A Glance: About Multiples:

Transcription

1 A Glance: This report is intended to shed light on general macroeconomic trends of four economies in the MENA region that could impact investors decisions and the financial performance of businesses.

2 A Glance: This report is intended to shed light on general macroeconomic trends of four economies in the MENA region Arab Republic of Egypt, Kingdom of Saudi Arabia, United Arab Emirates and Kingdom of Qatar that could impact investors decisions and the financial performance of A Glance constitutes an essential guide as it helps assess the overall performance of these countries economies, which in turn aids firms with their business development strategy. About Multiples: Multiples Group is a regional investment management firm focusing on building long term business partnerships while offering a full range of investment banking services covering medium and large scale projects across the MENA region through its headquarters in DIFC, Dubai and regional offices in Doha and Cairo. 2

3 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 EGYPT in Review * In January, the Supreme Electoral Committee (SEC) announced that the newly drafted national charter was approved by 98.1% of voters. * The number of tourists visiting Egypt in the first two months of 2014 has dropped 28% to 1.3 MM in comparison to January and February Egypt Main Economic Indicators: In H1 2014, the real GDP growth rate has significantly increased in Q2-14 scoring 2.5% which is 1% higher than the growth rate for the same period last year. On the other hand, the unemployment rate has remained high in the first quarter of 2014 while it slightly went down by 0.1% in the second quarter scoring 13.3%. * Egypt's budget deficit reached 8% of its gross domestic product (GDP). The deficit totaled some BN EGP (22.8 BN USD) for the period of July 2013 to April 2014, compared to around BN EGP (25.8 BN USD) in the same months of the preceding fiscal year. 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% Macro Economic Indicators 3.4% 2.2% -0.8% 1.5% 1.0% 0.9% 1.4% 2.5% * Abdel Fattah Al-Sisi won a crushing victory in the presidential election on May However, the turnout was low, and his win will only harden the rift between the authorities and the Muslim Brotherhood. Real GDP Growth Unemployment Rate 3

4 Inflation Rate: In Egypt, the headline Consumer Price Index (CPI) measures the change in the cost of a fixed basket of goods and services that are purchased by a representative sample of households from urban areas, which include Cairo, Alexandria, urban Lower Egypt, urban Upper Egypt, Canal cities and Frontier governorates. The most important categories in the headline CPI are Food and Beverages (40% of total weight); Housing, Water, Electricity, Gas and other Fuels 18.4% ; Medical Care 6.3% and Transportation 5.7%. Clothing and Footwear account for 5.4% of total index and Education for 4.6%. Hotels, Cafes and Restaurants represent 4.4% of total weight and Furnishings, Household Equipment and Routine Maintenance of the Dwelling for 3.8%. Miscellaneous Goods and Services account for 3.7%, Communications 3.1%, Recreation and Culture 2.4% and Tobacco and Related Products 2.2%. Headline CPI Core CPI (m/m percentage change) Headline CPI Core CPI Regulated Items Fruits & Vegetables Regulated Items Fruits & Vegetables (y/y percentage change) (m/m percentage change) (y/y percentage change) Jan Feb Mar Apr May Jun % 7.6% 7.3% Inflation Rate 8.6% 10.0% 11.7% 10.9% 9.0% Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 4

5 2-Jan-14 9-Jan Jan Jan Jan-14 6-Feb Feb Feb Feb-14 6-Mar Mar Mar Mar-14 3-Apr Apr Apr Apr-14 1-May-14 8-May May May May-14 5-Jun Jun Jun Jun-14 Stock Exchange: In the first quarter of 2014, the total value traded recorded 78.2 BN EGP, while the total volume traded reached 18,562 MM securities executed over 2,338 thousand transactions this quarter. Stocks trading accounted for 78.5% of the total value traded of the main market, while the remaining 21.5% were captured by bonds over the quarter. While in the second quarter of 2014, the total value traded recorded 90.9 BN EGP, while the total volume traded reached 15,892 MM securities executed over 1,729 thousand transactions this quarter. Stocks trading accounted for 70.35% of the total value traded of the main market, while the remaining 29.65% were captured by bonds over the quarter Egyptian Stock Market "EGX 30" Sector Indices Performance Q1-14 Food and Beverages Telecommunications Banks Chemicals Basic Resources Industrial Healthcare and Pharmaceuticals Real Estate Construction and Materials Travel &Leisure Personal and Household Products Financial Services excl. Banks -20%-10% 0% 10% 20% 30% 40% 50% Sector Indices Performance Q2-14 Chemicals Food and Beverages Personal and Household Industrial Travel &Leisure Banks Basic Resources Healthcare and Pharmaceuticals Telecommunications Construction and Materials Financial Services excl. Banks Real Estate -10% -5% 0% 5% 10% 15% 20% 5

