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November 2015

UAE September inflation eases to 4.3pc

INFLATION in the UAE eased to 4.3 per cent in September, according to consumer price data released by the National Bureau of Statistics.

The data showed inflation easing from August, which saw the highest annual rate (4.9 per cent) since February 2009.

Housing and utility costs, which account for over 39 per cent of consumer expenses, rose 8.3 per cent from a year earlier in September. Abu Dhabi, the biggest emirate in the UAE, hiked electricity and water tariffs from January 1.

Food and soft drink prices, which account for nearly 14 per cent of the basket, climbed 2 per cent from a year ago.

Transportation price inflation eased to an annual 5.9 per cent in September from 10.7 per cent in August. The UAE lowered gasoline and diesel prices in September; in August, gasoline prices jumped when the UAE reformed its domestic fuel pricing system, linking prices to global levels.

 

Mideast M&A value up 23pc to top $33bn

 

THE value of mergers and acquisitions (M&A) transactions with any Middle Eastern involvement reached $33.7 billion during the first nine months of 2015, marking a 23 per cent year-on-year growth, said an industry expert.

This marks the best annual start since 2010, added Nadim Najjar, managing director, Mena, Thomson Reuters.

Outbound M&A drove activity, up 57 per cent from the first nine months of 2014 to reach $17.2 billion, the highest first nine month total since 2009.  Qatar’s overseas acquisitions accounted for 55 per cent of Middle Eastern outbound M&A activity, while acquisitions by Saudi Arabian and UAE companies accounted for 27 per cent and 11 per cent, respectively.  Domestic and inter-Middle Eastern M&A decreased 2 per cent year-on-year to $8.5 billion.

Inbound M&A also saw a marked increased, up 154 per cent to $4.6 billion.   Energy & power was the most active sector, accounting for 31 per cent of Middle Eastern involvement M&A.  The largest deal with Middle Eastern involvement during the third quarter of 2015 was the $3.1 billion offer for the synthetic rubber business of Germany’s Lanxess AG by Aramco Overseas Co BV.  Bank of America Merrill Lynch topped the 9M 2015 announced any Middle Eastern involvement M&A league table with $7.8 billion.

 

Oil to weigh on Islamic finance growth: S&P

 

Growth in Islamic finance industry is set to slow down next year over the sharp fall in oil revenues and regulatory changes, Standard and Poor’s Ratings Services said yesterday.

“Islamic finance assets worldwide exceed $2 trillion by our estimate. But we now think the industry faces challenges from the decline in oil prices, changes in the global regulatory framework for banks and insurance companies, and its own fragmented nature,” said Standard & Poor’s global head of Islamic Finance Mohamed Damak.

The Ratings Services in a report published yesterday, “Islamic Finance To Still Grow In 2016 But With A Sag” said its expects Islamic finance growth will drop to single digits in 2016 from between 10 percent and 15 percent over the past decade. Islamic finance is facing the fall in the oil price, rapid regulatory changes, and lack of integration current headwinds could result in more stringent application of the profit and loss sharing principle and higher standardisation.

Still, Islamic finance will have the impetus to continue progressing and maintain some growth. Governments in core markets see in Islamic finance a tool to maintain their investment spending, somewhat countering the negative impact of oil prices on their budgets.

The regulatory changes could help the industry in resolving issues related to the lack of liquidity management instruments and applying more stringently its principle of profit and loss sharing. Standardisation of documents and Sharia’h ruling could enhance industry integration and free stakeholders’ capacity to focus on innovation, the report said.

S&P expects the industry will be worth $3 trillion sometime in the next decade. “Islamic finance stakeholders’ efforts and the industry’s contribution to development of the real economy will likely fuel growth,” added Damak.

The decline in oil prices is taking a toll on oil exporting countries governments’ public finances, and most of these countries are core markets for Islamic finance. “Positively, we expect governments in Gulf Cooperation Council countries will protect their investment spending to support growth. Still, if oil prices fall much below our current expectations and government balances weaken further as a result, we think GCC governments will increasingly cut investment spending,” the research note said.

The rapid changes in the global regulatory environment for banks and insurance companies are also affecting Islamic finance. In particular, Basel III for banks and Solvency II and the implementation of bank resolution regimes implementation in major EU countries are raising the bar for Islamic financial institutions to keep pace with developments in conventional finance.

 

330,000 millionaires in Mena region

 

THE Middle East and North Africa (Mena) region accounted for about 330,000 millionaires in 2015 and the number is projected to rise by another 52 per cent to 500,000 adults by 2020, according to a report.

Household wealth in the Mena region totalled $4.4 trillion in mid-2015, down 2.2 per cent since mid-2014. In constant currency terms, however, net wealth increased by 1.7 per cent, the Credit Suisse Research Institute’s annual Global Wealth Report (GWR) for 2015 said.

Qatar recorded the highest average wealth per adult of $157,000 in mid-2015, growing 0.8 per cent from the same period last year. Qatar occupied the 21st place globally in terms of average wealth, up from 29th place in the year 2000.

The UAE followed closely with $144,400 wealth per adult, a decline of  0.3 per cent from last year; Kuwait’s wealth per adult amounted to $113,400, a decline of 7.6 per cent from last year; Saudi Arabia recorded a rise of 0.9 per cent from mid-2014 to reach $39,500; and Egypt’s wealth per adult fell 5.3 per cent to $7,000.

In terms of total wealth, Saudi Arabia ranked first among GCC economies, with an estimated total wealth of $0.7 trillion, closely followed by the UAE with an estimated wealth of  $0.6 trillion. 
Mena countries have an estimated 2,300 ultra high net worth individuals, the report said.

In the Middle East, Saudi Arabia and UAE are expected to see an increase in the  number of dollar millionaires  by  72 per cent and 62 per cent respectively,  in the in the next five years.
Household wealth in the Mena region totalled $4.4 trillion in mid-2015, down 2.2 per cent since mid-2014. In constant currency terms, however, net wealth increased by 1.7 per cent.




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