And then there were three…

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WHAT WE’RE TRACKING TODAY

THIS MORNING: Arab foreign ministers’ diplomacy-heavy week continues in Madrid

Good morning, wonderful people. It’s an IPO-heavy kind of morning, with news from Talco, Fakeeh Care, and Miahona. All three have enjoyed strong investor appetite for their main-market offerings, suggesting there’s plenty of interest out there in quality Saudi names even as the Tadawul has underperformed global markets so far this year.

Happening today:

#1- IPO WATCH- The two-day bookbuilding window for the retail tranche of Al Taiseer Group Talco Industrial’s (Talco) IPO starts today with a maximum of 1.2 mn shares up for grabs. Talco priced its IPO on Tadawul’s main market at SAR 43 per share, pegging it at the top of its initial price range, after its institutional offering drew in strong demand with a 68.5x oversubscription rate. The aluminum products maker is taking a 30% stake to the market in a secondary share sale.

#2- Arab foreign ministers led by Foreign Minister Prince Faisal bin Farhan arrivedin Madrid last night, where they will push for an immediate ceasefire in Palestine, as Israel intensifies its attack on Rafah. The foreign trip by the Arab foreign ministers saw stops in Paris and Brussels.

^^ We have more on both stories in this morning’s news well, below.

#3- The Taiwan Business Forum in Riyadh kicks off today at the Riyadh International Convention and Exhibition Center. The Jeddah iteration of the event wrapped up yesterday with 21 Taiwanese companies poking the tires of sectors including tech, foodstuffs, and medical devices, Aleqtisadiah reports.

WEATHER- Riyadh could see dusty winds with a daytime high of 41°C and a low of 28°C. Jeddah will see clear skies with a daytime high of 38°C and a low of 27°C, with Makkah set for a high of 45°C and a low of 29°C.

HAPPENING TOMORROW-

#1- Miral Dental Clinics will make its debut on parallel market Nomu tomorrow in a direct listing, according to a Tadawul statement. Shares will be allowed to trade within daily price fluctuation limits of ±30% and static price fluctuation limits of ±10%. The dental group had set a price guidance of SAR 100 per share for its direct listing on Nomu, with trading limited to qualified investors.

#2- Demo day for the final round of the Sanabil 500 MENA seed accelerator will take place tomorrow in Riyadh with seven finalists. Applications for the next batch are now open and will close on 6 August 2024.

DATA POINTS-

#1- The total value of vehicle ins. premiums paid in the Kingdom rose 38% y-o-y to a record high SAR 14.3 bn in 2023, according to Aleqtisadiah analysis of data from Tadawul and the Saudi Central Bank. The rise comes on the back of recently-introduced regulations that require ins. coverage for all vehicles, as well as an increase in the total number of drivers on the road as more women get behind the wheel, the newspaper suggests.

#2- Saudi’s trade surplus with GCC nations grew 38% y-o-y to SAR 14 bn in 1Q 2024, Mubasher reported, citing compiled data from statistics agency Gastat. This increase was driven primarily by the Kingdom’s trade surplus with the UAE, which more than doubled y-o-y during the period to SAR 6.9 bn. Trade surplus with Bahrain rose 76.7% to SAR 6 bn while surplus with Qatar more than tripled to SAR 522 mn.

WATCH THIS SPACE-

#1- Cargo flights between Saudi and Nigeria are set to resume soon, Nigeria’s Aviation and Aerospace Development Minister Festus Keyamo said in a post on X. Officials discussed “the resumption of cargo flights operations between both countries that had gone comatose over the years” during the Future Aviation Forum last week in Riyadh, Keyamo said. Saudi had suspended flights to and from Nigeria during the pandemic in 2021, and cargo service has never really returned.

#2- The Saudi Roadway Code will be rolled out in three phases as officials look to standardize the planning, design, construction, operation, and maintenance of roads across the Kingdom, state news agency SPA reported. The breakdown:

Awareness raising from now through year-end;
Government entities need to adhere to the code from 1 January 2025;
The private sector will be required to follow it by from 1 July 2025.

About the code: The code includes 25 guidelines covering road, bridge and tunnel planning, implementation, maintenance and safety. It will also have a special code on the effects of road works on the environment, with another related to requirements of self-driving vehicles.

