Sunday, December 8, 2019Rabia II 11, 1441 AH

BUSINESSGULF TIMES

Tariff deadline keeps focus on Wall St trade

New crude-only Opec+ target isn’t a loophole

TRUMP PLAN | Page 14RUSSIA STANCE | Page 3

HIGHEST LEVELS OF SUCCESS : Page 16

Nebras Power celebrates 5 years of incorporation

Qatargas LNG output achieves ‘best in class’ reliability performance in ’19Qatargas’ liquefi ed natural

gas (LNG) production is on target achieving the “best

in class” reliability performance of 98.8% while the Laff an Refi n-ery achieved a strong reliability of 98.6%, well ahead of the current year targets.

The world’s top LNG compa-ny’s “achievements in 2019 and its strong performance” in a wide range of areas were highlighted at its Annual Town Hall meetings held in Doha and Al Khor recently.

The company also completed “successful and safe” shutdowns of three of its mega LNG trains to ensure their reliability.

Qatargas maintained a “strong environmental and safety per-formance” as it achieved a fl ar-ing rate of 0.38 against a target of 0.44 thanks to a successful fl are reduction project whereas the greenhouse gas (GHG) emission rate showed 0.35 against a target of 0.42.

In the year under review, Laf-fan Refi nery 1 marked 10 years of operation without any Lost Time

Incident (LTI) and the company successfully completed two key environmental projects – the Waste Materials Management fa-cility and the Treated Industrial and Process Water facility.

Updates on the North Field Ex-pansion (NFE) and North Filed Production Sustainability (NFPS) projects were provided during the event.

While the NFPS project will ensure that the current produc-tion capacity of the North Field offshore wells is well maintained into future, the NFE project will further enhance Qatar’s produc-tion capacity from the current 77mn tonnes per year (Mtpy) to 110mn Mtpy by 2024. Updates on the Barzan Pipeline and Heli-um 3 projects were also provided during the event.

The 2020 strategic goals, as explained during the meetings, included striving for an “Inci-dent and Injury Free” workplace, improving uptime availability, reliability and utilisation of the LNG plants to achieve full plant

capacity and meet supply rights; and enhancing and promoting re-liability culture across the organi-sation to drive effi ciency.

In addition, further strategic goals were identifi ed as maxim-ising revenue by penetrating new markets; maximising customer satisfaction while retaining con-tractual and fi nancial perform-ance; and achieving Qatarisation targets through a skill-based Qa-tarisation strategy.

At the events, Qatargas per-formance, challenges and strate-gic goals were reviewed.

The Town Hall meeting is an open forum for employees to meet with Qatargas’ chief executive of-fi cer and the management leader-ship team for discussions on the company’s performance, future challenges and strategic goals for the year ahead. A question and answer session followed in which Qatargas CEO Sheikh Khalid bin Khalifa al-Thani, and the man-agement team replied to employ-ees’ questions and enquiries on work-related matters.

Qatargas’ “achievements in 2019 and its strong performance” in a wide range of areas were highlighted at its Annual Town Hall meetings held in Doha and Al Khor recently. A question and answer session followed in which Qatargas CEO Sheikh Khalid bin Khalifa al-Thani and the management team replied to employees’ questions and enquiries on work-related matters.

BUSINESS

Gulf Times Sunday, December 8, 20192

Colombia risks downgrade from tax cut plan: CardenasBloombergBogota

Colombia’s credit rating is un-der threat from tax cuts being debated by congress, former

fi nance minister Mauricio Cardenas said.

The government’s tax bill would re-duce its revenues by about 1% of gross domestic product in 2022, Cardenas said. President Ivan Duque’s adminis-tration is taking a gamble by betting on faster growth and lower tax evasion to keep the fi scal defi cit in check, he said.

“It’s putting Colombia at a serious risk of a downgrade and that’s some-thing that we should avoid,” Cardenas said on Thursday, in an interview in Bogota.

Cardenas, who served as fi nance minister from 2012 to 2018, called on congress to reject some of the more costly measures, such as a proposal that would allow companies to deduct some municipal taxes from their na-tional tax payments. This on its own would deprive the treasury of revenue equivalent to 0.7% of GDP, without doing much to boost growth, he said.

Even with a downgrade, Cardenas said the country would still retain its investment grade rating. The fi nance ministry declined to comment.

The government needs to cut the defi cit to 2.7% of GDP this year, and 2.3% in 2020, to avoid breaching the

limits established by the balanced budget law. To achieve this, Duque has been helped by a surprise $2.2bn windfall profi t from the central bank, and by dipping into the cash balance of state-controlled oil company Eco-petrol S.A.

“Is this sustainable? No,” Cardenas said. “The medium-term fi scal situa-tion of Colombia hasn’t been resolved.”

Moody’s Investors Service and Fitch Ratings rate Colombia two notches above junk, while S&P Global Ratings rates the country at the lowest level of investment grade.

The government said last month that it is seeking a special dividend of $1.1bn from Ecopetrol, of which its share would be about $920mn.

Cardenas said he always resisted the temptation to do this when he was minister, even when times were hard-est.

Including the special dividend and regular dividends, the company will be paying out more than 80% of its 2018 profi ts to shareholders, according to a study by Itau’s Colombia brokerage.

If the dividend payout ratio is rou-tinely above 60%, the company’s fi -nances and credit rating are going to deteriorate, Cardenas said.

Cardenas, who as minister used to chair central bank policy meetings, said there’s a 25% probability that the government will cut borrowing costs next year, if external conditions are weak and growth is below potential.

