Egypt Independent: Business-Main news en Saudi plans stock market reforms to draw foreign money <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p><span id="articleText"><span class="focusParagraph">Saudi Arabia announced a string of reforms to its stock market that could attract billions of dollars of fresh foreign money and smooth sales of state assets as the kingdom grapples with damage to its finances caused by low oil prices.</span></span></p><p><span id="articleText">When Riyadh opened its bourse to direct foreign investment last June, it took a cautious approach, imposing tight ownership limits and minimum qualifications for overseas institutions to reduce the risk of them destabilizing the market.</span></p><p><span id="articleText">Reforms announced on Tuesday suggested authorities are now courting foreign money more aggressively. Last week, Deputy Crown Prince Mohammed bin Salman outlined sweeping plans to cut the kingdom&#39;s dependence on oil exports.</span></p><p><span id="articleText">Among his plans are a privatization program that will include offering a stake of under five percent in national oil giant Saudi Aramco. The Saudi stock market could have trouble absorbing the shares without an infusion of foreign money.</span></p><p><span id="articleText">&ldquo;This is a very good piece of news and supportive of the stock market in the medium to long term,&quot; Sebastien Henin, head of asset management at Abu Dhabi&#39;s The National Investor, said of Tuesday&#39;s announcement.</span></p><p><span id="articleText">&quot;It may clear the road for the possible listing of Aramco shares...All in all, this will align the bourse with international markets and encourage foreign investors to allocate funds to Saudi shares.&quot;</span></p><p><span id="articleText">Each foreign institutional investor will be allowed to own directly a stake of just under 10 percent of a single listed company, up from a previous ceiling of five percent, the Capital Market Authority (CMA) announced.</span></p><p><span id="articleText">Other restrictions were scrapped, including a ceiling of 10 percent on combined ownership by foreign institutions of the market&#39;s entire capitalization. All foreign investors combined will still be limited to owning 49 percent of any single firm.</span></p><p><span id="articleText">To qualify as a foreign institutional investor in Saudi Arabia, each asset manager will only need to have a minimum of US$1 billion of assets under management globally, instead of $5 billion. The CMA said it would now accept investments by new types of foreign institution including sovereign wealth funds and university endowments.</span></p><p><span id="articleText">The regulator also said it had approved the introduction of securities lending and covered short-selling to the stock market, which would give investors more options to hedge their purchases against market downturns.</span></p><p><span id="articleText">Meanwhile, the Saudi Stock Exchange will introduce during the first half of 2017 the settlement of trades within two working days of execution, the bourse said.</span></p><p><span id="articleText">At present, trades must be settled on the same day. This has inconvenienced foreign investors in particular as they must have large amounts of money on hand before trading, which can be hard given Riyadh&#39;s time zone and its Sunday toThursday business week. Many big emerging markets have settlement after two days.</span></p><p><strong><span id="articleText">MSCI entry </span></strong></p><p><span id="articleText">Saudi Arabia wants to join international index compiler MSCI&#39;s emerging markets index as soon as in 2017, because many global funds base their investments on that index. Officials have conceded same-day settlement is an obstacle to inclusion.</span></p><p><span id="articleText">MSCI is expected to say in June whether it will review Saudi Arabia for possible inclusion in the index, and the reforms announced on Tuesday could help to sway its decision.</span></p><p><span id="articleText">Nevertheless, the Saudi stock market did not react positively to the announcement; its index .TASI was 1.4 percent lower in late trade.</span></p><p><span id="articleText">One reason is that the reforms will take considerable time to materialize. The CMA said its new foreign ownership rules, and a date for them to take effect, would be revealed only by the end of the first half of 2017.</span></p><p><span id="articleText">A deeper reason is that despite last June&#39;s opening to foreign institutions, overseas funds have so far not been very keen to put their money into Saudi Arabia; total direct and indirect foreign investment accounts for less than one percent of the $408 billion stock market, bourse data shows.