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The Daily Roundup

UK PM Theresa May officially triggers start of Brexit with Article 50 - Saudi Aramco set to issue 7-year sukuk of up to US$6bn – Turkish TSKB issues second green bond – Ukraine loses UK High Court case over US$3bn bond to Russia – Gazprom prepares 7-year £850mn Eurobond – Members of OAS urge Venezuela’s Maduro “to respect democracy” – IFC’s US$100mn loan to AAIB to scale up lending in Egypt

Mar 29, 2017 // 4:10PM

Global:

Prime Minister Theresa May has triggered Article 50 of the Lisbon Treaty starting a two-year countdown to the UK's exit. Britain's ambassador to the EU, Sir Tim Barrow, hand-delivered a six page letter from Theresa May to EU Council President Donald Tusk in Brussels to formally begin divorce proceedings.

Middle East & Turkey

The Turkish development and investment bank Turkiye Sinai Kalkinma Bankasi (TSKB) has issued US$300mn in subordinated tier 2 sustainable notes, its second green bond in less than 12 months. The first arrived in May 2016 through a senior 10-year 7.625% unsecured offering, first ever to come from a Turkish bank. Proceeds from the sale will go towards increasing the banks’ capital base, as well as funding climate-friendly initiatives.

Dollar bonds from Turkey's Halkbank fell as much as 0.7 cent across the curve on Wednesday, following charges put against company's deputy chief executive in New York for his alleged role in a scheme that violated sanctions on Iran. Bonds maturing 2021 and 2020 fell just over 0.7 cents in the dollar, according to Tradeweb data, hitting six-week lows, while the 2019 notes slipped 0.66 cent.

Ezdan Holding, a Qatari real estate developer and operator, has set initial price guidance for a five-year US dollar-denominated Sukuk issue at 5.125%, Reuters reported. HSBC and Mashreq Bank are the global coordinators, joined by Dubai Islamic Bank, Emirates NBD, Natixis and Standard Chartered as book runners. The transaction is expected to receive a Ba1 rating from Moody's and BBB- from Standard & Poor's

The merger of the two biggest banks in the United Arab Emirates, First Gulf Bank PJSC and National Bank of Abu Dhabi PJSC, is expected to leave the combined company with a larger representation on the benchmark emerging-market index, triggering hundreds of millions of dollars of inflows to the stock, according to EFG-Hermes estimates. The new entity could gain an MSCI Emerging Markets Index weighting of 0.18%, once a liquidity factor adjustment is removed.

Central Bank of Bahrain (CBB) announced that the BD35mn monthly issue of Government Treasury Bills has been subscribed by 202%. They the maturity date of the bond is 1 October 2017 and they weighted average rate of interest is 2.36%, equivalent to the previous issue on 5 March 2017. The outstanding value of Government Treasury Bills is BD 1.810 bn.

Saudi Aramco is set to pay a significant premium to the government and its previous borrowing during its first sukuk issuance. Aramco is offering 7-year, riyal-denominated sukuk at 25bp over the six-month SAIBOR as the company continues to diversify its funding in line with Saudi Arabia's economic reforms. The private placement could be as large as about US$6bn, according to Reuters, and is expected to take place early next week.

Citigroup Inc (C.N) came out victorious in the latest arbitration pursued by Abu Dhabi Investment Authority over the sovereign wealth fund's US$7.5bn investment in 2007 to bail out the struggling bank during the subprime mortgage meltdown. In November 2007, anticipating US$8-11bn in losses due to write-downs, Citigroup reached a deal in which the Abu Dhabi fund invested US$7.5bn in exchange for a 4.9% stake in the bank. The court ruled that a contractual clause the investment authority said the bank had breached "does not impose continuing obligations on Citigroup regarding the commercial reasonableness of its decision making", and awarded Citigroup nearly $9.5 million in legal fees and expenses.

The board of Alizz Islamic Bank has reportedly approved the issue of Additional Tier 1 sukuk to raise up to OMR30mn (approx. US$78mn) through private placement, pending regulatory approvals.

The UK is doubling its trade finance funds for Qatar from £2.25bn to £4.5bn, in a move to support UK exporters and their Qatari buyers, following the new memorandum of understanding signed by the two governments to create a Joint Economic and Trade Committee.

Africa

Tanzania's President John Magufuli has ordered a special audit of mining companies to determine if they pay their fair share of taxes to the East African country, following an abrupt ban on exports of gold and copper concentrates introduced by the government. Mining accounts for 3.5% of Tanzania’s GDP, but the government wants the sector to pay more taxes.

The International Finance Corporation (IFC), gave a US$100mn loan to the Arab African International Bank (AAIB), to help the bank scale up its lending operations to small and medium enterprises and build its sustainable energy finance portfolio in response to increased energy bills for many companies and SMEs, in Egypt. Around $50mn will be allocated to SMEs to support the bank’s strategy to increase its lending to the smaller businesses, while the rest. Other $50m will be allocated to introducing credit lines that support energy efficiency,

Rwanda's Central Bank maintained the benchmark rate at 6.25%, after cutting 25bp in December, and said the economy should continue to perform well as depreciation pressures on the Rwandan franc have eased.