PSAs-

Pilgrims from Pakistan, Malaysia, Indonesia, Morocco, and Turkey will have access to special lounges at Jeddah and Madinah airports, courtesy of the General Authority of Civil Aviation at Jeddah and Madinah airports, according to a statement. The countries — along with Bangladesh and Ivory Coast — are part of the Makkah Route Initiative which aims to deliver high-quality services to pilgrims from the beneficiary countries upon their arrival to Saudi until their departure.

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THE BIG STORY ABROAD-

One story is on every front page this morning: Israel’s deadly strike in Rafah and Israeli troops exchanging fire with Egyptian forces at the Rafah crossing.

There’s been a global outcry after Israel killed at least 45 people in a Rafah tent camp. Even its closest allies in the US have piled on, though two US officials told Axios that the Biden administration is still deciding whether the attack crosses a red line. European Union foreign ministers have for the first time “engaged in ‘significant’ discussion on sanctioning Israel if it doesn’t comply with international humanitarian law,” Politico reports, citing remarks by Irish Foreign Minister Micheál Martin.

PRESENTED WITHOUT COMMENT- A “tragic mistake,” says Netanyahu: Addressing the Israeli Parliament yesterday, Prime Minister Benjamin Netanyahu said that the deaths were due to a “technical failure” and came despite Israel’s “immense efforts to avoid harming the non-involved” (watch, runtime: 0:45).

The news is everywhere this morning: Reuters | Financial Times | New York Times | Times of Israel | Associated Press.

AND- An Egyptian officer was shot dead during an exchange of fire between Israeli and Egyptian forces yesterday. The Egyptian Armed Forces are investigating, a military spokesman said. The two sides are in talks to de-escalate, according to a statement from the Israeli side picked up by the Financial Times.

Expect Egypt to remain firmly engaged as a mediator as diplomats resume shuttle diplomacy this week on a potential ceasefire in Gaza.

MEANWHILE- It’s crickets in the global business press this morning. Both US and UK markets were closed yesterday for national holidays.

CIRCLE YOUR CALENDAR-

The two-day Global Project Management Forum will open in Riyadh on Sunday, 2 June, bringing together project managers and stakeholders for talks on the project management ecosystem and emerging technologies.

The #Growth Summit is set to kick off on Wednesday, 5 June, bringing together marketing, product and growth experts at the InterContinental in Riyadh. You can request your invite here.

The Global EV and Mobility Tech Forum will open its doors on Wednesday, 10 July to Thursday, 11 July at the Riyadh International Convention and Exhibition Center. The event will bring together policymakers, NGOs, and startups.

Talco prices IPO at top range ahead of retail subscription

Aluminum products maker Al Taiseer Group Talco Industrial (Talco) priced its Tadawul IPO at SAR 43 per share, financial advisor Alinma Investment said in a statement yesterday. The institutional tranche of the main market offering closed last week with a 68.5x oversubscription rate, signaling strong investor appetite. Talco is taking a 30% stake to market in a secondary share sale.

Pricing + valuation: The share price means Talco is set to raise SAR 516 mn from the IPO and give it a market cap of up to SAR 1.7 bn at the start of trading, according to our calculations.

What’s next? The two-day book building process for retail investors starts today and wraps up tomorrow. Investors can subscribe to a maximum of 1.2 mn offer shares, according to Alinma’s statement. The final allocation of shares will take place by Sunday, 2 June, while the first trading day remains contingent on fulfilling regulatory requirements.

Use of proceeds: Talco’s selling shareholders will take the transaction’s proceeds home after covering transaction related-expenses, which are estimated at SAR 16 mn. All the proceeds will be divided between the selling shareholders on a pro rata basis.

The pitch: Talco is a leader in the industry, with a footprint in 26 countries across the GCC, MENA region and East Asia, Europe, US, and Australia. Several expansions throughout the years helped bring its aluminum production capacity to 60k MT as of June 2023. It currently operates two factories in Riyadh and one in Jeddah.

ADVISORS- Alinma Investment is quarterbacking the transaction as financial advisor, lead manager, bookrunner and underwriter, while Stat Law Firm is acting as counsel. PwC is Talco’s financial due diligence advisor. Front & Sullivan is serving as market consultant, while KPMG is acting as the company’s auditor. The receiving agents are Alinma Bank, Al Rajhi Bank, and Riyad Bank.

Fakeeh Care + Miahona wrap up retail offering

Two retail offerings wrap: Fakeeh Care and Miahona both closed the retail portion of their IPOs on Tadawul’s main market yesterday, with each reporting a healthy subscription book.

