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Research Department

KSA Country Report


16 October 2007

Initiation of Coverage
General Information
Ratings S & P's short-term sovereign credit rating Fitch country ceiling rating A-1 AA-

The Ace of Spades


Summary
Economic profile Saudi Arabia is the largest economy in the Middle East and one of the biggest worldwide oil producers. Its fiscal and external balances are largely dependent on oil revenues, generating an average of 82.0% of the fiscal balance income and 90.0% of the external balance proceeds. This makes the fiscal and external balances directly correlated to oil price and production shifts. Fiscal balance floods with oil revenue Fiscal and external balances recorded new highs in 2005 with a surplus taken forward into 2006. Arab Light oil prices jumped from USD34.53 per barrel in 2004, to USD49.9 per barrel in 2005, and USD62.19 per barrel in 2006. Pricing now hovers at a YTD average of USD62.01 per barrel. A diversification scheme was set to decrease the economy's heavy reliance on the oil sector. Four economic cities were established to serve that purpose and the government has been allocating a considerable portion of its spending on development projects. Inflation well below its GCC peers Amid global inflationary trends, KSA managed to curb any attempts toward an alarming increase in local prices. Monetary and fiscal policy were both utilized to reach such an end. Interest rates were raised following global monetary policy tightening, as well as an increase in government expenditure on subsidies. It is worth noting that although the Saudi riyal is pegged to the US dollar, with the recent Fed rate cut by 50 basis points Saudi Arabia chose not to follow suit on attempts to control inflation in the KSA. Concerns lying ahead Concerns, however, are raised about KSA's ability to tame inflation rates without affecting its diversification plan in the course of dropping oil prices. Also, the unemployment rate is growing since expatriates make up 88.4% of the private sector labor population, while 37.0% of the population lies below 15 years of age, according to statistics taken in 2006. This puts added pressure on the government to create jobs in the future and to raise the current employment rate.

Capital Market Main Indicators 2005 Market Cap (USD bn) Market Cap/GDP (%) Turnover (USD mn) Market Performance (%) Market PE 646 2006 327 YTD 356

205.0%

94.0%

N/A

1,104

1,403

1,138

114.0%

-54.0%

-0.3%

19.7x

14.5x

14.4x*

* FY07 expectations

Table 1: Economic Indicators (FY02-FY07**)


FY02
Real GDP Growth (%) Nominal GDP (SAR bn) Inflation-CPI (%) Fiscal surplus (% GDP) Total External Debt (% GDP) Government Debt (% GDP) M2 Growth YoY (%) Arab Light Oil Price, USD bbl, Avg Oil Price, OPEC, USD/bbl average Official Reserves (USD) Exchange rate USD:SAR 0.1 707.1 0.2 (2.9) 16.25 91.9 14.5 24.3 24.36 20.6 3.75

FY03
7.7 804.8 0.6 4.5 15.1 82.0 8.4 27.7 28.09 22.6 3.75

FY04
5.3 938.8 0.4 11.0 13.8 65.0 21.3 34.5 35.70 27.3 3.75

FY05
6.1 1,182.5 0.7 18.4 13.2 41.1 10.0 49.9 50.64 26.5 3.75

FY06*
4.2 1,307.5 1.8 20.3 13.7 28.1 20.0 61.1 62.29 27.4 3.75

FY07**
3.6 1,346.4 3.5 14.1 ------3.75

* FY06 figures are subject to revision **FY07 figures are projected *Fiscal Year ends in December Source: SAMA, NCB, BMI HC Brokerage

Analyst
Tel e-mail Egypt Sales UAE Sales

Reem Mansour, MA ECID


+ 2 02 3749 6008 (ext. 368) rmansour@hc-si.com + 202 3749 6008 +971 4 20 66 888

Disclaimer
This memorandum is based on information available to the public. This memorandum is not an offer to buy or sell, or a solicitation of an offer to buy or sell the securities mentioned. The information and opinions in this memorandum were prepared by HC Brokerage from sources it believes to be reliable and from information available to the public. HC Brokerage makes no guarantee or warranty to the accuracy and thoroughness of the information mentioned in this memorandum, and accepts no responsibility or liability for losses or damages incurred as a result of opinions formed and decisions made based on information presented in this memorandum. HC Brokerage does not undertake to advise you of changes in its opinion or information. HC Brokerage and its affiliates and/or its directors and employees may own or have positions in, and effect transactions of companies mentioned in this memorandum. HC Brokerage and its affiliates may also seek to perform or have performed investment-banking services for companies mentioned in this memorandum.

KSA Economy

Also available at www.hc-si.com

Table of Contents I. II. III. IV. V. VI. Summary An Overview of the KSA Economy Fiscal Surplus Monetary Policy KSA Enticing Investors Appetite International Trade 3 5 7 12 17 18

KSA - Economy

I. Summary
Oil plays a major role in the economic performance of the Kingdom of Saudi Arabia; exposing the Kingdom to external shocks stemming from international oil prices and production volatility. In 2005, nominal GDP grew 25.5% largely fuelled by the hike in international oil prices and a production increase. A decelerating rate in oil price hikes was manifested in 2006's nominal GDP growth rates, growing at 10.2%. In preventing the roller coasters rides driven by oil prices, officials have set a vision by the year 2025 to ensure economic diversification. In 2005, new economic cities came to light, creating a vibrant atmosphere to encourage private sector participation and targeting the injection of investments worth SAR300.0 billion over the coming two decades. Fiscal Policy Similarly, the fiscal balance is highly dependent on oil revenue. As a result, 2006 marked a new record for the fiscal surplus to GDP ratio standing at 20.3%, breaking an all time high of 13.6% of GDP made in 1975. Arab Light Oil prices skyrocketed 45.2%, up from USD34.53 per barrel in 2004 to USD49.9 per barrel in 2005 and USD61.1 per barrel in 2006. Expenditures were also on the rise but were maintained at an average of 32.0% of GDP throughout the past few years. Spending was mainly allocated to development projects moving in line with the year 2025 vision. Subsidies also went up 60.0% from SAR5.3 billion in 2004 to SAR8.5 billion in 2006 to buck attempts of local prices trailing the global inflationary trend. A spark was triggered, however, taking local inflation up to 3.8% in July 2007 from 1.8% in 2006 and 0.7% in 2005, still low by global standards but high for the KSA. Monetary Policy & Inflation In the wake of global inflation, local prices were firmly tamed by utilizing monetary policy with official repo rates and reverse repo rates hiking to 5.5% and 5.0% in early 2007 against 4.75% and 4.25%, respectively, in January 2006. Pressures on inflation stems from (I) growing money supply (II) increasing rate of government spending and (III) US dollar weakening against other currencies. It is worth noting that due to credit tightening and concerns over economic growth of the US, the Federal Open Market Operations Committee (FOMC) decided on its meeting held on 18th September 2007, to aggressively reduce fed rates by 50 basis points going down to 4.75%. Although the US economy is faced with inflationary risks the FOMC seems more worried now over economic growth. Nevertheless, KSA refused to take interest rates downwards on the official repo rate and reverse repo rates as it realizes the importance of controlling the inflation rate for the time being. The differential went up to 75 basis points from 25 basis points. Money supply (M2) grew significantly in 2006, up 20.0% against a 10.0% rise in 2005 on the back of a 36.7% surge in time and savings deposits against 21.3% growth a year earlier. This was triggered by increasing deposit rates and a downfall in the stock market. In the first quarter of 2007, M2 grew by 5.7%, generated by a 5.7% rise in time and savings deposits and 5.8% growth in demand deposits. Inflation during that period stood at 2.2%. Inflation as of July 30th 2007 stood at 3.8% YoY. Further pressures stem from an increase in government spending generated by petro-dollar money, and further weakening of the US dollar against other currencies. KSA imports 72.0% from sixteen countries; Europe and Asia make up the biggest share of the pie. Foreign currency Following the footsteps of its GCC neighbors and matching the GCC 2010 unity criterion, the Saudi Riyal is pegged to the US dollar at (USD1:SAR3.75). The trend has been preserved for over two decades now. It served the economic prosperity of KSA well, creating a favorable atmosphere for foreign investors with clear entrance and exit foreign exchange policy, however it reduces the effectiveness of KSA's monetary policy. The peg is expected to be maintained, especially since Saudi Arabia is not facing the alarming inflationary trend that plagued the UAE, for instance; most importantly, KSA is working hard on its diversification scheme, as an appreciation of the Saudi Riyal might decrease its exports' competitiveness in global markets.

