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Liquidity Easing in Saudi Arabia Markets

Cash squeeze in the nation’s banking system is suddenly dissipating.Cash squeeze in the nation’s banking system is suddenly dissipating.

Liquidity in Saudi Arabian financial markets is improving owing to government initiatives such as the successful foray into international bond market, a report said.

The Saudi Arabia Interbank Offered Rate, Saibor, has declined lately, as the Saudi Arabian Monetary Agency, Sama, reduced the size of weekly issuance of treasury bills and also introduced 90-day repos, added the Economic Research released by Al Rajhi Capital, a leading provider of financial services in the kingdom, TradeArabia reported.

The IMF cut the kingdom’s 2016 non-oil GDP forecast growth to 0.3%, as against 1.6% predicted in May 2016, as government spending cuts negatively impacted business confidence.

Bank claims on the private sector grew by 7% year-on-year in September, as against a 7.5% y-o-y rise in August. Meanwhile, deposits dropped at a faster pace in September (-4.3% y-o-y versus 2.8% in August), pushing the loan-to-deposit ratio beyond the 90% mark for the fourth consecutive month.

On the equity front, Tadawul All Share Index advanced 6.9% m-o-m in October, as compared to a 7.5% m-o-m drop in September. In a push to diversify its economy, Saudi Arabia will push automotive, pharmaceutical and solar industries, another report said Sunday.

Saudi Arabia will develop automotive, pharmaceutical and solar industries, going into the future, its energy minister said, revising its strategy to help the world’s largest oil exporter to diversify its economy.

  New Clusters

Khalid al-Falih said the kingdom would set up new industrial clusters such as energy cities south of Dammam, a maritime complex in Ras Al Khair and another city in Jizan for basic and more developed industries.

He said the capital of the Saudi Industrial Development Fund could be boosted to give loans to projects.

Falih was speaking at an annual event for Saudi Basic Industries Corp, one of the world’s largest petrochemicals companies.

Meanwhile, stocks just chalked up their longest rally since 2014, default risk is tumbling and the cash squeeze in the nation’s banking system is suddenly dissipating.

Such is the optimism reverberating through Saudi Arabia’s markets since the nation, the world’s biggest oil exporter, made good on a promise to sell its first international bonds that its markets are in their best phase for months.

October’s $17.5 billion offering, the largest from an emerging-market nation, was part of the kingdom’s plan to cope with falling crude prices and develop its $646 billion economy away from oil.

 

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