The MENA WEEKLY MONITOR

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1 CONTACTS The MENA WEEKLY MONITOR Treasury & Capital Markets Bechara Serhal (961-1) Nadine Akkawi (961-1) Private Banking Toufic Aouad (961-1) Corporate Banking Khalil Debs (961-1) RESEARCH Marwan Barakat (961-1) Jamil Naayem (961-1) Salma Saad Baba (961-1) Fadi Kanso (961-1) Gerard Arabian (961-1) Farah Nahlawi (961-1) Economy p.2 EY REPORT SHOWS 43% RISE IN MENA IPO VALUE TO US$ 1.9 BILLION AND DECLINE IN NUMBER OF DEALS IN 9M2018 The MENA region raised US$ million through four IPOs in Q3 2018, as per the latest EY MENA IPO Eye report. Compared to Q3 2017, IPO value saw an increase by 22%, while activity declined by 33%. Also in this issue p.3 S&P affirms Egypt s B/B LT and ST foreign and local currency sovereign credit ratings p.4 Moody's keeps outlook on UAE banking system at stable p.4 UAE to allow full foreign ownership of selected sectors by early next year Surveys p.5 DUBAI ECONOMY TRACKER INDEX GROWS BUT AT SLOWEST RATE IN MORE THAN 2.5 YEARS The headline Dubai Economy Tracker Index fell to 52.5 in October 2018, down from 54.4 in September and the lowest reading since March 2016, says Emirates NBD. Also in this issue p.5 Abu Dhabi tops list amongst Middle Eastern cities in hotel occupancy in 9M 2018 p.6 Fitch affirms Abu Dhabi credit ratings citing its strong fiscal and external metrics and high GDP per capita as key strengths Corporate News p.7 ADNOC & WANHUA CHEMICAL GROUP SIGN LONG-TERM LPG SALES CONTRACT Abu Dhabi National Oil Co. said it has concluded a 10-year Liquefied Petroleum Gas (LPG) sales agreement with Wanhua Chemical Group of China, which will purchase up to 1 million metric tons of LPG per annum. Also in this issue p.7 KSA s Fawaz Alhokair Group signs deal for 300 million Irish development p.7 DEWA awards US$ 78 million contract for construction of reservoirs in Hatta p.7 Dubai Holding to buy minority stake in Azadea Group p.8 DWS Group acquires stake in digital investment platform Neo Technologies p.8 Aldar awards US$ 91 million contract to build phase of Alghadeer mega project p.8 UAE s Danube Properties awards US$ 41 million project main construction works contract Markets In Brief p.9 PRICE DECLINES IN REGIONAL EQUITIES, TWO-WAY FLOWS IN BOND MARKETS MENA equity markets came under downward price pressures this week, largely dragged by Saudi stocks amid an oil price slump that was mainly triggered by US sanction exemptions on Iran s oil exports and concerns over a global economic slowdown that may curb oil demand growth. In parallel, regional fixed income markets saw mixed price movements, with no major variation in the average regional five-year CDS spreads. This was reflected by a shy weekly contraction in the Z-spread based Audi compiled bond index of 0.9%. MENA MARKETS: WEEK OF Nivine Turyaki (961-1) nivine.turyaki@bankaudi.com.lb Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box Lebanon - Tel: research@bankaudi.com.lb 1

2 ECONOMY _ EY REPORT SHOWS 43% RISE IN MENA IPO VALUE TO US$ 1.9 BILLION AND DECLINE IN NUMBER OF DEALS IN 9M2018 The MENA region raised US$ million through four IPOs in Q3 2018, according to the latest Ernst & Young EY MENA IPO Eye report. Compared to Q3 2017, IPO value saw an increase year-on-year by 21.9%, while activity declined by 33.3%. Over the first nine months, the MENA region saw 19 IPOs valued at US$ 1.9 billion, against 25 IPOs valued at US$ 1.3 billion in 9M2017, according to figures derived from the report. According to EY officials, in light of fluctuating oil prices and headwinds in the economy, IPO activity in the MENA region has been slow from Q1 to Q However it is positive to see that IPO value increased year-on-year in Q3, especially when several entities across MENA delayed their plans for IPOs in 2018 due to various factors including (but not limited to) regulatory and global trade concerns and uncertain market conditions in a rising interest rate environment. According to the report, Saudi Arabia led the MENA IPO activity in Q3 with the IPO of Leejam Sports Company on the Saudi Stock Exchange, which raised US$ million, making it the biggest IPO in the third quarter. In the previous quarter, four companies went public, three of which were REIT listings on the Tadawul. Additionally, in the GCC region, Oman s Muscat Securities Market (MSM) had a single IPO listing for Dhofar Generating Company in the power and utilities sector raising US$ 52.0 million. While IPO performance has been slow this year, regulatory updates and inclusions in global indices have been positive for the GCC IPO market, as per EY. FTSE Russell has issued a statement that it plans to include Tadawul as a secondary emerging market index in This follows the September 2018 announcement where MSCI signed an agreement with Tadawul to jointly launch a tradable index in Q4 2018, which is intended to function as a platform for investment instruments, covering exchange-traded fund (ETFs). Looking to Oman, increased clarity in regulatory processes in the power and water sectors has created transparent competition in the sectors, encouraging developers and investors. With as many as six power generation and water desalination companies planning IPOs within three years, Oman s IPO pipeline looks very healthy, as per the same source. MENA IPO ACTIVITY Sources: EY, Bank Audi's Group Research Department 2

3 The Abu Dhabi Securities Exchange has announced plans to roll out futures trading in 2019 to boost investments. The stock exchange is connecting with seven companies that have IPOs on their agenda. There have also been talks of MSCI reclassifying the Kuwait Stock Exchange as an emerging market in The stock exchange is currently a frontier market. In the wider MENA region, Egypt and Tunisia recorded one deal each. The IPO of Cairo for Investment & Real Estate Development Company raised US$ 69.7 million. The IPO program laid out by the Egyptian government, which plans to list public sector companies on its stock exchange, has strengthened the prospects of future IPOs in the country that would promote local and foreign capital inflows. The government also has plans to introduce an IPO program offering minority stakes of State-owned and private companies in various sectors, in the next three to five years, as per EY. Further, in North Africa, the Tunis Stock Exchange saw the IPO of Tunisie Valeurs in Q raising US$ 7.6 million, following a year-long gap of no activity. The improved classification of Tunisia by the FTSE Russell and MSCI, along with the World Federation of Exchanges (WFE) member status, received in October 2018, has reinforced the attraction of Tunisia for foreign investment, as per the same source. Globally, IPO activity saw a significant slowdown in Q3 2018, with 302 IPOs raising US$ 47.1 billion, marking a decrease of 15% and 2% respectively, compared to Q Current market and investor confidence fluctuations are causing companies to delay or pull out of planned IPOs in Q despite the recovery in oil prices. Reasons for this could be current market and global trade uncertainties. Globally, the third quarter has been a relatively quieter period for IPO activity driven by geopolitical tensions, trade issues between the US and China and the looming exit of the UK from the European Union, all of which have dampened investor confidence in the short term, as per EY. S&P AFFIRMS EGYPT S B/B LT AND ST FOREIGN AND LOCAL CURRENCY SOVEREIGN CREDIT RATINGS Standard & Poor s (S&P) affirmed the B/B long-term and short-term foreign and local currency sovereign credit ratings on Egypt. The outlook is stable. The stable outlook balances the rating agency s expectation that Egypt's current account deficits (CADs) would now stay as a smaller percentage of GDP and that growth prospects would remain strong, against risks of fiscal slippages and an increase in the high stock of relatively short-dated government debt issued at high interest rates. The rating agency could consider a positive rating action if Egypt's economic growth significantly outperforms S&P s forecasts, if larger-than-anticipated improvements in the current account position sharply reduce Egypt's external financing requirements and external debt levels, and if Egypt's reform program significantly reduces government debt. Negative pressure on the rating could arise if Egypt's plan to gradually reduce government debt to GDP is derailed by fiscal slippages, higher borrowing costs, more pronounced currency depreciation than expected, or if foreign exchange reserve levels were to fall significantly. Standard & Poor s could also see negative pressure on the rating if the security environment worsens, hindering