Rising oil prices over the past two years have led to improved liquidity conditions for banks in the Middle East, but is that relatively benign environment coming to an end?
It has not been a good year for stock market listings in the Middle East. In the first half of 2018, there were only 13 flotations, raising a total of $1.3bn in capital, according to consultancy firm EY, and there has not been much activity since then. Most of the market debuts were by real estate investment trusts (reits), and if these are excluded, only five companies came to market, raising a total of $149m.
Bolstered by Saudi Arabia’s record-breaking $17.5bn bond issue in October, Middle Eastern sovereign debt issuance reached $104.1bn in 2017. That was 34 per cent more than the previous year, and the highest on record.
Military spending around the Middle East has dropped for the third year in a row, according to data from the London-based International Institute for Strategic Studies (IISS). Despite ongoing turmoil in many parts of the region – including civil wars in Libya, Syria, Iraq and Yemen – total spending fell by 3.5 per cent over the past year, from $153.9bn in 2016 to $148.5bn in 2017.
The Middle East and North Africa are generally seen as one of the least stable parts of the world. Indeed, the Institute for Economics and Peace ranks it the most violent region in its annual Global Peace Index. That’s not surprising, given the civil wars in Iraq, Libya, Syria and Yemen, as well as the insurgency in Egypt’s Sinai Peninsula, intermittent violence in Israel and the neighboring Palestinian Territories, plus the occasional flare-ups in Iran and Saudi Arabia and elsewhere.
With global economic growth picking up and concerns about rising inflation, the chances of interest rates increasing this year appears relatively high. In particular, there is speculation the US Federal Reserve could increase interest rates on the dollar as soon as March.
The cost of renewable energy is now falling so fast that it should be a consistently cheaper source of electricity generation than traditional fossil fuels within just a few years, according to a new report from the International Renewable Energy Agency (IRENA).
The quantity of oil and gas rigs deployed in the Middle East and North Africa (Mena) region has held steady this year, with the average number of platforms in use over the first nine months of 2017 standing at 422, one more than the average for the whole of 2016.
The region might be going through a tough time as a result of low oil prices and political turmoil, but for investors in the region’s largest companies, there is still growth to be found.
By almost any measure, Saudi Arabia’s bond issue on October 19, 2016 was a success. While analysts had been predicting an issuance of between $10bn and $15bn, the final amount was $17.5bn, setting a new record for the largest ever emerging markets sovereign bond—the previous record had been set by Argentina in April 2016, when it sold $16.5bn.