Everything’s on track at Neom, officials say

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WHAT WE’RE TRACKING TODAY

Spanish gov’t ups stake in Telefonica in bid to counter Stc — just as Housing Minister AL Hogail lands in town

Good morning, friends. It’s a brisk morning for news on this hump day. Assurances on Neom, lower growth forecasts, and, of course, tensions between Iran and Israel dominate this morning’s news report.

UP FIRST- Driving the news agenda today:

#1- It’s day two of the IMF and World Bank spring meetings in Washington, DC. Today’s highlights: The release of the latest IMF World Economic Outlook and chapter one of its Global Financial Stability Report. You can check out today’s schedule here.

Why it matters: The WEO is a closely-watched gauge that helps set sentiment about the global economy. We’ll have full coverage tomorrow.

#2- Housing Minister Majed Al Hogail began an official three-day visit to Spain yesterday for talks with Spanish officials on housing, infrastructure and real estate development among other topics, according to state news agency SPA.

Will Spanish protectionism be on the agenda, too? Spain’s government continues to buy shares of mobile network operator Telefonica, increasing its stake yesterday for the second time in three weeks as it looks to keep ahead of Stc, which is also accumulating shares. The latest buy gives Spanish state investment firm Sepi a 5% stake after it accumulated another 2% in recent days.

The end-game: Edging out Stc as a major shareholder. “The [Spanish] government aims to buy as much as 10% of Telefonica’s shares as soon as possible, which would leave it a step ahead of the Saudi state-backed telecom’s plan to take a 9.9% stake,” per Bloomberg.

#3- Foreign Minister Prince Faisal bin Farhan arrived in Pakistan yesterday for talks on potential Saudi investment there, according to state news agency SPA. The visit comes nearly a week after Pakistan’s PM discussed a USD 5 bn investment package during a meeting in Makkah with Crown Prince Mohammed bin Salman.

REMEMBER- The Kingdom has been among key backers of the financial crisis-hit Pakistan, which is struggling with depleted foreign reserves. Saudi extended the term of its USD 3 bn in deposits at the State Bank of Pakistan through December of this year. The country also received last year USD 2 bn in financial assistance from the Kingdom to shore up finances.

WEATHER- Look for intermittent thunderstorms today and tomorrow in Riyadh, Eastern Province and Al Qassim, according to our favorite weather app. Public safety officials continue to warn against the risk of flash floods.

WATCH THIS SPACE-

#1- Saudization of sales professionals in the ins. industry is now in effect, the Ins. Authority said in a post on X. Foreign workers in the industry can no longer be compensated with sales commission.

#2- The local arm of wealth manager Fisher Investments has gotten the okay to offer investment management and advisory services, according to a Capital Market Authority statement.

#3- Just two weeks to go for a fresh mining round for six exploration licenses: The Industry and Mineral Resources Ministry has set Wednesday, 1 May as the deadline for domestic and international mining outfits to submit technical bids for six exploration licenses, data from the ministry showed. The ministry hopes prospectors will find gold, silver ores, copper, zinc, and lead.

BACKGROUND- The ministry unveiled last month a fresh incentives package worth SAR 685 mn to boost mineral exploration in the Kingdom. The program is being rolled out in collaboration with the Investment Ministry and aims to reduce early-stage risk for exploration companies.

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THE BIG STORY ABROAD-

Israel’s senior military officer signaled yesterday that “missiles into the territory of the State of Israel will be met with a response.” Herzi Halevi was speaking in a carefully choreographed set piece, standing in front of an F-35 fighter jet on one of the air bases Iran had targeted in the Sunday missile and drone attack.

WHERE WE STAND NOW: Officials in the Arab world and the West are still working overtime to try to tamp things down, with the United States, the European Union, Germany, France and the UK all urging Israel to hold back. (FT | WSJ | NYT | Politico)

Saudi was not involved in a coalition that helped Israel intercept Iranian drones, sources familiar with the matter told Al Arabiya. The sources denied reports in Israeli media suggesting that Arab forces took part in downing drones. A Wall Street Journal piece yesterday talked up intelligence sharing between the US and its regional allies in the lead up to Iran’s strike.