6 Exchange Rate: Dollar exchange rate has increased in the Egyptian official market throughout the first half of 2014 from 6.96 EGP to 7.15 EGP. It s worth mentioning that the central bank has stopped defending the Egyptian pound against the US dollar due the great fall in international reserves after 25 th January revolution USD/EGP Exchange Rate Egypt References: * Central Bank of Egypt (CBE) * Ministry of Finance (MOF) * Central Agency for Public Mobilization and Statistics (CAPMAC) * Tradingeconomics.com * Investing.com * Egyptian Exchange (EGX) 6

7 Kingdom of Saudi Arabia in Review * Investment in small and medium enterprises in Saudi Arabia is expected to grow to more than 70 BN USD by the end of 2015, with the government and banks providing much-needed funding. * As part of moves to boost inward investment, the Council of Ministers has agreed to ease the extremely bureaucratic rules for foreign companies wishing to bid for government procurement projects. * The Saudi market is potentially the largest for solar energy in the GCC, and has previously expressed its desire to add up to 50GW of renewables to its energy sector by They have talked about a 120 BN USD program, but haven't rolled out any plans yet. KSA Main Economic Indicators: * In the first half of year 2014, the real GDP growth rate has increased in Q1-14 scoring 5% which is 1% higher than the growth rate of last quarter of This increase continued in the second quarter to reach 5.1%. * On the other hand, the unemployment rate 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% has remained constant throughout the first half of 2014 at 5.5%. 8.6% Macro Economic Indicators 5.1% 4.4% 3.8% 3.8% 4.0% GDP real Growth 5.0% 5.1% Unemployment Rate 7

8 Inflation Rate: The annual cost of living index in KSA went up by 2.7 percent in June 2014 compared to the same month in the preceding year, whereas the annual inflation rate for all the months of the second quarter in 2014 stood at 2.7 percent. The cost of living index also registered monthly increases of 0.3 percent and 0.1 percent in April and May respectively. The effect of major groups were in variable degrees on the general cost of living index. In terms of its influence on the cost of living index, housing, water, electricity, gas and other fuels group ranked first with 37.7% in the second quarter of 2014 compared to 20.6% in the same quarter of the previous year; followed by miscellaneous goods and services with an influence rate of 17.3% compared to 7.2% in the same quarter of the previous year; next was transport group with an influence rate of 13.8% compared to 7.1% for the corresponding quarter of the preceding year. In contrast, the effect of food and beverages group on the annual change rate of the general index went down significantly from 33.4% in the second quarter of 2013 to 5.9% in the second quarter of Inflation Rate of the General Cost of Living Index 2014 Y/Y % M/M % Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun Annual Inflation Rate Monthly Inflation Rate 8

9 Stock Exchange: The TASI continued to show upward momentum in May as high levels of liquidity in the economy sustained growth. The TASI has showed nine straight months of positive growth. This growth has been underpinned by high oil prices and solid domestic fundamentals in the Saudi economy. Average daily turnover grew for the fifth month in a row and reached 11.5 BN SR in May. Turnover by sector was dominated by the larger sectors, with the exception of insurance which saw rises in activity prompted by investor speculation. Larger sectors, such as petrochemicals, agriculture & food and real estate saw the biggest average daily turnover, with the insurance sector being the exception Tadawul (TASI) Jan-14 1-Feb-14 1-Mar-14 1-Apr-14 1-May-14 1-Jun Turn Over by Sector "BN SR" 9

10 Exchange Rate: The Saudi riyal's exchange rate has been constant to the US dollar, which has been in place since 1986, is almost certain to remain unchanged at an average of 3.75SR:1USD in the first half of Additionally, it s not expected that the long proposed single GCC currency will set up until after As a result, the riyal will track movements in the US currency, which is expected to strengthen steadily over the coming years as the Federal Reserve (the US central bank) tightens its monetary stance USD/SAR - Exchange Rate KSA References: * Saudi Arabian Monetary Agency (SAMA) * Jadwa.com * Investing.com * Trading Economics.com 10

