Middle East & Turkey
Economists are expecting Kuwait’s economy to contract by 0.5% this year after the gulf nation reduced its crude oil production to 2.7 million barrels per day, in line with the agreed OPEC target. Non-oil GDP will grow 3.2% in 2017, but growth including oil will only start to recover in 2018, according to the survey cited by Bloomberg.
Bahrain is leading the initiative to Shariah Governance principles and practises with a new Shariah Governance (SG) module issued this week by the country’s Central Bank, CPI Financial reported. The landmark module, issued after extensive consultation with the industry and with the CBB’s centralised Shariah Supervisory Board (CSSB), is likely to produce a significant shift in establishing a framework for Shariah compliance among Islamic banks in Bahrain, as well as setting a benchmark for global Shariah Governance practises. The new regulations will be applicable from 30th June 2018 on all Islamic retail and wholesale banks in Bahrain.
Oman Oil Exploration and Production, the exploration arm of state-owned Oman Oil, has raised a USD1bn pre-export financing loan, a company source told Reuters on Tuesday. The loan, a five-year facility coordinated by Natixis and Societe Generale, was oversubscribed and “competitively priced”, according to the source.
Africa
Zimbabwe’s Finance Minister Patrick Chinamasa said the southern African nation would not be able pay USD1.8bn in arrears to the World Bank and African Development Bank (AfDB) until economic fundamentals improve. Chinamasa said in a radio interview that a payment plan agreed with foreign lenders in 2015 in Lima could only proceed once Zimbabwe has reduced its fiscal deficit from around 10% of GDP, cut its wage bill from 92% of the budget and increased its import cover. He noted that the government had negotiated a cheaper loan to pay the USD1.8bn, but postponed the payment after realising that it could push the economy into a debt cycle.
Zambia borrowed USD134mn from Standard Chartered Plc to help fund the road sector, according to a finance ministry official cited by LusakaTimes. The borrowing plan was included in the 2017 budget, Mukuli Chikuba, permanent secretary at the finance ministry, said on Tuesday. The loan is the second that Standard Chartered has arranged for the government since a USD450mn syndicated loan in the first half of 2016. Five new loans worth USD296mn were contracted in the first half of the year, according to the ministry’s mid-year economic review. The country’s external debt grew to USD7.4bn by the end of June.
Offshore funds in Nigeria are offering to sell the dollar at close to its black-market rate, traders said, cited by Reuters, further worsening a liquidity lull on the FX market. The funds, which shifted dollars into the market last week to buy naira treasury bills, offered to sell the greenback at 365 naira, close to the black-market rate of 367. Local banks were bidding to buy at just 359, while the naira’s official rate currently stands at 305.85.
Ghana Cocoa Board (Cocobod) has once again extended its annual pre-export financing (PXF) facility, worth USD1.3bn this year, according to Global Trade Review. The loan value is down USD500mn from the USD1.8bn it has been in the past two years. The facility is fully underwritten and will be structured similarly to previous Cocobod annual trade facilities. It is priced at 65bp above Libor, a decrease from the 67.5bp offered last year. Rabobank, Crédit Agricole, Natixis, Standard Bank and Sumitomo Mitsui Banking Corporation (SMBC) were the co-ordinating mandated lead arrangers (MLAs) and bookrunners, while Ghana International Bank was the initial MLA.
South Africa has issued a pair of dollar bonds in overseas capital markets worth USD2.5bn to help finance its foreign currency commitments, National Treasury said on Wednesday, cited by Reuters. The transactions for a 2027 and a 2047 bond at coupon rates of 4.85% and 5.65% respectively were more than two times oversubscribed, attracting bids of bids of over USD5.3bn, the treasury noted.
Americas
The US Federal Reserve maintained its benchmark federal funds rate at 1 - 1.25%, as expected, but will begin unwinding its massive USD4.47tn balance sheet in October as it edges towards tighter monetary policy. The Central Bank, which has raised its rate twice this year by a total of 50bp, also maintained its forecast for raising the fed funds rate by another 25bp this year and raised its forecast for economic growth this year.
Venezuela claimed on Wednesday it had transferred funds for a payment due last week on its sovereign bond maturing in 2027, and reiterated pledges to honour all debt commitments following reports that the coupon payment was delayed. However, two bondholders told Reuters they had not yet received payment of the USD185mn coupon that was due on Friday. Venezuela is facing further complications in moving funds through the global financial system following several rounds of sanctions by Washington, although it has been continued to make efforts to service its debt.
Chile’s Central Bank said it had revoked a reciprocal credit line with its Venezuelan counterpart, citing what it called Venezuela’s failure to pay back its debts, Reuters reported. In a statement, Chile’s Central Bank said it had notified its Venezuelan counterpart and that the line would be cancelled within 10 days. The monetary authority said it has been taking steps to mitigate its exposure to Venezuela since 2014 and was currently owed USD2.1mn by the CBV.
