Global Themes
Emerging markets witness a fifth straight month of net 'non-resident' portfolio inflows in April, data from the Institute of International Finance (IIF) showed. Inflows reached US$20bn, making it the strongest three-month streak since 2014, helped by record dollar-denominated emerging market debt issuance.
OPEC oil output fell for a fourth straight month in April, according to a Reuters survey, as top exporter Saudi Arabia kept production below its target, while maintenance and unrest cut production in exempt nations Nigeria and Libya. But more oil from Angola and higher UAE output than originally thought led compliance to drop below 90% from a revised 92 percent in March, the survey indicated.
Middle East & Turkey
UAE banks' balance sheets will continue to remain constrained due to more conservative lending despite broadly improving liquidity, according to a recently published report from Alvarez & Marsal. The professional services firm said the decline in loan growth outstripped deposit growth in 2016. "However, the good news is we are seeing signs of this downward cycle bottoming out. There is plenty of reason for banks’ shareholders to feel optimistic. Returns are still considerably higher than in other parts of the world, and banks are being run very prudently," said Dr. Saeeda Jaffar, a director at Alvarez & Marsal.
Singapore's Changi Airport Group has been awarded the contract to operate the King Abdulaziz International Airport in Jeddah, Saudi Arabia, for up to 20 years, the kingdom's aviation authority said on Sunday, adding that the selection was made after a thorough evaluation of bids.
State-owned Saudi Electricity Company is said to be in talks with regional and international lenders about issuing a US dollar denominated sukuk, according to a report from Reuters. The company is reportedly close to finalising the list of banks that will arrange the transaction, which be upwards of US$1bn in size.
The head of Saudi Arabia's central bank announced that the country would stick to the currency peg linking the Saudi riyal to the U.S. dollar. "The peg exchange rate has served us very well and it continues to serve us, so we will stick to it," Ahmed al-Kholifey told an investment conference.
The Saudi government is looking to tap the international and domestic bond markets again this year, with the exact amount depending on demand for and the pricing it can obtain, Finance Minister Mohammed al-Jadaan said on Tuesday, quoted by Reuters. He told an investment conference that the state budget deficit would be funded with three streams - international debt, local debt and drawing down the government's financial reserves - and that using the reserves would be the last resort. Saudi Arabia issued a debut US$17.5bn sovereign international bond last year, followed by a US$9bn sukuk last month, but halted monthly domestic bond issues at the end of last year to ease pressure on banking sector liquidity.
Kuwait Deputy Prime Minister and Finance Minister Anas Al-Saleh has reaffirmed the country's commitment to reforms despite an uplift in global oil prices, he told Kuwait Times in an interview this week. The country has already cut a raft of power, fuel and water subsidies as part of its reform plans, with further reforms including tightening of fiscal spending and improving government efficiency. Despite the progress being made on the reform front, the IMF still believes the country will need to raise up to US$114bn to finance the budget deficit over the next six years.
Qatar will look to reassess its bond issuance programme in the second half of this year, according to a report from Bank of America Merrill Lynch. “A strategic decision has been taken not to tap the Qatar Investment Authority (QIA) foreign assets. This is in part due to the rate of return on QIA assets being greater than the cost of borrowing and as it allows QIA’s investment income to be reinvested,” explained Bank of America Merrill Lynch MENA Economist Jean Michel-Saliba in the bank's recent monthly report.
Egypt's Central Bank has delayed its monetary policy meeting to May 21, three days later than originally scheduled. The Bank gave no reason for the move. The meeting will be the Bank's first since March 30, when it held its key overnight and lending rates steady at 14.75% and 15.75%, respectively.
Egypt may issue US$1.5bn to US$2bn in international bonds in the coming few weeks, Finance Minister Amr el-Garhy said to local television channel CBC. This would be the second time the sovereign taps the international markets, after selling US$4bn notes in January.
The International Monetary Fund will review Egypt's austerity programme as the country looks to receive a second instalment of its US$12bn funding package. The Middle Eastern sovereign is looking to secure the latest US$1.25bn tranche from the lender.
Africa
Angola's Central Bank maintained its benchmark BNA rate at 16%, and confirmed that inflation is continuing to follow the downward trajectory that began in January, easing to 37.86% in March, down from 39.45% in February.
Dubai Islamic Bank's unit in Kenya has been granted a banking license from the country's Central Bank, making it the third fully sharia-compliant lender in Kenya.
South Africa's Financial Services Board (FSB) is probing certain trades made in the hours before former Finance Minister Pravin Gordhan was recalled from an investor roadshow and then dismissed, an official said on Tuesday. The Johannesburg bourse said in April it was probing the trades involving currency futures and would forward its findings to the FSB once they were finalised, Reuters reported Tuesday.
Tunisia's Central Bank raised its key interest rate by 50bp to 4.75% to help ease rising inflationary pressures following a sharp fall in the dinar's exchange rate, hinting that further action could be taken if these pressures intensify. It was the first change in rates by the Central Bank of Tunisia (CBT) since October 2015, when the rate was lowered by 50bp.
Americas
Colombia's Central Bank cut its benchmark intervention rate by a further 50bp to 6.50%, a larger cut than expected by most analysts, and said further cuts would depend on how fast inflation falls to its 3% target. It is the third rate cut this year by the Central Bank of Colombia, which has lowered the rate by a total of 100bp as inflation continues to decelerate amid a sluggish economy.
President Nicolás Maduro of Venezuela said in a televised address this week that he plans to rewrite the country's constitution. Maduro said he would call a "constitutional assembly of the people" to help rewrite the charter, a move the country's opposition quickly dismissed as a ploy aimed at diverting attention from the current economic crisis.