The tone abroad: A dangerous turning point in the Middle East (FT)

Regional markets were mixed as traders took things in stride: The Tadawul was up slightly, as was the ADX, while the DFM was basically flat.

US markets reacted much as Mohamed El Erian suggested they would, with major benchmarks sagging at the closing bell. Traders of European equities took things with a bit more equanimity as major benchmarks closed up or little changed yesterday. Oil and gold were up a little bit in overnight trading.

The EnterpriseAM Hyperbole Award™: “We’re now in the prelude to World War III precisely when humanity should rebuild its economy towards the rapid goal of decarbonization.” CNBC used the “prelude to World War III” bit in its front-page coverage of sentiment.

Other headlines worth knowing about:

Sales of Apple’s iPhone lineup may have fallen as much as 10% in 1Q 2024, according to independent data, losing a bit of ground as Samsung launched its S24 lineup and Chinese manufacturers Xiaomi and Transsion picked up steam in their home market. (Financial Times)
Tesla is laying off up to 10% of its global workforce, CEO Elon Musk said in a memo to employees. The company’s shares were down 3% on the news. (CNBC)
Goldman Sachs’ 28% bottom-line growth beat analyst expectations, sending its stock up 3%. Advisory work, underwriting fees, and bond trading fueled profit growth. (Reuters)

OIL WATCH-

Analysts at Citigroup have raised their forecasts for West Texas International by USD 8 a barrel in the short term as the situation between Israel and Iran escalates, Bloomberg reports. The bank expects WTI to hit USD 100 per bbl if the conflict drags out. “What is not priced into the current market … is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade above USD 100 per bbl,” the business information service reports, citing a note by analysts including Max Layton.

How bad could it get? Societe Generale’s Global Head of Commodities Research sees Brent crude, the “European” benchmark, rising as high as USD 140 should a wider regional conflict take a more serious form, putting pressure on Iran’s oil supply. United Overseas Bank shares the same view.

CIRCLE YOUR CALENDAR-

The Gulf Film Festival (GFF) runs through Thursday, 18 April in Riyadh. Organized by the Film Commission in cooperation with the Gulf Cooperation Council (GCC) General Secretariat, the five-day event will showcase a selection of 29 films from across the region. It will also include three training workshops and six educational seminars focused on fostering artistic dialogue and raising awareness of cinema’s social impact.

Riyadh will host a special meeting of the World Economic Forum on 28-29 April.

Automechanika Riyadh will open on Tuesday, 30 April till Thursday, 2 May at the Riyadh International Convention and Exhibition Center.The annual trade fair will showcase the automotive industry’s latest advances and innovations.

The King Salman bin Abdulaziz Royal Reserve Festival will kick off today at the Cultural Center in Al-Qurayyat governorate, state news agency SPA reports. The art and culture event runs until Thursday, 18 April.

Everything is on track at Neom, officials tell global contractors after report of a slower build-out

Business as usual at Neom? Some 100 global construction firms got briefings on Neom’s construction progress at a two-day industry forum held days after Bloomberg suggested a slower buildout of the USD 500 bn mega development, according to a statement by Neom. They were briefed on progress in Neom’s flagship project The Line, the Spine Oxagon, Trojena, and Neom International Airport. The identities of the participating contractors in the forum were not disclosed, but Neom said the forum saw participation from firms from Asia, Europe, North America and North Africa as well as Saudi builders.

Workforce set to grow: The statement set the current construction workforce at Neom at over 140k, a figure Neom officials think will grow to more than 200k by 2025 as contractors expand their head count to keep pace with work orders.

What they said: “As we go into our busiest ever phase of development, the scale of potential across Neom is monumental. With projects progressing fast across all parts of the region, we are committed to collaborating with globally renowned contractors to achieve the vision of Neom,” Neom CEO Nadhmi Al Nasr said.