the recovery in investment and tourism. The ratings reflect strong GDP growth prospects and lower external pressures, underpinned by the implementation of fiscal and economic reforms, which have accompanied a three-year US$ 12 billion International Monetary Fund (IMF) Extended Fund Facility (EFF) program. S&P also believes that Egypt's monetary framework is gradually improving, albeit from a weak base. Nevertheless, the ratings remain constrained by wide fiscal deficits, high public debt, low income levels, and still-high gross external financing needs. Elevated fiscal deficits averaging about 12% of GDP over the past five years reflect large current expenditures including energy subsidies, wages, and high interest costs. 3

4 However, fiscal deficits have declined since 2016 and S&P expects a continuing gradual downward trajectory in fiscal deficit and debt ratios, partly reflecting still-high levels of inflation. Nonetheless, the rating agency projects that Egypt's debt-to-gdp and interest-to-revenue ratios would remain high and sensitive to exchange rate movements in either direction. Official estimates indicate that Egypt s real GDP growth was 5.3% in fiscal year 2018, up from 4.2% in the previous year. This stronger performance was supported by broad-based growth across several sectors, particularly manufacturing, natural gas, tourism, and construction. The Zohr gas field was fast tracked and started production in December It is currently producing 2.0 billion cubic feet (bcf)/day, adding to Egypt s overall gas production of about 6.0 bcf/day, and enabling Egypt to achieve natural gas selfsufficiency in October MOODY'S KEEPS OUTLOOK ON UAE BANKING SYSTEM AT STABLE Moody's kept its outlook on the United Arab Emirates banking system at stable, reflecting a gradually recovering economy, as well as banks' strong capital, resilient profitability and solid funding. A combination of rising oil production, government infrastructure spending in Dubai, as well as Abu Dhabi's fiscal stimulus package would bolster economic growth. Moody's forecasts GDP growth of 2.2% in 2018 and 2.9% in 2019, following a slowdown to 0.8% in The recovering economy would stimulate credit growth, as per the same source. Loan performance would progressively stabilize, as the recovering economy and the resilience of large borrowers will offset ongoing problem loan formation among small and mid-sized businesses and individual borrowers, as per the report. Strong capital levels provide a large, loss-absorbing buffer for the UAE's banks. Moody's expects strengthening profitability to support capital levels, with sector-wide tangible common equity (TCE) at 14%-15% of risk-weighted assets over the next 12 to 18 months. Moody s added that profitability of banks would improve slightly as rising interest rates support net interest margins. As banks raise their lending rates, their higher loan yields will moderately outweigh the higher rates they would need to pay on deposits. In addition operating expenses would remain broadly stable, and loan-loss provisioning would gradually stabilize as the economy recovers. Higher oil prices would continue to support solid funding and liquidity, according to Moody s. UAE banks will remain primarily deposit-funded, with only a moderate need to turn to confidence-sensitive capital markets. UAE banks have sufficient liquidity headroom to accommodate a pick-up in credit growth.the UAE government's willingness and capacity to support local banks if needed will remain high over the next 12 to 18 months. UAE TO ALLOW FULL FOREIGN OWNERSHIP OF SELECTED SECTORS BY EARLY NEXT YEAR The United Arab Emirates government aims to publish a list of the sectors in which it would permit foreign ownership of up to 100% by early next year, according to the country s Economy Minister. Special business areas in Dubai known as "free zones" already permit 100% foreign ownership, but socalled "onshore" businesses limit foreign ownership to 49%. A new foreign investment law, approved last month, allows foreigners to own more than 49% and up to 100% in UAE-based businesses. The law is one of a series of economic reforms aimed at spurring investment and attracting foreign investors amid an economic slowdown in the Gulf, due to lower oil prices and a slump in real estate, as per Reuters. Foreign ownership increases would be allowed in sectors such as technology, space, renewable energy, and artificial intelligence, as per the same source. Other sectors are under consideration, with the law anticipated to increase foreign investment by between 15% and 20% next year. 4

