GCC Weekly Wrap - 25 March

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1. WEEKLY WRAP March 25 , 2018 ECONOMIC UPDATE & NEWS Germany ZEW Survey Curr. Situation Mar 90 90.7 92.3 Germany ZEW Survey Expectations Mar 13 5.1 17.8 Mar-21st 1.75% 1.75% 1.50% US FOMC Rate Decision France Markit Manufacturing PMI Germany IFO Business Climate Mar P 55.5 53.6 55.9 Mar 114.6 114.7 115.4 0.50% UK Bank of England Bank Rate Mar-22nd 0.50% 0.50% US Initial Jobless Claims Mar-17th 225k 229k 226k Russia Gold and Forex Reserve Mar-16th - 455.4b 455.2b Canada CPI YoY Feb 1.90% 2.20% 1.70% US Durable Goods Orders Feb P 1.60% 3.10% (3.50%) Source: Bloomberg GLOBAL NEWS  The US Federal Reserve has raised its benchmark funds rate by 0.25% to 1.75% at the upper end. There are two more rate hikes expected in 2018. (Source: Reuters)  The US current account deficit rose by 26.3% YoY to USD 128.2bn which is 2.6% of the current GDP in the Q4-17. The deficit is driven by rise in the deficits on goods and secondary income. (Source: BEA)  US durable goods orders rose 3.1% to USD 247.7bn in Feb-18, while shipments of manufactured durable goods rose 0.9% MoM to USD 249.7bn in the same period. (Source: Census)  Eurozone’s annual inflation rate fell to 1.1% in Feb-18 as compared to 1.3% in Jan-18. (Source: EC Europe) 3.00 2.90 2.80 2.70 2.60 2.50 2.40 2.30 2.81 19-Mar 3.00% 12-Mar 2.70% 05-Mar 2.80% 26-Feb Feb 19-Feb CPI YoY 12-Feb UK UST 10yr Bond 05-Feb (0.50%) 29-Jan Prior 0.40% 22-Jan Actual 0.50% 15-Jan Survey Feb 08-Jan Period CPI MoM 01-Jan Event UK 25-Dec Region Source: Bloomberg  Saudi Arabia’s holdings in US Treasury bonds rose by 27.8% YoY to USD 143.6bn in Jan-18. (Source: Mubasher)  Saudi Arabia’s government has sold domestic Sukuk worth SAR 4.9bn in three tranches, the Ministry of Finance stated. (Source: Zawya)  Saudi Arabia’s bilateral trade value with US amounted to SAR 135.0bn during FY-17. The country’s exports to US amounted to SAR 69.0bn. (Source: Gulf Base)  Oman government’s long-term issuer and senior unsecured bond rating has been downgraded to Baa3 by Moody’s, due to huge fiscal deficit and the ongoing weakening of the economy. (Source: Gulf Base)  Oman’s crude oil and condensate production accounted to 27.1mn barrels with a daily average of 966,985 barrels during Feb-18. (Source: Times of Oman)  Eurozone recorded a EUR 3.3bn surplus in trade in goods with the rest of the world in Jan-18, compared with a deficit of EUR 1.4bn in Jan-17 driven by a 9.1% YoY rise in exports. (Source: Eurostat)   Japan’s exports rose by 1.8% YoY to JPY 6,463.0bn, while imports rose by 16.5% YoY to JPY 6,459.6bn in Feb-18. Thus, the trade balance fell by 99.6% YoY to JPY 3.4bn during the same period. (Source: Customs)   The Bank of Japan’s government debt holdings rose by 6.8% YoY to JPY 449.0tn (USD 4.2tn) in Dec-17, due to the quantitative easing program. The Central Bank of Bahrain announced that its monthly issue of Sukuk Al-Salam Islamic securities has been fully subscribed, whose maturity is of 91 days with an expected return of 3.2%. (Source: BNA) Kuwait's Public Authority for Industry is