To read the full report, please download the PDF above.

MENA Monthly Compendium

EHSAN KHOMAN
Head of Commodities, ESG and
Emerging Markets Research –
EMEA
DIFC Branch – Dubai
T:+971 (4)387 5033
E: ehsan.khoman@ae.mufg.jp

 

SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +44(4)387 5031
E: soojin.kim@ae.mufg.jp

 

MUFG Bank, Ltd.
A member of MUFG, a global financial group

MENA Monthly Compendium

We are pleased to share in the link our latest MUFG MENA monthly compendium which aims to organise and highlight the array of themes surrounding the MENA region, from standalone thought leadership research, market developments and events to MUFG’s involvement on MENA related transactions as well as broader activities.

MUFG’s leading MENA regional financing for our clients

Since December 2024, MUFG was involved in the following prominent capital markets transactions:

  • MUFG acted as Joint Lead Manager and Bookrunner on the USD1.5bn Perp NC6 AT1 Sustainable Sukuk offering from Al Rajhi Bank. The transaction was an outstanding success, as illustrated by multiple milestones and achievements:

1. Securing the largest transaction size for an AT1 out of the GCC region at USD1.5bn;

2. Strong tightening from IPTs of 50bps to final landing levels of 6.250%, representing a very strong outcome in the recent more volatile rates market backdrop; and

3. Attracting strong interest from international investors with an orderbook that peaked USD4.1bn, surpassing Al Rajhi’s previous transaction.

MENA market perspectives

  • Saudi Arabian and UAE banks well-positioned for defensive outperformance. Throughout 2024, EM banks have been exposed to a significant wave of global macro volatility, driven primarily by sources such as the US monetary policy cycle, the Chinese growth outlook, the Japanese yen carry trade and heightened geopolitical risk. Yet, the performance has not been homogeneous. Encouragingly, buoyed by robust fundamentals, fiscal support, pegged currencies as strong US dollar hedges, and lower sensitivity to elevated global risk, we view that Saudi Arabian and UAE banks are well-positioned in 2025. Saudi banks stands out with strong loan growth (in line with Vision 2030), resilient asset quality, and favourable re-rating potential, while the UAE banks presents opportunities with stable fundamentals and undervalued relative positioning.
  • Oman is on the cusp of re-entering the EMBI IG index. Assuming a six-month review calendar, Oman could be upgraded by Moody's (BBB-; positive) as soon as late February/early March. This has the potential of theoretically driving ~USD2-3bn of passive investor buying, conditional on the final weight allocation of Oman’s re-entry, and we believe some investors may be pre-positioning for the upgrade. To put the impact of index inclusion on bond spreads into context, the outperformance tends to materialise a year before the re-inclusion in IG indices, and spreads on average stop rallying ~6 months before the upgrade. This has also been the case for Oman at an index level, with most of the outperformance versus EM IG materialising in 2022 and 2023 already. However, in ~1-2 months prior to an upgrade to IG, spreads tend resume their outperformance. Oman is already in this period if the late February/early March upgrade materialises. On the day of the upgrade, bond spreads tend to squeeze further. A similar trajectory may transpire in Oman, in our view, given the resolute strengthening in fundamentals (see here).

Middle East - Monthly Compendium January 2025

I understand that any materials on this website have been produced only for persons regarded as professional investors (or equivalent) in their home jurisdiction and in jurisdictions which the MUFG entity producing the material is permitted to do so under applicable laws, rules and regulations.

I also understand that all materials on this website are not investment research or investment advice.