Arabia Monitor- Research Overview Q1 2015

1. About Arabia Monitor
2. Arabia Monitor Views
3. Arabia Monitor News
4. Arabia Monitor Membership
Outline

Putting regional developments within a global context

Forward-looking analysis that is ahead of the curve
Ahead of the Curve
Our forward-looking perspective places
regional developments in a broader context
and delivers strategic investment and decision
making insights.

Concise and clear bullet points that cut through the noise
Cutting through the Noise
Arabia Monitor distils its research into
executive-friendly bullet point format,
ensuring our views are clear and our analysis
concise.

Extensive high-level network for privileged access to insights
Privileged Access
Arabia Monitor’s competitive edge is our
collaboration with senior decision makers who
add valuable insights from a position of
authority.

Dr. Florence Eid-Oakden is the CEO and Chief Economist of Arabia Monitor. Dr. Eid has been a professor of
economics and finance at the American University of Beirut and a visiting professor at INSEAD and HEC Paris.
Formerly Head of MENA research at JP Morgan, she has also worked with the World Bank on Latin America &
North Africa and on the buy side as a hedge fund investment professional. She serves on the Board of Directors
for the Arab Banking Corporation International Bank in London and Arab Bankers Association of North America
in New York, on the Advisory Board of the Al Faisal University College of Business, Saudi Arabia, and has been a
Trustee of the American University in Paris. Dr. Eid holds a Ph.D. in Organization Economics from the
Massachusetts Institute of Technology (MIT) with a joint Harvard-MIT doctoral committee. She is fluent in Arabic,
English, French and Spanish.
Waleed Shoukry heads Arabia Monitor’s Fixed Income & FX Strategy, specializing in MENA hard & local
currency, and fixed income markets. Waleed has created the Arabia Credit Monitor and the Arabia FX
Monitor. Previously he was a Director and Emerging Markets Fixed Income/FX Proprietary Trader at Merrill Lynch
and an Associate Portfolio Manager of Emerging Debt Markets at Citigroup. Waleed holds a BSc. in Finance &
International Business from New York University and an MSc. in Global Finance & Economics from the New
School University. He is fluent in Arabic and English.
80+ years of experience for unparalleled MENA understanding
Dr. Cyrus Sassanpour, Senior Advisor, is concurrently a Fellow at the Centre for Social and Economic Research
(CASE), Warsaw, Poland. He had a long career (1983-2009) with the International Monetary Fund (IMF), where
he served as the IMF Senior Representative in a number of countries in the Middle East, South Asia, and Central
Europe. Previously, he was a senior economist with The United Nations Conference on Trade and Development
(UNCTAD) in Geneva, and headed the International Money and Finance Division of The Organization of the
Petroleum Exporting Companies (OPEC) in Vienna. Dr Sassanpour has lectured at the Graduate Institute of
International Studies in Geneva, and at the London School of Economics and Political Science. He holds a PhD
in Economics from Brown University. He is fluent in Farsi and English with working knowledge of Arabic.

Arabic, French & Mandarin speaking analysts add local
perspective
Yifu Jia (Bruce) leads Arabia Monitor's Chinese business development, given his special interest in
combining his academic and cultural backgrounds to support stronger Sino-Arab relations. Yifu lived
in Syria, travelling extensively around the Middle East through a study exchange program and as an
intern for the Damascus based office of a China Petrochemical Corporation (Sinopec) affiliate. He
holds a double BA degree in Arabic Language and Art from Peking University, Beijing, and an MA
degree in Cultural & Creative Industries from King's College, London. He is fluent in English and
Arabic in addition to his native Mandarin in which he helps publish for Arabia Monitor.
Charlene Rahall
Charlene Rahall leads Arabia Monitor’s research on the Levant. Born and raised in Sierra Leone,
West Africa, Charlene also covers MENA and Sub-Saharan Africa relations. She also contributes to
bespoke projects Arabia Monitor is commissioned to carry out. Charlene holds a BSc degree in
Economics from the University of Liverpool. She is fluent in English and Arabic.
Shwan Rasheid
Shwan Rasheid leads Arabia Monitor’s research on Iraq and Morocco, supported by his native
experience in both countries. Shwan also leverages his previous working experience to support
Arabia Monitor’s business development. He has five years of consulting experience, specialized in
projects in the Middle East with particular focus on oil, construction, and development. Shwan holds
a BSc degree in Banking & Financial Management from Cass Business school, and an MA degree in
International Business from European Business School. He is fluent in English, Kurdish, French, Arabic,
and Portuguese.

