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The Daily Roundup

Fitch: Islamic Banking assets to deteriorate in 2017 – Iran to issued US$4.5bn in bonds by March 2018 – Qatar Reinsurance gets approval for T2 issuance – Kuveyt Turk gets nod for sukuk – SARB expecting private credit expansion – CBN to auction fresh local T-Bills – Argentina doubles down on fiscal transparency – Brazil rules out Oi debt forgiveness – China liberalises, opens derivatives market to foreign investors – Russia to launch OFZ for households in April

Feb 27, 2017 // 6:08PM

Middle East & Turkey

A slowdown in Islamic financing growth in the UAE will reveal a deterioration in banks' asset quality as portfolios season more quickly, Fitch Ratings says. "Financing growth slowed in 2016 and we expect a continuing slowdown in 2017, leading to faster seasoning of banks' portfolios and higher impaired financing ratios. Rapid growth in the sector in recent years has artificially improved asset quality metrics as impaired financing ratios are typically lower in the early years of financing arrangements," the rating agency said in a statement.

Iran's Oil Ministry reported that by 2018 the country could sell up to US$4.5bn in local and hard-currency bonds in a bid to fund a slew of new energy projects and boost international investment into the country, according to SHANA, a news website run by the Ministry. The country's Parliament approved a motion on Sunday that would allow it to sell up to US$3bn in international bonds after March 21, and could look to raise an addition sum that would go towards repaying about US$1.5bn in existing debt. The country has been more or less locked out of international bond markets since 1979.

The Sultanate of Oman's upcoming US dollar bond has won strong ratings from the big three rating agencies. Moody's gave the senior unsecured bond notes a '(P)Baa1', while S&P and Fitch gave the issuance a 'BBB-' and 'BBB' respectively. The sovereign is due to issue between US$1-1.5bn in Q1 this year. Bank Muscat, Citigroup, Deutsche Bank, HSBC, ICBC Standard Bank, JP Morgan, Societe Generale and Standard Chartered are managing the sale.

The Saudi Ministry of Finance has announced the appointment of Ayman Mohammed Al-Sayari as Acting Head of the Debt Management Office (DMO). Al-Sayari is replacing Fahad Al Saif, who left HSBC to help set up the DMO in the run-up to the country's landmark US$17.5bn bond issuance. The move comes as the country plans another international bond sale for this year.

Saudi Arabia's Capital Market Authority Vice Chairman Mohammed El-Kuwaiz says the country's move to a T+2 cycle by the end of June will help open up the country's equities markets to foreign investors. The current system requires same-day settlement. Foreign investors currently hold just 4% of the stocks traded on Saudi exchanges.

Qatar Reinsurance, a division of Qatar Insurance Company, has approved a plan to issue fresh Tier 2 bonds, the company said in a disclosure to the Qatar Stock Exchange. The company has not yet confirmed the size of the issuance.

British Foreign Secretary Boris Johnson and Egyptian President Abdel Fattah al-Sisi have finalised a loan guarantee agreement that will see the UK back up to US$150mn in loans to Egypt. The loan guarantee was part of a US$6bn pledged in bilateral funding Egypt needed to secure to qualify for a US$12bn IMF loan.

Turkish participation bank Kuveyt Turk has secured regulatory approval to raise up to TRY2bn (US$550mn) through the issuance of sukuk. The bank hit the Eurobond and local currency market last year.

Turkey reports January trade Tuesday, with a deficit of US$4.15bn expected. It then reports February CPI Friday, which is expected to rise 9.74% year on year, compared to 9.22% in January. CPI would move further above the 3-7% target range, but the Central Bank seems likely to keep its benchmark interest rate stable when it meets in March. The CBRT is under significant political pressure to use non-traditional monetary tools to stem the Lira's slide rather than targeting interest rates.

Africa

South African police said it was not currently investigating Deputy Finance Minister Mcebisi Jonas as part of a probe into allegations he was linked to corruption at state-owned South African Airways. Local press reports suggested he was being investigated for influence peddling in a bid to score more favourable pricing on components and tyres at the airline.

The SARB will release money supply and private sector credit extension (PSCE) data Tuesday. M3 money supply is expected to have slipped marginally to 6% year on year in January from 6.06% year on year in December, while PSCE growth is expected to have increased to 5.25% year on year in January from 5.11% year on year in December. It is also expected to reveal trade balance numbers.  Bloomberg consensus for the trade balance is a compression of ZAR1.3bn from ZR12bn in December.