KSA - Economy

Balance of Payments The trade balance's well-being is highly correlated to oil price and production changes as oil proceeds make up an average of 90.0% of total export revenues. In due cause, the current balance surplus tagged its glorifying victory in 2005 by stamping a new historical high at 28.5% of GDP. This was sparked by the jump in oil prices, and production almost reaching its peak. The trend is expected to be maintained because oil prices (Arab Light Oil) have rebounded to reach USD68.76 per barrel in August 2007, after crashing to USD53.0 per barrel in the first quarter of 2007. Global political disorder, bad weather conditions, and rising GDP growth rates led oil prices up. The Road Forward Saudi Arabia has been undergoing structural and economic reforms, improving its budget allocation and working on decreasing its debt exposure as well as setting plans for diversification, which proves the credibility of economic policies. Short-term risk can rise from a deep plunge in oil prices, while in the long term risks stem from a growing unemployment rate.

KSA - Economy

II. An Overview of the KSA Economy


Politics Ruled by the Al Saud family, King Abdulah Bin AbdulAziz was recently appointed as the king of Saudi Arabia, and the successor to his brother the late King Fahed Bin AbdulAziz. Abdulah is known to be pro-liberal, accelerating private sector gears in the economy and opening its doors to foreign exposure. The king's popularity can not be ignored despite some protests against Saudi Arabia's close ties with the US and the rising unemployment rate. Oil: Rolling the dice The Middle East's largest economy, Saudi Arabia has a nominal GDP estimated to have grown at 10.2% (SAR1.3 trillion) in 2006 against 25.5% in 2005 (SAR1.2 trillion) and real GDP growing at 4.2% (SAR798.8 billion) in 2006 as opposed to 6.1% (SDR765.9 billion) in 2005. The Kingdom of Saudi Arabia (KSA) is ruled by petroleum (mining and manufacturing), constituting 28.1% of total real GDP in 2006. Hence, the relatively sluggish growth rate of 2006 is largely attributed to lower oil prices and production. Government services ranked second on the biggest contributors to real GDP list amounting to 18.0%, while the finance, insurance, real estate and business services follow to constitute 12.5% of GDP.

Chart 1: Real GDP by sector (FY05-FY06*)


FY 05
Producers of government services 17% Other 31% Producers of government services 18%

FY 06
Other 30%

Finance, insurance, real estate & busniess services 12%

Mining & quarrying 29%

Manufacturing 11%

Finance, insurance, real estate & busniess services 13%

Minning & quarrying 27%

Manufacturing 12%

*Preliminary Estimates Source: Central Department of Statistics & Information, HC Brokerage

In nominal terms, the oil sector comprised more than 50.0% of GDP in 2006 fuelled by the shoot up in the Arab Light Oil prices. The oil price rally continues but at a slower pace, reaching USD68.76 per barrel in August 2007. Global oil demand is expected to continue to go up as a result of worldwide economic growth and bad weather conditions resulting from global warming. Saudi Arabia acknowledged that relying on oil based revenue is an economic gamble; betting on oil price volatility is a game that cannot be played indefinitely. In due cause, officials set a vision for the year 2025 where ''the Saudi economy will be a diversified, prosperous, private-sector driven economy, providing rewarding job opportunities, quality education, health care and necessary skills to ensure the well-being of all citizens while safeguarding Islamic values and the Kingdom's cultural heritage.'' Four economic cities have been established to work on reaching such a goal. Saudi Arabia provides 48.0% of total power generation in the region, and is the largest cement producer in the GCC. This moves well in line with the plan. Labor population dominated by non-Saudis That said, Saudi Arabia has also embarked on a Saudization program that increases the number of Saudis in labor population. Population amounted to 23.63 million in 2006, 37.0% of which fall below 15 years of age. The population is growing at a high CAGR of 2.4% in line with its GCC peers. The unemployment rate stood at 6.9% in 2005. The problem intensified in 2006 as expatriates constituted 88.4% of the private sector's labor force while the unemployment rate stood at 9.1% for men, and 26.3% for women. This puts the economy at stake over the long-run. In due cause, the government has been reducing the number of visas issued to decrease the percentage of expatriates.
KSA - Economy 5

KSA Today The dependence of the KSA economy on oil revenue is reflected in the budget surplus and current account balance. However, this raises its exposure to external shocks hitting hard on both accounts the fiscal and external balances. However, in the wake of robust global economic growth, global warming, and political unrest, oil prices are not expected to be seen near its 2004 levels (USD34.5 per barrel) or below, signaling continued prosperity in the economy of KSA. Nevertheless, the following are two major concerns (a) rising unemployment rate and (b) soaring global inflation rates. Although the government of Saudi Arabia has staged a good performance in controlling inflation rates at 2.2% in the first quarter of 2007, inflation rates soared to 3.8% in July 2007 YoY. The challenge lies in the government's ability to control inflation without having to dramatically increase subsidies, which might affect its development plans and/or negatively influence the target of decreasing a public debt. The economy of Saudi Arabia has set vigorous plans to decrease its reliance on the oil sector and up to date it has been impressively carrying it out.