His Royal Highness Prince Turki Al Faisal bin Abdul Aziz Al Saud is one of the founders of the King Faisal
Foundation and serves as Chairman of the King Faisal Center for Research and Islamic Studies.
Previously, HRH served as the Director General of the Saudi General Intelligence Directorate (GID)
until August 2001. He is a former ambassador to the UK and Ireland, and was posted in the United
States until his retirement in 2007. Furthermore, HRH is a Trustee of the Oxford Islamic Centre at Oxford
University and the Centre for Contemporary Arab Studies (CCAS) at Georgetown University.
Mr. Victor Chu is Chairman of First Eastern Investment Group, a leading Hong Kong-based direct
investment firm, and a pioneer of private equity investments in China. He is admitted to practice law
in both England and Hong Kong. Mr Chu is concurrently a Foundation Board Member of the World
Economic Forum and board member of the Zurich Insurance Group. Previously he served as director
of the Hong Kong Stock Exchange, and Deputy Secretary-General of the International Bar
Association (IBA). Mr Chu is also a former council member of University College London and the
Foreign Affairs University of China, Chatham House and the Cambridge University East Asia Institute.
Dr. Richard Debs is an Advisory Director of Morgan Stanley, having been the founding President of
Morgan Stanley International. Previously, Dr. Debs served as the Chief Operating Officer of the
Federal Reserve Bank of New York, where he was also an Alternate Member of the Federal Open
Market Committee. Dr. Debs is Chairman Emeritus of the American University of Beirut and now
chairs the university’s Advisory Council. His foundation, R.A Debs Consulting, is renowned for
philanthropic ventures including the US/Middle East Project, and The US-Saudi Business Council.
Internationally reputed Advisory Council

Our view: (Sample from Q1 2015 MENA Outlook publication)
Enter the rainy days as oil prices plummet
1 Arabia Monitor; IMF.
2 Arabia Monitor; Central Bank of Egypt.
 As we enter 2015 with oil prices at recent record lows, the GCC
economies that have become regional engines of growth are redoubling
resolve on both the economic and political fronts.
 We expect Saudi Arabia, the UAE, Qatar and possibly Kuwait to pass
budgets in the new year that are either larger or equivalent to their
current budgets, even though the price of oil is firmly below their
break-even prices (with the exception of Qatar and Kuwait’s) (Figure
1). They will support the more vulnerable countries (Bahrain and
Oman), and deliver on their key financial commitments to Egypt.
 These countries are unlikely to do much in support of oil prices for a
few quarters to come, despite the whopping losses their equity markets
are already posting, and their heavy retail investor component.
- The GCC street remains more restive since the Arab Spring, but
governments also have tried and tested methods that include
buying into their own stock markets, accelerating public
expenditures where they matter, and even direct “financial
support programs” to their citizens. That’s partly what reserves
are for –- rainy days.
 This is all less costly than losing market share in the face of uncertainty
about just how long conventional energy markets will continue to reign
supreme.
 And if, along the way, the GCC’s newly reinvigorated political and
security resolve manages to fend off a few challenges (less oil revenue
to ISIS, a less intransigent Russia on Syria, a less meddlesome Iran, and
a delayed threat from unconventional energy producers), well those
will have been convenient double bonuses.
 This is a tricky wager, with its own natural inflection point: the
networked GCC street. Only if these governments know their streets
(and security apparati) as well as they think they do, will this pay off.
The next couple of quarters should reveal the answer.
Figure 1 – Oil Price Needed to Balance Budgets (USD per barrel)1
 Conflicts in the region and their potential spillovers remain
the most important downside risk to the outlook.
 In Yemen, the political situation has continued to
deteriorate over the past month. The Houthi-Ali Abdullah
Saleh alliance appears to be consolidating against a series
of political rivals, as president Hadi is increasingly isolated.
 Libya has sunk into further turmoil after the Supreme Court
ordered the internationally recognised parliament in Tobruk
to be dissolved. This ruling has divided the country further,
and adding fuel to fire is continued regional backing of
opposing sides. Libya will get worse over 2015 before it sees
a chance of getting better over time as Libyans get tired of
fighting.