5 SURVEYS DUBAI ECONOMY TRACKER INDEX GROWS BUT AT SLOWEST RATE IN MORE THAN 2.5 YEARS The headline Dubai Economy Tracker Index fell to 52.5 in October 2018, down from 54.4 in September and the lowest reading since March 2016, says Emirates NBD. While still in expansion territory, the headline index points to the slowest rate of growth in the private sector in more than two and half years. The travel & tourism sector weighed on the overall index, as it contracted marginally last month. Both output and new orders across the whole of Dubai s private sector increased in October, but at markedly slower rates. Output growth was the weakest year-to-date, while new order growth was the slowest since April 2016, as per Emirates NBD. The employment index remained in contraction territory for the second month in a row, as more firms reported a decline in headcount than those reporting an increase. However, the vast majority of firms surveyed reported no change in job numbers in October. Margin pressures intensified last month, as input costs rose at a slightly faster rate than in September, while output (selling) prices declined on average. Stocks of inventories also declined last month, the first time this has happened since February Despite the soft survey data, firms in Dubai were the most optimistic than they have been since at least 2012, with nearly 77% of respondents expecting their output to be higher in a year s time, according to Emirates NBD. The travel & tourism sector index declined further to 49.6 in October from 51.3 in September, the lowest reading since February 2016 and signalling a contraction in the sector last month. The main driver was a decline in the new work index to 49.4 as 29% of firms in the sector reported fewer new orders in October compared with the previous month. Output increased on average in October but at the slowest rate this year. Furthermore, the wholesale & retail trade sector index declined to 53.7 in October from 55.5 in September, indicating a slower pace of growth in the sector last month. Both output and new orders increased a slower rate despite the steepest price discounting since January Employment in the sector was broadly unchanged after declining modestly in September, and there was little sign of higher input costs on average. Last but not least, the construction sector index rose to 55.5 in October from 53.8 in September, with output rising sharply (64.1) and new work growth accelerating as well (58.5). However, some of the increase in new orders was likely due to price discounting - firms reduced selling prices for the second month a row despite slightly higher input costs. ABU DHABI TOPS LIST AMONGST MIDDLE EASTERN CITIES IN HOTEL OCCUPANCY IN 9M 2018 Ernst & Young issued its latest Hotel Benchmark Survey on the Middle East for the first nine months of 2018 (four and five star hotels), according to which occupancy rates increased in four cities within the region and decreased in the remaining ten. Cairo registered the most significant increase of 9.3%. The highest decrease of 21.4% was registered by Muscat. According to the survey, the cities of Abu Dhabi, Dubai and Ras Al Khaimah took over the first three ranks amongst peers in hotel occupancy, with 75.8% for Abu Dhabi, 73.8% for Dubai and 70.8% for 5

6 Ras Al Khaimah. At the lower end of the regional scale were Muscat (54.0%), Riyadh (53.1%), and Manama (50.2%). Furthermore, a total of six cities reported increases in the average room rate, registering 9.6% in the case of Jeddah. The most significant upward movements after Jeddah were posted by Cairo (+7.3%) and Ras Al Khaimah (+5.4%). The most significant decreases were registered by Doha (-15.4%), Muscat (-12.1%), and Manama (-10.4%), according to EY. Moreover, the hotel rooms yield increased in five cities, remained unchanged in once city, while the other eight reported a decrease. The most significant increases were seen in Cairo, Jeddah and Amman with 15.9%, 8.1% and 3.7% respectively. Muscat, Doha and Manama reported the highest decreases of 30.6%, 19.8% and 10.9% respectively. ERNST & YOUNG MIDDLE EAST BENCHMARK SURVEY Sources: Ernst & Young, Bank Audi's Group Research Department FITCH AFFIRMS ABU DHABI CREDIT RATINGS CITING ITS STRONG FISCAL AND EXTERNAL METRICS AND HIGH GDP PER CAPITA AS KEY STRENGTHS Fitch affirmed Abu Dhabi's Long-Term Foreign-Currency Issuer Default Rating (IDR) at AA with a stable outlook. Abu Dhabi's key credit strengths are its strong fiscal and external metrics and high GDP per capita, balanced by high dependence on hydrocarbons and a relatively underdeveloped economic policy framework. Sovereign net foreign assets are estimated to be the third-largest among Fitch-rated sovereigns, at over 190% of GDP in 2018, and government debt is the second-lowest, at around 7% of GDP. Oil and gas contribute around 80% of fiscal revenue, making it highly volatile, as per Fitch. Moreover, UAE governance scores remain below the AA median, although they are the best in the Gulf Cooperation Council (GCC). Higher oil prices are leading to a rapid rebound of revenue and continued increases in government spending. The rating agency expects a fiscal surplus of 2.7% of GDP in 2018, from a deficit of 3.5% of GDP in Higher oil prices will drive a 30% increase in revenue, while spending will rise by about 8%, after nearly identical increases in revenue and spending in Fitch s fiscal numbers include the estimated investment income of Abu Dhabi Investment Authority (ADIA) in government revenue but treat any transfers from ADIA as financing items. 6

7 CORPORATE NEWS ADNOC & WANHUA CHEMICAL GROUP SIGN LONG-TERM LPG SALES CONTRACT The Abu Dhabi National Oil Company (ADNOC) announced it has concluded a new long-term Liquefied Petroleum Gas (LPG) sales agreement with Wanhua Chemical Group of China. Under the terms of the 10- year contract, Wanhua will purchase up to 1 million metric tons of LPG per annum. According to an ADNOC executive, the signing of an important long-term sales agreement with a major end-user of LPG reinforces ADNOC s position as a major supplier of crude oil and petroleum products to the growing economies of Asia. In line with its strategy to maximize value from its downstream refining, petrochemical and gas processing operations, ADNOC produces up to 10,500,000 metric tons per year of LPG. This is sold both locally in the UAE and internationally. According to a Wanhua Chemical Group executive, the company is government-owned but also publicly listed on the Shanghai Stock Exchange. The company has investment grade credit ratings from Moody s, S&P and Fitch Ratings. Wanhua is one of the world s leading chemical companies and the largest user of LPG in China, as per the same source. LPG is the main feedstock for Wanhua petrochemical units, with consumption demand of up to 6 million tons per annum projected by KSA S FAWAZ ALHOKAIR GROUP SIGNS DEAL FOR 300 MILLION IRISH DEVELOPMENT Saudi developer Fawaz Alhokair Group signed an agreement with Waterford City and County Council to invest 300 million to construct a mall, hotel and housing development in the south-east Irish city. Local authority members from the city and county council approved plans for the European arm of Saudi retail giant Fawaz Alhokair Group to develop the new retail center in the city s North Quays. Ireland s independent planning authority An Bord Pleanála also gave the go-ahead for compulsory purchase orders for properties required for the redevelopment project. The development includes 30,000 square feet of retail space, 15,000 square feet of hotel accommodation, 30,000 square feet of apartments, as well as 10,000 square feet of office space. Planning permission for the project is expected to be submitted in Q1 next year, with more than 2,300 direct jobs expected to be created by the development. The local authority will now hold public consultations for submissions and observations before the planning permission is submitted. DEWA AWARDS US$ 78 MILLION CONTRACT FOR CONSTRUCTION OF RESERVOIRS IN HATTA Dubai Electricity and Water Authority, the utilities regulator for the emirate, has awarded a contract worth AED 288 million (US$ 78 million) for the construction of two 60 million gallon reservoirs in Al Nakhali in the Hatta region, south-east of Dubai. The project is expected to provide storage for up to 120 million gallons of desalinated water. DEWA is also undertaking a similar 60 million gallon reservoir development in Al Lusaily. Including the Al Nakhali reservoirs, Dubai's total storage capacity will hit 1.01 billion gallons, the utilities regulator said. Current capacity is at 830 million gallons. Construction and operation of the reservoirs is expected to be complete within 24 months. DUBAI HOLDING TO BUY MINORITY STAKE IN AZADEA GROUP Dubai Holding, the investment vehicle of the emirate s Ruler, agreed to buy a minority stake in Lebanese fashion retailer Azadea Group, Bloomberg reported. 7

