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The Daily Roundup

Saudi Aramco IPO could be carried out with a share price discount for local investors – Russian Railways set 4.25–4.5% yield guidance for dollar-denominated US$500mn Eurobond – Peru could sell up to US$3bn of bonds to prop water company Sedapal in infrastructure projects – El Salvador issues a US$601mn note – South Africa bond yields surge after tax reform announcement

Feb 22, 2017 // 5:29PM

Middle East & Turkey

The Assembly General Meeting (AGM) of Qatar Islamic Bank has voted in favour of the proposal to increase the limit of the perpetual Additional Tier 1 Capital (AT1) Sukuk from QAR5bn to QAR7.5bn. The meeting, held on 21 February, also approved the board of directors’ proposal to distribute 47.5% cash dividends of the nominal value per share, i.e. QAR4.75 per share.

Saudi Arabia’s state own oil producer, Aramco, which is gearing up for what may be the world’s biggest initial public offering, is considering discounted shares for local investors, according to Bloomberg. The oil company has discussed ways to structure the offering in different tiers, allowing Saudi buyers to receive the stock at a lower price than international investors.

Africa

Tanzania's current account deficit narrowed 48.8% to US$2.05bn last year, on the back of fewer imports and a rise in tourism earnings and gold exports, the Central Bank said. Tanzania, which has a population of around 50 million, is Africa's fourth-largest gold producer after South Africa, Ghana and Mali. Revenues from gold exports rose 22.5% to US$1.45bn, Reuters reported. Bank of Tanzania (BoT) attributed the surge to higher prices and output.

Morocco's annual consumer price inflation rose to 2.1% in January from 1.8% in December due to higher food and non-food prices, the High Planning Authority said on Wednesday. Annual food inflation rose to 2.8% from 2.5% the previous month. Non-food price inflation rose to 2.6% in the year to January, up from 1.4% in December.

The Finance Minister of South Africa, Pravin Gordhan, introduced a new set of fiscal reform that target the country´s wealthiest individuals. The top marginal income-tax rate for about 103,000 people earning more than R1.5mn (US$115,000) a year will be raised to 45 % from 41%. The Treasury expects to collect R1.14tn rand in taxes in the 12 months through March. South Africa’s benchmark 2016 issue bond softened upon the news, with the yield rising 6bp at one point to 8.79%. At 1520 GMT it had recovered a bit to 8.765%.

Latin America

Republic of El Salvador announced a US$601mn bond issuance on Wednesday, rated B- by S&P.

Ecuador looks likely to go to the polls again in April after authorities acknowledged Lenín Moreno, the candidate of the ruling left-wing Alianza Pais movement, had fallen just short of the votes necessary to secure the presidency. Moreno is the chosen candidate of left-wing president Rafael Correa, the US-trained economist who steps down on May 24 after a decade in power.

Mexico’s economy grew at a quicker rate than first thought in the fourth quarter of 2016. The country’s economy expanded 0.7% in the final three months of the year from the third quarter, and was up from a previous estimate of 0.6%. Growth was 2.4% year-on-year, also better than the initially reported 2.2%.

The US-Mexico trade spat continues to escalate: after President Donald Trump suggested imposing a 20% import tariff on all the goods coming in through the US’ southern border, Mexico responded by proposing a ban on US corn imports as a way to increase its leverage in trade negotiations. Last week, senator Armando Rios Piter announced that he is planning to introduce legislation banning corn imports from the US, and replacing them with corn produced in Brazil and Argentina.

Argentina's Central Bank kept its monetary policy rate unchanged at 24.75% for the twelfth consecutive week on Tuesday, though it said inflation in February would likely be higher than in previous months as a result of increases in regulated prices. Consumer prices in greater Buenos Aires rose 1.3% in January, far below expectations and in line with the Central Bank's target for inflation between 12% and 17% in 2017.

Peru's finance ministry is considering selling bonds to help state water company Sedapal build up to PEN10bn (US$3bn) in infrastructure projects through 2021, state news agency Andina reported on Tuesday. The government said earlier this month that it was also evaluating selling bonds to help pay for an expansion at state-owned energy company Petroperu's refinery.

Colombian President Juan Manuel Santos on Tuesday named financial regulator Gerardo Hernandez to the Central Bank board, replacing one of its seven members. Hernandez will help the board at its next policy meeting on Friday decide whether to change the key lending rate from its current 7.5% as the bank seeks to bolster sluggish economic growth, while tackling still-high inflation. He replaces the outgoing Carlos Gustavo Cano, whose term is ending after 12 years.

Asia

Hong Kong’s GDP climbed higher in the fourth quarter as exports of services picked up during the period and the decline in retail sales slowed, Bloomberg reported Wednesday. The territory’s GDP grew 3.1% year-on-year, above expectations of 2% growth. The economy grew 1.9% in 2016, the city’s financial secretary Paul Chan said as he opened his 2017-2018 budget speech. This was above estimates of 1.7% growth.

A carbon tax plan revealed this week by Singapore will cover refineries in the city-state, officials confirmed on Tuesday, adding to pressure on international oil groups in one of Asia’s biggest refining centres. The measure, which will be implemented from 2019 and apply to power stations and other large emitters, raises costs for an industry where margins have been squeezed by a surge in diesel and gasoline exports from China.

Russia, CIS and Europe

Gazprom’s CEO Alexey Miller met Germany’s federal minister for economic affairs and energy Brigitte Zypries in Berlin to discuss the planned Nord Stream 2 gas pipeline, which will flow Russian gas to Europe via Germany, Kallanish Energy reports. The parties discussed the routes for Russian gas supplies to Europe, “paying particular attention” to the Nord Stream 2 project. The line will double Russia’s gas exports to European markets, with an additional 55 billion cubic meters (Bcm) of gas capacity. The project, led by Gazprom (51% share), also has owners, including Wintershall and Uniper (15.5% each) and Gasunie and ENGIE (9% each), according to the Russian giant.

Demand for Russian Railways’ 7-year dollar-denominated Eurobonds exceeded US$1.75bn, with the size eventually set at US$500mn and final yield guidance for set at 4.25–4.5%. The company held a road show of the Eurobonds on Monday and Tuesday in London, with J.P. Morgan and VTB Capital acting as organizers. The company is also considering offering rouble-denominated Eurobonds later, a Russian media sources claimed.

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January / March 2020

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