11 Qatar in Review * State spending overshot budgeted spending in 2013/14 by 10%, while the fiscal surplus soared by 45.9%, according to preliminary data from the Ministry of Finance. * The real-estate price index of the Qatar Central Bank (QCB) surged by 29.97% year on year in June, driven by population growth and a surge in public spending on infrastructure projects related to the 2022 football World Cup. * Bank credit expanded by 12.8% year on year to 613.5BN QR (168.54BN USD) in June, according to the QCB, on the back of increased activity in the real estate and contracting sectors. Qatar Main Economic Indicators: According to Qatar s Ministry of Development Planning and Statistics, Real GDP growth accelerated to 6.5% in 2013 on strong investments in the nonhydrocarbon sector while growth in the hydrocarbon sector slowed. The implementation of major projects created an estimated 120k jobs in 2013 alone. In H1 2014, the economy grew on average by 6% as accelerating non-hydrocarbon growth (particularly in construction) offset a temporary decline in hydrocarbon production. Financial services and trade, restaurants and hotels were the other main contributors to Q1 growth, benefitting from the expanding population. * The government's external debt fell by 17% year on year to 74.3 BN QR (20.4 BN USD) in 2013/14, according to the QCB. * The QCB has begun to sell sevenyear bonds as part of efforts to develop the yield curve and widen the scope for local companies to raise capital by issuing debt. 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Macro Economic Indicators 16.7% 13.0% 6.1% 6.5% 6.2% 5.7% Q Q GDP Real Growth Unemployment rate 11

12 Inflation Rate: Consumer Price Index (CPI) inflation averaged 2.8% in the first half of 2014, compared with 3.1% in Following the sharp fall in , rents have begun picking up. This has been driven by the rapid population growth, which increases demand for housing. As rents (together with fuel and energy) account for 32.2% of the CPI basket, domestic inflation has been on an upward trajectory, progressively rising from -6.2% in 2009 to 3.5% in On the other hand, falling global food prices have partially offset rising domestic inflationary pressures, leading to a moderation in foreign inflation to 2.1%. As a result, overall CPI inflation registered 3.1% in 2013 and moderated to 2.8% in the first half of Base Year = 2007 Consumer Price Index Q1 Q2 Q3 Q4 Q1 Q2 Household Consumption (CPI) Food, beverages & Tobacco Clothing & footwear Rent, utilities & related housing service Furniture, Textiles & Home Appliances Medical Care & health Services Transport & Communication Entertainment, Recreation and Culture Miscellaneous Goods & services % 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% CPI Inflation 3.1% 1.9% 1.9% 2.8% H % -4.9% Domestic Foreign CPI 12

13 Stock Exchange: The Banks and Financial Services sector, led trading volume during June 2014 accounting for 32.46% of the total trading volume, followed by Real Estate sector, which accounted for 23.49%, the Telecoms sector which accounted for 15.33%, the Consumer Goods and Services sector, which accounted for 12.65%, the Industrials sector which accounted for 8.93%, the Transportation sector which accounted for 3.98%, and finally followed by Insurance sector which accounted for 3.15%. The Banks and Financial Services sector, led trading value during June 2014 accounting for 43.26% of the total trading value, followed by Industrials sector, which accounted for 17.09%. In addition to the Real Estate sector that accounted for 14.62%, the Telecoms sector accounted for 10.26%, the Consumer Goods and Services sector which accounted for 8.31%, the Insurance sector ranked third, accounting for %, and finally followed by Transportation sector which accounted for 2.79%. Trading Volume By Sector Insurance Transportation Industrial Services Telecom Real Estate Banking 0.0% 10.0% 20.0% 30.0% 40.0% Trading Value By Sector Transportation Insurance Services Telecom Real Estate Industrial Banking 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Qatar Stock Exchange "QE" Jan-14 5-Feb-14 5-Mar-14 5-Apr-14 5-May-14 5-Jun-14 13

14 Exchange Rate: The riyal is pegged to the dollar at an average rate of 3.64 QR: 1 USD during the first half. The authorities seem committed to maintaining the current exchange-rate regime, arguing not only that Qatar's gas and oil exports are denominated in the US currency but also that this offers stability and reassurance to investors. Pressure for revaluation is unlikely to return unless the dollar weakens substantially USD/QAR Exchange Rate Qatar References: * Ministry of Planning and Statistics (QSA) * Qatar National Bank Reports (QNB) * Qatar Exchange (QE) * Investing.com * Trading Economics.com 14