BACKGROUND- Bloomberg said planners had scaled back their estimate for how many people will live in The Line by 2030, saying it would come in at a bit under 300k compared to the original 1.5 mn. That suggested a slower buildout with at least one of the contractors working on the project set to layoff some of the workers on site, the business information service wrote.

World Bank sees Saudi growth at 2.5% in 2024, down from its previous estimate of 4.1%. Oil production caps are to blame.

The World Bank has slashed the Kingdom’s growth forecast to 2.5% in 2024, down from the 4.1% it penciled in January 2024, according to the lender’s latest MENA economic update (pdf). The Finance Ministry is targeting GDP growth of 4.4% in its budget for this fiscal year, Finance Minister Mohamed Al Jadaan said in December 2023.

IN CONTEXT: That’s in line with the International Monetary Fund forecast. It said in January that it sees the domestic economy growing at a 2.7% pace this year. The economy contracted 0.9% last year, down from 8.7% growth in 2022.

The silver lining: The non-oil economy will grow a strong 4.8% in 2024, up from the 4.3% that was penciled in in November 2023, the World Bank said. That’s broadly in line with official guidance, with Economy and Planning Minister Faisal Alibrahim having said at the World Economic Forum in January that non-oil GDP should grow 4.5-5.0% this year.

Looking ahead: The multilateral lender expects the local economy to grow 5.9% next year, up from its January 4.2% forecast. This is in line with the IMF’s January forecast of a 5.5% growth in 2025. GDP per capita is expected to grow 0.5% this year and 3.8% in 2025, up from a contraction of 2.8% in the previous year.

Fiscal balance: The budget deficit is expected to widen to 2.4% of GDP this year on falling oil receipts, up from 2.1% in the previous year, the report shows. Meanwhile, the government is penciling in a lower deficit of 1.9% of GDP for this fiscal year.

REGIONALLY- The multilateral lender is forecasting 2.8% growth in the GCC this year and 4.7% in 2025, the World Bank suggests, saying it expects voluntary oil production cuts to be phased out. It’s also expecting a 2.7% growth for the MENA region this year and 4.2% in 2025, matching pre-pandemic levels.

Consumer prices broke an upward trendline on an annual basis in March 2024

Inflation reversed a two-month upward trend, dipping to 1.6% y-o-y in March 2024, down from 1.8% in February, according to the latest figures from the General Authority for Statistics (GASTAT) (pdf).On a monthly basis, consumer prices dipped 0.1% m-o-m last month, fueled by a 0.7% m-o-m decrease in utility prices. You can dive deeper into GASTAT’s full report on February’s average prices of goods and services here.

What’s getting more expensive? Anything having to do with real estate, of course. Rent was up 10.5% y-o-y in March 2024, reflecting a 9.7% increase in the price of villas, even though prices in the furnishing and home equipment sector fell 3.2% y-o-y, mainly due to a 5.3% price decrease in furniture, carpet, and flooring prices. Utility and fuel prices rose 8.8% y-o-y.

Also more expensive: The price of food products, beverages, tobacco, and textiles were up 2.4% y-o-y last month, reflecting a 10% increase in the price of leather goods as well as by a 4.9% increase in the prices of grain mill products, starches, and other food products, according to GASTAT’s latest Wholesale Price Index (pdf). Education was also up 1.2% y-o-y fueled by a 4.3% increase in the cost of secondary education. Additionally, food and beverages inched up 0.9% y-o-y, and culture and recreation prices were up 0.7% on the back of a 5.1% rise in package holiday prices.

Clothing and footwear lead the list of goods that were less costly, falling 4% y-o-y driven by a 6.6% decrease in ready-made clothing prices. It’s the second month in a row that clothing and footwear prices have fallen.

Producer prices rose 3.8% y-o-y in March, driven by a 25.2% increase in basic chemicals’ prices, and a 12% hike in refined petroleum products and a 25.2%, according to the latest GASTAT figures (pdf). On a monthly basis, wholesale prices inched up 0.4% m-o-m in March.