FAKEEH CARE-

The retail tranche of healthcare provider Fakeeh Care’s IPO was 14.5x oversubscribed, Argaam reported, citing a statement from our friends at HSBC Saudi Arabia, which is the sole financial advisor and bookrunner. The final allocation of shares wrapped up yesterday with a minimum of three pieces per retail subscriber.

REMEMBER- The institutional offering was 119x oversubscribed, signaling strong investor appetite for the Riyadh-based healthcare provider’s offering, which is set to become the largest IPO so far this year.

The IPO has lured in UAE’s Adia: Abu Dhabi Investment Authority (Adia), the UAE’s largest sovereign wealth fund, has emerged as a key buyer in the IPO with a cornerstone investment of 1.04 mn shares, according to a supplementary prospectus. Alongside Olayan Saudi Investment — the other cornerstone investor — the two funds will together buy 1.99 mn shares out of a total of 4.98 mn shares on offer.

What’s next: Rump shares will be distributed proportionally among the subscribers based on the size of their demand compared to the total offering at an allotment ratio of 1.4%, according to Argaam. Fakeeh has yet to announce when trading will begin on its shares.

Background: Fakeeh Care is taking a 21.5% stake to market through an offering of both new and existing shares. The IPO was priced top of the range at SAR 57.5 per share, giving the family business a market cap of 13.3 bn post-listing, with the offering set to reel in some SAR 2.9 bn in proceeds.

ADVISORS- Our friends at HSBC are acting as sole financial adviser. HSBC is joint bookrunner together with our friends at EFG Hermes as well as ANB Capital. Moelis is advising the selling shareholders, while AlRajhi Bank, Saudi National Bank, Arab National Bank, SAB, Alinma Bank and Bank Aljazira are serving as receiving banks.

MIAHONA-

Water treatment outfit Miahona’s retail offering was 6.1x oversubscribed, with retail investors set to secure a minimum of 10 shares each, lead manager Saudi Fransi Capital said in a disclosure to Tadawul. A strong demand from retail investors will see the total offering for institutional investors fall to 80% despite it being 170x covered.

What’s next? Rump shares will be allocated to subscribers on a pro-rata basis to fulfill the remaining demand, with an allocation ratio of 11.6% for every subscribed share, according to the disclosure. Miahona’s date of listing is yet to be announced.

Background: The sole owner of Miahona — Vision Invest — is selling a 30% stake on Tadawul’s main marke t in a secondary share sale. The IPO was priced top of the range at SAR 11.5 per share, valuing the IPO at SAR 555.5 mn, and giving the company a market cap of SAR 1.85 bn post-listing. The selling shareholder will take home the proceeds from the offering after paying an estimated SAR 28 mn in fees associated with the transaction.

ADVISORS- Our friends at EFG Hermes KSA and Saudi Fransi Capital (SFC) are quarterbacking the transaction as financial advisor, bookrunner, and underwriter. SFC is also separately acting as the lead manager. SFC and Riyad Bank are receiving agents. Latham & Watkins is acting as legal counsel, while PwC is financial due diligence advisor, KPMG are serving as auditors, and Arthur D. Little as market consultant.

A RUNDOWN OF THE SAUDI IPO PIPELINE-

Other transactions that are now in the market or expected soon:

Riyadh-based aluminum products maker Al Taiseer Group Talco Industrial (Talco) plans to sell a 30% stake and has just priced its offering at the top of the range (see above);
Fintech startup Rasan is set to sell a 30% stake, pricing its offering at the top end of the range after its institutional tranche closed 129.1x oversubscribed;
Labor agency Saudi Manpower Company (Smasco) is selling a 30% stake and also priced its shares at the top of its initial range following strong institutional investor demand;
Hotels and resorts operator Boudl has filed to go public;
Fourth Milling Company will list before the end of June;
Singapore’s Olam Group is mulling the IPO of its Olam Agri subsidiary on Tadawul;
Hypermarket operator Lulu is said to be eyeing a dual listing on Tadawul and ADX;
Aster DM Healthcare looks set to spin off its GCC assets and seek a dual listing on Tadawul and in the UAE;
PIF-backed lender Riyad Bank is considering the listing of its investment banking arm Riyad Capital;
Nupco — a unit of the PIF — has reportedly tapped Rothschild & Co as financial advisor for its potential Tadawul IPO;
Budget airline Flynas is reportedly looking to go public this year.