Asia
S&P on Thursday followed Moody’s Investors Service earlier this year in lowering its rating for China in the run-up of the world’s second largest economy’s first sovereign dollar bond sale since 2004, and just before the 19th Communist Party Congress. The rating now stands at A+ from AA-, according to S&P’s website, with the outlook changed from negative to stable. According to the Bloomberg, while S&P’s announcement of a cut to the fifth-highest grade puts fresh focus on China’s debt issues, the structure of even its offshore bond market suggests there will be little impact on prices: Chinese buyers account for almost two-thirds of the dollar debt sold by issuers from the country.
Mongolia's Central Bank retained its policy rate at 12% "to stabilize inflation around the target rate and thereby facilitate the stability of the macroeconomic environment in the medium to long run." The Bank of Mongolia (BM) cut its rate by 200bp in June, its first cut this year and the second cut following 100bp cut in December 2016, as the bank unwinds a 450-point rate hike in August 2016 to stabilize the exchange rate of the tugrik and maintain its FX reserves.
The Philippine Central Bank left its benchmark interest rate unchanged at a record low with inflation seen remaining within the target. Policy makers held the key rate at 3%, the Central Bank said in a statement on Thursday, as headline inflation is forecast to average within the 2-4% target range.
The Asian Development Bank (ADB) has extended USD1.1bn worth of loans to sustainable energy sector development in Indonesia, according to Global Trade Review. The package consisted of two loans: one USD500mn loan for sustainable and inclusive energy projects, another USD600mn results-based loan which will allow PLN, Indonesia’s state electricity utility, to provide sustainable energy in the country’s east. The PLN loan is guaranteed by the Indonesian government.
India’s rupee fell to an 11-week low and sovereign bonds slumped on concern the nation’s fiscal deficit will widen after the government said it was considering measures to boost growth, Bloomberg reported. Policy makers are studying economic indicators and appropriate action will be taken at the right time, the Finance Ministry wrote on Twitter Thursday, citing Finance Minister Arun Jaitley. Concerns about India’s public finances heightened as the government was weighing a stimulus package of INR400bn (USD6.2bn).
The Hong Kong Monetary Authority (HKMA) has invested USD1bn to a lending syndication programme with the IFC, according to Global Trade Review. The funds will go towards the IFC’s Managed Co-Lending Portfolio Programme (MCPP), which is disbursed in loans in emerging markets. To date, the programme has lent to more than 100 countries across infrastructure, telecoms, manufacturing, agribusiness and service sectors.
Indonesia’s state-controlled construction company Waskita Karya obtained a syndicated loan of IDR5tn (approx. USD375mn) from a group of nine banks. Sumitomo Mitsui Banking Corporation (SMBC) acts as sole mandated lead arranger and book-runner for the five-year loan, while the Bank of China (Hong Kong) Limited Jakarta branch acts as mandated lead arranger. Lead arrangers for the new Waskita Karya loan are Bank KEB Hana Indonesia, Bank Permata, Bank OCBC NISP, while Bank China Construction Bank Indonesia, Bank CTBC Indonesia, Bank Shinhan Indonesia, and Bank SBI Indonesia act as arrangers.
Russia, CIS & Europe
Russia’s Central Bank confirmed on Thursday it will nationalise the ailing B&N Bank, the second major private bank to be rescued in the past two weeks. B&N admitted yesterday it had asked for a rescue package after running into financial difficulties that saw it require emergency liquidity. The Central Bank will take a majority equity stake in B&N and Rost Bank, a failing lender it is absorbing with Central Bank funds, through a specially established Banking Sector Consolidation Fund. B&N, which is heavily exposed to Rost Bank, will be the eighth largest lender in Russia once the two banks are merged.
Russian hydropower giant RusHydro plans to offer 5-year RUB-denominated Eurobonds, with a yield guidance of around 8.25%, PRIME agency reported on Thursday. RusHydro said in June it planned to offer RUB10–15bn worth of RUB-denominated Eurobonds in September.
KazTransGas issued a USD750mn international bond with a 4.375% coupon maturing in 2027. Bonds were sold at a price of 99.799% with an initial yield of 4.4%, with Citigroup, ING Wholesale Banking London, VTB Capital, SkyBridge Invest.
Slovenia has issued EUR700mn (USD833.49mn) of euro-denominated bonds by expanding two existing bond issues that expire on 2027 and 2040, the finance ministry said on Thursday. A statement from the ministry said it also expanded a USD-denominated bond that expires in 2024 by USD528.8mn, as part of a plan repurchase and replace a total of USD857mn of USD-denominated bonds with expiry dates in 2022 and 2023, thereby reducing cost of debt servicing, the ministry said.