planning to develop a multipurpose industrial city worth USD 6.6bn in the country. (Source: Zawya) QATAR NEWS  Industrial production rose by 1.2% MoM, buoyed by a 2.1% increase in mining sector in Jan-18. (Source: The Peninsula) (Source: Reuters)  Australia’s total number of employed personnel increased by a seasonally adjusted rate of 17.5% MoM and 3.5% YoY to 12.5mn in Feb-18. The unemployment rate stood at 5.6%. (Source: ABS)  CPI rose by 0.8% YoY while it remained unchanged over a month in Feb-18. Transport sector witnessed the highest increase of 7.9% over the year. (Source: Gulf Times)  In its minutes of meeting, the Reserve Bank of Australia cited higher unemployment rate and lower inflation, as reasons for maintaining ultra-low rate of 1.5%. (Source: Forex Live)  The government is planning to extend the renewal term of commercial registrations to 5 years from the current 1 year, a senior Qatar Chamber official stated. (Source: Gulf Times)  China’s fiscal revenue rose by 15.8% YoY, while spending rose by 16.7% in the first two months of 2018. (Source: Reuters)  Public Works Authority (Ashghal) is planning to spend worth QAR 21.8bn for development of roads and infrastructure projects in 2018. GCC NEWS  (Source: Gulf Times)  Hamad Port has reported 1.0 mn TEU (twenty-foot equivalent unit) mark within 14 months from Jun-17 amidst an economic blockade imposed on the country, the Minister of Transport and Communications, stated. (Source: Gulf Times) Dubai's non-oil foreign trade grew by AED 26.0bn over a year to reach AED 1.3tn in 2017, driven by strong growth in trading sector. (Source: Arabian Business)  Abu Dhabi's CPI rose by 4.5% YoY in the first two months of 2018, driven by a 6.3% YoY rise in food & beverage prices and a 12.5% YoY rise in Transport prices. (Source: Trade Arabia)  Commercial Bank Qatar has received an approval to introduce Global Medium Term Notes Programme in US market to raise up to USD 2.0bn of funds with maturity of 30 years. (Source: Gulf Times)  Abu Dhabi is planning to combine its two state owned investment funds in order to create Sovereign Wealth Fund worth more than USD 200.0bn. (Source:The Peninsula)  Doha Bank and Masraf Al Rayan are planning to individually introduce second ETF, one of which is expected to launch in the year 2018. (Source: Saudi Arabia's CPI rose 2.9% YoY as the government introduced a 5.0% value-added tax and hiked domestic gasoline prices (Source: Reuters)   Gulf Times) Capital Intelligence, has affirmed its financial strength rating for Qatar National bank to AA-, due to its good asset quality, strong capitalization and profitability. (Source: Gulf Times) 1