KSA - Economy

III. Fiscal Surplus


Being the biggest global oil exporter manifested in a fiscal surplus standing at 20.3% of GDP in 2006, (SAR265.0 billion) against (SAR217.9 billion) in 2005, 18.4% of GDP. Fiscal Budget at its Peak I) Expenditures (i) Capital Expenditure in 2005 doubled on attempts to reduce dependence on oil revenue, nevertheless its share remains low, standing at only 4.3% of GDP and in 2006 it went up to SAR70.9 billion, representing 5.5% of GDP. Government spending on capital expenditure has been rising significantly to pave the road for private investments. It is budgeted to amount to SAR140.0 billion in 2007, 36.8% of total expenditures; where SAR29.0 billion of which are directed to the building of new educational facilities to promote human resource development; SAR5.6 billion to health care and SAR9.3 billion to municipal development which entails the construction of new ports, airports, roads, and bridges. (ii) Current Expenditure gained the lion's share, amounting to SAR322.4 billion in 2006 up from SAR287.2 billion in 2005, 82.0% of total expenditures and 31.1% of GDP. The trend continues in 2007 as capital expenditure is expected to reach 63.2% of total expenditures (SAR240.0 billion), according to officials' estimates. Subsidies amounted to 0.7% of GDP in 2006 (SAR8.5 billion) as it jumped 60.0% from 2004 (SAR5.3 billion) to (SAR8.5 billion) in 2005 and is planned to reach SAR12.8 billion in 2007, 3.3% of total expenditures. The increase comes in to accommodate relatively rising local prices.
Chart 2: Average of Budget Allocations (FY01-FY06) and Planned Budget Allocations of major sectors in FY07

FY01-FY06
Infrastructure Development 1% Subsidies 3%

FY07
Public Adminstrations & others 19%

Defense & Government Security lending 35% institutions 0%

Transport & Communicatio ns 3%

Municipal Services 4%

Health & Social Development 4%

Public Administration & others 17% Subsidies 3%

Health & Social Development 9% Economic Resource Development 3%

Municipal Services 3%

Transport & Communication Development 3%

Human Resource Development 24%

Defense 37% Economic Resources Development 4% Human Resource Development 27%

Infrastructure Development 1%

Source: Ministry of Finance & SAMA, HC brokerage

Moving in line with its 2025 vision and the Saudization program, the government plan seemed generous in spending on human resource development in 2007. This should build a strong foundation to provide ''rewarding job opportunities, quality education'' and paving the road for private investments, in part as an attempt to decrease reliance on oil generated revenue. The budget planned for 2007 allocated SAR96.7 billion to human resource development, up from SAR87.2 billion in 2006. Government's interest in education development was growing remarkably since 2006; 6,800 new schools, four new universities and 56 new colleges were planned to be established in 2007. Vocational training was also in centre stage; a vast number of vocational centers were included in the construction plan. Saudi Arabia is encouraging the private sector to share in building the kingdom's infrastructure as a means to promote efficient allocation of the budget's resources. Nevertheless, KSA is providing world class infrastructure.

KSA - Economy

II) Revenues (i) Oil Revenue and other revenue: Heavy exposure to oil income floods the fiscal balance revenues and leaves it subject to international oil price shocks and productivity ceilings set by the OPEC. Oil revenue made up 82.0% on average of KSA's total revenues over the past three years. In 2007, total revenue is expected to amount to SAR400.0 billion as opposed to SAR673.7 billion in 2006. Although the breakdown of revenue is unavailable for 2006 and 2007, it is regarded that the government is conservative in projecting its yearly income where the actual 2006 total revenue came in 72.8% higher than the budgeted revenue that stood at SAR390.0 billion. The price of Arab Light Oil made an average of USD61.1 per barrel in 2006 where the government seems to have based its projections at much lower than that, hovering around late USD40.0 per barrel if not less. It is worth noting that in the first quarter of 2007 the price of the Arab Light Oil dropped to an average of USD53.0 per barrel yet made a rebound in the second quarter at USD65.92 in June 2007, and at USD68.76 in August 2007. (ii) Other Revenues: The breakdown for other revenues is not specified, however it is worth highlighting that the government collects zakat (equivalent to tax) of a fixed rate of 2.5% on local firms and taxes non-Saudi firms at a 20.0% rate. In April 2000, income tax dropped from 45.0% to 30.0% then a second reduction took place in April 2004, taking the rate down to a flat 20.0% rate following the GCC's trend. The gas and oil sectors are taxed differently, 30.0% on the former and 85.0% imposed on the latter. Personal tax rate for locals (zakat) is 2.5%, while for foreigners it stands at 20.0%.
Chart 3: Breakdown of Total Revenue (FY05 and FY06)
FY05
Other Revenue 11%

FY06
Other Revenue 10%

Oil Revenue 89%

Oil Revenue 90%

Source: Ministry of Finance, HC Brokerage

Celebrating the Surplus The fiscal surplus in 2006 reached SAR289.7 billion against SAR217.9 billion in 2005 and SAR107.1 billion in 2004. This was generated by the continuous surge in oil prices that climbed from 2004 to 2006 by 77.1%. Although in the first half of 2007 Arab Light Oil prices averaged USD59.36, that were dragged down by the first quarter 2007 prices that stood at USD53.0 per barrel, hence a surplus is still expected. The government expects a surplus of SAR20.0 billion with revenues amounting to SAR400.0 billion in 2007. The government might be too conservative again with its expectations. Based on the sensitivity analysis below shows that even with the most uptight conditions Saudi Arabia's budget will not lurk below the surface. We expect total revenue to rather hover around SAR421.2 billion if oil prices stood at USD45.0 per barrel and production restricted to, at most, 8.5 million barrels per day. In 2005, Saudi crude oil production stood at 9.39 million barrels per day. In 2006, the OPEC passed restrictions to its members, taking Saudi Arabia's output level down to 9.12 million barrel per day. In the first half of 2007, production dropped further to an average 8.54 million barrels per day.
Table 2: Oil Production
Crude oil production (million b/d) Arab light price (USD/b)
Source: OPEC, HC Brokerage

2003 8.71 27.7

2004 8.96 34.5

2005 9.39 49.9

2006 9.12 61.1

2Q07 8.52 62.1 (YTD)