PIF in talks to get a piece of Egyptian agriculture firm Daltex

The Public Investment Fund (PIF) is reportedly in talks to acquire an unspecified minority stake in Egyptian agriculture firm Daltex Corporation through a capital increase, Egyptian media outlet Al Mal reports, citing unnamed sources it says have knowledge of the matter.

It’s still early days: The talks are still in the early stages and both sides are yet to reach an agreement or sign a contract, the sources added. If the acquisition goes through, Daltex would use the funds from the transaction to finance the company’s expansions, and finance its exports of production requirements.

About Daltex: The agriculture player has been operating in the Egyptian market since 1964 and has established itself as a “ leading exporter of Egyptian potatoes and a fully-integrated player operating across all aspects of the agricultural value chain.”

Advisors: Our friends at EFG Hermes are reportedly financial advisors to Daltex, while Matouk Bassiouny and Adsero Ragy Soliman & Partners are counsel.

PIF has been interested in more than one Egyptian company of late: The fund’s wholly owned subsidiary the Saudi Egyptian Investment Company submitted an offer earlier this month to acquire up to 100% of leading Egyptian education company CIRA Education.

Prince Alwaleed Bin Talal and investment vehicle among investors in latest funding round by Elon Musk’s xAI

Prince Alwaleed bin Talal is backing Musk’s AI startup: xAI — a California-based artificial intelligence startup owned by tech bn’aire Elon Musk — recently closed a USD 6 bn series B funding round that saw the participation of several key investors, including Prince Alwaleed bin Talal and his investment vehicle Kingdom Holding, according to a blog post.

Also investing in the round: Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, and Fidelity Management and Research Company, among others. The size of each investor's contribution was not disclosed.

What we know: The funding will help xAI launch its first AI-powered products, optimize infrastructure, and fast-track its research and development efforts, the startup said in the statement. The round brings the startup’s valuation at USD 24 bn, up from a pre-funding valuation of USD 18 bn, Musk said in a post on X. “There will be more to announce in the coming weeks,” Musk said in a separate post.

Prince Alwaleed + Musk are more than acquainted: Prince Alwaleed, together with the Kingdom Holding became the second largest shareholder in X (previously known as Twitter at the time) in October 2022 after Musk took the social media platform private. Prince Alwaleed and KHC collectively own a 4% stake in X.

About xAI: Founded in 2023 by Musk, xAI is looking to build advanced AI systems, “that are truthful, competent, and maximally beneficial for all of humanity,” with the goal of understanding “the true nature of the universe,” the statement read.

IN CONTEXT- Plenty of appetite for AI: The Kingdom is cooking up a world-scale AI play that could see the new technology contribute as much as USD 135 bn to the local economy by 2030, according to a recent report from PwC. Additionally, the Public Investment Fund is looking to set up a USD 40 bn AI-focused fund that would make it the world’s largest investor in artificial intelligence.

Saudi startups raised USD 240 mn in 1Q 2024, beating their MENA peers -Magnitt

Total capital committed by VC firms to Saudi startups fell 42% y-o-y in 1Q 2024 to USD 240 mn across 35 transactions, according to venture data platform Magnitt’s 1Q KSA Venture Investment Report. Saudi attracted 65% of the total capital raised by startups in the MENA region in 1Q.

Salla led the charge: The pre-IPO round of e-commerce app Salla accounted for more than half of the funds raised during the first quarter of the year, with USD 130 mn in investment tickets during Leap 2024 last March. The round was the region’s only megadeal during the quarter.

Smaller tickets, but not a “retreat in investor sentiment”: The MENA region as a whole saw a downturn in VC investments during the quarter, said Magnitt Founder and CEO Philip Bahoshy. “While funding saw a downturn, the deal flow in Saudi Arabia remained nearly flat, posting a modest 13% decrease in 1Q 2023. Digging deeper, it becomes evident that while the overall funding has diminished, the Kingdom’s entrepreneurial ecosystem continues to attract investors.”

How Saudi startups are faring in 2Q 2024 so far: Three Saudi startups raised a combined USD 4.8 mn in April. That’s a 60% y-o-y increase compared to the USD 3 mn three Saudi startups raised in April 2023.

Everything you need to know about two tech-focused events coming to Riyadh next week

Business solutions platform Exito is hosting the Digital Transformation Summit (DTS) on Wednesday, 5 June, at the Crowne Plaza Riyadh Minhal. DTS is set to feature more than 300 senior executives, and 600 speakers from the tech segments of artificial intelligence, Web 3.0, internet of things, quantum computing, cybersecurity and other “fourth industrial revolution technologies,” according to its website.

