200MW SOLAR PLANT
DUBAI: All qualified bidders were requested to present proposals for a 200MW concentrated solar power, CSP, plant, the fourth phase of the Mohammad Bin Rashid Al Maktoum Solar Park in Dubai, the Dubai Electricity and Water Authority, DEWA, said.
“This 200MW CSP Plant will be operational by April 2021, since we intend to continue generating 1,000MW from CSP by 2030. Undoubtedly, this project is another milestone achievement that will put Dubai and the UAE at the forefront in the region in producing renewable and clean energy, and supports the vision of His Highness Shaikh Mohammad Bin Rashid Al Maktoum [Vice-President and Prime Minister of the UAE and Ruler of Dubai],” said Saeed Mohammad Al Tayer, MD and CEO of DEWA.
The Mohammad Bin Rashid Al Maktoum Solar Park is the largest single-site strategic solar energy project of its kind in the world, and is part of DEWA’s efforts to support the Dubai Clean Energy Strategy 2050 to increase the share of clean energy in Dubai total energy output to be 7 per cent by 2020, 25 per cent by 2030, and 75 per cent by 2050.
DEBUT APPETITE IN GULF REGION
By many measures 2016 was a blockbuster year for debt markets in the Gulf region. Backed by solid credit fundamentals and compelling valuations, the size and frequency of debt issuance last year surpassed even the most optimistic of forecasts. But the success should not be viewed as a one-time anomaly. Instead, in our view, recent developments have created a platform for potential further out performance for the asset class in 2017.
The reasons are straight forward: a more stable oil price, coupled with further fiscal consolidation by GCC governments and continued easy global monetary policies are all potential contributors forcredit to perform. It is worth remembering that a year ago there were serious concerns about slumping oil prices and the spillover impact on the region’s hydrocarbon dependent economies. This wall of worry has, for now, been removed.
ICE Brent crude oil futures have rallied to over $55.6 (Dh204) a barrel as of December 16, 2016 compared to a 2016 low of $26.21 in February. The recent push higher was sparked by an Organisation of Petroleum Exporting Countries (Opec) agreement, along with other major suppliers, to cut around 2 per cent from global production. This new pact increases the likelihood that a lingering oversupply in the oil market will be eliminated, providing a positive backdrop for oil prices, which should also feed into the credit story for much of the GCC.
MUBADALA EYES $15B SOFTBANK FUND BACKING
Abu Dhabi’s Mubadala Development Co. is considering committing $10 billion to $15 billion to partner with SoftBank Group Corp and Saudi Arabia’s Public Investment Fund in a new vehicle to invest in global technology, according to people familiar with the matter.
The SoftBank Vision Fund is set to close in January and will be capped at $100 billion, the people said, asking not to be identified as the information is private. No agreements have been reached, and Mubadalahasn’t made a final decision on the amount it will invest, the people said. A spokesman for Mubadala declined to comment. Representatives for SoftBank didn’t immediately respond to calls and e-mails seeking comment.
Masayoshi Son’s SoftBank announced the new venture in October, agreeing to commit at least $25 billion in the next five years with the Saudis putting in as much as $45 billion. The Tokyo-based company has lined up $10 billion to $15 billion in financing from Japanesebanks to partly finance their share of the fund, with the rest coming from future asset disposals, the people said.
SAUDI SOVEREIGN FUND TO BUY STAKE IN UAE FIRM
Abu Dhabi: Saudi Arabia’s top sovereign wealth fund is buying a stake in UAE utility company Utico in a multi-million dollar deal, the chief executive of the UAE firm told Reuters on Wednesday. Public Investment Fund (PIF) has entered into a binding agreement with private utility provider Utico Middle East to buy a “significant minority stake”, Richard Menezes said. He declined to give the deal value, saying details will be published soon.
PIF has been looking at investments in Saudi Arabia and elsewhere across a range of sectors in recent months. It hired HSBC to advise it on a potential purchase of a stake in Riyadh-based ACWA Power, a developer and operator of power and water plants, sources said.
ABU DHABI PORTS, KHALIDA INTERNATIONAL SHIPPING SIGN DEAL
Abu Dhabi: Abu Dhabi Ports has signed a Musataha agreement with Khalidia International Shipping, a subsidiary of Emirates Business Group to set up a third-party logistics (3PL) warehouse with a total investment of Dh80 million in Khalifa Industrial Zone’s (Kizad) trade and logistics cluster.
Located in “Khalifa Port Free Trade Zone” (KPFTZ), a dedicated new project that will serve as a platform for businesses looking to expand in the trade, logistics, and manufacturing sectors in the region, the warehouse will be developed on a 47,081.4 square metre plot of land with a total capacity of 33,318 pallet positions. It is expected to be completed in the second quarter of 2018.
DP WORLD ACQUIRES ADDITIONAL STAKE IN PUSAN NEWPORT
Abu Dhabi: DP World said it had acquired an additional 23.94 per cents take in Pusan Newport Company Limited (PNC) in South Korea from Samsung Corporation & Subsidiaries to increase its holding in PNC to66.03 per cent. The terms of the transaction are undisclosed, the ports operator said in a statement.
“Pusan Newport Company Limited is the largest terminal in the port of Pusan and a major gateway hub of Northeast Asia. We expect the port of Pusan to remain an important part of our global network and this investment further underlines our commitment to South Korea,” stated Sultan Ahmad Bin Sulayem, Group Chairman and CEO, DP World.
PNC is the largest terminal in the port of Pusan with 5.25m TEUs (twenty-foot equivalent units) capacity, handling 34 per cent of the new port volumes. The Port of Pusan began operations in 2006, and operates 23 container berths connecting to 500 ports in 100 countries. Overall, it is the sixth largest port worldwide with volumes of 19.5m TEUs in 2015, accounting for approximately 75 per cent of total container volumes in South Korea.
DP World, on the other hand, has a portfolio of 77 operating marine and inland terminals supported by over 50 related businesses in 40 countries with a significant presence in both high-growth and mature markets. Last year, it handled 61.7 million TEUs across its portfolio.