Our view: (Sample from Q4 2014 MENA Outlook publication)
A tale of two regions
1 Arabia Monitor; IMF.
2 Arabia Monitor; Central Bank of Egypt.
 Three years into the Arab Spring, Arabia Monitor conducts a comparison this
quarter between the MENA region and Latin America (LA) during the period
when that region was transitioning to democracy, thirty years ago. We find
that the pace of change in the MENA region is actually rapid, when compared
to the transition in LA.
 This tale of two regions also reveals that the MENA region has not got a day
to lose in promoting the creation of “citizenship” through both rights and
responsibilities, but starting with education in the broadest sense, about
what “transition” means.
 To help us gain a granular understanding of the relevance to MENA of the
transition in LA, we conducted a Special Feature dialogue with H.E. Jorge
Alvarez Fuentes, the Ambassador of Mexico to Egypt, who has served in the
Arab world since 2007, after having lived and experienced the transition in
Latin America.
 Ambassador Alvarez Fuentes helps us shed light on the role and impact of
various political and social movements during transition, including radical
and terrorist movements, but also the Catholic Church in both conciliatory
and hostile roles at various times in various countries.
 “It is all negotiable”, we are told, including when allies in opposition to old
regimes become adversaries on the direction of travel under new regimes.
Patience, and “voice” are key ingredients, even through setbacks;
transitions are not only non-linear, they also have the nasty habit of rolling
back at times.
 We also examine how terrorist movements, in LA were included in political
processes, despite religious cleavages that at times militated against that.
 We take a deep dive into a comparison between Brazil on the eve of its
transition and Egypt in recent years, to draw lessons for this important
economy in our region. It turns out that in Brazil, the military led the
political reform process, eventually sizing down its own role in the economy
and society.
 On the theme of two regions, never before has our region been less of a
monolith. Between countries at war (Iraq, Syria, Libya) and thriving economies
(Saudi Arabia, the UAE, Morocco). Today MENA is itself a tale of two regions.
 The uncertainty about Syria’s future and Iraq’s unity and recent
developments in Yemen have not led investors to downplay opportunities
offered by other countries in the region. During the first week of the
attacks there was no significant sell off in regional GCC equity and fixed
income markets. Instead, markets have reflected seasonality and
technicals surrounding the annual Hajj holiday.
 The GCC economies continue to prosper on the back of strong
government balance sheets, high public spending and low government
debt. Saudi Arabia’s debt to GDP is expected to be less than 2.5% by
year-end, one of the lowest in the world. Its economy in 2014 is set to
grow at 4.5% in real terms this year and private sector growth is above
5.5%. Saudi FX reserves are close to 90% of GDP. This means that Saudi
Arabia has strong cushions even as oil prices dip below USD 100pb.
 To many, Lebanon seems vulnerable to an impending crisis. However, its
banking system continues to be liquid and stable, despite perennial
budgetary shortfalls, and its fixed income market has done well this
year. Egypt’s worst days are probably behind it even if plenty of
challenges remain, a budget deficit above 11% of GDP being one of
them. Egypt’s equity market has rallied over 40% YTD and its debt
markets have been among the best performing in MENA and EM this year.
 We are not oblivious to risk. The international coalition against ISIS will
take time to score irreversible gains, and in the meantime we live with the
risk of reprisals, in both Arab and Western capitals.
 That this risk has not yet been factored into regional markets also
speaks to the tale of two regions.
 If and when it does, will the region become more of a monolith and see
risk premia rise across the board and equity markets collapse? Probably
not across the board, given the differentiation with which both
international and regional investors now look at MENA markets.
 This differentiation helps MENA leverage the economics to buttress the
transition, as Latin America did.

Impressive track record of accurate calls
GCC – “We expect Saudi Arabia, the UAE, Qatar and possibly Kuwait to pass budgets in the new year that are
either larger or equivalent to their current budgets, even though the price of oil is firmly below their break-
even prices.” – December 2014
Lebanon – “As in the previous 14 attempts to elect a new president for Lebanon, the lack of parliamentary
quorum prompted Parliament Speaker Nabih Berri to postpone the voting session to 19 November. We
expect the presidential vacuum to extend into early 2015.” – November 2014
Saudi Arabia – “Lower oil prices are not expected to materially affect government expenditures, at least
over the short term.”– November 2014
Syria – “Though Syria’s new constitution, passed by referendum in February 2012, imposes a two-term limit
on the presidency, it is not retroactive; Assad could legally remain in power until 2028 through two seven-
year terms.”– May 2014
Iran – “Our baseline scenario is that the interim deal would be extended for a further six months as parties
continue to bridge the gap between their positions. An extension until January 2015 would allow the Iranian
government to benefit from the partial easing of sanctions for most of 2014/2015.” – May 2014