KSA - Economy

Expenditure is budgeted at SAR380.0 billion, SAR10.0 billion lower than last year. Based on historical records, expenditures averaged 32.0% of GDP over the past three years, hence expenditure in 2007 is expected to hover around SAR400.0 billion if nominal GDP stands at 1,329.2 billion, according to IMF GDP forecasts. That said, a scenario in line with today's market translates into a surplus hovering around SAR191.5 billion in FY07 with oil prices averaging at USD60.0 per barrel and oil production output at 8.6 million barrels per day.
Table 3: Sensitivity analysis (Fiscal Balance in 2007)
Saudi Arabia light oil price (USD per barrel) Oil production bpd increase (%) Oil revenue Other Revenue Total Revenue Total Expenditure Surplus/(Deficit)
Source: HC Brokerage

2007 (a) 2007 (b) 60.0 60.0 -8.5% 485.0 106.5 591.5 400.0 191.5 0% 530.6 116.5 647.1 400.0 247.1

2007 55.0 -8.5% 440.4 96.7 537.1 400.0 137.1

2007 (d) 45.0 -9.7% 345.4 75.8 421.2 420.0 1.2

The sensitivity analysis clearly proves the strong impact of oil prices and productivity on the budget surplus. This puts KSA at stake if oil prices take a deep dip and production contracts while expenditures on education, human resources, and health increase to meet its 2025 vision target, let alone increased spending on subsidies to keep inflation rates in control. It is worth noting that although some expectations foresee oil prices breaking USD60.0 per barrel on the back of global economic growth, bad weather conditions and possible political upheavals, Saudi Arabia plays the price moderator role within the OPEC while keeping strong ties with the US.
Table 4: Annual Government Revenues and Expenditures
SAR Billion

Total Revenues Oil Revenue Other Revenue Total Expenditures Capital Expenditure Current Expenditure Overall Surplus Overall Surplus as a % of GDP
*2007 figures are budgeted Source: Ministry of Finance, HC Brokerage

FY00 258.0 214.4 43.6 235.3 18.4 217.0 22.7 3.2

FY01 228.2 183.9 44.2 255.1 31.6 223.5 (26.9) (3.9)

FY02 213.0 166.1 46.9 233.5 30.0 203.5 (20.5) (2.9)

FY03 FY04 293.0 392.3 231.0 62.0 33.5 223.5 4.5 330.0 62.3 37.6 247.6 11.0

FY05 564.3 504.5 59.8 346.5 62.3 284.2 217.9 18.4

FY06 673.7 604.5 69.2 393.3 70.9 322.4 289.7 22.2

FY07* 400.0 380.0 140.0 16.3 20.0 -

257.0 285.2

36.0 107.1

The chart below shows that deducting oil revenue from total revenue balance drags it into the red just like most GCC economies, even the UAE was no exception.

KSA - Economy

Chart 4: Impact of Oil Revenues on Budget

700 650 600 550 500 450 400 350 300 250 200 150 100 50 0

T. Revenues Include Oil 673.7


Total Revenues ( SAR billion) Surplus % GDP

T. Revenues Exclude Oil


65
62.3 59.8 69.2

564.3

55 45

Total Revenues (SAR billion) Deficit (% GDP)

393

35 25 15 5 -5
11.0 18.4 22.2

FY04

FY05

FY06

-15 -25
-23.7 -24.3 -24.8

FY04

FY05

FY06

Source: Ministry of Finance and Ministry of Economy & Planning, HC Brokerage

Government Domestic Debt on the Decline In public debt, the government staged a remarkable performance while taking it down from 91.9% of GDP in 2002 (SAR650.0 billion) to an expected 28.0% of GDP in 2006 (SAR366.0 billion), as announced by the Ministry of Finance. GDP growth rates coupled with fiscal balance surpluses, running since 2003, both shared a hand in the positive note. The government has been planning to buy back its outstanding treasury bills before its maturity, which reflects its attempts to continue reducing its public debt. The floods of money coming in from oil proceeds preserves the trend. This makes the KSA eligible to join the GCC monetary union as expected in 2010 as it sets a ceiling at 60.0% to GDP of public debt for each member. Furthermore, total external debt to GDP is not a source of worry. It is expected to stand at 13.7% of GDP in 2006, down from 16.2% in 2002.
Chart 5: Total External Debt to GDP
50 45 40 35 30.5 T. External Debt (USD billion) T. External Debt (% GDP) 32.5 34.9 40.6 47.4 20 19 18

USD Bil.

30 25 20 15 10 5 0 2002 2003 2004 2005 2006

16 15 14 13 12 11 10

Source: SAMA, HC Brokerage

KSA - Economy

Growth Rate

17

10

Conclusion
Like many GCC economies, the Kingdom of Saudi Arabia is heavily dependent on oil revenue to maintain a budget surplus. However, government spending is increasing on capital equipments, education, and human resource development, which should positively affect the economy in the long run and create opportunities for investing in other sectors. This should help diversify its portfolio eventually and decrease its reliance on the hydrocarbon sector. Meanwhile, the fiscal balance is highly correlated to oil price and productivity changes. A plunge in either hits the fiscal balance hard. On the other hand, government spending is increasing yet maintains an average of 32.0% of GDP with more allocation shifting towards development projects. With its recent inclusion in the WTO, Saudi Arabia has taken serious steps to promote private sector's role through stimulating privatization and encouraging private investors in infrastructure development. This should ease the burden on government spending. That said, international oil prices are not expected to witness a sharp fall at the wake of worldwide events of accelerating growth, global warming, and political instability. Even with a drop to USD45.0 per barrel of oil, the fiscal balance is expected to lie firmly in the black.

KSA - Economy

11

IV. Monetary Policy


Heading towards the GCC monetary unity, Saudi Arabia pegged its Saudi riyal to the US dollar at (USD1:SAR3.75). It is expected to maintain the peg, especially since it is not plagued with heavy inflationary pressures. Lowest Inflation Rate Among Peers The inflow of petro-dollar money and the increase in liquidity did not result in an alarming surge in inflation rates. It inched up 2.2% in the first quarter of 2007, as opposed to the same corresponding period last year and 1.8% in 2006. In July 2007, inflation inched up 0.8% from June 2007, standing at 3.8% YoY. The government managed to stop prices from dramatically shooting up, unlike the UAE where inflation hit 11.3% in 2006. However, it is worth highlighting that inflation in the UAE was largely driven by rent price hikes which constitute 36.14% of the Consumer Price Index (CPI) making it unfair to compare it to the KSA. The reason is that the weight of rent is not disclosed in the KSA CPI. Rent is grouped with renovation, fuel and water, which recorded a surge of 5.9% from fiscal year 2006 to May 2007. On the other hand, Transport and communication fell 2.2% from fiscal year 2006 to May 2007. Since both items are also grouped in one category it is difficult to define the reason of the drop. However, Saudi Arabia has been active in the telecom sector opening its doors for competition which limits price increase.