Food infl ation rears its head in Chile and Brazil in NovemberBloombergBrasilia

Higher food costs fuelled infl ation in Bra-zil and Chile in November, representing a fresh challenge to monetary policy in both

nations.In Brazil, food became 0.72% more expensive

from the previous month due to a surge in meat prices. The increase was well above the headline infl ation reading of 0.51%. In Chile, fresh fruit and vegetables drove a 1.3% spike in food costs, while overall prices only crept up by 0.1% from October.

The fi gures put Brazil and Chile among the emerging market nations grappling with pricier staple products. While reasons for the increase diff er – drought and unrest in Chile, rising Chi-nese demand in Brazil – the data also raise a yel-low fl ag for policy makers, who have cut interest rates in both nations this year.

In Brazil, the infl ation pick-up comes as econo-mists and company executives sound the alarm on rising meat prices due to dwindling supply. China, the world’s top meat consumer, doubled pork im-ports and shipped in 63% more beef in October than a year earlier as the country struggles to ease shortages due to African swine fever.

“The food price shock has arrived” in Brazil, said Leonardo Costa, an economist at Rosenberg Associados. “We’re increasing our 2019 infl ation call to 4% because the increase in food and bever-age costs will be even stronger in December.”

Months of subdued prices have allowed policy makers to cut borrowing costs to a record low of 5%. The central bank has indicated that next week it will deliver a fourth straight cut of 50 basis points, and traders are expecting it to be the last.

Compounding concerns about a rise in the cost of living is a recent currency weakening in Bra-zil. The real has fallen roughly 7% this year – the fourth largest drop among 24 emerging market currencies tracked by Bloomberg. A weaker cur-rency can fuel infl ation by making imports more expensive.

Meanwhile, Chile’s economy is reeling from six weeks of social upheaval that’s left at least 20 people dead, shuttered businesses and interrupt-ed transportation. The protests sunk the peso to a record low, prompting the central bank to promise as much as $20bn in spot and swap operations to prop up the currency.

Higher food prices in November were due to both currency pass-through and also supply dis-ruptions related to the protests, according to a research note from Capital Economics. Overall in-fl ation will remain pressured through the start of next year, they wrote.

This week, Chile’s central bank kept its bench-mark interest rate unchanged and signaled it will remain steady for upcoming months even as the social upheaval undercuts growth estimates.

South African Airways rescue chief faces long to-do list

Behind South America’s year of rage, years of woes

BloombergJohannesburg

South Africa’s government has hired a veteran business-rescue specialist to take charge of the state-owned airline in a renewed attempt to restore it to financial health and remove a burden on the nation’s finances.Les Matuson and his team at Johannesburg-based Matuson & Associates will get 4bn rand ($273mn) in working capital from creditors and the government to keep South African Airways operating into 2020 – a move aimed at assuring passengers that their flights over the busy year-end season will take off as planned.These are some of the most pressing issues facing SAA’s temporary managers:

Rationalise routes

The scaling back of SAA’s global network has been a fixture of previous restructuring plans drawn up to ease debt and stem persistent losses, which amount to more than 28bn rand over 13 years. Some routes have already been cut, such as those from Johannesburg to Mumbai and the Nigerian capital Abuja, but more drastic action is required, according to Mike Mabasa, chairman of the Air Services Licensing Council.“Route rationalisation must be top of

the agenda,” he said by phone. “SAA is bleeding cash on some routes – they are not able to get bums on seats.”Cuts should primarily come from destinations outside Africa that are already well serviced by rivals, said Mabasa, adding that it can be cheaper to reach some international destinations via the Middle East than direct with SAA. That would leave the South African carrier to focus on a domestic service and compete better with Ethiopian Airlines Group in the rest of the continent.SAA’s most recent restructuring plan, dated August 21, favours a reduction in frequencies rather than a full withdrawal, but also lays out more extreme scenarios where flights to cities such as Sao Paulo and Perth are curtailed. Its ex-Africa operation could then target North America – namely New York and Washington, DC – and Europe.

Optimise fl eet

If routes are cut, the airline will have to pare back the size of its fleet, which comprises almost 50 Airbus SE jets. Aircraft will also need to be upgraded to reduce fuel spend and boost profit, with the replacement of aging A340 models with more eff icient A350s already underway.The first of four A350-900 aircraft was delivered early last month, which acting chief executive off icer Zuks Ramasia

said at the time was a step toward financial stability. SAA spokesman Tlali Tlali says Matuson will now decide how the fleet should be renewed.“Using A350s on routes to Hong Kong and New York will see an immediate 20% to 25% saving just on fuel costs,” said Linden Birns, managing director of Plane Talking, a Cape Town-based aviation advisory service.

Job cuts

SAA’s surprise attempt last month to cut almost 1,000 jobs, or about a fifth of the workforce, accelerated the path toward bankruptcy protection after two labour groups embarked on a costly week-long strike. That’s likely to make Matuson wary of any immediate attempt to revive the plan, with union negotiations likely to take place instead.Solidarity, which has about 280 SAA group staff among its members, had filed its own lawsuit to force bankruptcy protection before the government pre-empted the action with its own plan. Larger labour groups, such as the National Union of Metalworkers of South Africa, have said they back business rescue in principle but want to be involved in the process – objecting to not being consulted about the identity of the practitioner.“The unions won’t be doing themselves any favours by pursuing further strike action,” said Mike Mabasa. “They

should instead make progressive recommendations to the protector.”

Scrutinise fi nances

A key element of the work of any team of corporate recovery practitioners is to go through a distressed company’s

finances, and that may be where some of the real SAA horrors lie. While financial statements for the year through March 2018 show losses holding steady at about 5.3bn rand, the carrier hasn’t yet submitted accounts for the most recent year.

Two years ago, auditor general Kimi Makwetu completed a review of SAA and found that – apart from mounting losses – the airline failed to properly record financial information and the value of assets such as planes and property.

