Saudi debt market to continue to grow after 18.3% rise: Fitch

Saudi debt market to continue to grow after 18.3% rise: Fitch
Fitch said the corporate funding culture in Saudi Arabia is still geared mostly towards bank financing, but this is gradually changing. Shutterstock.
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Updated 17 November 2023
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Saudi debt market to continue to grow after 18.3% rise: Fitch

Saudi debt market to continue to grow after 18.3% rise: Fitch

RIYADH: Saudi Arabia’s outstanding debt capital market will see further growth after an 18.4 percent annual increase in the third quarter of 2023, according to research by Fitch Ratings.

The agency said the total sector size hit $358.8 billion, with 62 percent as sukuk and the rest in bonds.

The Kingdom’s debt capital market growth is expected to be supported by the diversification of funding and the development of capital markets in Saudi Arabia.

Bashar Al-Natoor, global head of Islamic finance at Fitch, said “ambitious giga-projects and capital market development initiatives” were also fueling the sector’s expansion.

He added: “We expect continued initiatives to diversify funding – not only by the sovereign, but also by banks, corporates and projects that are likely to seek alternative channels like DCM”. 

In a press note, Fitch said the corporate funding culture in Saudi Arabia is still geared mostly towards bank financing, but this is gradually changing. 

“Saudi riyal issuance was almost solely dominated by sukuk across all sectors over the past five years, and the government only issues local-currency debt in sukuk format,” it added.

Saudi Arabia accounted for 25.1 percent of the global US dollar sukuk market in the third quarter of the year. 

The Kingdom has the largest debt capital market in the Gulf Cooperation Council, with 69.4 percent of the sukuk market.

It also has 23.4 percent of the US dollar global environmental, social, and governance sukuk market. 

Sukuk issuances stood at $12.3 billion in the three months to the end of September,  down 2.1 percent on the previous quarter. 

Bonds issuances were $1.4 billion - up 16.8 percent on the second quarter of the year.

Some 90 percent of issuances in the three months to the end of September were in sukuk format. 

Fitch rates $46.7 billion of Saudi outstanding sukuk, 97.1 percent of which are investment-grade.

The press note said: “Liquidity available to the banking sector has tightened, and we expect deposits to remain the main source of funding for Saudi banks in the longer term. 

“However, all banks are expected to continue diversifying their funding bases through wholesale funding, including issuing sukuk and bonds. 

“We also expect (the) corporate segment to reduce reliance on bank financing and issue more debt.”


Riyadh Air plans wide-body jet order next year: official

Riyadh Air plans wide-body jet order next year: official
Updated 5 sec ago
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Riyadh Air plans wide-body jet order next year: official

Riyadh Air plans wide-body jet order next year: official

RIYADH: Saudi Arabia’s new national airline, Riyadh Air, plans next year to order wide-body aircraft capable of seating more than 300 passengers, its chief financial officer told AFP on Thursday.

The order would be the third for the airline, which was created last year and plans to operate its first flights in the summer of 2025.

“We will do our third RFP (request for proposal) for an ultimate ultra wide body, which has in excess of 300 seats as well, but that will be next year,” Adam Boukadida said on the sidelines of the Future Investment Initiative investor forum in Riyadh, referring to the request for proposal procurement document.

“It could be Boeing, it could be Airbus. At the moment, we’re very happy having the relationship with both of these key suppliers.”

On Wednesday, Riyadh Air announced a multi-billion dollar deal to purchase 60 narrow-body Airbus A321neo aircraft from Airbus.

That brought the firm’s total aircraft orders to 132 after a deal inked last year with Boeing for 39 wide-body Dreamliner 787-9s, which seat just under 300 passengers, with options for 33 more jets.

Saudi Crown Prince Mohammed bin Salman sees aviation as a key component of his Vision 2030 reform agenda to remake the petroleum-dominated country, aiming to more than triple annual traffic to 330 million passengers by the end of the decade.

Riyadh Air expects to serve 100 routes by 2030 and more than 120 by 2035. 

Deliveries of the Airbus planes “will start from the second half of 2026 all the way out to 2030,” Boukadida said.

“This will bring us in excess of 130 aircraft before 2030, so we’re still on track for the second half of next year to commence operations to over 100 destinations by 2030.”

Also on Thursday, Riyadh Air announced the establishment of its first revolving credit facility of up to SR5 billion ($1.3 billion) involving eight financial institutions from Saudi Arabia and the Gulf region.

“This would help us fund our growth, but also provide a platform for us to grow up until 2030 to be an international player,” Boukadida said.


Rafal Real Estate set to redefine Riyadh’s urban landscape with 3,580 new apartments: CEO

Rafal Real Estate set to redefine Riyadh’s urban landscape with 3,580 new apartments: CEO
Updated 31 min 44 sec ago
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Rafal Real Estate set to redefine Riyadh’s urban landscape with 3,580 new apartments: CEO

Rafal Real Estate set to redefine Riyadh’s urban landscape with 3,580 new apartments: CEO

RIYADH: Saudi developer Rafal Real Estate Development Co. is poised to launch a major project in northern Riyadh, unveiling 3,580 residential apartments aimed at transforming the city’s urban landscape, the company’s CEO revealed. 

The Tilal Al-Khuzam development is a core part of Rafal’s collaboration with China’s Citigroup and is part of the Al-Khuzam master plan in partnership with the National Housing Co. 

“We are announcing next week the launch of a major development under the Khuzam masterplan,” said Elias Abou Samra during an interview with Arab News at the Future Investment Initiative in Riyadh. 

The project, situated near King Khalid International Airport and centered around Al-Khuzam Park, aims to introduce “urban living with a peaceful, quiet, green atmosphere” to Riyadh, creating a new model for the city’s residential environment. 

Abou Samra explained that Tilal Al-Khuzam, along with other projects in Rafal’s pipeline, supports a broader strategy to stabilize revenue streams in a cyclical real estate market. 

FII platform 

The CEO noted that FII has evolved into an influential platform for collaboration, bringing local and international stakeholders together. 

“FII has become a showcase for Saudi Arabia and a window to the world to show and demonstrate what we’ve been achieving,” he said. This year, he added, international interest has shifted from curiosity to active participation in the Kingdom’s growth story. 

For Rafal, FII has provided valuable networking opportunities, bringing a diversity of stakeholders together and opening up new avenues for growth. 

Abou Samra emphasized the role Rafal and other local developers play in this evolving landscape, saying: “I think it’s the mission of every local developer to open up and become a small platform for foreign investors.” 

Redefining co-living 

Rafal’s projects showcase an emphasis on international standards and adaptability to global real estate trends. Notably, the company’s Hive brand is redefining co-living in Riyadh through a partnership with a regional operator that initially launched Hive in Dubai. 

“We have already launched five assets across Riyadh,” said Abou Samra, adding that Hive’s plug-and-play model meets the needs of young Saudis and expats by fostering community and flexibility.

Over the next five years, Rafal anticipates launching five Hive projects annually, aiming for a gross development value of SR8 billion ($2.1 billion). 

Regarding the company’s IPO plans, Abou Samra noted that Rafal is adopting a measured approach, looking to establish stable revenue over the next three to five years. “Real estate is a cyclical market; usually, to go public, you need to have stable returns; hence the rental products that you are doing because it stabilizes our cash flows,” he said. 

The CEO added: “It’s better to IPO a company when you have more visibility and more stability with the developments that are happening in the market.” 

Rafal has been able to tap into a favorable financing environment in Saudi Arabia, where bank liquidity remains robust. Projects are primarily funded through off-plan sales. “The best thing to do when we have off-plan sales is that it’s basically free funding,” he added. 

Creating communities 

In line with Vision 2030, Rafal is focused on urban planning, helping to create vibrant communities that promote a modern, connected lifestyle. “It’s our duty as developers to feed the market with the proper supply; hence the projects that I mentioned,” Abou Samra said. 

Rafal intends to replace outdated infrastructure with projects that cater to the Kingdom’s fast-paced development, emphasizing that “this is a story of transformation within the city that is even more interesting than the typical supply-demand economics.” 

As for the residential community projects like Tilal Al-Khuzam, Abou Samra noted that the venture aligns with Saudi Arabia’s economic diversification goals, especially given the anticipated demand. 

With a gross development value of SR3 billion, this project complements other Rafal initiatives, collectively contributing to a SR6 billion project portfolio launched in 2024 alone. 

The growing demand for new residential spaces is evident in Rafal’s planned pipeline for Hive and Tilal Al-Khuzam, providing long-term value for the market. 

The transformation in the Kingdom’s real estate market, driven by Saudi Arabia’s Crown Prince Mohammed bin Salman’s vision to make Riyadh one of the world’s top city economies, will continue to attract investors and developers worldwide. “The market is shifting from a predominantly local market in every aspect to an international market,” Abou Samra said. 

The CEO affirmed that Riyadh’s progress under Vision 2030 is on track to meet these ambitious goals. “We are well on track for that,” he said, citing Rafal’s ability to meet both local and international demand for world-class residential properties. 


US’s PGIM Real Estate eying potential Saudi investments, official says

US’s PGIM Real Estate eying potential Saudi investments, official says
Updated 46 min 42 sec ago
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US’s PGIM Real Estate eying potential Saudi investments, official says

US’s PGIM Real Estate eying potential Saudi investments, official says

RIYADH: US firm PGIM Real Estate is monitoring the progress of the Saudi market, with an eye on future investment, according to the firm’s co-CEO. 

Speaking to Arab News on the sidelines of the Future Investment Initiative taking place in Riyadh, Raimondo Amabile – also the global chief investment officer of the company – explained that in order to also pump money into the region, they will need to find the right partner. 

The firm, which has $1.33 trillion in assets under management and administration, provides global access to private alternative investments for institutions and individuals. 

Reflecting on Saudi Arabia’s investment potential, Amabile said: “We’re familiar with this place. We’re familiar with major institutions here. We kind of like the direction of travel when it comes to where the country is going. So, we are seriously considering to be much closer to the place to really understand the implementation of these visions of the country.”

He added: “And as I said, I’m pretty sure that the opportunities that will emerge, these opportunities that will be, I guess will be in a place where you can definitely think of attracting. You’re investing international capital into the market because, again, these are the same investment thematic which are driving growth in other places.” 

The co-CEO went on to highlight that the question that remains is how the firm is planning to invest in the country. 

“My experience with emerging markets like this, well, underwriting the partner and finding the right partner, whether it’s a government entity or a private partner, it’s actually the most important thing because we need to be sure that we have enough of an inside through the partnership which will allow us to get comfortable with our investment proposition and, of course to give to our clients the comfort that their money is invested on a very good risk adjust proposition,” Amabile said.

In terms of where the “hot money” is going into in 2025, he said that it is most likely a data center. 

“We have been investing in data centers since more than 10 years. We know this space very well. It’s definitely one of the thematic investments which we like,” the co-CEO said. 

Amabile also shed light on how this is the right time to invest in the real estate market. 

“First of all, when it comes to real estate, this is the right time to consider investing in the real estate. We have gone through two years of tough market. The market has reset, value has gone down. Now, the cost of capital is coming in after of course, an increase of cost of capital. The fundamentals are still strong,” he said. 

“So, there is actually enough ingredients right to really underwrite the recovery of the market. We believe that we are at the bottom of the market right. So definitely, it’s the right time to consider going in, and whether you’re going to go in a credit strategy, financing strategy, or a private equity strategy, taking an equity position, they both have very good risk adjust propositions which you can capture,” the global chief investment officer added. 

He also highlighted that one of the largest asset classes that the company has in its portfolio is global living, which includes income-generating residential properties tailored for rental and various generational needs.

Under the theme “Infinite Horizons: Investing Today, Shaping Tomorrow,” this year’s edition of FII saw discussions on how investments can drive a thriving and sustainable future, pushing the boundaries of what is possible for humanity. 

This aligns with the forum’s mission to create a purposeful present and a promising future, as well as its vision to bring together the brightest minds and most promising solutions to serve humanity.


Oil Updates – prices rise on optimism over solid US fuel demand

Oil Updates – prices rise on optimism over solid US fuel demand
Updated 31 October 2024
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Oil Updates – prices rise on optimism over solid US fuel demand

Oil Updates – prices rise on optimism over solid US fuel demand

TOKYO/BEIJING: Oil prices rose on Thursday, extending the previous day’s rally, driven by optimism over US fuel demand following an unexpected drop in crude and gasoline inventories, while reports that OPEC+ may delay a planned output increase offered support.

Brent crude futures gained 47 cents, or 0.65 percent, to $73.02 a barrel by 8:05 a.m. Saudi time. US West Texas Intermediate crude futures, which are set to expire later in the day, climbed 43 cents, or 0.63 percent, to $69.04 per barrel.

Both contracts rose more than 2 percent on Wednesday, after falling more than 6 percent earlier in the week on the reduced risk of a wider Middle East conflict.

US gasoline stockpiles fell unexpectedly in the week ending Oct. 25 to a two-year low on strengthened demand, the Energy Information Administration said, while crude inventories also posted a surprise drawdown as imports slipped.

Nine analysts polled by Reuters had expected an increase in gasoline and crude inventories.

“The surprise decline in US gasoline stockpiles provided a buying opportunity as demand appeared stronger than anticipated,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

“Expectations of a potential delay in the OPEC+ production increase were also supportive ... If they do delay, WTI could recover to the $70 level,” he said.

Reuters reported OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies such as Russia, could delay a planned oil production increase in December by a month or more because of concern over soft oil demand and rising supply.

The group is scheduled to raise output by 180,000 barrels per day in December. It had already delayed the increase from October because of falling prices.

A decision to postpone the increase could come as early as next week, two OPEC+ sources told Reuters.

OPEC+ is scheduled to meet on Dec. 1 to decide its next policy steps.

Manufacturing activity in China, the world’s biggest oil importer, expanded in October for the first time in six months, suggesting that stimulus measures are having an effect.

Markets are awaiting the results of the US presidential election on Nov. 5 as well as further details of China’s economic stimulus. Reuters reported that China could approve the issuance of over 10 trillion yuan ($1.4 trillion) in debt over the next few years on the last day of its Nov. 4-8 parliamentary meeting.

In the Middle East, Lebanon’s prime minister expressed hope on Wednesday that a ceasefire deal with Israel would be announced within days as Israel’s public broadcaster published what it said was a draft agreement providing for an initial 60-day truce.

The push for a ceasefire for Lebanon is taking place alongside a similar diplomatic drive to end hostilities in Gaza.

But the market impact is likely to be muted.

“Most of the Middle East geopolitical risk was stripped out of the oil price after Israel’s response to Iran over the weekend,” IG market analyst Tony Sycamore said.

Iran said that Israeli strikes on Saturday, in retaliation for Iran’s Oct. 1 attack on Israel, caused only limited damage.


Saudi GDP grows 2.8% in Q3 amid strong non-oil expansion: GASTAT 

Saudi GDP grows 2.8% in Q3 amid strong non-oil expansion: GASTAT 
Updated 31 October 2024
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Saudi GDP grows 2.8% in Q3 amid strong non-oil expansion: GASTAT 

Saudi GDP grows 2.8% in Q3 amid strong non-oil expansion: GASTAT 

RIYADH: Saudi Arabia’s real gross domestic product rose by 2.8 percent in the third quarter of this year compared to the same period in 2023, driven by an increase in non-oil activities, official data showed.  

According to the General Authority for Statistics, the Kingdom’s non-oil sector expanded by 4.2 percent year on year in the third quarter, reflecting the goals of Vision 2030 to diversify the economy beyond oil revenues. 

GASTAT data also showed a 3.1 percent rise in government activities year on year, while oil activities grew by a modest 0.3 percent. On a quarterly basis, Saudi Arabia’s seasonally adjusted real gross domestic product rose by 0.8 percent in the third quarter compared to the second quarter. 

Breaking down quarterly figures, non-oil activities increased by 0.5 percent, while oil activities saw a 1.5 percent gain. However, government activities declined by 0.3 percent quarter over quarter. 

Earlier this month, the International Monetary Fund projected Saudi Arabia’s economy to grow by 1.5 percent in 2024 and 4.6 percent in 2025, affirming the Kingdom’s economic resilience. The World Bank echoed similar optimism, forecasting growth of 1.6 percent this year and acceleration to 4.9 percent in 2025. 

These IMF and World Bank projections exceed Saudi Arabia’s own pre-budget forecast, which estimated GDP growth of 0.8 percent in 2024, bolstered by a 3.7 percent rise in non-oil activities. 

Credit rating agency S&P Global, in its September report, also highlighted Saudi Arabia’s economic resilience, forecasting GDP growth of 1.4 percent in 2024 and 5.3 percent in 2025, driven by the Kingdom’s commitment to economic diversification and reducing reliance on oil revenues. 

Affirming the progress of Saudi Arabia’s economic diversification, GASTAT reported earlier this month that the Kingdom’s non-oil exports, including reexports, increased by 7.5 percent in August, reaching SR27.52 billion compared to the same month last year. 

On a monthly basis, Saudi Arabia’s non-oil exports rose by 8.13 percent in August from July levels. 

During the Future Investment Initiative’s eighth edition, Saudi Arabia’s Minister of Finance Mohammed Al-Jadaan highlighted the sector’s growth, noting that non-oil GDP now represents 52 percent of the Kingdom’s economy.