The industry in brief: ICT spending in the Kingdom is worth c. USD 34.5 bn, the summit’s website says, without providing a timeframe. AI is forecasted to contribute USD 135.2 bn to domestic GDP by 2030, foreign investment in the local IT market currently stands at USD 2.13 bn, while investment in the tech sector amounts to USD 6.4 bn, according to the website.

Talking points: Smart cities and infrastructure, high-speed networks, generative AI, smart collaboration, AI-powered customer experience, and cyber risks are top of the agenda.

On the speaker list:

Razan AlMazroo, director of beneficiary experience at the Digital Government Authority;
Jayesh Maganlal, group chief information and digital officer at Roshn;
Abdullah Biary, chief information security officer at United Cooperative Assurance;
Filip Nekvinda, chief information and digital officer at Abdul Latif Jameel Enterprises;
Ibraheem Sheerah, CTO at Saudi Airlines Holding;
Akram Nour, chief digital transformation at the Economic Cities and Special Zones Authority;
Naser Al Abeedi, director of IT strategies and architecture at Ma'aden;
Irfan Bhatti, vice president for enterprise architecture & core banking at Banque Saudi Fransi;
Atiq Bajwa, director enterprise risk management at Saudi Arabia Military Industries;
Bander Al Shahrani, head of digital and innovation at PIF-owned Ardara;
Mahmoud Bin Eid, training planning director at the Ministry of Communications and Information Technology.

An extra for startups: DTS is hosting the Riyadh Startups Showdown which is part of the Startup World Cup 2024 Silicon Valley Regional competitions.

What’s next? Exito is also hosting the Saudi Manufacturing Show which is set to feature tech executives from the local manufacturing sector on Thursday, 6 June. The invite-only event exclusively for tech leaders and government officials has discussions on the agenda including the impact of future trends and emerging tech on the future of manufacturing, cybersecurity, and AI-enabled manufacturing.

Speaking at the show:

Luay Ayyash, director of construction at The Royal Commission for AlUla;
Anbasa Kandiel, advisor to the vice minister of Industry and Mineral Resources;
Mohammed Alshangiti, director of the Procurement Center of Excellence at Ma’aden;
Ahmad Khraishi, executive director at Dussur;
Faisal AlNasser, CIO at Almarai;
Wassim Ghaida, director of operations at AlYemni Group;
Damian Baldysz, manufacturing systems director at Ceer;
Ali Mousa Al-Jabrah, CEO at Astra Mining.

Prince Alwaleed’s investment into Musk’s AI startup is getting attention

Prince Alwaleed bin Talal and his investment company Kingdom Holding’s investment into Elon Musk’s AI startup xAI is leading the conversation on Saudi in the foreign press this morning, with coverage from the New York Times | The Guardian | CNN. The series B round is also making the rounds — sans mention of Saudi — in Bloomberg | Reuters | Financial Times. We have chapter and verse in the newswell, above.

PIF launches space company in localization drive

REAL ESTATE-

#1- Sports Boulevard doubles value of real estate fund: The Sports Boulevard Foundation is doubling the value of its private real estate investment fund Sports Boulevard Real Estate Fund 1 to SAR 2 bn under a partnership with Ajdan Real Estate Development Company and Albilad Capital, according to a statement. The fresh funds were earmarked to boost the “private sector participation” in the Arts District — one of Sports Boulevard’s eight districts — it said in a statement.

A look at the fund’s structure: The Sports Boulevard Development Company remains the major unitholder in the fund, with the structure seeing Ajdan Real Estate Development Company as a developer and primary investor and Albilad Capital as the fund manager.

About the Riyadh megaproject: Inspired by Salmani architectural style, Sports Boulevard — one of the capital’s megaprojects — is a large-scale linear park that aims to promote the capital to be among the world’s most liveable cities. It spans over 135 km on Prince Mohammed bin Salman bin Abdulaziz Road to connect the capital’s east to the west through dedicated green pathways for athletes, cyclists, pedestrians and others.

#2- PIF-backed master developer Diriyah Company broke ground on a premium office space in Diriyah, the original home of the Saudi royal family, state news agency SPA reported. It will build five low-rise sustainable office buildings offering 39k sqm of gross leasable area and a total gross floor area of 47k sqm. The exterior facade of the buildings, which could accommodate 4k people, will be inspired by the traditional Najdi architecture.