Real estate prices inched up 0.6% y-o-y in 1Q 2024, fueled by a 1.2% y-o-y increase in the prices of residential properties, GASTAT figures show (pdf). Meanwhile, the prices of commercial properties dipped 0.5% y-o-y, and that of agricultural properties remained basically unchanged, dipping 0.1%.

Budget Saudi unit acquires 70% of UAE freight forwarder Overseas Development

Budget Saudi subsidiary acquires majority stake in Overseas Development in UAE: Aljozoor Alrasekha Trucking (Rahaal) — a wholly-owned subsidiary of vehicle rental firm Budget Saudi —- has signed a sale and purchase agreement to acquire a 70% stake in UAE freight forwarder Overseas Development ’s subsidiary in the UAE. The transaction was valued at AED 13.3 mn (c. SAR 13.6 mn), Budget said in a disclosure to Tadawul.

Rahaal is on the move: It acquired in November a 70% stake in Overseas Development’s Saudi subsidiary, having inked back in July 2022 an MoU that could also see it take a stake of the same size in Overseas’ Kuwait unit.

About the company: Founded in 1976 in Jeddah, Overseas Development provides industry-specific logistics, shipping and freight services across the Kingdom, Kuwait, the UAE, and Lebanon. The company also offers customs brokerage and ins. services for its sea, land and air shipments, according to its website.

Procurement startup Penny Software raises pre-series A round

Homegrown B2B SaaS procurement platform Penny Software has raised an undisclosed amount in a pre-series A funding led by Dubai-based venture capital firm Iliad Partners, according to a statement by the company yesterday. The funding round also saw GSI Ventures and US-based Knollwood Investment Advisory participate alongside existing investors, including Dallah Investment, Hambro Perks Oryx Fund, Class 5 Global, Altuwajiri family fund, and strategic angel investors.

What does Penny Software do? The cloud-based source-to-pay platform digitizes and oversees procurement cycles from request to approvals. It aims to streamline and centralize all procurement requirements through handling sourcing, comparing quotes, issuing purchase orders, and facilitating payments. Penny was founded in 2020

Where are the funds going: The fresh funds will be channeled towards Penny’s plans for regional and global expansion, it said, without providing further details on target countries. It said an investment by Iliad Partners — the first by the VC firm in Saudi — will see it “strategically positioned to capture significant growth” in the global procurement software market.

Penny expects some USD 1 bn in gross transaction value to be managed on its platform this year.

What they said: “We are excited to leverage this partnership to scale our operations, enhance our product offering, and solidify our position as a leader in the procurement software industry,” Penny Software CEO and Co-Founder Iyad Aldalooj said.

ICYMI- Penny Software raised USD 5 mn in 2022 in a seed round that was led by US-based Outliers Venture Capital, with investments from Shorooq Partners, Hambro Perks ORYX Fund, Class 5 Global, and strategic angel investors. The funds were directed towards the company’s global expansion plans.

Saudi Fisheries dismisses CEO, appoints CFO as temporary chief

The board of Tadawul-listed Saudi Fisheries (Sfico) has named Mahmoud Abdul Hay Abu Aqeel as its acting CEO after it “relieved” Awad Farouk Al Desoukiof his duties, it said in a disclosure to Tadawul yesterday. Aqeel has been Sfico’s chief financial officer since 2022 and has some 17 years of industry experience.

Sfico is a major producer and distributor of fresh and frozen fish and fish products. The company reported deeper losses last year even as revenues ticked up.

The sales volume of 17 cement manufacturers declined 14% y-o-y in March. PLUS: Debt, hospitality news

MANUFACTURING-

The total sales of 17 local cement manufacturers were down 14.3% y-o-y to 3.7 mn tons in March, with Northern Region Cement leading the drop with a 63% fall in sales, according to data seen by Argaam. Only four of them recorded higher sales on an annual basis last month led by Umm Al-Qura Cement’s 36% increase in sales.

MEANWHILE- Al Jazira Capital expects cement producers under its active coverage to see their net income rise almost 33% y-o-y in 1Q 2024.

REAL ESTATE-

Dar Al Arkan to develop villas in Roshn’s Sedra: PIF-backed real estate developer Roshn signed an agreement worth over SAR 215 mn with partner developer Dar Al Arkan — one of Saudi’s largest listed real estate developers — to develop residential villas for the first phase of its flagship Sedra project in Riyadh, state news agency SPA reported yesterday. No further details were provided.

About Sedra: The flagship development, which is being built over 35 mn sqm, is set to add more than 30k residential units to the capital. It is being developed in eight phases, with Roshn announcing last month the launch of the fourth phase of the project.

DEBT WATCH-

IT service provider and consulting Perfect Presentation Commercial Service (2P) has renewed a shariah-compliant SAR 80 mn credit facility with SAB through 31 December 2024, it said in a disclosure to Tadawul. The company also secured a SAR 46 mn project from Umm Al-Qura University, it said in a separate filing.

HOSPITALITY-

Al Hokair Group said it began preparations to provide catering services in one of Neom’s residential complexes within the timetable agreed under its contract with Al Fanar Group-affiliated Alpha Facilities Contracting, it said in a disclosure to Tadawul yesterday. The local hospitality player has recruited the needed personnel, and obtained the first supply of required materials for the project, it added. Al Hokair Group was awarded the SAR 760 mn project by Alpha General Contracting in December last year.

European Central Bank will likely cut rates this summer

ECB to cut rates in June? The European Central Bank (ECB) will start cutting interest rates in June, Governing Council member Francois Villeroy de Galhau told French newspaper Le Journal du Dimanche over the weekend. “Bar a surprise, we should decide on the first cut at our next meeting on 6 June … Our cut early June will have to be followed by other cuts by year-end,” he said.

Where rates currently stand: The ECB kept rates unchanged when it met last Thursday, keeping the deposit rate at a record 4% in place since September.

Meanwhile in the US, June cuts are looking less likely: Traders have ruled out the Federal Reserve slashing rate over the summer — some have penciled in mid-September for when the Fed will start cutting rates, while some don’t see the Fed cutting rates at all this year, Reuters reports. This came in response to March’s inflation data coming in hotter than expected — consumer price inflation rose 3.5% y-o-y up from 3.2% the month before.

THE MARKETS THIS MORNING-

Major Asian benchmarks are all substantially in the red this morning, following Wall Street’s lead: Korea’s Kospi is off 2.1%, the Nikkei is down 1.6%, and the Hang Seng has lost 1.2%. The Shanghai composite is fairing a bit better — it’s off just 0.8% after China reported its economy grew 5.3% in 1Q 2024, beating expectations.

European and US stock futures are largely unchanged but point to a lower opening later today.

TASI	12,708	+0.3% (YTD: +6.2%)
MSCI Tadawul 30	1,610	-0.3% (YTD: +3.8%)
NomuC	26,549	+0.6% (YTD: +8.2%)
USD : SAR (SAMA)	3.75 Buy	3.75 Sell
Interest rates	6.5% repo	5.5% reverse repo
EGX30	29,616	+3.9% (YTD: +19%)
ADX	9,254	+0.2% (YTD: -3.4%)
DFM	4,244	-0.01% (YTD: +4.5%)
S&P 500	5,062	-1.2% (YTD: 6.1%)
FTSE 100	7,966	-0.4% (YTD: +3%)
Euro Stoxx 50	4,984.5	+0.6% (YTD: +10.2%)
Brent crude	90.2	-0.3%
Natural gas (Nymex)	1.7	-4.5%
Gold	2,401	+1.1%
BTC	64,602.8	+0.6% (YTD: +54%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.3% yesterday on turnover of SAR 9.7 bn. The index is up 6.2% YTD.

In the green: Saudi Cable (+9.9%), Chemical (+7.6%) and Salama (+7.2%).

