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Saudi Arabia Banks Third Largest Reserves in 2012 as UAE Sees Private Sector Output Rise and Profits Double for Dubai Investments

Middle East : 10 May 2013

Saudi Financial Reserves Grow to Record Levels

Saudi nabbed third spot in terms of financial reserves, coming in behind China and Japan with $541 billion in assets at the close of last year. The kingdom’s assets surged due to rising oil output and prices.

SAMA controls Saudi’s gold and cash reserves and reported a surge of almost 21.5 percent from 2010 to 2012. China came in with $3.2 trillion and Japan reported $1.3 trillion, according to statements made by Fadi Al Ajjaji, economist.

Saudi Arabian reserves were more than 170 percent of the reserves under the control of all Euro members. On a global scale, at the end of 2001 Saudi reserves accounted for 0.8 percent of total global reserves. That figure jumped to 5.1 percent by the close of 2011. Preliminary figures report a rise to 6.16 percent by the close of last year and forecasts state the reserves will continue to grow, reaching 6.5 percent by the end of this year.

Oil export earnings peaked around SR 1.24tr, resulting in a substantial SR 374bn budget surplus. Average oil prices for 2012 went above $100 per barrel, almost 50 percent higher than the crude price required to break even.

Crude output in Saudi also rose to a record high 9.8 million barrels per day annual average. That figure is 0.5 million above the previous year’s average.

The asset gain recorded in 2012 is the second largest gain in four years, since a 50 percent spike in crude prices back in 2008 resulted in a surge of SR 513bn. Assets rose by SR 352bn in 2011 and SR 135bn in 2010, both significantly lower than the 2012 growth.

Driven by robust oil prices, the Kingdom announced record high budgetary figures of SR 820bn for this year. Analysts forecast that actual spending will far surpass levels seen in previous years. Saudi’s budget reports revenues of SR 829bn and an SR 9 billion budget surplus.

Private Sector Output Swells in the UAE

The section of the UAE’s private sector that does not produce oil recorded higher levels of output in April, continuing an expansion trend from the previous month.

New orders rose significantly, and employment levels increased at a rapid pace not seen in the last two years. The rate of increase decreased to the slowest levels of the last twelve months.

The HSBC UAE PMI rates the service and manufacturing sectors’ performance and dropped from 54.3 in March to 54 in April. The PMI also indicated that operating conditions will continue to improve across the UAE. This data continues the trend of improvement seen in the last 44 successive reports, although the most recent reading was the lowest recorded in five periods of the survey.

HSBC’s Chief Economist for MENA, Simon Williams, noted that the recent solid results indicates an economy sticking to the same momentum.
Levels of output in the non-oil private sector of the UAE continued to rise in the most recent survey period. Higher numbers of incoming new businesses and enhanced market conditions supported the most recent rises in output, according to the panellists involved.

April figures for order book volumes rose, although the pace is slower than other points in the year. Enhanced efforts from sales teams and positive market conditions have driven the growth of new work, according to the panellists. Reports of sluggish conditions in export markets have resulted in slower growth rates in new business from abroad.

Private sector firms in the UAE reported for the second month that outstanding business levels have dropped, linking the lower levels of work-in-hand with bringing on new staff and improving efficiency levels. Delivery times for suppliers improved, as per recent patterns. Unreliable reports indicated that improved levels in average lead times were a result of quicker payments and long-term supplier relationships.

Employment levels also rose in April, and job creation rates sped up to a high not seen in two years. April’s overall input price levels came in higher and rose sharper than the previous month’s rate. Purchase prices rose as a result of general inflation, and staff cost inflation rates sped up. The output prices recorded in the non-oil private sector of the UAE dropped for the second month in a row.

Results from the new export orders index indicated that new exports are set to increase. This increase was a result of enhanced marketing efforts and expansions in some firms, based on subjective evidence.

Williams noted his concern for the softer export reading, but stated that strong results in new orders, employment and output pointed to overall growth of about 4 percent for 2013, with Dubai leading in performance.

First Quarter Profits Double for Dubai Investments

Dubai Financial Market’s largest listed investment firm, Dubai Investments, reported first quarter profits surged 97 percent this year, reaching Dh 211 million.
The investment firm posted a profit of Dh 107 million in the first quarter of 2011.

Consolidated total income for Q1 came in at Dh 649 million, higher than Q1 2011 figures of Dh 566 million. At the end of March, total assets came in at Dh 12.5 billion, and net worth rose to Dh 8.7 billion.

Restatements of assets and liabilities came after deconsolidation of joint ventures, yet had little impact on net worth or profitability of Dubai Investments. The annual rate for return on share capital reached 23.6 percent in the first quarter, significantly higher than the full year rate of 9.0 percent for 2012.

Dubai Investment’s CEO and Managing Director Khalid Kalban stated that every sector of the firm’s business contributed to the growth reported, although real estate performed “exceptionally well.” A positive market sentiment and overall economic growth presented good opportunities for the company’s diversified business base. Dubai Investments continue to monitor marketplace developments, aiming to capitalize on the opportunities available.

Kalban noted that outlook for the balance of 2013 excites management, who continue to work on divestments forecasted to result in healthy returns in the future. A Sukuk valued at $300 million is in the finalization stages before issuance, planned by a Dubai Investments subsidiary.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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