By Matthew BristowBogota

One South American nation after another has seen an explosion of anti-government rage in recent months. Five years of weak economic growth is stoking dissent, as is a widespread belief that the costs of adjustment aren’t being fairly shared between rich and poor. In Argentina, which had an election to serve as a safety valve, incumbents were voted out. In Bolivia, a contested election unleashed massive protests. Elsewhere, in the Andean nations of Colombia, Chile and Ecuador people have taken to the streets in the hundreds of thousands.

1. How bad is the economy?

Over the last five years, South America has been the world’s worst-performing region economically. Argentina is in deep recession, and Venezuela is undergoing one of the worst slumps in history. Elsewhere, growth is sluggish rather than catastrophic. The International Monetary Fund expects the economies of South America to contract 0.2% this year.

2. What accounts for the doldrums?

According to the UN Conference on Trade and Development, all 12 countries in South

America are commodity dependent, meaning raw materials such as oil, iron ore, copper, soy and coal account for more than 60% of merchandise exports. That’s true for just a quarter of nations in South Asia, Central Asia and Europe and none in North America. A boom in commodity prices from 2000 to 2014 led to a decrease in the poverty rate in Latin America from 27% to 12%, but since then demand from China and elsewhere has cooled as the global economy slowed. That’s caused commodity prices to drop, shrinking export and government revenue as well as investment. Colombia, for example, sold exports worth $42bn in 2018, down from a peak of more than $60bn in 2012.

3. How have citizens been aff ected?

Unemployment has risen in all the major South American economies over the last five years, including Argentina, Brazil, Chile, Colombia and Peru. That’s also made it harder for these economies to absorb millions of migrants fleeing Venezuela’s crisis, who need jobs. Wage growth has also been sluggish. As finance ministries try to keep debt under control, austerity programmes have meant higher taxes and less money spent on subsidies and government services.

4. How does inequality factor in?

All the world’s most unequal countries are

either in Africa or in Latin America and the Caribbean according to data from the World Bank. A common complaint from protesters in Colombia, Chile and Ecuador is that the poorest citizens are hurt the most by austerity measures. Inequality, like corruption, seems harder to bear when the economy is weak and the jobless rate is rising.

5. In what ways is the unrest country-specifi c?

Chile: The nation appeared to be on the cusp of first-world status, with a standard of living approaching that of Portugal or the Czech Republic. Still, Chile, like the rest of the region, is a deeply segregated society, with the poor living largely out of sight of the wealthy. A modest increase in transport fares unleashed a wave of anger that few suspected existed.Colombia: As elsewhere in the region, protesters are aggrieved by corruption and inequality. Many are also angry about continuing violence in rural Colombia following a peace deal in 2016 between the government and Marxist guerrillas. These include the unsolved murders of community leaders who, in many cases, are thought to have been killed by drug-traff icking mafias who took over territory from the demobilized rebels.Ecuador: Protests were triggered by the elimination of fuel subsidies, which were

part of an IMF-backed austerity drive. Demonstrations were led by indigenous groups who make up 7% of the population and who complain of being excluded from positions of power in politics and in the economy.Bolivia: Violence was sparked first by a disputed election in which President Evo Morales claimed victory, and then by his resignation after the armed forces chief called on him to quit. The country is split along ethnic lines, and many indigenous Bolivians who had backed Morales, a member of the Aymara indigenous group in a country traditionally ruled by a white elite, have protested the new, transitional government, led by a woman of European descent.

6. How have governments reacted?

The governments of Ecuador, Chile and Colombia all caved in to some of the protesters’ demands, or proposed measures to placate them, while in Bolivia Morales was forced out. In all four countries, aggressive police tactics have resulted in protester deaths, further stoking outrage. In Colombia, demonstrators are calling for the country’s anti-riot squad to be disbanded. In Chile, anti-police graff iti has become common in big towns, and there are calls to reform the police after weeks of violent confrontations with protesters.

Bloomberg QuickTake Q&A

Riot police stand guard outside the Central Bank of Colombia building during a national strike in Bogota on November 21. President Ivan Duque’s administration is taking a gamble by betting on faster growth and lower tax evasion to keep the fiscal deficit in check, former finance minister Mauricio Cardenas said.

A passenger waits to be served at the South African Airways customer desk at the O. R. Tambo International Airport in Kempton Park, South Africa (file). The scaling back of SAA’s global network has been a fixture of previous restructuring plans drawn up to ease debt and stem persistent losses, which amount to more than 28bn rand over 13 years.

Trump steel tax has Brazil worried about US keeping beef ban

Worsening trade tensions may delay the removal

of US barriers on imports of Brazilian fresh beef,

people familiar with the matter said, according to

Bloomberg.

President Donald Trump’s decision to reinstate

tariff s on Brazilian steel and aluminium, which

took the government of Jair Bolsonaro by sur-

prise, poured cold water on Brazilian expectations

the US would soon resume imports of fresh beef

from the South American country, according

to the people who asked not to be identified

because talks aren’t public.

Despite the good relationship between the two

leaders, Brazilian government off icials don’t

expect the US to ease imports of agriculture prod-

ucts in an electoral year in the US, the people said.

BUSINESS3Gulf Times

Sunday, December 8, 2019

Russia says new crude-only Opec+ target isn’t a loopholeBloombergVienna

The exclusion of a light oil called conden-sate from Russia’s output target under the Opec+ deal is not a loophole, but a way to

bring the country in line with the rest of group, said Energy Minister Alexander Novak.

At Friday’s meeting of the Organization of Petroleum Exporting Countries and its allies in Vienna, Russia was given permission to exclude the liquid hydrocarbon that condenses out of natural gas from its production target. The change brings Russia’s November oil output in line with its pledged cut, where previously it had fallen short.