2. WEEKLY WRAP March 25 , 2018 EQUITY Index Price S&P 500 WTD %Δ MTD %Δ YTD %Δ COMMENTARY Index Price WTD %Δ MTD %Δ YTD %Δ 2,588.3 (6.0) (4.6) (3.2) MSCI EM 1,172.1 (3.4) (1.9) 1.2 23,533.2 (5.7) (6.0) (4.8) S&P GCC 1,653.6 0.7 1.8 3.8 Nasdaq 6,508.1 (7.3) (5.1) 1.7 Dow Jones Islamic 3,560.3 (4.6) (3.0) (2.2) FTSE 100 6,921.9 (3.4) (4.3) (10.0) KSA (TASI) 7,840.9 1.2 5.7 8.5 11,886.3 (4.1) (4.4) (8.0) UAE (DFM) 3,149.5 (1.5) (2.9) (6.5) DJIA DAX 30 CAC 40 BIST 100 Nikkei 5,095.2 (3.5) (4.2) (4.1) UAE (ADX) 4,577.8 0.8 (0.4) 4.1 116,602.8 (0.5) (2.0) 1.1 Qatar (DSM) 8,825.7 (0.2) 2.0 3.5 4.0 20,617.9 (4.9) (6.6) (9.4) Kuwait (KSE) 6,662.4 (1.4) (1.6) Sh. Comp 3,152.8 (3.6) (3.3) (4.7) Bahrain (BAX) 1,333.9 (1.6) (2.6) 0.2 Hang Seng 30,309.3 (3.8) (1.7) 1.3 Oman (MSM) 4,800.9 (2.0) (4.0) (5.9) Sensex 32,596.5 (1.7) (4.6) (4.3) Jordan (ASEGI) 2,220.6 (0.2) 0.0 4.4 Source: Bloomberg GLOBAL INDICES Weekly Performance (%) YTD Performance (%) Jordan (ASEGI) BIST 100 Sensex FTSE 100 (3.4) MSCI EM (3.4) CAC 40 (3.5) Sh. Comp (3.6) Hang Seng (3.8) DAX 30 (4.1) Nikkei (4.9) DJIA (5.7) S&P 500 (6.0) Nasdaq (7.3) (8.0) (6.0) (0.2) (0.5) Jordan (ASEGI) Nasdaq Hang Seng MSCI EM BIST 100 S&P 500 CAC 40 Sensex Sh. Comp DJIA DAX 30 Nikkei FTSE 100 (1.7) (4.0) (2.0) 4.4 1.7 1.3 1.2 1.1 (3.2) (4.1) (4.3) (4.7) (4.8) (8.0) (9.4) (10.0) (15.0) 0.0 Source: Bloomberg (10.0) (5.0) 0.0 5.0 10.0 Source: Bloomberg GCC INDICES Weekly Performance (%) YTD Performance (%) KSA (TASI) KSA (TASI) 1.2 8.5 UAE (ADX) 0.8 UAE (ADX) 4.1 S&P GCC 0.7 Kuwait (KSE) 4.0 Qatar (DSM) S&P GCC 3.8 Qatar (DSM) 3.5 (0.2) Kuwait (KSE) (1.4) UAE (DFM) (1.5) Bahrain (BAX) Bahrain (BAX) (1.6) Dow Jones Islamic Oman (MSM) Dow Jones Islamic Oman (MSM) (2.0) UAE (DFM) (4.6) (6.0) (4.0) (2.0) 0.0 (5.9) (6.5) (10.0) 2.0 Source: Bloomberg 0.2 (2.2) (5.0) 0.0 5.0 10.0 Global Global equity markets experienced a sharp sell-off in the last week, as imposition of new US tariffs on Chinese goods and retaliatory measures from China heightened concerns of a trade war between the two nations. Moreover, a slightly hawkish tone of the US Fed about the rate hike process in 2019 also weighed on the sentiments of the investors. All US Equity indices ended lower, with Nasdaq underperforming its peer indices. Social Media shares were among the notable losers, amid speculations of stricter regulations following news of data leakage from Facebook. The Stoxx Europe 600 and FTSE 100 index fell 3.1% and 3.4%, respectively. Basic Resources, Technology and Banking stocks were the major decliners. The strength in the GBP on account of a possible rate hike by Bank of England also weighed on the market. The Nikkei index fell 4.9%, amid strength in JPY. GCC Most GCC equity markets ended lower during the last week. The Saudi Arabian benchmark climbed 1.2%, amid optimism of being included into emerging market index of international index compiler, FTSE. ZAIN Saudi rose 2.4%, after announcing to extend the maturity of its USD 600mn loan. However, Saudi Electric dropped 4.2%, after the company reported wider than expected Q4-17 net loss. Emirati markets ended mixed during the last week. Aldar Properties and Emaar Properties ended lower after announcing a joint venture agreement to develop properties in local and international markets. Qatar The QE index fell 0.2% during the last week. Increased selling pressure from Qatari and domestic retail investors led to the overall losses in the index. Total trading turnover and volume declined, with Banking, Industrial and Telecom sectors together accounting for 71.0% of the total