8 The two companies reached an initial agreement on the transaction, as per the same source which added that the stake purchase would value the Lebanon-based Azadea at more than US$ 1 billion. Azadea has franchises across the Middle East and North Africa for brands in fashion, food, home furnishings, multimedia and sporting goods, including Gap, Inditex s Zara and Virgin Megastore. DWS GROUP ACQUIRES STAKE IN DIGITAL INVESTMENT PLATFORM NEO TECHNOLOGIES DWS Group (DWS), an integral part of Deutsche Bank and one of the world s leading asset managers, has entered into a binding agreement to acquire an equity stake of 15% in Dubai-based Neo Technologies, a financial technology company through Neo Strategic Holding Limited. Neo Technologies is a first mover in digital asset management solutions in the MENA region, based out of the Dubai International Financial Center (DIFC), as per a DWS Group statement. As part of the transaction, a strategic partnership will be formed whereby DWS and Neo Technologies will collaborate on the development and expansion of digital asset management services throughout the region. Neo Technologies enables DWS to obtain further presence in a region with high growth rates in asset management, as per DWS Group. Neo Technologies operates a platform-as-a-service model for the financial services industry allowing financial institutions to rapidly introduce digital asset management solutions to their end clients. As a white-label solution, Neo provides an integrated front, middle and back office that is built specifically for the MENA region, adapting to local languages and regulatory requirements. Integrations with partner platforms, brokers, and specialist advisors enable clients of Neo Technologies the ability to efficiently scope the services and products they offer to their end users, as per the same source. ALDAR AWARDS US$ 91 MILLION CONTRACT TO BUILD PHASE OF ALGHADEER MEGA PROJECT Aldar Properties has announced the appointment of Al Rakha Contracting and General Transport as the main contractor for infrastructure buildings and early works package for the first neighborhood in the second phase of Alghadeer. The project, an AED 10 billion mega development situated close to the border of Abu Dhabi and Dubai, was launched in April and will be built over the next 15 years. The AED 335 million (US$ 91.2 million) contract comprises construction of 707 maisonettes, townhouses and villas following site preparation work. This neighborhood is located in the North West section of the masterplan, which features over 14,000 homes, commercial properties, cultural and institutional amenities and entertainment attractions to be built over the coming 15 years. UAE S DANUBE PROPERTIES AWARDS US$ 41 MILLION PROJECT MAIN CONSTRUCTION WORKS CONTRACT Danube Properties, a UAE-based developer, has awarded an AED million (US$ 40.7 million) contract to Cast Construction, a Dubai-based contractor, for the main construction works of its residential project Jewelz located at Arjan, near Miracle Gardens. The developer s 10th housing project, AED 300 million Jewelz offers 463 residential units, ranging from studio, one and two-bedroom apartments. It is located on a plot adjacent to the park with a private entrance leading to the property. The project, which was launched this March, is scheduled for delivery in the first quarter of