</span></p><p><span id="articleText">Low oil prices, as well as the inefficiencies of Saudi firms and the greater dynamism of other emerging economies, have diverted money from the kingdom. It may take years before it becomes clear if the economic reform drive will change this.</span></p><p><span id="articleText">At the end of 2015, only nine foreign institutions had obtained licenses to invest directly in the Saudi market. The Middle East head of a big international fund manager, declining to be named because of commercial sensitivities, said this number would not necessarily rise sharply when restrictions were eased.</span></p><p><span id="articleText">&quot;You can ease regulations as much as you want, but the value proposition of Saudi Arabia needs to be strong enough to make it worthwhile for institutional investors to come in,&quot; he said. </span></p> Tue, 03 May 2016 13:18:00 +0000 Reuters 2469313 at sites/default/files/photo/2016/05/03/505021/saudi_stocks.jpg Tokyo slide keeps mood downbeat <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p>A 3 percent plunge in the Tokyo stock exchange and falls in European banking shares added to a gloomy global financial mood on Monday, pushing oil prices lower and the dollar to an 18-month low against the yen.<br /><br />With trading thinned out by holidays in London and many Asian economies, a solid read of manufacturing sentiment in Germany drove the Frankfurt stock exchange around 1 percent higher. <a href="!daxx" target="_blank">(.GDAXI)</a><br /><br />That also helped France&#39;s CAC 40 (<a href="!CAC" target="_blank">.FCHI</a>) gain almost half a percent. But elsewhere the picture showed more of the concern over banking, poor economic growth and over-inflated asset prices that has gripped financial markets for much of this year.<br /><br />Brent crude fell more than 1 percent LCOc1 to $46.78 a barrel while the European banking index .SX7E lost 0.6 percent. MSCI&#39;s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.3 percent.<br /><br />The yen, which tends to gain when Japanese and global market investors get worried about growth, reached 106.14 yen per dollar in early Asian trade before steadying on the day.<br /><br />Last week was the yen&#39;s best since the 2008 financial crisis, thanks largely to a Bank of Japan policy meeting that gave no hint of further efforts to stimulate a long-moribund economy with more outright money-printing.<br /><br />&quot;A lot of people are still talking about Japan,&quot; said Thu Lan Nguyen, a strategist with Germany&#39;s Commerzbank.<br /><br />&quot;The BOJ are creating the impression that they will always react too late to deflationary risks. Now that they have disappointed, I think it would take something really new to change the market&#39;s mind on the yen.&quot;<br /><br />Adding to the subdued sentiment, a survey released on Sunday showed that activity in China&#39;s manufacturing sector expanded for the second month in a row in April but only marginally, raising doubts about the sustainability of a recent pick-up in the economy.<br /><br />Australian shares fell 0.2 percent after disappointing results from Westpac Banking Corp (<a href="" target="_blank">WBC.AX</a>).<br /><br />Australia&#39;s central bank board will meet for a policy review on Tuesday and is widely expected to keep its cash rate at a record low of 2.0 percent, though some economists expect a cut.<br /><br />Markets in Hong Kong, China, Taiwan, Singapore and Malaysia were closed on Monday. Japan is in the middle of its Golden Week series of holidays and markets there will be closed on Tuesday, Wednesday and Thursday of this week.<br /><br />Investors have also turned broadly negative on the dollar in the past two months, worried that the U.S. Federal Reserve will be unable to raise interest rates this year. A fall to a 6-1/2 month low of $1.1484 against the euro (<a href=";destCurr=USD" target="_blank">EUR=</a>) bode ill for the run-in to payrolls data on Friday. The dollar index of its strength against a basket of six rival currencies, fell 0.2 percent to 92.899 .DXY.<br /><br />&quot;The start of the new month does not mean a new trend.&nbsp; The technical tone of the dollar is weak,&quot; Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.<br /><br />&quot;The Federal Reserve acknowledges the continued improvement in the labor market. The problem is that it has not translated to stronger consumption, and business investment remains soft.