Chart 6: Inflation rates KSA, EU & US (2002-2006)


2.3 1.8 2 0.7 1.9 0.3 0.6 0.2 0 1 1.6 2 2.25 2.3 2.3 KSA 3 4 2.7 3.4 EU

2006 2005 2004 2003 2002

3.6

US

Source: IMF, ECB, BMI, SAMA, HC Brokerage

Inflationary Pressures and Risks (i) Dollar depreciation: Further depreciation in the dollar puts pressure on local prices. Saudi Arabia imports 72.0% of its imports from sixteen countries, mainly from Europe and Asia, which is large enough to exercise pressure on inflation. One way the government tries to accommodate that is increasing subsidies expenditure which amounted to only 0.7% of total expenditures in 2006. But, the government has set plans to allocate its spending on development projects to maintain a budget surplus; such extra expenses might destabilize the government's plan. A plunge in oil prices is when the situation aggravates.

KSA - Economy

12

Chart 7: Correlation between EUR:SAR & CPI (FY02-1H07)


CPI EUR:SAR

4 Growth rate (%)

0 2002 2003 2004 2005 2006 1H07

Source: Bloomberg, HC Brokerage

(ii) Government spending: The increase in international oil prices boosts injections of hot money

into the economy. This raises money supply. But since the government is the main beneficiary of oil proceeds, then only when government spending increases market liquidity grows remarkably, pushing prices upwards. Government expenditure grew by 25.3% in 2006 against 18.4% in 2005. Money supply (M3) growth rate in August 2007 grew at 18.9% YoY and 19.3% in 2006. M1 grew by 8.8% (SAR338.9 billion) in August 2007 against 10.% (SAR312.7 billion) in 2006. (iii) Domestic demand: An increase in local demand and GDP growth rates has shared a hand in rising inflation rates. Private final consumption grew by 6.5%, as opposed to 9.5% in 2005. Private consumption constituted 25.5% of total GDP in 2006.
Table 5: Consumer Price Index Breakdown (FY01-1Q07)
CPI Food & Beverage Fabrics, Clothing and footwear Renovation, rent, fuel and water Home furniture Medical care Transport and telecommunications Education and entertainment Other expenses and Services
Source: Ministry of Economy & Planning, HC Brokerage

FY01 97.8 97.6 92.9 100.1 97.3 100.7 96.3 99.5 98.8

FY02 98.0 98.0 92.3 100.0 96.8 100.8 96.4 99.3 100.8

FY03 98.6 98.6 91.8 100.0 96.2 101.0 94.8 98.7 103.2

FY04 FY05 98.9 99.6 103.4 89.6 100.3 94.5 101.4 94.2 98.1 103.9 106.5 88.3 100.0 94.9 101.4 91.8 98.4 106.4

FY06 101.8 112.2 87.8 101.0 95.2 102.7 89.7 98.6 114.7

1Q07 104.2 118.2 86.2 104.9 95.8 103.8 87.6 98.7 117.2

Real interest rates remain positive Saudi Arabian Monetary Agency (SAMA) uses the official repo and reverse repo as instruments to control market liquidity and tame inflationary pressures. SAMA took official repo rates on a series of upward rides reaching 5.5% in April 2007. Reserve repo rates witnessed the same fate, hitting 5.0% for the same period, up from 4.25% in early 2006. Three months inter-bank rates (SIBOR) also inched up to reach 4.87% in August 2007, up from 4.82% in January 2007. Hence, real interest rates remain positive with the inflation rate standing at 2.2% in the first quarter of 2007 and 2.5% in first half of 2007. In July 2007 it stood at 3.8% YoY.

KSA - Economy

13

Chart 8: Official Repo Rate, FED Funds Rate and Euro Rate
5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% Apr-06 Jun-06 Jul-06 May-06 Aug-06 Mar-06 Sep-05 Sep-06 Jun-07 Nov-05 Dec-05 Dec-06 Sep-07
0.00% 2003 2004 2005 2006 1H07

Official Repo Fed ECB

Source: SAMA, FED & ECB

Chart 9: Inflation and 3 months deposit rates (FY03-1H07)


6% 3 mont hs deposit rat e 5% CPI

Growth rate

4% 3% 2% 1% 0%

Source: SAMA & Bloomberg, HC Brokerage

A story of interest rates World-wide heightened growth caused global inflationary pressures and urged central banks to tighten monetary policies. In the US, the Federal Open Market Committee (FOMC) raised Fed rates upward 17 times from a 50-year low of 1.0% in 2003 to 5.25% in 2006. Being pegged to the dollar, local Saudi interest rates followed suit. It is worth pinpointing, however, that the government is stacked with USD24.7 billion worth of foreign exchange reserves which helps it to withstand dollarization pressures. This is supported by the perception that the real effective exchange rate of the Saudi Riyal is strengthening against the USD upon large current account surplus. The FOMC cut fed rates to 4.75% in September 2007 however Saudi Arabia did not follow to control any inflationary attempts.

Table 6: Inflation and Interest Rates (FY03-1Q07)


2003 Interest rate SAR Average 3 months deposit rate (%) USD Average 3 months deposit rate (%) Euro Average 3 months deposit rate Inflation rate CPI (%)
Source: SAMA, HC Brokerage

2004 1.7 1.5 2.0 0.3

2005 3.7 3.4 2.1 0.7

2006 5.0 5.1 3.0 2.2

1H07 4.9 5.3 3.9 2.4

1.6 1.1 2.2 0.6

KSA - Economy

14

Foreign exchange SAMA maintained the Saudi Riyal peg to the US dollar at (USD1:SAR3.75) for over two decades now. Adopting a flexible exchange rate system or revaluing the USD:SAR peg are both not expected. The GCC monetary unity requires a peg to the US dollar, and a revaluation will decrease the countrys export's competitiveness in international markets. Although dollar devaluation imposes inflationary risks, it is worth noting that the government has been doing a good job in containing inflation in light of the USD devaluation. Foreign exchange earnings Oil exports represent 90.0% of total exports (SAR703.7 billion in 2006) and is considered the countrys main foreign exchange earner. Saudi Arabia attracts investors interest and FDI, however, a breakdown of capital transactions on the balance of payments is not revealed to estimate its importance. Other exports and services receipts amount to SAR131.9 billion in 2006, which is considered a minor portion when compared to oil receipts. This becomes a major concern when international oil prices and production decreases, thus negatively influencing the kingdom's foreign exchange earnings.
Table 7: Foreign Currency Earners and Percentage Contribution (FY04-FY06)
SAR Billion