15 United Arab Emirates in Review * According to data published by the UAE National Bureau of Statistics (NBS) the country s economy expanded by 5.2% (yoy) in real terms. This is higher than the most recent IMF forecast of 4.8% published in April UAE Main Economic Indicators: * UAE s GDP is expected to grow 4.2% in 2014 while the country's exports are expected to grow 6% in 2014 from 379 BN USD in * UAE s unemployment rate in 2013 and 2014 is fixed at 4.2%. Employment rate among expatriate workers is 79% while only about 45% of UAE nationals are employed. * The number of new residency visas issued in Dubai during the first half of 2014 rose by 30%, according to new figures. However, the government did not release figures on how many residency visas were cancelled during this time. 6.00% 4.00% 2.00% Macro Economic Indicators 5.20% 3.90% 1.70% 4.20% * Banks have reported a generally positive set of financial results for the second quarter, reflecting stronger lending and fee revenue and the fading impact of the debt woes of * The UAE occupied the first position in the general Edelman credit index of trust in 2014 with 79 points, ahead of China in second place, Singapore, Indonesia and India in the following places. 0.00% -2.00% -4.00% -6.00% E -4.80% Real GDP Growth Unemployment 15

16 Inflation Rate: * UAE inflation rate in H recorded 2.21%. On a month-by-month basis, the rate of inflation recorded a monthly increase by 0.41% while goods and services costs increased by 5.17%. * Abu Dhabi inflation rate in H was 2.7%, shown by the increase in the CPI to points during the first half of 2014, up from points during the same period of * In Dubai, the inflation rate in consumer prices for the first half of 2014 increased by 2.74% compared with 2013, and that s due to the increase in water, electricity, gas, and fuel prices by 4.58%. 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% 1.73% Inflation 0.50% 1.11% 2.21% E -0.09% Dubai Consumer Price Index H1 Base Year = 2007 Relative Weight change % Food and beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services Abu Dhabi Consumer Price Index Q1 Q2 Base Year = 2007 Relative Relative Weight change % change % Food and beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services

17 Stock Exchange: * According to the sectors contribution to trading value in Dubai Stock exchange throughout H1 2014, the Real Estate and Construction sector ranked first in terms of the traded value, while the Banking sector ranked second. In the third place came the financial and Investment services sector. * By the end of H1 in Abu Dhabi, according to the sectors contribution to trading value, the Real Estate and Construction sector ranked first in terms of the traded value, to reach 58.76% of the total traded value in the market. The Banking sector ranked second at 27.45% UAE Stock Exchange H1 value traded by sector in Abu Dhabi 6.97% Real Estate and Construction Banks 1.50% 2.33% 2.59% 0.22% 0.16% 0.03% Telecommunication Financial and Investment Services Energy Industrial Insurance 27.45% 58.76% Services ADI DFMGI Consumer Staples Q1 value traded by sector in Dubai Real Estate and Construction Banks Financial and Investment Services Transportation Insurance Services Telecommunication Consumer Staples Industrial 1.58% 2.61% 4.97% 16.75% 22.78% 1.36% 0.01% 0.01% 49.94% Q2 value traded by sector in Dubai 0.93% Real Estate and Construction Banks 1.36% Financial and Investment Services Transportation Services Insurance Telecommunication Consumer Staples Industrial 0.73% 3.40% 13.83% 14.08% 0.01% 0.00% 65.66% 17

18 Exchange Rate: * The Emirati Central Bank remains committed to the existing peg of the UAE dirham to the US dollar. The peg has provided stability for decades and having ridden out the problems associated with a fixed currency (including a lack of monetary flexibility), the authorities seem committed to the system. * The UAE dirham has been fixed at a rate of 25 to 1 USD since USD/EGP Exchange Rate UAE References: * Dubai Financial Market (DFM) * Abu Dhabi Securities Exchange (ADX) * Gulfbusiness.com * Zawya.com * khaleejtimes.com * Investing.com Visit our website: Contact us: info@multiplesgroup.com Cairo Office: Capstone Office Building, Building S5-6 Area 5, District 1, 5th Settlement, New Cairo. Dubai Office: Office no. N 415, North Tower,Emirates Financial Towers, DIFC, P.O Box , Dubai, UAE. Tel: