Saudi Central Bank lowers benchmark rate by 50 bps, following US Fed decision  

Saudi Central Bank lowers benchmark rate by 50 bps, following US Fed decision  
This is the first rate cut in over four years. FILE
Short Url
Updated 08 November 2024
Follow

Saudi Central Bank lowers benchmark rate by 50 bps, following US Fed decision  

Saudi Central Bank lowers benchmark rate by 50 bps, following US Fed decision  

RIYADH: Saudi Arabia’s benchmark interest rate, held at 6 percent since July last year, has been lowered to 5.5 percent following a 50-basis-point cut announced by the Kingdom’s central bank.

This move aligns with the US Federal Reserve’s recent policy shift, which lowered interest rates by the same amount on Wednesday to a target range of 4.75-5 percent. It marks a shift in monetary policy after two years of rate hikes aimed at curbing inflation. 

Gulf Cooperation Council central banks, including Saudi Arabia, followed suit as their currencies are pegged to the US dollar. 

Anuj Goel, senior executive officer at Century Private Wealth, told Arab News: “The rate cut injects a shot of adrenaline into Saudi Arabia’s non-oil sectors. Construction and services are well-positioned to benefit from the influx of cheaper credit, which could significantly boost the Kingdom’s diversification efforts.” 

He added: “Vision 2030, Saudi Arabia’s ambitious plan for a post-oil economy, might gain an unexpected boost from this monetary easing, potentially further accelerating non-oil activities that align with the Vision 2030 objectives.” 

Lower interest rates are expected to relieve pressure on businesses and households with existing loan facilities, boosting domestic spending and improving corporate cash flow.

 

In a statement the central bank, also known as SAMA, said: “In line with its objective of preserving monetary stability, SAMA has decided to reduce the rate of Repurchase Agreement by 50 basis points to 5.50 percent, and the rate of Reverse Repurchase Agreement by 50 basis points to 5 percent.” 

This is the first rate cut in over four years, reflecting progress on inflation and a reassessment of economic risks.   

The policy shift could rejuvenate corporate activities and lending, particularly in the real estate sector, which has already seen substantial growth in Saudi Arabia.   

As global economic conditions change, GCC countries could leverage their resources and capital to drive internal growth.  

With lower borrowing costs, there is potential for investment in infrastructure, technology, and innovation — areas critical to the long-term diversification goals under Saudi Vision 2030.     

This initiative aims to reduce the region’s dependence on oil revenues while strengthening Saudi Arabia’s position as a hub for innovation and sustainable development.   

Lower rates are expected to have a significant impact on corporate lending. Saudi businesses, especially those in capital-intensive sectors like real estate, construction, and infrastructure, stand to benefit from cheaper credit, enabling more aggressive expansion and investment.  

This is crucial as the Kingdom continues to invest in large-scale projects such as NEOM, the Red Sea Project, and other key initiatives under Vision 2030.  

For Saudi banks, the rate cut presents both opportunities and challenges. Lower rates typically encourage more borrowing, potentially driving growth in lending portfolios, particularly in the real estate sector, where demand for housing has surged, fueled by a young population and urbanization trends.  

“The real estate market, which has seen a 5 percent price increase since 2020, could see further growth due to lower interest rates. As Riyadh attracts more expatriates, the housing market might experience accelerated growth, fueled by the availability of cheaper credit,” Goel said. 

The sector could receive a further boost as lower interest rates make mortgages and property financing more affordable for consumers. 

While a rate cut can stimulate lending, it also compresses profit margins banks earn from loans. According to recent SAMA data, banks posted record-high profits of SR7.83 billion ($2.1 billion) in July, a 23 percent increase year on year.  

The Dubai-based asset and wealth manager also cautioned that the combination of rate cuts and ongoing economic stimulus could spark inflationary pressures, particularly in the housing sector, thereby adding complexity to Saudi Arabia’s economic landscape. 

GCC rate decision 

Following the US Federal Reserve’s decision on Sept. 18, central banks in the UAE and Bahrain also lowered their interest rates by 50 basis points. 

Qatar took a slightly different approach, cutting its deposit, lending, and repo rates by 55 basis points.     

Meanwhile, Kuwait, which pegs its currency to a basket rather than solely to the US dollar, opted for a more modest reduction, trimming its discount rate by 25 basis points. 

These coordinated moves reflect the GCC's alignment with global monetary trends while balancing local economic considerations.    

Gulf countries generally did not require high interest rates compared to the US due to relatively stable inflation rates, often at or below 2 percent.    

As the US Federal Reserve begins its rate-cutting cycle, many economists view this as beneficial for the Gulf region.  

Lower rates in the US can help ease funding pressures, particularly as the region faces a weaker oil-price outlook.

Reduced interest rates in the Gulf can support investment programs and alleviate financial strains from lower oil revenues, aiding in managing economic development and infrastructure projects.   


Riyadh to see 1m sq. m. of new office space by end of 2026: Knight Frank

Riyadh to see 1m sq. m. of new office space by end of 2026: Knight Frank
Updated 10 sec ago
Follow

Riyadh to see 1m sq. m. of new office space by end of 2026: Knight Frank

Riyadh to see 1m sq. m. of new office space by end of 2026: Knight Frank

RIYADH: Saudi Arabia’s push for regional headquarters has spurred demand for office space in Riyadh, with the capital’s stock set to grow by 1 million sq. meters by 2026, a report showed.

According to global property consultancy Knight Frank’s Autumn 2024 Saudi Arabia Commercial Market Review, this will bring the city’s total office space to 6.3 million sq. meters.

The regional HQ program also impacts office lease rates, with 517 companies now committed to establishing their primary hub in the Kingdom, the report disclosed.

This comes ahead of the nation’s goal of attracting approximately 480 multinational corporations to move their headquarters to the Kingdom by 2030.

“Vision 2030 is reshaping Saudi Arabia’s economy and society, with a central focus on transforming Riyadh into a key regional and global center for business, finance, leisure, and tourism,” said Faisal Durrani, partner and head of research for the Middle East and North Africa at Knight Frank.

“Indeed, 49 percent of the new jobs created in the Kingdom over the last five years has been in Riyadh, which is adding to the upward pressure on office rents, with many key office districts and business parks fully leased, with waiting lists,” Durrani added.

He went on to say that the limited availability of office space is also forcing up Riyadh’s Grade B rents, which have climbed by 27 percent over the past year.

In the Dammam Metropolitan Area region, Grade A rents have climbed by 2.2 percent since the third quarter of 2023, fueled mainly by strong demand from the public sector, he added.


Saudi hotel industry sees 11.4% spending surge, amid overall weekly POS decline: SAMA

Saudi hotel industry sees 11.4% spending surge, amid overall weekly POS decline: SAMA
Updated 13 min 42 sec ago
Follow

Saudi hotel industry sees 11.4% spending surge, amid overall weekly POS decline: SAMA

Saudi hotel industry sees 11.4% spending surge, amid overall weekly POS decline: SAMA

RIYADH: Spending in Saudi hotels saw a week-on-week increase of 11.4 percent between Nov. 10 and 16, reaching SR399.7 million ($106.4 million), according to the Kingdom’s central bank.

The weekly point-of-sale transactions bulletin from SAMA showed that restaurants and cafes recorded the second largest sectoral increase with a 4.3 percent rise to reach SR2.07 billion, which also equated to the biggest share of the overall value.

Spending on furniture came in third place, registering a 2 percent increase to SR304.8 million.

Overall, Saudi Arabia’s POS transactions registered a weekly decrease of 1.5 percent, with the education sector leading the decline.

SAMA recorded SR13.2 billion in transactions over the week, with the education industry posting the highest sectoral decrease at 47.9 percent to reach SR89.5 million.

The central bank’s figures showed that the electronics sector saw the second-largest dip, with a 10.9 percent slide to SR198 billion.

Spending on telecommunication recorded the third most significant decrease, at 7.4 percent, reaching SR117.1 million. 

Expenditure on food and beverages saw a 0.6 percent negative change this week, reaching SR1.9 billion, claiming the second-biggest share of this week’s POS transaction value.

Spending on miscellaneous goods and services followed, accounting for the third largest POS share with a 4.1 percent dip, reaching SR1.5 billion.

Spending in the leading three categories accounted for 42 percent or SR5.5 billion of the week’s total value.

At 0.02 percent, the smallest increase occurred in spending on recreation and culture, boosting total payments to SR309.5 million. Expenditures on public utilities surged by 0.2 percent to SR52.9 million. 

Geographically, Riyadh dominated POS transactions, representing 34.06 percent of the total, with expenses in the capital reaching SR4.5 billion — a 3.5 percent decrease from the previous week. 

Jeddah followed with a 0.04 percent surge to SR1.8 billion, and Dammam came in third at SR641.4 million, down 4.6 percent.

Madinah experienced the most significant rise in spending, increasing 6.9 percent to SR567 million.

Tabuk recorded a decline of 7.5 percent, reaching SR235.9 million, and Abha dropped 3.4 percent to stand at SR149.4 million.


Japan, Saudi medical centers unite to revolutionize stem cell therapy

Japan, Saudi medical centers unite to revolutionize stem cell therapy
Updated 20 November 2024
Follow

Japan, Saudi medical centers unite to revolutionize stem cell therapy

Japan, Saudi medical centers unite to revolutionize stem cell therapy
  • Cytori Therapeutics K.K., has been a pioneer in the stem cell therapy business

TOKYO:  Cytori Therapeutics Japan and the King Abdullah International Medical Research Center have signed a Memorandum of Understanding to strengthen research and training initiatives in the field of cell therapy. 

The signing ceremony took place between Dr. Ahmed Alaskar, executive director of KAIMRC, and Hoshino Yoshihiro, president and CEO of Cytori Therapeutics K.K., during the Riyadh Global Medical Biotechnology Summit 2024.

The partnership underscores the potential of regenerative medicine in treating chronic diseases such as diabetes, liver cirrhosis, critical limb ischemia, chronic wounds, knee osteoarthritis and other aging-related conditions. The aim of combining Cytori’s cutting-edge stem cell technology with KAIMRC’s expertise in translational research is to develop groundbreaking treatments for these critical health issues.

The two organizations will collaborate on fundamental research, clinical trials and other areas of mutual interest, including projects in biomedical R&D, preclinical studies and clinical trials, as well as training and development for staff in health-related and engineering fields.

Cytori Therapeutics K.K., has been a pioneer in the stem cell therapy business, specializing in cell therapy services and the development of adipose-derived regenerative cells from human subcutaneous fat tissues for therapeutic use. The company also develops, manufactures, and exports medical devices. 

This article is also available on Arab News Japan


Oil Updates – prices little changed as market weighs mixed drivers

Oil Updates – prices little changed as market weighs mixed drivers
Updated 20 November 2024
Follow

Oil Updates – prices little changed as market weighs mixed drivers

Oil Updates – prices little changed as market weighs mixed drivers

SINGAPORE: Oil prices held steady for a second day on Wednesday as concerns about escalating hostilities in the Ukraine war potentially disrupting oil supply from Russia and signs of growing Chinese crude imports offset data showing US crude stocks rising.

Brent crude futures dipped 5 cents to $73.26 a barrel by 8:41 a.m. Saudi time. US West Texas Intermediate crude futures was flat at $69.39 per barrel.

The escalating war between major oil producer Russia and Ukraine has kept a floor under the market this week.

“We may expect (Brent) oil prices to stay supported above the $70 level for now, as market participants continue to monitor the geopolitical developments,” said Yeap Jun Rong, market strategist at IG.

On Tuesday, Ukraine used US ATACMS missiles to strike Russian territory for the first time, Moscow said. Russian President Vladimir Putin lowered the bar for a possible nuclear attack.

“This marks a renewed build up in tensions in the Russia-Ukraine war and brings back into focus the risk of supply disruptions in the oil market,” ANZ analysts said in a note to clients.

On the demand side, US crude oil stocks rose by 4.75 million barrels in the week ended Nov. 15, market sources said on Tuesday, citing American Petroleum Institute figures.

That was a bigger build than the 100,000 barrel increase analysts polled by Reuters were expecting.

Gasoline inventories, however, fell by 2.48 million barrels, compared with analysts’ expectations for a 900,000-barrel increase.

Distillate stocks also fell, shedding 688,000 barrels last week, the sources said.

Official government data is due later on Wednesday.

In a boost to oil price sentiment, there were signs that China, the world’s largest crude importer, may have stepped up oil purchases this month after a period of weak imports.

Data from vessel tracker Kpler showed China’s crude imports are on track to end November at or close to record highs, an analyst told Reuters.

Weak imports by China so far this year have pulled down oil prices, with Brent sinking 20 percent from its April peak of more than $92 a barrel.


Saudi Arabia raises $910m in November sukuk offering 

Saudi Arabia raises $910m in November sukuk offering 
Updated 20 November 2024
Follow

Saudi Arabia raises $910m in November sukuk offering 

Saudi Arabia raises $910m in November sukuk offering 

RIYADH: Saudi Arabia’s National Debt Management Center has completed its riyal-denominated sukuk issuance for November, raising SR3.41 billion ($910 million), a 28.19 percent year-on-year increase. 

In October, the Kingdom issued sukuk worth SR7.83 billion, while the figures for September and August were SR2.6 billion and SR6.01 billion, respectively.  

Sukuk, also known as Islamic bonds, are Shariah-compliant debt products that allow investors to gain partial ownership of an issuer’s assets until maturity. 

Saudi Arabia’s consistent sukuk issuances align with a report released by Moody’s in September, which stated that the global markets for these Islamic bonds are expected to remain strong in 2024.  

The report also projected that the issuance of Shariah-compliant bonds could reach between $200 billion and $210 billion this year, up from just under $200 billion in 2023. 

According to a statement by the NDMC, the November sukuk issuance was divided into five tranches. The first tranche, valued at SR2.52 billion, is set to mature in 2029. 

The second tranche was valued at SR434 million and will mature in 2031, while the third tranche amounted to SR137 million, with a maturity date in 2034. 

NDMC stated that the fourth tranche, sized at SR10 million, is scheduled to mature in 2036. The fifth tranche, valued at SR310 million, will mature in 2039. 

A report by Fitch Ratings in October highlighted that sukuk issuances are on the rise, driven by improving financing conditions following the US Federal Reserve’s rate cuts to 5 percent in September. 

Fitch noted that global sukuk outstanding reached $900 billion by the end of the third quarter of 2024, an 8.5 percent increase compared to the same period in 2023.  

The report further projected that interest rates could decline to 4.5 percent by the end of 2024 and 3.5 percent in 2025, likely boosting sukuk issuances in the short term. 

In August, Fitch reported that the UK remains a significant hub for Islamic finance, with the London Stock Exchange ranking as the third-largest listing venue for US dollar sukuk globally. 

Saudi Arabia’s continued momentum in sukuk issuances reflects its commitment to developing the Islamic finance market as a core component of its Vision 2030 economic diversification strategy.