Novak denied the decision was a loophole that would give Russia an opportunity to pump more oil and still claim compliance with the Opec+ deal because the oil nation’s statistics don’t publish separate crude and condensate volumes.

“We have a very precise way to calculate our crude oil and condensate output fi eld by fi eld, crude variety by crude variety,” Novak said in an interview with Bloomberg TV in the Austrian capital. “It is impossible to create a loophole.”

Russia has every means to refl ect the break-down in its data and will be transparent about the oil production levels with Opec, analysts and media, Novak said. The country reached an agreement with Opec on feeding data from its computerised oil-tracking system to the agen-cies monitoring the group’s output, he said.

Russia, one of the architects of the Opec+ deal, has consistently failed to comply with its pledged output cut this year. Last month, No-vak said one of the key hindrances was rising production of condensate from new natural gas fi elds. The nation includes condensate in the to-tal oil production volumes, while its Opec part-ners do not.

At the Vienna meeting, Opec+ agreed to re-duce its output target by 500,000 barrels a day in the fi rst quarter.

Russia’s cuts target will be deepened by about 70,000 barrels a day, bringing its total obligation for crude-only supply curbs to some 300,000 barrels a day.

The new rules on condensate will help Russia achieve full compliance with its pledges, Novak said. Already in November, if condensate had been excluded, Russia’s crude-only daily cuts reached some 232,000 barrels, more than re-quired under the Opec+ deal, Novak said.

The nation is determined to deliver the pledged cuts in full in the fi rst quarter, even as low winter temperatures in Siberia, Russia’s main oil region, make supply reductions diffi -cult, Novak said.

Nielsen to be YPF chairman as Argentina chases shale dreamBloombergBuenos Aires

Economist Guillermo Nielsen, a staunch supporter of shale drilling in Argentina, will chair state-run oil producer YPF SA as the country’s new government seeks to revive a battered economy.The move could be viewed favourably by investors betting on the nation’s nascent shale trove. While Nielsen doesn’t come from the oil industry, he’s been pushing for policies to spur Vaca Muerta, a shale play that has potential to rival the Permian Basin in the US. That’s because he and other advisers

to President-elect Alberto Fernandez want to turn the economy around by boosting exports.Nielsen, 68, will be chairman of the board, Fernandez told reporters in Buenos Aires on Friday. The former government debt negotiator and ambassador didn’t reply to requests for comment. YPF declined to comment.As chairman, Nielsen will be the government’s operator at YPF. Chief executive off icer Daniel Gonzalez, meanwhile, has expressed a desire to stay on. But during the presidency of Cristina Fernandez de Kirchner, who nationalized YPF in 2012, the CEO and chairman roles were merged. She is

now Argentina’s vice president-elect.Shareholders, who are scheduled to hold their annual meeting in April, have to approve the chairman’s appointment. The meeting will probably be moved forward, said a person familiar with the matter, who declined to be named because discussions are private.During the election campaign, Nielsen advised Alberto Fernandez and met powerful oil union leaders as he pushed a bill that he’s drafted to spur Vaca Muerta’s development. The document includes provisions to slash taxes for shale drillers – putting Argentina on a par with the Permian – and to build a

pipeline to haul natural gas output to export markets.“It’s a good move because Nielsen has been an outspoken supporter of Vaca Muerta development,” said David Tawil, an Argentine shale investor in New York and president of Maglan Capital LP.YPF has drilled most of the oil wells in Vaca Muerta in a venture with Chevron Corp. But other big companies are starting to arrive, including Exxon Mobil Corp, Royal Dutch Shell Plc and ConocoPhillips. They need free oil markets and the ability to repatriate dollars to keep investing.Right now, though, Argentine drillers

get fewer dollars per barrel than in other countries because of government meddling to stem inflation, and the nation also has currency controls. Chevron only committed to the shale venture with YPF in 2013 after it was exempted from a previous set of controls.Oil caps have hurt YPF this quarter, with the company curbing spending as prices at the pump hit their lowest levels in dollars since at least 2010, according to an investor presentation. YPF has more than half of the Argentine fuel market.The big question mark is how Fernandez, who’s promised to “un-

dollarise” energy prices, will implement that sort of regulation, which could hinder shale gas drilling. It’s also unclear whether he’ll allow the cost of fuel to track market levels, especially as he seeks to tame inflation in other areas. Nielsen opposes crude and fuel caps because they choke investments, according to a person familiar with the matter.“Price controls would quickly sap YPF’s balance sheet and lead the company to restrict investments, with cash burn likely accelerating as returns fall across the board,” Bloomberg Intelligence analyst Fernando Valle wrote in a December 3 report.

Demand slowdown in top gas buyer set to worsenBloombergBeijing/Singapore

A slowdown in gas demand growth in China, the driver of global use over the past two years, is expected to slacken further, adding to investor concern as supply continues to build.Consumption in 2021-2025 will grow at a slower pace than it has in the current five-year period, a researcher at China’s economic planning department said at the BloombergNEF summit in Shanghai on Wednesday. Furthermore, a weaker economy and rising imports via pipeline could shrink the share of liquefied natural gas in the overall Chinese market, according to gas utility ENN Energy Holdings Ltd.The country’s overall gas use has expanded 9.5% so far this year, down from 18% in 2018, amid concerns that the slowing economy has prompted the government to focus less on pollution control, which had earlier helped spur demand for the fuel.That contrasts with the boom in 2017-2018, when President Xi Jinping’s calls for blue skies sparked a race among local governments and businesses to switch millions of homes and factories from burning coal to using more of cleaner-burning gas.The demand slowdown has pushed LNG prices in Asia lower by almost 40% this year, a slump also aided by China’s rising domestic output of the fuel.China’s gas demand growth will likely slow