Export Proceeds

FY04 471.3

% 92.3%

FY05 675.3

% 93.7%

FY06 789.2

% 92.0%

Oil exports Other exports


Services Receipts

Investment Income Oil Sector (bunker Oil) Other


Total % GDP
*FY06 figures are subject to revision Source: SAMA, HC Brokerage

414.1 57.2 39.2 16.0 1.3 21.9


510.5 54.4%

81.2% 11.2% 7.7% 3.1% 0.25% 4.3%

604.0 71.3 45.4 18.6 1.8 25.0


720.7 60.9%

83.8% 10.0% 6.3% 2.6% 0.25% 3.5%

703.7 85.5
68.2

38.8 2.1 27.3


857.4 64.2%

82.1% 10.0% 8.0% 4.5% 0.25% 3.2%

Money Supply Money supply (M3) growth rate in August 2007 grew at 18.9% YoY against 10.1% in 2006. M1 grew by 8.8% (SAR338.9 billion) in August 2007, against SAR312.7 billion in 2006. This was triggered by the continued rally of interest rates hikes accompanied with a faltering path of local stock market encouraging investors to safeguard their investments into deposits. Petro-dollar money has also helped in the surge of money supply to a certain extent since the main beneficiary of oil proceeds is the government. Hence, international oil price hikes will continue to boost local liquidity growth only if the government increases its spending.

Table 8: Money Supply

End of Period 2005 End of Period 2006 283.5 64.3 219.3 448.8 165.3 55.7 105.0 312.7 69.3 243.4 515.9 226.0 660.6 122.0

August 2007 338.9 65.6 273.4 605.7 263.2 727.2 124.9

M1 SAR Bn Currency outside Banks AED Bn Demand Deposits AED Bn M2 SAR Bn Time & Savings Deposits SAR Bn M3 SAR Bn Other Quasi Monetary Deposits SAR Bn

* M1, or narrow money: money in circulation outside the banking system and demand deposits in local currency ** M2, or assets that can easily be converted into money: time and saving deposits in local currency, demand deposits in foreign currency and foreign currency time and saving deposits **M3: M2 + other quasi-monetary deposits Source: SAMA, HC Brokerage

KSA - Economy

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Managing market liquidity through repos and reverse repos The government uses the official repo and reverse repo to maintain local price stability and control liquidity and ease pressure on the USD:SAR peg. In due cause, a series of rate hikes started in 2004 following FED rates. Trailing SAMA's interest rate upward, deposit rates had little choice but to follow suit. The average Saudi riyal three months deposit rate stood at 4.87% in July 2007, while Euro based three months deposit rate stood at 4.16% for the same period with the differential standing at 80 basis points and 60 basis points lower than the US dollar based three months deposits in August 2007. This trend has been taking place since the second quarter of 2006 and the reason behind that is buyers' perception that the Saudi Riyal real effective exchange rate has appreciated against the US dollar on the back of injections coming from oil driven revenue. Talk and expectations have been revolving around a Saudi riyal-US dollar de-pegging rather than a revaluation of the riyal after the recent aggressive fed rate cut. Conclusion The government of Saudi Arabia managed to tame inflation rates since 2005 and throughout 2007 amid global inflationary trends, rising money supply growth rates, and a devaluing dollar. Increasing interest rates seems to have resolved the situation. Interest rate hikes accompanied with a stock market correction encouraged investors to invest their savings in deposits which increased money supply (M2), growing at 20.0% in 2006, SAR538.7 billion and reached SAR602.2 billion in August 2007. If USD devaluation against other currencies persists import prices will increase, eradicating profit margins and decreasing the money supply, and thus decreasing pressure on inflation with local prices going up on the back of expensive products. However, KSAs exports will become cheaper in international markets. So far the government utilized fiscal policy in conjunction with monetary policy to stabilize the inflation rate. Subsidies grew by 60.0% from 2004 (SAR5.3 billion) to 2006 (SAR8.5 billion), but carrying forward this trend might eventually stagger a fiscal surplus.

KSA - Economy

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V. KSA Enticing Investor's Appetite


Saudi Arabia redefines benchmarks Racing its GCC competitors, Saudi Arabia ranked number 38th in 2007 in the world (second in the Middle East after Israel); according to the IFCs "Doing Business" report. Kuwait and Oman have a long way to go before competing with KSA's placing. The Saudi Arabian General Investment Authority (SAGIA) was established in early 2000 to promote private investments in growth acceleration. ''SAGIAs mission is to achieve rapid economic growth in the Saudi Arabian economy by creating a pro-business environment, providing comprehensive services to investors, and fostering investment opportunities in key sectors of the economy. In pursuit of this mission, SAGIA has recently announced the launch of four greenfield, privately developed economic cities across the nation''. In 2005, King Adbdullah Economic City was established with a focus on industrial sector and educational development. In 2006, the following three new cities came to light: 1Prince AbdulAziz Bin Mousaad Economic City which focuses on the agro-industrial sector, mining, processing industries. 2- Knowledge Economic City which concentrates on IT, Islamic studies and medical research. 3- Jazan Economic City which has oil and copper refineries, aluminum and petrochemicals industries. Investments in these cities amounts to SAR165 billion (USD44 billion). In aggregate terms, SAR300 billion worth of investments are planned to be lured in over the coming two decades. This is part of the plan to make Saudi Arabia one of the top economies attracting FDI globally. Gross fixed capital formation in 2006 is estimated to have stood at 17.0% of GDP, 9.8% of which is expected to be generated from the private sector in the non-oil field, far exceeding that of government investments standing at 5.2% of GDP. All the while, the oil sector accounted only for 2.0% of GDP worth of investments. This goes well with the government's plan heading towards diversification. SAGIA is planning on reaching its goal through creating a favorable business atmosphere, exceptional infrastructure, and a lavishing environment to professionals in the economic cities, far exceeding standards set by industrial parks and free zones.