The South African rand was by far the worst-performing emerging market currency falling another 0.83%, to 13.1000 per dollar .The South African currency has had a bad week, after reports that president Jacob Zuma had discussed his intention to sack his financial minister Pravin Gordhan with members of the allied South African Communist Party.

Asia

Malaysia’s relative success at stifling currency speculation may be counterbalanced by a growing tide of capital outflows. According to Bloomberg, offshore trading in ringgit non-deliverable forwards platform has dropped by about 70% since policy makers took steps in November to deter foreign banks from trading the contracts; but the rise in short-selling of government debt following the crackdown, with more than MYR35bn (US$8bn) withdrawn from Malaysian sovereign bonds in the four months through February, may force the government to roll-back some of the measures.

Thailand's Central Bank left its policy rate at 1.5% as, with positive factors including improving economic activity and rising inflation counterbalanced with simmering uncertainty about the global economy and monetary policy in advanced economies. In an update to its forecast, the BOT raised its 2017 economic growth forecast to 3.4% from December's forecast of 3.2%, driven by stronger exports.

Vietnam’s economy grew at a slower pace than economists anticipated in the first quarter, as industrial output eased following Samsung Electronics Co. smartphone production cuts. GDP rose 5.1% from a year earlier, according to Bloomberg, below the median estimate of 6.25%. A drop in Samsung’s output in Vietnam contributed to a 10.7% contraction in exports of phones and parts, he agency noted.

Latin America

Brazilian President Michel Temer on Wednesday reaffirmed the country’s commitment to fiscal discipline, which ought to help it regain the confidence of financial markets following a two-year recession. Later this week Temer's government is expected to announce a series of tax increases and a spending freeze to meet its primary budget deficit goal of BRL139bn (US$44.37bn).

Venezuela’s president Nicolas Maduro announced that his government will put a new currency exchange rate in place next week. The new rate will replace the Dicom exchange rate, one of Venezuela's two official rates. The Venezuelan Bolivar currently trades around 710 per U.S. dollar under the Dicom exchange rate and at ten under the Dipro rate, the oil-exporting nation’s other official rate. On the black market, however, a dollar can fetch around VEF3,000.

Members of the Organisation of American States (OAS) met in Washington D.C on an extraordinary meeting to demand a dialogue between, Venezuelan President Nicola Maduro's government and the opposition, as the South American country endures its worst economic and political crisis in recent history. Twenty OAS nations including the US, Mexico, and Brazil called for “concrete proposals” to deliver a diplomatic solution in Venezuela.

Barrick Gold and Goldcorp have come together to invest US$520mn into one of the world’s biggest undeveloped gold mines in Chile’s Atacama Desert. They will set up a 50/50 joint venture to develop projects in Chile’s Maricunga gold belt in the north of the country. Structured in a series of transactions, Goldcorp agreed to buy a 25% share in the Cerro Casale mine from Barrick and will also acquire a further stake from Kinross Gold.

Russia, CIS and Europe

The Czech government sold 2x times more bonds than originally planned at an auction on Wednesday, looking to benefit from a low yield environment as the Central Bank prepares to remove the cap on the koruna. The Central Bank (CNB) sold the planned CZK2bn of long-term 0.95/30 bonds, and additionally a CZK9.45bn 3-year zero-coupon bond, way over the original size of CZK4bn. The average yield stood at -0.055 percent, below -0.022 at an auction last week.

Ukraine is preparing an appeal after the British High Court ruled that the country failed to offer a "justiciable" for not paying its US$3bn bond to Russia. This included a claim that non-payment was a countermeasure against Russian interference with its sovereignty and the Crimea annexation. Following the court ruling, Ukraine's sovereign dollar bond prices fell across the curve on Wednesday, with the bond maturing 2027 losing 0.6 cent, while 2025 and 2020 issues slipped 0.5 cent and 0.3 cent respectively.

Russian gas giant Gazprom is set to issue a 7-year £850mn Eurobond with a yield of 4.25%, with Deutsche Bank, Gazprombank, J.P. Morgan and VTB Capital acting as organizers of the placement. According to the Russian press, demand for the Eurobond exceeded £1.5bn and the initial yield guidance widened from 4.375–4.5% to 4.25–4.5%. Earlier in March Gazprom sold a US$750mn 10-year Eurobond with a yield of 4.95%.

Hungary's Central Bank left all its key interest rates unchanged, as per expectations. It also set a limit of HUF500bn, down from HUF750bn, that banks can keep in its 3-month deposits at the end of the second quarter "to preserve the amount of liquidity crowded out over the past two quarters, and thereby maintain the loose monetary conditions achieved."

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