In the red: Tadawul Group (-2.7%), Solutions (-2.3%) and Zoujaj (-2.2%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.6% yesterday on turnover of SAR 103.7 mn. The index is up 8.2% YTD.

In the green: AlBabtain Food (+9.5%), Amwaj International (+8.6%) and Meyar (+5.6%).

In the red: Raoom (-7.7%), AlMohafaza (-4.7%) and Al Naqool (-3.7%)

CORPORATE ACTIONS-

Saudi Arabian Mining Company (Ma’aden)’s BoD recommended a 5.7 mn share buyback, to be allocated to its employee stock ownership program, it said in a disclosure to Tadawul.

Bin Farhan talks green energy with Uzbek leader

Green projects top the agenda for bin Farhan in Uzbekistan: Foreign Minister Prince Faisal bin Farhan discussed with Uzbek President Shavkat Mirziyoyev ongoing green energy projects by Saudi in the Central Asian country, Central Asian news agency Trend reported yesterday, citing the Uzbek president’s office. They also discussed potential cooperation in agriculture, health, IT and revamp of transport infrastructure among other sectors.

REMEMBER- Saudi and Uzbekistan signed agreements worth USD 12 bn in November that will see the kingdom invest in everything from energy, agriculture, chemistry and IT to pharma and infrastructure.

Saudi ❤️ Uzbekistan’s renewables: Saudi renewables giant Acwa Power has poured some USD 7.5 bn into renewable energy projects in Uzbekistan to date. The projects are set to produce some 25 GW of renewable energy by 2030, slashing emissions by 3 mn tons. It recently signed a SAR 985 mn power purchase agreement with the National Electric Grid of Uzbekistan (NEGU) for the development of the 200 MW Nukus 2 wind farm along with an accompanying battery energy storage system (BESS) facility.

The FM also participated in the Gulf Cooperation Council-Central Asian countries summit in Tashkent, where discussed the crisis in Gaza and the urgency of an immediate ceasefire in the war-torn strip, state news agency SPA reported. He also took part in the Gulf Ministerial Council (GCC) extraordinary meeting in the Uzbek capital which saw participating ministers agreeing on the importance of an immediate de-escalation in the region to preserve peace and stability, according to state news agency SPA.

CALENDAR

APRIL

11-20 April (Thursday-Saturday): IMF and World Bank spring meetings, Washington, DC.

14-18 April (Sunday-Thursday): The King Salman bin Abdulaziz Royal Reserve Festival, Al-Qurayyat.

16 April (Tuesday): FEI World Cup Equestrian, Riyadh.

28-29 April (Sunday-Monday): World Economic Forum Special Meeting, Riyadh.

29 April-1 May: Future Hospitality Summit at Al Faisaliah Hotel, Riyadh.

30 April-2 May: Automechanika Riyadh 2024 at Riyadh International Convention and Exhibition Center.

MAY

2-5 May (Thursday-Sunday): Townhall Expo, Riyadh.

6-9 May (Monday-Thursday): Saudi Smart Manufacturing, Riyadh.

6-9 May (Monday-Thursday): Saudi Smart Logistics, Riyadh.

13-15 May (Monday-Wednesday): Smart Future Expo, Riyadh.

13 May (Monday): Saudi Giga Projects, Riyadh.

19-21 May (Sunday-Tuesday): Saudi Energy Convention, Riyadh.

20-21 May (Monday-Tuesday): Future Projects Forum, Four Seasons Hotel, Riyadh.

20-22 May (Monday-Wednesday): Future Aviation Forum 2024, Riyadh.

21-23 May (Tuesday-Thursday): The Saudi Food Show, Riyadh.

Signposted to happen sometime in May:

Global Trade Review (GTR): KSA
Saudi Energy Convention

JUNE

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

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

5 June (Wednesday): World Environment Day.

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

AUGUST

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

SEPTEMBER

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

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

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

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

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.

DECEMBER

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

Signposted to happen sometime in 2024:

The AFC Champions League Elite

2025

FEBRUARY

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

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