9 CAPITAL MARKETS EQUITY MARKETS: MENA EQUITIES DOWN WEEK-ON-WEEK, MAINLY DRAGGED BY SAUDI STOCKS MENA equity markets came under downward price pressures this week, largely dragged by Saudi stocks amid an oil price slump that was mainly triggered by US sanction exemptions on Iran s oil exports and concerns over a global economic slowdown that may curb oil demand growth. The heavyweight Saudi Tadawul registered a 2.1% fall in prices week-on-week, mainly driven by extended oil price declines, with Brent prices shedding 3.6% to reach US$ 70 per barrel, in addition to some unfavorable company-specific factors. Most petrochemical stocks traced a downward trajectory. Petrochemicals giant SABIC s share price decreased by 2.8% to SR Petrochem s share price plunged by 5.4% to SR Yansab s share price declined by 1.0% to SR Saudi Kayan Petrochemical Company s share price closed 3.6% lower at SR Petro Rabigh s share price plummeted by 6.6% to SR Petro Rabigh announced 2018 third quarter net profits of SR 243 million, versus net profits of SR 706 million during the corresponding period of the previous year. Also, Arabian Pipes Company s share price shed 5.1% week-on-week to SR APC announced a 2018 third quarter net loss of SR 16.8 million as compared to net profits of SR 6.6 million during the corresponding period of the previous year. Dar Al Arkan s share price declined by 1.7% to SR Dar Al Arkan announced a net profit after zakat and tax of SR 36.7 million during the third quarter of 2018, down by 82% year-on-year. In contrast, the UAE equity markets posted a 1.7% rise in prices week-on-week, mainly helped by some favorable company-specific factors. In Abu Dhabi, Taqa s share price surged by 4.7% to AED Taqa posted net profits of AED 153 million during the third quarter of 2018, as compared to a net loss of AED 194 million a year earlier. Eshraq Properties share price closed 3.8% higher at AED Eshraq Properties posted net profits of AED 28.2 million for the first nine months of 2018 as compared to net profits of AED 0.37 million for the same period last year. In Dubai, Shuaa Capital s share price went up by 2.8% over the week to AED Shuaa Capital posted net profits of AED 30.1 million during the third quarter of 2018, as compared to net profits of AED 23.0 million a year earlier. Emaar Malls share price surged by 6.7% to AED Emaar Malls recorded EQUITY MARKETS INDICATORS (NOVEMBER 04 TILL NOVEMBER 10, 2018) Sources: S&P, Bloomberg, Bank Audi's Group Research Department 9

10 net profits of AED 1.6 billion during the first nine months of 2018 versus net profits of AED 1.5 billion in the same period of Arabtec Holding Company s share price jumped by 14.1% to AED Arabtec hired New York-based investment bank Moelis & Co to advise on a new restructuring plan. The Egyptian Exchange recorded a 4.0% increase in prices week-on-week, mainly supported by some favorable company-specific factors and on improved sentiment after that the Egyptian Ministry of Planning announced that the domestic economy grew by 5.3% year-on-year during the first quarter of FY Ghabbour Auto s share price jumped by 7.5% to LE Ghabbour Auto announced 2018 third quarter net profits of LE 240 million as compared to a net loss of LE 139 million a year earlier. Emaar Misr for Development s share price closed 3.7% higher at LE The firm reported 2018 third quarter net profits of LE million versus net profits of LE million during the same period of the previous year. EFG Hermes share price went up by 3.1% to LE EFG Hermes frontier markets division announced plans to expand further east, on expectations that a long bear market for the asset class is about to end. Commercial International Bank s share price increased by 2.4% to LE Telecom Egypt s share price closed 2.7% higher at LE The Qatar Exchange posted shy price gains of 0.1% this week amid mixed price movements. 20 out of 45 listed stocks registered price gains, while 24 stocks recorded price falls and one stock saw no price change week-on-week. Price gains were mainly supported by improved investor sentiment following Qatar s first cabinet reshuffle since 2016, while price falls were mainly driven by some profit-taking operations as the Qatar Exchange topped the gainers list so far in the MENA region, registering year-to-date price gains of circa 22%. QNB s share price went down by 1.0% to QR Doha Bank s share price declined by 2.2% to QR In contrast, Ezdan Holding s share price surged by 5.3% to QR Ooredoo s share price closed 5.8% higher at QR FIXED INCOME MARKETS: MIXED PRICE MOVEMENTS IN REGIONAL BOND MARKETS THIS WEEK Regional fixed income markets saw mixed price movements this week, with no major variation in the average regional five-year CDS spreads. This was reflected by a shy contraction in the Z-spread based Audi