The Central Bank of Nigeria will sell fresh treasury bills this week including NGN6.14bn in 91-day notes and NGN62bn in 182-day notes, lower than the volume of treasury notes sold at the previous auction.

The Nigerian government has formalised plans to issue up to NGN20bn (approx. US$64mn) in green bonds in April this year, a positive step forward in the country's bid to diversify its funding sources. The government said projects that would benefit from proceeds of the issuance include the Solar Unit Distribution Programme (SUDIP), Renewable Energy Micro-Utilities, Energising Education Program (EEP), FCT Bus Rapid Transport and Afforestation Programme.

Americas

Peru's Central Reserve Bank said private sector credit in January grew by 5.5% year on year.  Sol-denominated credit grew 6.5%, while US dollar loans expanded 3.1%.

The Argentinian government introduced plans to introduce quarterly targets and enhanced fiscal reporting, measures aimed at strengthening financial transparency and fiscal accountability. It also reaffirmed its deficit reduction and fiscal consolidation targets for the year. The government reaffirmed a primary deficit target of 4.2% of GDP in 2017, and set targets of 3.2% in 2018 and 2.2% in 2019, above the targets set a year ago.

Colombia is expected to release fresh CPI data on Saturday, about one week after the country's Central Bank surprised markets with further easing measures by cutting interest rates 25 bp to 7.25%. The CB is expected to reveal inflation growth has slowed from 5.47% seen in January to 5.37% this month, an improvement but nevertheless still falling outside the 2-4% target range.

The Brazilian government has ruled out a bailout for distressed telecoms giant Oi. Brazil's Science and Technology Minister Gilberto Kassab said in an interview this weekend that the country would need to amend state rules in order to waive the country's debt, which includes over US$6.5bn in taxes and fees owed to state governments.

Companhia Brasileira de Distribuição plans to issue between BRL800mn and BRL1.8bn in privately placed CRAs, according to a note from bondholders. The company has not given a timeframe for the issuance.

Asia

Longfor Chongqing Enterprise Development, an onshore subsidiary of Longfor Properties, issued RMB3.04bn (approx. US$442mn) in green bonds, split into RMB1.6bn 5NC3 notes at 4.40% and RMB1.44bn 7NC5 paper at 4.67%. The issuance marked the first Green bond issued by a Chinese developer in the country's interbank market.

Continuing its momentum in giving international investors more access to the country's onshore markets, China's foreign exchange regulator said on Monday it would allow foreign investors in the interbank bond market to trade a wide range of derivatives. The State Administration of Foreign Exchange and Trade said it would allow qualified foreign investors (excluding foreign Central Banks) to sell forwards, options and FX swaps. The regulator also said it would strengthen its oversight of the derivatives market in a bid to avoid significant currency volatility.

The Indian government is looking to approve a new law that would extend tax incentives to state-run rail companies, allowing them to issue bonds tax-free. The move aims to allow these firms to access longer term funding through the corporate bond market at more favourable terms. A separate Metro rail development fund could also be created to support these bonds.

The government of India has reportedly chosen India Infrastructure Finance Co. Ltd (IIFCL) to lead a credit enhancement guarantee fund, according to Live Mint. The fund, announced alongside last year's federal budget in April, will see between Rs1,000-1,500 crore used to help infrastructure borrowers access loans and better rates.

Uttar Pradesh Power (UPPCL) raised Rs65.1bn (approx. US$970mn) through 4 to 10-year state government-guaranteed rupee bonds, using an account at the Reserve Bank of India as a backstop, a first for a state-owned Indian distribution company according to Reuters. The RBI guarantee aims to give investors added confidence in picking up the paper because, while the structure of the transaction allows the bonds to be serviced using all of the state's revenues - not just those generate by UPPCL.

Russia, CIS and Europe

Russia's Ministry of Finance will start selling rouble treasury bonds for households in April, Finance Minister Anton Siluanov said this week. The government hopes to raise up to RUB30bn (approx. US$519mn) by selling OFZ bonds to households and individuals, issued every 6 months and untradeable on the secondary markets. The bonds will carry maturities between 1 and 5 years.

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