over the duration of the 14th Five-Year Plan from 2021 to 2025 compared with current levels, Tian Lei, an assistant professor at the National Development & Reform Commission’s Energy Research Institute, said in an interview on the sidelines of the BNEF summit.Consumption will probably be weaker at the start of the five-year period, before accelerating toward the end due to environmental pressure, he added.A sharp deceleration in China’s economic growth – with gross domestic product expanding in the third quarter at the slowest rate in decades – coupled with rising pipeline imports following the start-up of the Power of Siberia line from Russia, could cut LNG’s market share in China and lower import growth, according to Mark Lay, deputy general manager of ENN.China’s LNG imports gained 14% this year through October after rising more than 40% in each of the prior two years. Increased domestic gas production amid the nation’s eff orts to bolster energy security will also erode overseas purchases, said Daniela Li, a BloombergNEF analyst.Despite prospects of a slowdown, the current gas consumption levels still represent “extraordinary growth,” said Bernard Samuels, vice president of China gas development at Royal Dutch Shell Plc. The government’s plans for a national pipeline company could help lower prices for domestic customers and boost demand, he said.

Future of solar panel production will have two faces

BloombergBeijing

Solar customers increas-ingly want panels that cap-ture energy from both their

sunny and shady sides, as plum-meting component prices fi nally allow such products to be cost-eff ective.

Panels that are bi-facial, as the technology is known, will probably become the industry standard, according to one of the world’s biggest solar manu-facturers, LONGi Green Energy Technology Co. They already dominate in the Middle East and are making inroads in the US, Eu-rope and elsewhere, according to another top maker.

The shift is being driven by ev-er-cheaper parts, which are mak-ing the products profi table even though adding solar glass on the underside of panels boosts power output by less than 10%, accord-ing to BloombergNEF. Bi-facials will likely make up 15% of the glo-bal market next year, up from 4% this year, BloombergNEF analyst Wang Xiaoting said on Tues-day at the research fi rm’s annual summit in Shanghai.

In bi-facial panels, manufac-turers replace the opaque backing material with a transparent sub-stance that allows photovoltaic cells to capture energy from both sides. How much power they can get from the underside depends on several factors, such as how high the panel is mounted and what kind of material is below it.

The panels can boost returns by 5% to 8%, and that could grow by another 7 percentage points, said Xing Guoqiang, chief tech-nology offi cer at Canadian Solar Inc, which has tested bi-facials in projects from the Mojave Desert in California to Inner Mongo-lia, China. About 40% of solar projects in the US will use the panels next year, said Yin Rong-fang, executive vice president at Trina Solar Ltd.

Russian Energy Minister Alexander Novak arrives at the Opec headquarters in Vienna, Austria on December 5. Russia has every means to reflect the breakdown in its data and will be transparent about the oil production levels with Opec, analysts and media, Novak said.

A liquefied natural gas tanker leaves the dock after discharging at PetroChina’s receiving terminal in Dalian, Liaoning province, China (file). A sharp deceleration in China’s economic growth – with gross domestic product expanding in the third quarter at the slowest rate in decades – coupled with rising pipeline imports following the start-up of the Power of Siberia line from Russia, could cut LNG’s market share in China and lower import growth, according to Mark Lay, deputy general manager of ENN.

BUSINESS

Gulf Times Sunday, December 8, 20194

BloombergLondon

The US and China are trying to agree on the amount of American agriculture products that Beijing

is willing to purchase, said White House economic adviser Larry Kudlow, who declined to repeat President Donald Trump’s advice to farmers two months ago to buy more tractors and land.

The two sides are in “almost around-the-clock” negotiations on some of the most “delicate” matters, including a dollar amount of commodity purchas-es, he said Friday in an interview with Bloomberg Television.

“The fi nal strokes are not there, we’re coming down to short strokes,” he said. “Now, some of the most delicate mat-ters have to be adjudicated, discussed, analysed and evaluated.

And then it will be presented to Presi-dent Trump, and he’ll take a look at it.”

While negotiators are close to phase one of a broader trade deal and “progress has been made,” they haven’t yet put anything in writing and top offi -cials have no current plans to meet face to face, he said.

Trump has threatened to impose tar-iff s on Chinese imports if an accord isn’t reached by mid-month, which Kudlow said could still happen.

“There are no arbitrary deadlines on any of this,” he said. “On the other hand, December 15 is a very important date, because if the agreement isn’t complete, our current law will restore tariff s.”

Eight weeks ago, Trump announced that a phase-one agreement had been reached between Washington and Bei-jing, subject to getting it down on paper in a process that might take three to fi ve weeks.

According to Trump at the time, Chi-na agreed to $40bn to $50bn in US agri-cultural goods annually – a quantity so large, he indicated, that farmers should invest in more equipment and land.

Asked today about the president’s advice, Kudlow stopped short of re-peating it.

“I don’t want to tell the farmers what they should and should not do,” he said. “I’m not going to give them free advice on how they run their businesses.”

Stocks have zigzagged this week on confl icting signs of progress in a trade war between the world’s two largest economies that has led to the biggest volley of tariff s since the 1930s.

In recent days, American and Chi-nese negotiators have signalled that they may be drawing closer to signing phase one.

Trump diminished expectations for it to happen soon when he said earlier this week that he wouldn’t mind if it takes until after the 2020 US election to get a deal.

Meanwhile, China is in the process of waiving retaliatory tariff s on imports of US meat and soy by domestic com-panies, a procedural step that may also signal a broader trade agreement with the US is drawing closer.

Earlier on Friday, the Labour Depart-ment said payrolls jumped 266,000 in November, the most since January, after

an upwardly revised 156,000 advance the prior month.