trading volume. United Development Co and Qatar Gas Transport Co declined 8.0% and 5.4%, respectively, as both stocks traded exdividend. Out of the total 45 listed shares, 44 exchanged hands, 18 declined, 24 advanced and 3 remained unchanged. Source: Bloomberg DSM INDEX 10,500 9,500 8,825.7 Indicator Price Last Close 8,825.7 MAVG 50 8,967.2 MAVG 100 8,547.3 8,500 MAVG 200 8,725.3 7,500 Sep-17 6 Month High 9,459.6 6 Month Low 7,714.3 RSI (14 Days) 85.0 Nov-17 Index Dec-17 50 SMA 100 SMA Feb-18 200 SMA Mar-18 Source: Bloomberg 2
3. WEEKLY WRAP March 25 , 2018 RATES & CREDIT US Treasury (%) Qatar Treasury (%) 3.00 2.50 2.26 4.00 3.06 3.80 3.44 4.54 3.07 3.70 3.00 2.41 1.95 1.50 4.21 3.01 2.81 2.60 2.40 2.00 1.00 4.73 5.00 3.50 2.86 2.00 1.53 2.03 1.26 2.37 1.00 0.50 0.00 0.00 2 Yrs 3 Yrs 5 Yrs Current 10 Yrs 2 Yrs 30 Yrs 3 Yrs 5 Yrs Current Last Year Source: Bloomberg 10 Yrs 30 Yrs Last Year Source: Bloomberg CDS Qatar Govt. Int. Bonds Maturity Price (USD) Z Spread (BPS) Yield (%) WTD Δ (USD) YTD Δ (USD) Global QGIB 2019 103.9 27.5 2.59 (0.1) (1.4) US 27.0 0.9 2.6 (0.3) QGIB 2020 103.8 49.4 2.99 (0.1) (1.4) UK 19.2 1.3 1.9 (2.1) Qatari Diar 2020 96.9 73.0 3.37 (0.0) (1.5) QGIB 2021 103.6 76.5 3.34 (0.1) (1.4) 85.7 3.53 (0.2) (2.3) 5 Years CDS Price (BPS) WTD Δ (BPS) MTD Δ (BPS) YTD Δ (BPS) Germany 11.8 0.6 1.0 0.4 QGIB 2022 103.3 France 19.2 0.3 0.8 (0.2) QGS 2023 97.9 97.5 3.68 (0.2) (1.2) Italy 104.8 2.5 5.3 (15.3) QGIB 2026 94.7 119.7 3.98 (0.1) (2.9) Greece 367.5 15.5 4.7 (60.0) QGIB 2030 150.3 153.4 4.37 (0.2) (5.6) QGIB 2040 122.2 184.1 4.74 (0.2) (6.3) QGIB 2042 114.2 183.2 4.73 (0.1) (6.3) QGIB 2046 98.5 181.3 4.71 (0.3) (5.4) Russia 123.3 2.8 18.7 (10.6) Japan 22.7 3.7 0.9 (4.6) Turkey 200.3 16.9 31.1 43.1 Brazil 173.4 21.0 15.3 9.3 Egypt 267.5 (7.1) 5.8 (61.6) Source: Bloomberg, QCB US Swap Rates Tenor GCC Price (%) Weekly Δ (BPS) YTD Δ (BPS) 3M LIBOR 2.286 0.084 0.591 6M LIBOR 2.447 0.084 0.610 12M LIBOR 2.677 0.063 0.570 Abu Dhabi 62.1 4.7 3.7 (4.9) Bahrain 273.4 27.9 24.7 (13.3) Dubai 108.1 6.0 3.7 (21.3) 2 years 2.583 (0.026) 0.503 Qatar 86.8 7.3 2.8 (20.3) 5 years 2.751 (0.046) 0.507 Saudi Arabia 84.8 6.4 5.5 (9.3) 10 years 2.845 (0.045) 0.445 30 years 2.906 (0.035) 0.362 International Credit Spreads Source: Bloomberg iTraxx Europe 60.6 10.6 7.9 15.4 iTraxx Europe Crossover 290.8 38.1 25.5 56.9 CDX North America IG 67.4 13.3 11.1 18.1 CDX North America HY 355.4 28.9 22.5 48.8 iTraxxSovX CEEMEA NA NA NA NA iTraxx Europe Senior Financial 24.7 1.7 1.1 8.6 iTraxx Europe Sub Financial 28.1 (2.4) (3.2) 7.6 Commentary US Treasury yields ended lower during the last week, on the back of jitters over the possibility of global trade war after Trump Administration unveiled tariffs on Chinese imports, which could also impact the global economic growth. The yields were however supported after US Federal Reserve presented a hawkish tone about increasing the interest rates and gave positive outlook to the US economy. The UK gilt yields edged higher, after the Bank of England kept the doors open for future rate hikes due to excess demand. Upbeat data on wage growth in the region also supported the yields. Source: Bloomberg 3