#3- Roshn partners up with Saudi Credit Bureau for accurate home-buying info: PIF-backed real estate developer Roshn inked an agreement with the Saudi Credit Bureau (Simah) to enhance the home-buying experience for its customers using precise financial data, it said in a post on X. No further details were provided.

HOSPITALITY-

#4- Nujuma — the first Ritz-Carlton reserve in the region — opened its doors earlier this week to welcome its first guests, according to a statement. The 63-key resort is located on PIF-backed Red Sea Global’s Ummahat Islands. Nujuma is Red Sea Global’s third operational resort after the Six Senses Southern Dunes and the St Regis Red Sea Resort.

Already breaking records: Stays at Nujuma start from SAR 9.9k (c. USD 2.6k) per night, beating Dubai’s Burj Al Arab as the most expensive hotel in the region. Villa rates at the Maldives-inspired island retreat start from SAR 8.8k per night, while its most expensive Royal Nujuma Villa has rates starting at SAR 81k per night.

EARNINGS WATCH-

Abdul Mohsen Al Hokair Group for Tourism and Development (Al Hokair Group) has trimmed its accumulated losses by 1.3% to reach 34.9% of its current capital, or SAR 110 mn, it said in a disclosure to Tadawul. Al Hokair Group has taken steps to cut accumulated losses, including restructuring the company’s sectors, divesting from “poorly performing projects” that generate losses among others.

SPACE-

The Public Investment Fund launched a commercial satellite and space company named Neo Space Group, it said in a press release. “The group will invest in localization, technology, start-ups, and knowledge in the space and satellite sector in Saudi Arabia.” The Kingdom could be running space tourism trials later this year, Saudi Space Agency CEO Mohammed Al Tamimi said at the Future Aviation Forum last week. “Within a window of 60 days from now, there will be an announcement to do some trials here in Saudi Arabia about space tourism,” he said.

DEBT WATCH-

Alkhorayef Water and Power Technologies obtained a Shariah-compliant banking facility worth SAR 275 mn from Bank Albilad, it said in a disclosure to Tadawul. The funding will be channeled to issue all types of governmental and non-governmental guarantees, letters of credit, and payments for projects.

INFRASTRUCTURE-

The Royal Commission at Yanbu signed an MoU with local SkyTower Investments to develop petrochemical, speciality chemicals and renewable energy projects, it said in a post on X. The MoU comes under the commission’s plan to lure in local and foreign investments to the Yanbu Industrial City. No further details were provided.

HEALTHCARE

Nomu-listed healthcare provider Al Modawat Specialized Medical will fast-track the expansion of its general hospital in Asir “to address high occupancy rates,” it said in a disclosure to Tadawul. The hospital’s expansion is expected to cost SAR 16.3 mn, though the final cost could vary with labor expenses, Al Modawat said. The hospital group first announced the expansion in March.

About the expansion plan: The expansion of the western building spans 3k sqm in the second floor to add inpatients rooms, while the eastern building will see the addition of 42 clinics and a radiology department spanning an area of 3.6k sqm. It will also see a 2k sqm area that includes a men’s gym and another 2k sqm that includes a women’s gym.

Al Hokair Group Al Modawat Specialized Medical Alkhorayef Water and Power Technologies ALSO ON OUR RADAR Bank Albilad Diriyah Neo Space Group (NSG) Public Investment Fund (PIF) Roshn Royal Commission at Yanbu Saudi Credit Bureau (Simah) SkyTower Investments Sports Boulevard Foundation Sports Boulevard Real Estate Fund 1

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PLANET FINANCE

ECB on track to cut interest rates next week, top bank officials suggest

The European Central Bank could start cutting interest rates as early as its June 6 meeting, the bank’s chief economist Philip Lane said in an interview with the Financial Times. “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction,” Lane said. A cut would make the ECB the first major central bank to loosen monetary policy after raising rites almost three years ago to tamp down inflation.

AND- Finland’s central bank governor is also suggesting the cut will come in June. Olli Rehn, who also sits on the ECB’s governing council, said yesterday that inflation is falling across the Eurozone “in a sustained way,” meaning “the time is thus ripe in June to ease the monetary policy stance and start cutting rates.” He flagged geopolitics and oil prices as risks to that forecast.

Don’t expect the ECB to go nuts: While rate cuts are on the cards, interest rates will need to stay high enough to keep a lid on inflation, Lane suggested. “Things will be bumpy and gradual. The best way to frame the debate this year is that we still need to be restrictive all year long,” he said.