&quot;</p> Mon, 02 May 2016 11:50:00 +0000 Reuters 2469271 at sites/default/files/photo/2016/05/02/504802/nikei.jpg Kuwait freedoms make austerity drive tricky for government <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p>A three-day strike by oil workers in Kuwait last month over pay reforms shows the government faces considerable opposition as it prepares to push through painful and controversial cuts to longstanding welfare benefits.<br /><br />Oil-exporting states around the Gulf are reducing subsidies for fuel, public utilities and food, and freezing or slowing the growth of public sector wages, as they try to curb big budget deficits caused by low oil prices.<br /><br />Saudi Arabia, the United Arab Emirates, Qatar, Oman and Bahrain have all taken such steps in the past six months. But Kuwait has been slower to act; reforms were still being discussed in parliament last week and no timetable has been set.<br /><br />In mid-March, Finance Minister Anas al-Saleh said the cabinet had approved in principle a &quot;repricing&quot; of some commodities and public services, but he gave no details and did not mention a date for the changes.<br /><br />One reason for the delay is that Kuwait has more of a history of industrial action than the rest of the Gulf, where unions are banned or tightly controlled. In recent years, brief work stoppages over pay and conditions have also hit Kuwait&#39;s national airline and the customs administration.<br /><br />More broadly, Kuwait&#39;s political environment is freer - in contrast to the other wealthy Gulf states, members of its rambunctious parliament routinely criticize government policy, and citizens are not shy about complaining on social media.<br /><br />In 2012, thousands of Kuwaitis demonstrated repeatedly against a new electoral law which they said disadvantaged the opposition. Such protests are almost unheard of in the other Gulf states.<br /><br />The result is that Kuwait&#39;s government is having a harder time imposing austerity policies than its counterparts, and the extent of those policies is still uncertain.<br /><br />&quot;The oil strike was a showdown between a welfare government and a civil society fearful that the government will solve its problem, resulting from a lack of planning, at its expense,&quot; said Shafeeq Ghabra, political science professor at Kuwait University.<br /><br />&quot;This strike shows that the government needs to have a major dialogue with civil society regarding economic as well political reform.&quot;<br /><br />Billions of dollars are at stake; finance ministry undersecretary Khalifa Hamada told the al-Qabas newspaper at the end of last year that &quot;rationalizing&quot; subsidies would save the government 2.6 billion dinars ($8.7 billion) over three years.<br /><br />Savings would be greater if the bloated public payroll could be reformed. The finance ministry projected in January that the government would run a budget deficit of 12.2 billion dinars in the fiscal year starting on April 1, 2016, after state contributions to the sovereign wealth fund.<br /><br /><strong>Strike</strong><br /><br />Between 7,000 and 13,000 of around 18,000 Kuwaiti nationals in the oil sector took part in the strike in late April, union members estimated. Union membership is not compulsory and foreign workers are not permitted to strike.<br /><br />Workers were protesting a proposed overhaul of the public sector payroll system that would set uniform standards for salaries, bonuses and benefits. The Oil and Petrochemical Industries Workers Confederation fears the government will use the reform to freeze salaries of higher-paid employees.<br /><br />Ultimately, the union called off the strike &quot;in honor of his highness the Emir&quot;, and the government insisted it made no concessions - an apparent victory for authorities. But the union has been talking to the government since the strike ended, so concessions could still be made.<br /><br />Kuwait&#39;s oil output fell as low as 1.1 million barrels per day during the strike from the usual output of around 3 million bpd, tarnishing the country&#39;s image as a reliable exporter.<br /><br />&quot;The workers have achieved their main objective of getting their message across,&quot; said Faisal Abu Sulaib, another political science professor at Kuwait University.<br /><br />Saif al-Qahtani, chairman of the oil workers&#39; union, said he could not speak for other unions but that some of them also opposed wage system reform.