4. WEEKLY WRAP March 25 , 2018 COMMODITIES Commodities Price Commentary Brent (USD/bbl) 70.5 WTI Crude (USD/bbl) 65.9 Oil prices ended higher during the last week, buoyed by an unexpected decline in US crude oil inventories by 2.6mn barrels. The prices were also supported by comments from Saudi Arabian officials to extend the production cut till the end of 2019. Geopolitical tensions in the Middle East also remained the driving factor for the oil prices. The natural gas prices declined on back of smaller-than-expected decline in natural gas inventories. The prices declined despite colder-than-expected weather forecast for next 8-14 days. Copper prices declined on reports of rise in copper inventories. Gold prices rose last week, as jitters over global trade war raised the demand for safe haven assets. Natural Gas (USD/mmBTU) 2.6 Gold (USD/t oz.) 1,349.9 Silver (USD/t oz.) 16.5 Copper (USD/lb) 298.5 Source: Bloomberg Weekly Performance (%) YTD Performance (%) Brent WTI Crude 6.4 WTI Crude Gold Copper (3.5) (3.6) (6.0) 3.1 Silver 2.0 Natural Gas 5.4 Gold 2.9 Silver 9.0 Brent 5.7 (3.6) Copper (9.6) Natural Gas (12.3) (4.0) (2.0) 0.0 2.0 4.0 6.0 8.0 (15.0) Source: Bloomberg (10.0) (5.0) 0.0 5.0 10.0 15.0 Source: Bloomberg FX Currencies Price Currencies Price GBP/USD 1.4162 USD/INR 64.5125 EUR/USD 1.2383 USD/CNY 6.3160 CAD/USD 0.7754 USD/TRY 3.9829 AUD/USD 0.7699 USD/EGP 17.6267 NZD/USD 0.7233 USD/ZAR 11.7473 104.7400 USD/RUB 57.3013 USD/JPY Commentary The USD ended lower last week, weighed by increasing concerns about global trade war. The currency was also pressured during the week after US Fed signaled slower than expected pace in the interest rate hikes for 2018. The GBP strengthened on back of final breakthrough in Brexit transition deal and data showing higher than expected rise in UK wage growth. The CAD strengthened on back of strength in oil prices and optimism surrounding NAFTA deal. The currency was also supported by upbeat domestic inflation data, raising prospects of rate hike by BoC. Strength in JPY was largely due to increased demand for safe haven assets during the last week. Source: Bloomberg Weekly Performance (%) YTD Performance (%) ZAR CAD GBP JPY EUR RUB CNY NZD INR AUD EGP TRY (1.6) (2.0) Source: Bloomberg JPY ZAR GBP CNY EUR NZD EGP RUB AUD INR CAD TRY 2.1 1.6 1.4 1.2 0.5 0.4 0.3 0.2 0.0 (0.2) (0.4) (1.0) 0.0 1.0 2.0 3.0 7.6 5.9 4.6 3.1 2.9 1.9 0.7 0.6 (1.4) (1.9) (2.5) (4.5) (6.0) (4.0) (2.0) 0.0 2.0 4.0 6.0 8.0 10.0 Source: Bloomberg DISCLAIMER It is understood that any opinions expressed by Commercial Bank or its affiliates as to the commentary, market information, and future direction of prices of specific securities reflects the views of the individual analyst who issued them, and not necessarily represent the views of Commercial Bank or its affiliates in any way. In no event shall CBQ or its affiliates have any liability for any direct or indirect losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this materials or for any delays, inaccuracies, errors in, or omissions of the said information. 4