compiled bond index of 0.9%. In the Qatari credit space, sovereigns maturing between 2019 and 2028 registered weekly price falls of up to 0.13 pt. Prices of Qatar 46 retreated by 0.16 pt. In contrast, sovereigns maturing in 2030, 2040, 2042 and 2048 saw price gains of 0.79 pt, 0.86 pt, 0.53 pt and 0.11 pt respectively. Ooredoo papers maturing in 2018, 2019 and 2023 were down by 0.06 pt, 0.13 pt and 0.10 pt respectively, while Ooredoo papers maturing in 2025, 2026, 2028 and 2043 posted price increases of up to 0.45 pt. Amongst financials, prices of Commercial Bank of Qatar 19 (offering a coupon of 2.875%) and 21 dropped by 0.10 pt and 0.06 pt respectively, while Commercial Bank of Qatar 23 closed up by 0.34 pt. Commercial Bank of Qatar plans to start a roadshow for its Australian dollar bond issue on November 19, In the Kuwaiti credit space, sovereigns maturing in 2022 and 2027 were down by 0.08 pt and 0.15 pt respectively over the week. KIPCO 20 closed down by 0.01 pt, while KIPCO 27 traded up by 0.07 pt. KIPCO completed a KWD 100 million five-year bond issue that was 1.35 times oversubscribed. The bonds were available in fixed and floating-rate tranches, with the floating tranche attracting the greater percentage of the allocation. The fixed rate bond pays investors a coupon of 5.5% annually, while the floating rate bond pays investors a coupon of 2.25% annually over the declared Central Bank of Kuwait discount rate, with a cap of 1% over the fixed-rate coupon. In the Dubai credit space, sovereigns maturing in 2020, 2022 and 2043 were down by up to 0.23 pt, while sovereigns maturing in 2021, 2023 and 2029 saw weekly price increases of up to 0.11 pt. DP World 20, 23, 28 and 37 saw price rises of up to 0.19 pt, while DP World 48 was down by 0.02 pt. Prices of Emirates Airline 23 and 25 rose by 0.08 pt and 0.04 pt respectively, while Emirates Airline 28 closed down by 0.18 pt. Majid Al Futtaim 19 and 25 registered price falls of 0.10 pt and 0.09 pt respectively, while Majid Al Futtaim Perpetual (offering a coupon of 5.5% and 6.375% respectively) were up by 0.25 pt each. 10

11 As to papers issued by financial institutions, DIB papers maturing between 2020 and 2023 saw price gains of up to 0.17 pt, while DIB Perpetual (offering a coupon of 6.25%) was down by 0.04 pt over the week. Emirates NBD 19 and 20 were up by 0.04 pt each, while Emirates NBD 22 traded down by 0.08 pt. Emirates NBD mandated five banks to be joint lead managers for a potential benchmark-sized issue of five-year bonds denominated in US dollars. In the Egyptian credit space, US dollar-denominated sovereigns maturing in 2020, 2023, 2025, 2027, 2028 and 2047 saw weekly price gains of up to 0.50 pt, while sovereigns maturing in 2022 and 2040 closed down by 0.25 pt and 0.13 pt respectively. Euro-denominated sovereigns were up by 0.13 pt and 0.50 pt respectively. As to credit ratings, Standard & Poor s affirmed the B/B long-term and short term foreign and local currency sovereign credit ratings on Egypt. The outlook is stable. The outlook balances S&P s expectation that Egypt s current account deficits would now stay as a smaller percentage of GDP and that growth prospects would remain strong, against risks of fiscal slippages and an increase in the high stock of relatively short-dated government debt issued at high interest rates. MIDDLE EAST 5Y CDS SPREADS V/S INTL BENCHMARKS Sources: Bloomberg, Bank Audi's Group Research Department Z-SPREAD BASED AUDI MENA BOND INDEX V/S INTERNATIONAL BENCHMARKS Sources: Bloomberg, JP Morgan, Bank Audi's Group Research Department 11

12 SOVEREIGN RATINGS & FX RATES Sources: Bloomberg, Bank Audi's Group Research Department DISCLAIMER The content of this publication is provided as general information only and should not be taken as an advice to invest or engage in any form of financial or commercial activity. Any action that you may take as a result of information in this publication remains your sole responsibility. None of the materials herein constitute offers or solicitations to purchase or sell securities, your investment decisions should not be made based upon the information herein. Although Bank Audi sal considers the content of this publication reliable, it shall have no liability for its content and makes no warranty, representation or guarantee as to its accuracy or completeness. 12