Brazil's credit pipeline continues to widen this month as JSL and Cemig both launch roadshows ahead of potential US dollar denominated issuances, according to local press reports. According to a note in Valor JSL is looking for up to US$300mn in 7-year notes, while Cemig is after US$500mn in 7-year money.
Mexico's Radio Centro hit the market this week to place a MXN412mn (approx. US$22mn) bond in the local markets. Sale of the notes maturing 2023 was managed by Casa de Bolsa Finamex
Brazilian construction company Even Construtora e Incorporadora S.A. placed BRL87mn (approx. US$27.4mn) in debentures in the local market. Sale of the notes due 2019 was led by Itau.
US President Donal Trump is said to be actively considering breaking up some of the country's large banks, according to a Bloomberg report. The move signals a possible return to decouple commercial and investment banking activities contained within the Glass-Steagall law.
Asia
China's leverage is rising at an alarming pace once again, People's Bank of China's (PBOC) research head Xu Zhong said Monday, according to state-run Xinhua news agency. Zhong said that overall leverage in the financial system was rising at an alarming pace despite absolute levels being relatively reasonable, pointing to high levels of stimulus spending and poor corporate management as key drivers of the trend.
Mahindra & Mahindra Financial Services has picked six banks to arrange investor meetings ahead of a possible rupee-denominated bond issuance. The company could issue up to Rs1,000 crore in fresh notes as early as next week, according to a report from IFR.
India's capital markets regulator, the Securities and Exchange Board of India (Sebi), has finalised rules for issuing and listing green bonds, it said this week. The rules, which were originally proposed last year but only recently given the green light by a number of important government ministries including the Ministry of New and Renewable Energy (MNRE) and the Ministry of Environment, Forest and Climate Change, will give the country's issuers added certainty when issuing green bonds.
Indonesia’s manufacturing index grew for second straight month, reaching a ten-month high of 51.2 in April, up 0.7% from March. Export orders rose in April to end a six-month run of contraction, as total new orders and output both grew for a second month, while output growth came in at the quickest clip in eleven months.
Taiwan’s manufacturing sector activity grew at a slower pace in April amid slowdown in output growth and rate of orders. The Nikkei-Markit Taiwan manufacturing purchasing managers’ index slipped to 54.4 in April from its March level of 56.2, though it remained well above the 50-point line separating expansion from contraction.
The Sri Lankan rupee traded steady on Tuesday with the market expecting dollar inflows from a sovereign bond and syndicated loans, although importer demand for the greenback after a long weekend weighed on the currency, according to dealers quoted by Reuters. Sri Lanka expects to raise up to US$1.5bn via a sovereign bond issuance and a further US$1bn from two separate syndicated loans.
India’s state-run power producer NTPC last Tuesday raised INR20bn (US$312mn) from five-year Masala bonds at a yield of 7.28%, after Housing Development Finance Corp set a new Masala milestone with a INR33bn deal at 7.35% earlier in the month. National Highways Authority of India also began marketing a maiden issue of Masala bonds to raise up to INR50bn and Mahindra & Mahindra Financial Services selected six banks for investor meetings.
The IMF has postponed a US$5.5bn bailout for Mongolia because of a measure included in the country's 2017 budget that forces foreign firms to bank with domestic institutions, the IMF's country representative said. Mongolia's economy has slid into a crisis caused by heavy foreign debt, a collapse in its currency and a slowdown in growth in its biggest trading partner, China. The IMF board had been expected to approve a rescue package at a meeting on April 28.
Subsidiaries of Singapore Telecommunications (Singtel) have signed credit facilities worth S$4.1bn (US$2.94bn) with large international banking syndicates, according to Global Trade Review. Singtel Group Treasury, a provider of financial and treasury services based in Singtel’s home market of Singapore, has agreed a S$2.5bn revolving credit facility with 12 banks, on a three-year term. The finance is guaranteed by the parent company, with ANZ, Bank of America Merrill Lynch, BNP Paribas, BTMU, HSBC, Mizuho, OCBC, Standard Chartered, SMBC and UOB involved in the transaction. In the second facility, Australia’s Optus Finance – a New South Wales-based mobile network operator owned by Singtel – signed a three-year A$1.5bn (US$1.13bn) RCF with 15 banks, also guaranteed by Singtel.
Thai lender TMB Bank Public Company Limited is readying a 10.5-year Basel III-compliant Tier 2 issuance. The subordinated unsecured debentures have been given a provisional local currency credit rating of A+ from Fitch.
Russia, CIS and Europe
The Central Bank of Azerbaijan has left its key refinancing rate unchanged at 15%, the Bank said this week. "A more flexible monetary policy is necessary in the current situation with taking into account the new macroeconomic factors. The current situation does not allow increasing the money supply," the CBA said in a statement.
Russia's Central Bank is well positioned for more rate cuts, according to analysts from Deutsche Bank. Analysts expect a 125bp cut overall through the end of the year. “We expect the short-end of the swap curves to rally further but the local curve to outperform XCCY. The further basis compression should be driven by the upcoming easing cycle and the lack of vol in local assets. Our 3m targets remain 8.70% in 3x6 FRAs, 8.75% in 1Y Rub (Mosprime) and 8.30% in 1Y XCCY. In bonds we keep our trade recommendations and favour bonds in the 3Y-5Y part of the curve," the report's authors wrote.
Czech Prime Minister Bohuslav Sobotka said he and his cabinet would resign in a bid to resolve a dispute with his Finance Minister, who has repeatedly come under fire for past business dealings. The billionaire Finance Minister Andrej Babis built Agrofert chemicals into one of the country's largest companies, but he has been investigated by various authorities for a number of dodgy business dealings. Sobotka among others has also argued that Babis has not adequately dissociated himself from his business activities.