KSA - Economy

17

VI. International Trade


A) Current Account The trade balance surplus was maintained in 2006, amounting to SAR557.0 billion as opposed to SAR470.7 billion in 2005. Outstanding oil export proceeds made 90.0% of total exports in 2006. Other exports represent a minor portion since the economy is mainly dependent on the oil sector. The wave of high international oil prices and production almost reaching its maximum capacity stamped remarkable results. Oil has been and is expected to remain the main trade balance earner.
Table 9: BoP Contributors as Percentage of GDP (FY06)
Item Oil Exports Non-Oil Exports
Source: SAMA, HC Brokerage

Percentage to GDP 54.1% 5.9%

Chart 10: Exports by Category (2002-2005)


120% 100% 80% Chemical products Refined oil products Construction materials & steel Other materials

Exports

60% 40% 20% 0% 2002 2003 2004 2005 2006

Source: General Port Authority, HC Brokerage

Other exports growth has been sluggish, exposing the trade balance to external shocks. It grew by 8.7%, which was offset by imports that grew 11.3% in 2006. Nevertheless, throughout the past three years an average 44.0% of total imports came in the form of machinery and transport equipments. This puts the diversification plan on the right track, as it should accelerate the non-oil exports' growth rate. Saudi Arabia's efforts to promote exports were further encouraged by an export program started in 2003 by the Saudi Development Fund to provide financial support and insurance to non-oil exporters. The insurance policy covers risks of defaults in payments to non-oil exporters resulting from political or commercial reasons. The program joined the International Union for Credit and Investment Guarantors (Bern Union) in October 2003.
Table 11: Imports Breakdown
(%) total imports

Machines, appliances and equipments Food stuff Chemical and metal products Textiles and clothing Metals and their products Wood and jewelry Transport equipment Other goods Total imports (%)
Source: SAMA, HC Brokerage

FY03 21.8 16.2 13.7 5.4 9.1 2.0 21.3 10.5 100.0

FY04 22.1 15.0 13.8 4.8 10.0 2.3 21.4 10.6 100.0

FY05 24.3 14.8 13.5 4.3 10.7 2.5 21.0 8.9 100.0

FY06 25.8 12.4 12.9 4.1 15.2 1.7 19.3 8.6 100.0

KSA - Economy

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In services, investment income continued to go up in 2006 reaching SAR25.9 billion up 40.0% YoY and making 47.6% of total services receipts. Services payments, however, dragged the services balance down heavily, weighted by other government services and private transfers. Private transfers account for 21.6% of total payments where about 88.4% of the labor population (5.4 million) are non-Saudi.
Table 12: Remittances as a percent of GDP (2001-2006)
SAR Billion

Remittances of expatriates % of GDP


Source: SAMA, HC Brokerage

2002 59.5 8.5

2003 55.4 6.9

2004 50.8 5.5

2005 52.4 4.5

2006 54.6 4.2

Table 13: Current Account (FY03-FY06)


SAR billion 1. Merchandise trade (FOB) A) Oil Exports Hydrocarbon B) Other Exports Of which Re-exports Exports C) Imports (-) 2. Services and Transfers A) Receipts I) Investment Income II) Oil Sector III) Other B) Payments I) Freight and Insurance II) Oil Sector III) Other Private Services IV) Other Government Services V) Private Transfers 3. Current Account Balance (1+2) Current Account Balance as % of GDP
Source: SAMA, HC Brokerage

FY03 221.7 307.5 41.1 4.9 127.0 -116.5 33.5 11.1 0.9 21.4 150.0 11.4 16.0 18.3 48.8 55.4 105.1 13.0

FY04 317.3 414.0 57.1 9.2 153.9 -122.5 39.2 16.0 1.2 21.9 161.8 13.8 14.2 27.6 55.2 50.8 194.7 20.7

FY05 470.7 604.0 71.2 10.7 204.5 -133.2 45.4 18.5 1.8 25.0 178.7 18.4 18.5 35.9 53.2 52.4 337.4 28.5

FY06 557.0 707.1 77.3 12.3 227.4 -199.3 54.4 25.9 2.1 26.3 253.8 20.9 36.4 48.0 93.6 54.6 357.6 27.3

Trade with GCC Imports from GCC countries is on the rise, up 19.3% in 2006 (SAR30.6 billion) from 11.5% in 2005 (SAR25.6 billion), 10.7% (SAR17.9 billion) in 2004 and 8.7% (SAR12.0 billion) in 2003. The rise in exports, however, did not keep up with the fast pace, making it a net importer from GCC countries over 2004, 2005, and 2006. Trade with the GCC grew in 2006, comprising 12.3% of total imports, eating away from the share KSAs main sixteen trade partners.
Table 14: Main Non-Oil Trade with GCC markets (Import & Exports)
SAR billion

Imports UAE Bahrain Kuwait Qatar Oman Total

2003 Exports 7.6 2.3 0.5 0.8 0.6 6.2 1.7 2.9 1.3 1.0 13.2

Imports

2004 Exports 9.4 5.7 0.8 1.0 0.8 7.5 2.0 4.0 1.9 0.9 16.5

Imports

2005 Exports 8.7 2.7 4.3 2.6 1.3 19.8

2006 Imports 15.3 12.0 0.9 1.1 1.3 30.6 Exports 11.0 3.3 4.8 3.7 1.4 24.2

12.4 10.0 1.0 0.7 1.3 25.6

12.0

17.9

Source: Ministry of Economy and Planning, HC Brokerage

Trade with the world The largest share of the kingdom's imports come from sixteen countries, mostly from Asia and the developed world. The major blocks of which are, the US (14.7%), Japan (8.0%), Germany (8.2%), and China (8.7%). Although Saudi Arabia imports from various countries, making its portfolio well diversified, the currencies of these countries are appreciating against the US dollar, indicating inflationary pressures.

KSA - Economy

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Table 15: Geographical Distribution of Imports


(%)

USA Japan Germany Mainland China UK Italy South Korea France India Australia Brazil Switzerland Finland Thailand Holland Sweden Sixteen Countries total GCC countries Other Arab countries Rest of the world Total Imports
Source: SAMA, HC Brokerage

2003 15.0 10.3 8.9 5.9 5.9 4.0 3.7 3.7 3.0 2.7 1.7 1.9 1.3 1.5 2.0 1.5 73.0 8.7 3.5 14.8 100.0

2004 15.3 9.8 8.1 6.6 5.7 3.4 3.8 3.5 3.2 2.9 1.7 1.9 0.7 1.2 1.8 1.7 71.2 10.7 3.5 14.6 100.0

2005 14.8 9.0 8.2 7.4 4.7 3.8 3.7 3.4 3.1 2.8 2.2 2.1 1.7 1.7 1.7 1.6 72.0 11.5 3.7 12.8 100.0

2006 14.7 8.0 8.2 8.7 4.0 3.9 3.8 3.9 3.7 2.6 1.8 1.6 1.7 2.0 1.4 1.6 72.0 12.3 3.2 12.4 100.0

Imports from the US have been declining since 1995, reaching 14.7% of total imports in 2006, down from 21.5% in 1995. On the other hand, upon vigorous growth rates taking place in the economy of China, imports grew significantly reaching 8.7 % in 2006 against 2.7% in 1995. B) Capital Account The only net inflow recorded in the capital account was the oil sector and other capital transactions amounting to SAR2.4 billion in 2006. Other private capital, commercial banks, and official capital reserves recorded net outflows of SAR360.1 billion. Robust growth attracts foreign investments which best serves the diversification plan and nourishes the capital account, yet it also increases income outflows. It is worth noting that although FDI is not clearly stated on the capital and financial account, according to the UNCTAD, FDI in KSA in 2006 amounted to USD4.6 billion, 22.8% of total FDI in the GCC, representing 1.3% of GDP. It is worth noting that although KSA ranks second in attracting FDI in the GCC it is far behind the UAE which drew in investments worth USD12.0 billion for the same year.
Table 16: Capital and Financial Account (FY03-FY06)
SAR billion