The jobless rate dipped to 3.5%, matching the lowest since 1969.

Average hourly earnings climbed 3.1% from a year earlier, exceeding pro-jections.

“The economy is outperforming ex-pectations,” Kudlow said.

US, China discussing amount of farm purchases: Kudlow

Trumpcalls for World Bank to stop loaningto China

ReutersWashington

US President Donald Trump on Friday called for the World Bank to

stop loaning money to China, one day after the institution adopted a lending plan to Beijing over Washington’s objections. The World Bank on Thursday adopted a plan to aid China with $1bn to $1.5bn in low-interest loans an-nually through June 2025.

The plan calls for lending to “gradually decline” from the pre-vious fi ve-year average of $1.8bn.

“Why is the World Bank loan-ing money to China? Can this be possible? China has plenty of money, and if they don’t, they create it.

“World Bank lending to China has fallen sharply and will con-tinue to reduce as part of our agreement with all our share-holders including the United States,” the World Bank said in an e-mailed statement to Reuters.

“We eliminate lending as countries get richer.”

Spokespeople for the White House declined to comment on the record. The World Bank loaned China $1.3bn in the fi s-cal 2019 year, which ended on June 30, a decrease from around $2.4bn in fi scal 2017.

But the fall in the World Bank’s loans to China is not swift enough for the Trump administration, which has argued that Beijing is too wealthy for international aid.

Russia to develop stakes in Pakistan economy in big wayInternewsIslamabad

Russia has decided to develop its stakes

in Pakistan’s economy in a big way and

to this eff ect a 64-member delegation

headed by Minister for Trade and Indus-

tries for the Russian Federation Denis

V Manturov is visiting Pakistan for four

days from today to December 11 to attend

an Inter-Governmental Commission.

Russia contributed a lot towards

Pakistan’s progress as it built the Pakistan

Steel Mills, OGDCL, Guddu and Mazzafar-

garh power plants, installed a lot of hydel

turbines, and repaired the Jamshoro

power plant and more importantly it was

a Russian engineer who erected Minar-e-

Pakistan (Pakistan Tower).

Under the latest scenario, Russia has

aspired many times to help reconstruct

Pakistan Steel Mills making it economi-

cally viable and play its role in Pakistan’s

energy sector.

Russia also wants to construct the

railway track from Quetta to Taftan.

Russia will off er Sukhoi SuperJet-100

passenger planes to Pakistan for PIA, sen-

ior off icials at Economic Aff airs Division,

ministries of Industries and Production

and Commerce.

Russia and Pakistan will also figure

out the much-delayed North-South gas

pipeline. This will be the sixth meeting

between the two countries at the IGC

level on economic, trade, scientific and

technical co-operation. Federal Minister

for Economic Aff airs Hammad Azhar

will represent Pakistan during the talks

at IGC level. Both sides will find out

more avenues in co-operation on trade,

economic, scientific, and technical areas

in IGC meetings.

The off icials said that working group

of both the countries on energy will meet

on December 9 whereas working group

on trade and industries will hold talks on

December 10 and a plenary session is to

be held on December 11.

Mentioning about the Russian off er of

SSJ-100 aircraft to PIA, the off icials said

that the said planes will be available on

direct purchase and lease to purchase

options and can be positioned immedi-

ately on wet lease to meet the immediate

operational requirements of PIA.

The aircraft can be operated both on

domestic and international sectors to

Middle East, CIS, India, China, Colombo,

Bangladesh, UAE etc.

Aircraft can be supplied on both wet or

dry lease with option to purchase.

The off icial said that the route analysis

done for PIA in 2012 and more impor-

tantly Sukhoi SuperJet SSJ-100 is a pet

project of President Putin.

Coming to Pakistan Steel Mills, the

off icial said that Russia in the recent past

off ered three options saying under op-

tion-1, Russia wanted that its state-owned

companies under g-to-g arrangement

will revamp Pakistan Steel Mills and then

it will handover it to Pakistan and under

option-2, Russian state-owned companies

will under g-to-g arrangement revamp

PSM with their own management re-

quired for operation and maintenance.

And under third option, the project will

get divided in three parts for revamping

under which power plant of 156MW will

be rehabilitated separately and similarly

Coke Oven Battery Plan (COPB), Cold

Rolling Mills and Hot Strip Mills and Jetty

will be revamped separately.

However, Pakistan wants to deal with

Pakistan Steel Mills under public private

partnership (PPP) mode.

The off icial went on to say that dur-

ing the IGC meeting, there are chances

to create joint venture in Pakistan for

production and maintenance of rolling

stock of spare parts that can be used for

running the Pakistan Steel Mills.

During the 4 days visit, both the

countries would also explore avenues for

increasing the bilateral trade which cur-

rently stands at about $400mn.

Pakistan’ exports stand at $150mn

while import from Russia $250mn.

Last year the bilateral trade surged

by up to $700mn as Pakistan purchased

MI-35 helicopters from Russia.

Talking about much-delayed North-

South pipeline, the off icial said that Rus-

sia has so far failed to provide sanctions-

free structure to Pakistan for initiating

$2.1bn pipeline.

Pakistan is very sensitive about

involvement of any Russian company

that is facing sanctions or on Watch List,

as Pakistan cannot aff ord any Russian

company to be involved in laying down

N-S pipeline as it is under scanner of FATF

and is still in the grey list. During the visit

this project would also be figured out

and progress will only be made once the

Russian side provides the sanctions-free

structure up to the satisfaction of Paki-

stan,’ the off icial concluded.

Kudlow: The US economy is outperforming expectations.