The trigger: Eurozone inflation registered 2.4% in April, down from a peak of over 10% in October 2022, inching closer to the bank’s 2% target. Cooling inflation data have led investors to pencil in a 25 bps cut for the benchmark deposit rate at next week’s meeting, the FT reports.

When can we expect rates to normalize? “Under the baseline forecasts, next year, when we expect wages to have visibly decelerated, when some of the base effects of fiscal measures which are pushing up inflation this year have faded out, then there will be a discussion about normalization,” Lane said.

Uh, Enterprise? What does that mean in plain English? Lane is suggesting the ECB is watching for two things on the inflation front before more aggressively cutting rates: For wages to grow at a slower pace next year — and for economies to fully adjust to the phase-out of energy subsidies and tax cuts. The subsidies and tax cuts were designed to shield consumers from high energy prices after Russia’s invasion of Ukraine and to ease the bite of inflation. They were in place throughout 2023 and are being phased out in much of the Eurozone this year.

Remember: The ECB held rates steady at its last policy meeting in April, keeping the deposit rate at a record 4% that’s been in place since September.

WHAT TO WATCH for later this week: Friday’s release of US core personal consumption expenditures, a key gauge watched by the Fed.

MARKETS THIS MORNING-

Asian markets are mixed this morning, with the Nikkei and Shanghai Composite both starting the day in the red, while the Kospi and Hang Seng are basically flat. Traders seem to have welcomed the ECB’s remarks as they look forward to a shorter trading week in the US and UK, where futures were up in overnight trading. European futures are also up at dispatch time.

SOUND SMART- Why do equities traders care about interest rates? Lower rates mean lower returns for investors in debt, resulting in more money in the hands of businesses and consumers. As debt yields decrease, some investors will shift back into stocks in search of better returns, even though stocks are generally more volatile than debt.

TASI	11,831	-0.2% (YTD: -1.1%)
MSCI Tadawul 30	1,470	-0.2% (YTD: -5.2%)
NomuC	26,449	-0.7% (YTD: +7.8%)
USD : SAR (SAMA)	3.75 Sell	3.75 Buy
Interest rates	6% repo	5.5% reverse repo
EGX30	27,287	-0.9% (YTD: +9.6%)
ADX	8,831	0.00% (YTD: -7.8%)
DFM	4,027	+0.4% (YTD: -0.8%)
S&P 500	5,305	+0.7% (YTD: +11.2%)
FTSE 100	8,318	-0.3% (YTD: +7.6%)
Euro Stoxx 50	5,059	+0.5% (YTD: +11.9%)
Brent crude	USD 83.10	+1.2%
Natural gas (Nymex)	USD 2.50	-0.7%
Gold	USD 2,376	+0.8%
BTC	USD 69,647	+1.4% (YTD: +64.9%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.2% yesterday on turnover of SAR 5.9 bn. The index is down 1.1% YTD.

In the green: Spm (+4.9%), Chubb (+4.0%) and Mesc (+3.5%).

In the red: East Pipes (-5.8%), Riyadh Cables (-5.6%) and Saudi German Health (-3.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.7% yesterday on turnover of SAR 28.6 mn. The index is up 7.8% YTD.

In the green: Osool and Bakheet (+9.2%), View (+6.5%) and Al Modawat (+6.2%).

In the red: Naseej Tech (-9.2%), Marble Design (-8.5%) and Al Mohafaza For Education (-7.3%)

CORPORATE ACTIONS-

The Capital Market Authority has cleared the merger between two of SNB Capital’s GCC equity funds into one entity, it said in a statement. The SNB Capital Al Ataa GCC Equity Fund and SNB Capital Al Jood GCC Equity Fund were merged into the SNB Capital GCC Growth and Income Fund.

Arab foreign ministers, European counterparts voice support for “irreversible steps” towards two-state solution

A ceasefire in Gaza and “irreversible steps” towards a two-state solution for Palestine and Israel were the two biggest talking points in Brussels yesterday, where Arab foreign ministers led by Foreign Minister Prince Faisal bin Farhan met with their European counterparts, the Foreign Ministry said in a post on X. The meeting, which was co-hosted by bin Farhan and his Norwegian counterpart Espen Barth Eide, saw discussions on “concrete measures” to establish a two-state solution through empowering the Palestinian Authority — which is controlled by Hamas rival Fatah.