Capital movements and Reserves A) Oil Sector and Other Capital Transactions (net) B) Other Private Capital (net) C) Commercial Banks D) Official Capital & Reserves
Source: SAMA, HC Brokerage

FY03 FY04 -105.1 -194.7 -2.1 -1.2 -38.1 -70.6 11.4 -6.0 -76.2 -116.8

FY05 -337.4 1.7 -108.9 20.6 -250.8

FY06 -357.6 2.4 -18.3 -44.2 -297.5

KSA - Economy

20

Conclusion The current account balance to GDP reached a high of 28.5% in 2005, up from its lowest deficit in 1995, amounting to 3.7% of GDP. The rise was triggered by the jump in international oil prices. The trend was maintained in 2006 and is expected to be sustained since a huge bulk of total exports come in the form of oil, and oil prices are not expected to see a huge drop (retreating back to a 2004 level standing at USD34.53 per barrel) from its current levels averaging USD62.01 per barrel year to date. Over and above, KSA is planning to raise its oil production to 12.5 million barrels per day in 2009 from a current production capacity of 8.54 million barrels per day, as of the first half of 2007. As for the Saudization program, the more it diffuses into the economy, the more workers' remittances will drop, positively affecting the trade balance. But until then, coupled with the planned increase in oil production, the trade balance surplus is expected to shrink with the increase in workers remittances and capital outflows generated by profit repatriation.

KSA - Economy

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HC Brokerage Cairo, Egypt


HC Brokerage
Senior Management
Hussein El Sherbiny Chairman & Managing Director hsherbiny@hc-si.com hc-research@hc-si.com Co-Head of Regional Research Co-Head of Regional Research Analyst- Chemicals & Fertilizers Senior Analyst Analyst Utilities, Logistics & Transportation Editor Analyst Local Textiles Analyst Tourism, Financial Serv. Analyst Cement Analyst Banking Senior Economist Financial Analyst Financial Analyst Analyst Food & Beverage, Tobacco, Mills Vice President/Head of TA Desk Technical Analyst nchoucri@hc-si.com whazem@hc-si.com aabdelnabi@hc-si.com ahmed.badr@af-hc.com christina.hedra@af-hc.com jbertman@hc-si.com eeldishish@hc-si.com gbenyamin@hc-si.com hshaarawy@hc-si.com halaa@hc-si.com rmansour@hc-si.com mkhamis@hc-si.com melhefnawy@hc-si.com sserrour@hc-si.com msaeed@hc-si.com Wael.atta@af-hc.com sales@hc-si.com Head of Sales Foreign Sales Desk Local and Gulf Sales Local and Gulf Sales Local Sales Local Sales GDR Trader Chief Equities Trader Local Bonds Trader selmaraghy@hc-si.com amohamed@hc-si.com yseif@hc-si.com hwahid@hc-si.com ymansour@hc-si.com ayounes@hc-si.com aelhemely@hc-si.com msaad@hc-si.com anabil@hc-si.com Ext. 200/201 +202 3749 6008 Ext. 356 Ext. 353 Ext. 359 +971 4 20 66 850 +971 4 20 66 858 Ext. 367 Ext. 362 Ext. 355 Ext. 364 Ext. 352 Ext. 368 Ext. 357 Ext. 363 Ext. 359 Ext. 175 +971 4 20 66 851 +202 3749 6008 Ext. 210 +202 3749 6082 Ext. 319 Ext. 206 Ext. 217 Ext. 208 Ext. 222 Ext. 213 Ext. 218

HC Brokerage, among Egypts top ranking securities brokerages, offers services primarily for the Egyptian market to institutions and high net worth individuals HC Brokerages product offerings include equities listed on the Cairo and Alexandria Stock Exchange (CASE), global depositary receipts (GDRs) for Egyptian companies listed on the London Stock Exchange, domestic fixed income products, Eurobond issues, for both Egypt and other countries, intermediation services for transactions involving unlisted securities in the over-the-counter (OTC) market, and listing services for the CASE.

Research
Nemat Allah Choucri Walaa Hazem Abdelaziz Abdel Nabi Ahmed Badr Christina Hedra Jonathan Bertman Engy El Dishish Germaine Benyamin Haitham El Shaarawy Hatem Alaa Reem Mansour, MA ECID May Khamis Mennatallah El Hefnawy Sara Serour Mohamed El Saiid, MFTA Wael Atta

Sales
Shawkat El-Maraghy Amro Mohamed Yasser Seif Hossam Wahid Yasser Mansour Abeer Younes Amr El Hemely Mostafa Saad Ahmed Nabil

HC Securities & Investment Cairo, Egypt


HC Securities & Investment
Senior Management
Hussein Choucri Chairman and Managing Director hchoucri@hc-si.com Ext. 122 +202 3749 0380/4 Managing Director Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President tallouba@hc-si.com welhatow@hc-si.com asallam@hc-si.com babdelmalek@hc-si.com mselim@hc-si.com rdurra@hc-si.com sahmed@hc-si.com ymowafy@hc-si.com Ext. 101 Ext. 112 Ext. 115 Ext. 116 Ext. 118 Ext. 110 Ext. 113 Ext. 117 +202 3749 0380/4 Executive Director Vice President Vice President, Head of Fixed Income Vice President Assistant Vice President Financial Analyst nmoussa@hc-si.com akamel@hc-si.com wwagih@hc-si.com oradwan@hc-si.com hkortam@hc-si.com smaguid@hc-si.com Ext. 125 Ext. 127 Ext. 220 Ext. 129 Ext. 124 Ext. 128 +971 4 20 66 888

HC Securities & Investment, the holding company for HC group, owns HC Brokerage and Hussein Choucri Financial Advisors. Investment banking is engaged in raising capital and providing advice in the areas of corporate finance, mergers and acquisitions, restructuring, divestitures and spinoffs, capital market services, project finance and real estate. Asset management offers portfolio and mutual fund services.

Investment Banking
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Nabil Moussa Adel Kamel Wael Wagih Omar Radwan, CFA Hassem Kortam, MSc Seif Meguid

Al-Futtaim HC Securities Dubai, UAE


Al-Futtaim HC Securities
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Al-Futtaim HC Securities is a fullservice securities brokerage offering trading solutions for the UAE markets.

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