<br /><br />Some other union members and analysts said a string of strikes in Kuwait remained unlikely. An official at the headquarters of the Kuwait Trade Union Federation, which represents 15 unions in the energy and government sectors, said it had not been informed of any other planned walkouts.<br /><br />Nevertheless, in the wake of the oil strike, the government may move even more gradually and cautiously with reforms. While most of the current parliament has been relatively supportive of the idea of reform, legislative elections are due next year, and the government will not want the issue of austerity to cause the election of a more antagonistic parliament.<br /><br />&quot;Negotiations may take time, but my expectation is that the government will ultimately move towards a compromise on some of the union&#39;s demands to prevent further economically damaging escalations,&quot; said Coline Schep, a Middle East and North Africa associate at consultancy Eurasia Group.<br /><br />&quot;Future strike action in the oil sector, or public sector more broadly, cannot be ruled out as it is a fairly well-established phenomenon in Kuwait...It is in the government&#39;s interest to try and avert further stoppages.&quot;</p> Mon, 02 May 2016 08:43:00 +0000 Reuters 2469261 at sites/default/files/photo/2016/05/02/504802/kuwait.jpg Halliburton and Baker Hughes scrap $28 billion merger <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p>Oilfield services provider Halliburton Co (<a href="" target="_blank">HAL.N</a>) and smaller rival Baker Hughes Inc (<a href="" target="_blank">BHI.N</a>) announced the termination of their $28 billion merger deal on Sunday after opposition from U.S. and European antitrust regulators.<br /><br />The tie-up would have brought together the world&#39;s No. 2 and No. 3 oil services companies, raising concerns it would result in higher prices in the sector. It is the latest example of a large merger deal failing to make it to the finish line because of antitrust hurdles.<br /><br />&quot;Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,&quot; said Dave Lesar, chief executive of Halliburton.<br /><br />The contract governing Halliburton&#39;s cash-and-stock acquisition of Baker Hughes, which was valued at $34.6 billion when it was announced in November 2014, and is now worth about $28 billion, expired on Saturday without an agreement by the companies to extend it, Reuters reported earlier on Sunday, citing a person familiar with the matter.<br /><br />Halliburton will pay Baker Hughes a $3.5 billion breakup fee by Wednesday as a result of the deal falling apart.<br /><br />The U.S. Justice Department filed a lawsuit last month to stop the merger, arguing it would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger NV being the other.<br /><br />&quot;The companies&#39; decision to abandon this transaction &ndash; which would have left many oilfield service markets in the hands of a duopoly &ndash; is a victory for the U.S. economy and for all Americans,&quot; U.S. Attorney General Loretta Lynch said in a statement on Sunday.<br /><br />The European Commission also previously expressed concerns that the deal might reduce competition and innovation.<br /><br />The Justice Department and Federal Trade Commission, which enforce U.S. antitrust law, have filed lawsuits to stop an unusually high number of deals in the past 18 months. Lynch said last month that the number of big and complex deals being proposed made it &quot;a unique moment in antitrust enforcement.&quot;<br /><br />The collapse of Halliburton&#39;s acquisition of Baker Hughes comes as both companies struggle to cope with the impact that lower energy prices are having on their clients.<br /><br />Last week, Baker Hughes reported a bigger-than-expected first-quarter loss and warned that the rig count globally would drop steadily through the end of the year because of fewer new projects.<br /><br />Halliburton said last month it cut more than 6,000 jobs in the first quarter as revenue slumped 40.4 percent and it took a $2.1 billion restructuring charge mainly for severance costs and asset write-offs.<br /><br />The merger&#39;s cancellation also represents a blow to the investment bankers who advised the companies, as their fee, typically in the range of a percentage point of a deal&#39;s value, is largely predicated upon the transaction being completed.<br /><br />Goldman Sachs Group Inc (GS.N) advised Baker Hughes, while Credit Suisse Group AG (CSGN.S) was lead financial adviser to Halliburton, with Bank of America Corp (BAC.N) also advising.</p> Mon, 02 May 2016 08:33:00 +0000 Reuters 2469259 at sites/default/files/photo/2016/05/02/504802/hallibut.jpg