* Arabia Monitor’s Credit and FX Monitor views do not constitute trade recommendations
MENA/EM sovereign credit was the best-performing risky
fixed income asset class in 2014
 Macro themes for MENA sovereign credit
 Looking more closely at credit returns, we find that idiosyncratic factors have dominated relative performances. The JPM EMBI Global
Emerging Debt Index is down 4.7% Dec MTD and up +3.5% YTD.
 MENA sovereign benchmark bonds have also widened by 2.6% Dec MTD and up 8.3% YTD. The top Dec 2014 MENA bond performers Leb21s
(+0.1%) and ADhabi19s(+0.1%). MENA bond laggards were Iraq28s (-12.5%) and Egypt20s (-3.1%).
 MENA sovereign CDS outperformed MENA sovereign bonds, down 0.2% Dec MTD and +4.3% YTD. The top Dec 2014 MENA 5yr CDS performers
were Iraq (+0.4%) & Lebanon (+0.1%). MENA 5yr CDS laggards were Dubai(-0.7%) & Bahrain (-0.6%).
 MENA sovereign sukuk bonds have also widened 1.3% Dec MTD and +5.9% YTD. The top Dec 2014 MENA sukuk bond performers were Dubai17s
(-0.7%) and & Qatar18s (-0.8%). MENA sukuk bond laggards were Dubai22s (-2.4%) & Qatar23s (-1.3%).
Figure 1 – MENA 5yr CDS Levels1 Figure 2 – MENA Benchmark Bonds Z-Spread1

Wealth of research for in-depth analysis
(Sample publication titles)
Country Views: Monthly Updates: Regional Views:
Saudi Arabia: The lingering
question of unemployment
Tunisia: Democracy
triumphs
Egypt: Fuel Subsidies –
Taming the dragon
Iran: Reflections from
Tehran
Trials and tribulations of
cheap oil – December 2014
GCC Oil Exporters: Best
performers amid year of
turmoil – November 2014
Back to school – September
2014
No summer holiday for parts
of MENA – August 2014
Weathering the Oil Price
Storm: A look at the 2015 GCC
budgets
Sino-Qatari Deals: A GCC
“win-win”
MENA business confidence
gravity defying
What can MENA learn from
the Latin American transition?

A prominent opinion former throughout international media
Dr. Florence Eid
delivers a
keynote
speech at the
ONS
conference,
Norway –
August 2014
Sino-Saudi links boost
global economy – Dr.
Florence Eid Article in
China Daily
Which Countries Can Withstand
Low Oil Prices? - Dr. Florence
Eid interviewed by Bloomberg -
December 1, 2014
MENA and China: Joined at
the hip - Caijing Magazine,
China - October 13, 2014
New Opportunities in
the Arab World – Dr.
Florence Eid on
Caixin Weekly
Economic Review

Cross-sector clientele realising the potential of our insights

A unique value proposition within a specialised niche
Receive
comprehensive
macroeconomic
coverage and
analysis on the
MENA region
Tap into a
wealth of
experience
and
unparalleled
depth of
research
Identify
changes in
the market
and how
they impact
your business
Understand
and act on
medium to
long-term
trends
shaping the
region
Explore
complex
dynamics
through
our
bespoke
studies
and
private
briefings

Arabia Monitor is an independent research firm specializing in macroeconomic and geopolitical studies on the
Middle East & North African region, which we view as the new emerging market. Our forward looking perspective
allows us to place recent developments in the region within a broader context and a long-term view. Our analysis is
based on the macroeconomic and financial balance sheet of Arab countries to deliver unique strategy insights and
forecasts to businesses across a wide range of sectors.
Arabia Advisors specialises in portfolio strategy and private placements. It works with firms, family offices and
government related organisations that are looking to streamline, re-balance or diversify their asset portfolios. Based
in the UAE as an off-shore company, Arabia Advisors services a regional and international client base with interest in
the Arab countries.
Arabia Monitor
18b Charles Street | London W1J 5DU
Tel +44 203 170 5533 | Fax +44 203 170 5532
email: info@arabiamonitor.com
www.arabiamonitor.com
© Arabia Monitor 2015
This is a publication of Arabia Monitor Limited (AM Ltd), and is protected by international copyright laws and is for
the subscriber's use only. This publication may not be distributed or reproduced in any form without written
permission.
The information contained herein does not constitute an offer or solicitation to sell any security or fund to or by
anyone in any jurisdictions, nor should it be regarded as a contractual document. Under no circumstances should
the information provided on this publication be considered as investment advice, or as a sufficient basis on which
to make investment decisions. The information contained herein has been gathered by AM Ltd from sources
deemed reliable as of the date of publication, but no warranty of accuracy or completeness is given. AM Ltd is not
responsible for and provides no guarantee with respect to any of the information provided herein or through the
use of any hypertext link.
Disclaimer

Arabia Monitor- Research Overview Q1 2015

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (11)

Similar to Arabia Monitor- Research Overview Q1 2015

Similar to Arabia Monitor- Research Overview Q1 2015 (20)

Arabia Monitor- Research Overview Q1 2015