All for peace in the region: The meeting aimed to “realize a just, comprehensive and lasting peace” that guarantees the rights of the Palestinian people and the security of Israel and the wider region, the ministers said. “This will pave the way for normal relations among nations in the region,” the statement said, without providing further details.

Rafah assault must end: The Arab FMs stressed during a meeting with the EU Foreign Affairs Council the necessity of the international community undertaking its responsibilities to stop the massacres in Rafah, state news agency SPA reported. The meeting came hours after an Israeli airstrike killed at least 45 people, including women and children, at a tent camp in Rafah overnight. The attack by Israeli forces, which caused global outrage, comes days after the top UN court ordered Israel to halt its attacks on Rafah.

CALENDAR

MAY

26-27 May (Sunday-Monday): Bookbuilding for retail investors in Smasco IPO.

27-28 May (Monday-Tuesday): Smart Data & AI Summit Saudi, JW Marriott Hotel, Riyadh.

29 May (Wednesday): Sanabil 500 MENA seed accelerator demo day, Four Seasons Hotel, Riyadh.

Signposted to happen sometime in May:

Global Trade Review (GTR): KSA
Saudi Energy Convention

JUNE

2 June (Sunday): OPEC+ meeting.

2-3 June (Sunday-Monday): Global Project Management Forum, Riyadh.

3-4 June (Monday-Tuesday): Electronic Applications Exhibition, Al Dammam.

4-7 June (Tuesday-Friday): Saudi Sports Show, Riyadh.

4-7 June (Tuesday-Friday): Aqarat Expo, Riyadh.

5 June (Wednesday): GROWTH Summit Riyadh, InterContinental Riyadh, Riyadh.

5 June (Wednesday): World Environment Day.

5 June (Wednesday): Digital Transformation Summit, Riyadh.

6 June (Thursday): Saudi Manufacturing Show, Riyadh.

10 June (Monday): #teamLabBorderless, Jeddah.

10 June (Monday): Deadline to register for school bus services for the upcoming academic year.

14-22 June (Friday-Saturday): Banks and capital markets closed for Eid Al Adha holiday.

JULY

4 July-25 August: (Thursday-Sunday): Esports World Cup, Boulevard Riyadh City, Riyadh.

10-11 July: (Wednesday-Thursday): Global EV & Mobility Tech Forum, Riyadh International Convention & Exhibition Center, Riyadh.

AUGUST

12-15 August (Monday-Thursday): The Saudi Food Expo, Riyadh

SEPTEMBER

10-12 September (Tuesday-Thursday): Global AI Summit, Riyadh.

11-12 September (Wednesday-Thursday): The Saudi Event Show, Riyadh.

17-19 September (Tuesday-Thursday): EV Auto Show, Riyadh.

18-19 September (Wednesday-Thursday): Saudi Maritime & Logistics Congress, Dammam.

24-26 September (Tuesday-Thursday) Saudi Infrastructure Expo, Riyadh International Convention and Exhibition Center, Riyadh.

23 September (Monday): National Day (national holiday).

OCTOBER

21-22 October (Monday-Tuesday): Smart Ports & Logistics Transformation Summit, Riyadh.

29-31 October (Tuesday-Thursday): Future Investment Initiative Conference, Riyadh.

31 October (Thursday): No-visa travel for Saudis to Montenegro on charter flights expires.

NOVEMBER

2-9 November (Saturday- Saturday): WTA Finals, Riyadh.

26-28 November (Tuesday-Thursday): Saudi Electricity Expo, Riyadh.

11-14 November (Monday-Thursday): Cityscape Global, Riyadh.

18-20 November (Monday-Wednesday): The Heavy Equipment and Truck Show, Dammam.

25-27 November (Monday-Wednesday): World Investment Conference, Riyadh.

26-28 November (Tuesday-Thursday): Saudi Electricity Expo, Riyadh.

DECEMBER

2-13 December (Monday-Friday): Conference of the Parties (COP16) to the United Nations Convention to Combat Desertification, Riyadh.

11 December (Wednesday): FIFA Congress, which will decide the hosting countries for the FIFA World Cup 2030 and 2034

Signposted to happen sometime in 2024:

The AFC Champions League Elite

2025

FEBRUARY 2024

10-13 February (Monday-Thursday): Leap 2025, the Kingdom’s premier tech investment conference.

2026

UN Trade and Development Global Suppl Chain Forum to take place in Saudi Arabia.

2027

World Water Forum takes place in Riyahd.

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