Troubled Hong Kong Airlines allowed to keep operatingAFPHong Kong

Low-cost carrier Hong Kong Airlines was allowed to continue flying after the city’s authorities decided yesterday not to punish it for delaying salary payments and ongoing financial problems.The international finance hub has seen six months of protests which has dealt a massive blow to the tourism sector and airline operators.“The Civil Aviation Department has been satisfied that Hong Kong Airlines is able to continue to operate properly and safely,” a spokesman from the Hong Kong Civil Aviation Department said yesterday.The city’s Air Transport Licensing Authority (ATLA) said on the same day that the airline has met the conditions for raising and maintaining its cash level.The authority added that it will continue to monitor the carrier’s operation closely.In late November, the carrier said its business was “severely affected” by the social unrest in the city and a sustained weak travel demand, which also impacted its payroll.The licensing authority later required the

airline to raise a significant amount of funds with a deadline in order to prevent its financial situation from deteriorating and to protect public interests.Hong Kong Airlines is owned by struggling Chinese conglomerate HNA Group, which has been looking to lower its debt burden.Earlier this year, it unloaded another budget carrier – HK Express – to rival Cathay Pacific and it also cut some operations.On Wednesday, in a letter to staff and colleagues, the carrier’s chairman Hou Wei said “an initial cash injection plan has been drawn up.” Although the amount of cash was not disclosed, the chairman said the company would pay outstanding salaries to staff on Thursday and the airline’s services will gradually return to normal as soon as the funds arrive.The tourism industry in Hong Kong has been battered by nearly six months of pro-democracy protests that have become increasingly violent, with visitor arrivals falling by half.The crisis comes as the economy was already feeling pressure from the China-US trade war.

Denis Manturov, Minister for Trade and Industries for the Russian Federation, reacts during a panel session at the Gaidar Forum at the Academy of National Economy and Public Administration in Moscow. Manturov is visiting Pakistan for four days from today to December 11 to attend an Inter-Governmental Commission.

The World Bank loaned China $1.3bn in the fi scal 2019 year, which ended on June 30, a decrease from around $2.4bn in fi scal 2017

An Airbus A320 aircraft operated by Hong Kong Airlines flies over the Hong Kong International Airport. The low-cost carrier was allowed to continue flying after the city’s authorities decided yesterday not to punish it for delaying salary payments and ongoing financial problems.

BUSINESS5Gulf Times

Sunday, December 8, 2019

BloombergJakarta

Indonesia’s central bank has sound-ed a more cautious tone on interest rates, signalling that the 175 basis

points of tightening seen last year may not be fully unwound in the current easing cycle.

Further cutting the benchmark inter-est rate “is not the only weapon” Bank Indonesia can employ, senior deputy governor Destry Damayanti said in an interview yesterday.

Policymakers also must ensure that Indonesian assets remain attractive to investors, she said, a potential reason not to lower the benchmark rate too far.

Indonesian officials have become

increasingly worried about the state of Southeast Asia’s largest economy amid a global slowdown and the US-China trade war.

The government has revised down this year’s growth projection several times, with the economy on course for its slowest expansion since 2017.

The bank now wants to gauge the im-pact of an aggressive stretch of rate cuts since July – 100 basis points in all.

While easing remains on the table, it’s not a given that the depth of rate cuts will match the extent of last year’s tightening, Damayanti said.

“We cannot say that. It really de-pends on the situation, global and also domestic,” she said. “We still have to maintain the attractiveness” of Indo-nesian assets, she added, pointing to

the spread between local and US rates.Indonesia’s economy has lost mo-

mentum in every quarter this year.Gross domestic product is forecast to

expand about 5.1% this year, down from an initial projection of 5.3%.

“Is it enough if Indonesia only grows at 5%? Of course not,” Damayanti said. “We need more acceleration in growth.”

The impact of this year’s rate cuts will start to be felt in the first quarter of 2020, she said.

Damayanti said the central bank is confident the economy will pick up in 2020, with growth expected closer to the midpoint of a 5.1%-5.5% range and private consumption seen growing about 5%. Inflation for all of 2019 is ex-pected to come in at 3.1% after the con-sumer price index hit a seven-month

low of 3% in November. The central bank is set to cut its inflation target band to 2%-4% in 2020, from 2.5%-4.5% this year.

Bank Indonesia will keep policy ac-commodative to support growth, but may use other tools beside rate cuts, Damayanti said.

Last month the central bank held its benchmark rate steady but lowered the proportion of funds banks must keep in reserve, a step to pump cash into the economy.

Damayanti said the bank might opt for further adjustments to reserve ra-tio levels and other macroprudential levers.

“We’re using a mixed policy,” she said. “The interest rate is not the only weapon we have.”

Bank Indonesia sounds more cautious tone on further interest rate cut

Damayanti: Bank Indonesia will keep policy accommodative to support growth, but may use other tools beside rate cuts.

Tencent-backed iDreamSky in talks to buy gaming firm LeyouBloombergHong Kong

iDreamSky Technology Holdings Ltd is in exclusive talks to buy rival gaming firm Leyou Technologies Holdings Ltd for about $1.4bn, according to people familiar with the matter.iDreamSky, which counts Tencent Holdings Ltd among its shareholders, is seeking co-investors to help finance the transaction, the people said, asking not to be identified because

the deliberations are private. Potential partners could include private equity firms as well as other gaming companies, the people said. The Shenzhen-based firm is working with Credit Suisse Group AG on the deal, they said.Leyou has risen about 16% this year, giving it a valuation of around HK$7.8bn ($996mn). Shares of iDreamSky have plunged more than 30% since its debut last year, valuing the company at about HK$5.8bn.There hasn’t been any final decisions as

talks are ongoing and the companies could still decide against a transaction, the people said. Representatives for iDreamSky and Credit Suisse declined to comment, while a representative for Leyou didn’t immediately respond to requests for comment.Leyou, listed in Hong Kong in 2011, has developed the free shooting games Warframe and Dirty Bomb. It’s also working with Amazon.com Inc to co-produce a video game based on the popular fantasy series “The Lord of the Rings.” Other upcoming games are

