The Daily Update - Saudi's Vision 2030 and Qatar's Surprise Surplus

As Saudi Arabia pushes forth with its Vision 2030 - in a bid to diversify its economy away from oil dependence - the rumour mill suggests that Saudi Arabian Oil Co. (Aramco) has selected a number of key investment banks to manage what is touted to be the largest IPO in history (Alibaba’s USD25bn IPO in 2014 remains the biggest). Reports suggest that we could get further updates as early as this week of the estimated 5% public sale, which is expected to be based on the current government valuation of USD 2tn (almost double the size of today’s most valuable company, Apple Inc.).

There is, however, a long way until the mandates are finalised, as a number of international stock exchanges, including: London, New York, Hong Kong, Singapore, Tokyo and even Toronto, are still competing to list the deal. Proceeds from the IPO are expected to be diverted to the manufacturing and tourism sectors, as high on Prince Mohammed’s agenda is job creation, and at least half of the sale proceeds could be used to fund domestic investment.

Meanwhile, neighbouring Qatar, whose economy has been under pressure following the Saudi-led spat saw its highest current account surplus in two years in the penultimate quarter of last year, at 5.3% of GDP; the Emirate suffered a 5% deficit in the same quarter of 2016. Although the tension between Qatar and its neighbours has fizzled out of late, mediator, Kuwait, called for renewed talks yesterday, and Sheikh Sabah said that there has been some progress towards a resolution, calling the situation “temporary”.

7 star NFA rated Qatar was amongst the top performing regions across our strategies last year. We continue to monitor the situation and currently remain comfortable with our positioning in the region, where the minimum rating of our holdings in Qatar stands at A1, and on average offer over 4 notches of credit cushion.