Civilisation Online and Transformers.In September, Leyou said that it was holding preliminary talks with potential investors on possible transactions, which may lead to a public takeover. Bain Capital, CVC Capital Partners and KKR & Co as well as other gaming companies were among bidders for Leyou, Bloomberg News reported last month.Last week, Leyou updated the progress in a filing that its controlling shareholder Charles Yuk had entered into a memorandum of understanding

to sell about 69.2% stake to an unidentified potential buyer. The company granted a 21-day exclusivity period to the potential purchaser to conduct due diligence and try to reach a formal agreement.As part of any potential deal, Yuk would acquire the company’s interests in certain off ices in the iconic Lippo Centre in Hong Kong and enter into an agreement to provide financing to help develop certain games, according to the filing.iDreamSky, listed in Hong Kong about

a year ago, had 57 games including 16 role-playing games on its platform as of June 30, according to its interim report. It has exclusive publishing rights in China for popular titles including Subway Surfers and Temple Run.Michael Chen, its co-founder and chief executive off icer, is iDreamSky’s largest shareholder with a 25.92% stake, according to data compiled by Bloomberg. Tencent Mobility, a unit of the Chinese technology giant Tencent, owns about 18.6% as the second-largest holder.

Solar power project for auction inSouth PakistanInternewsKarachi

Pakistan is entering into a new era of attracting power projects through

competitive bidding to provide cheaper electricity to end-con-sumers, as Sindh government is all set to auction the fi rst-ever project through the bidding process by March 2020.

To date, the country has at-tracted power projects by off er-ing incentives to investors un-der the cost-plus tariff formula, which ensured a fi xed internal rate of return (IRR) to investors.

The achievement of sur-plus installed capacity of power production in recent times al-lowed authorities to make a shift towards new power projects through the tariff -based com-petitive bidding.

“We are set to auction the fi rst 50-megawatt (MW) solar power project at Manjhand (district Jamshoro) through competitive bidding by February-March,” Sindh Solar Energy Project (SSEP) Project Director Mehfooz A Qazi said.

The 50MW project is part of the planned 400MW solar pow-er park in Sindh that is estimated to attract new investment of around $250mn.

“We aim to auction all the potential 400MW solar power projects by 2021 and start sup-plying electricity to the national power grid within the next fi ve years (2023-24),” he said.

The World Bank is providing fi nancial and technical support for establishing the solar park. “Word Bank has provided an as-sistance of $100mn for four dif-ferent solar power projects, in-cluding $30mn for establishing the 400MW solar park,” he said.

In this backdrop, the energy department of the government of Sindh appointed a consorti-um of foreign and local advisers to auction the 400MW power projects.

The consortium comprises Bridge Factor (Pakistan) and Tractebel Engie (Germany) in association with Renewable Resources Limited (Pakistan), Ashurst Law (Singapore) and Axis Law (Pakistan).

On behalf of the government of Sindh, Qasim inked the con-tract with the consortium to

hire its services in the presence of Provincial Energy Minister Imtiaz Ahmed Shaikh at Energy Department.

The project director hoped the solar projects would attract an investment of around $250mn, considering the country has re-cently attracted $38mn invest-ment for a 50MW solar project under the old formula of cost-plus tariff .

“We are highly hopeful the projects will provide cheaper and clean energy in the country,” he said.

Earlier, the National Electric Power Regulatory Authority (Ne-pra) had announced an upfront tariff of 5.23 cents per unit (Kilo-watt per hour) to attract solar projects under the old formula of cost-plus tariff . “The competi-tive bidding will surely attain a comparatively cheaper tariff than the upfront tariff ,” he said.

The competitive bidding process allows the Sindh gov-ernment to accept the lowest tariff -bid from new potential investors.

Later-on, it may ask other in-vestors to match the lowest bid to become part of the 400MW solar park.

He said the investors would off er the much cheaper tariff than the upfront one, as cost of solar power projects has mas-sively gone down over a period of time.

“The government awarded a (high) tariff of 15-16 cents per unit for the fi rst solar park (Quaid-e-Azam Solar Park of 100MW set up in Bahawalpur, Punjab) years back.

The cost of solar power projects has further cut down since Nepra approved the up-front tariff of 5.23 cents per unit for solar power,” he said.

Solar remains one of the low-cost sources of electricity gen-eration in the energy mix in the country.

More importantly, the federal government has planned to in-crease the share of solar power to around 25% by 2025 compared to around 4-5% at present.

Qazi said the demand for elec-tricity has been increasing by 5-7% per year. “The surge in de-mand may come comparatively higher and quicker considering the country is set to see acceler-ation in economic growth going forward.”

Toyota’s biggest problem is keeping hybrid car models in stockBloombergDetroit

Toyota Motor Corp has a problem with selling its hybrids – it can’t get enough of them.“The only thing holding us back on hybrids is capacity,” Bob Carter, Toyota’s North American executive vice president for sales, told reporters on Thursday at an event in Detroit. “We can’t make enough Corolla and RAV4 hybrids.”While many of its competitors are walking away from hybrids and ploughing billions into battery-powered cars, the Japanese automaker has seen demand surge for its 14 gasoline-electric models. Toyota’s hybrids accounted for 13% of total Toyota and Lexus brand sales in the US last month and made up nearly a quarter of the volume for its top seller, the RAV4 compact SUV.Toyota could easily sell twice the number of hybrid RAV4 models, but can’t source enough electric batteries for the popular vehicle, Carter said. It currently has an 11-day supply of them in stock, compared to more than 20 days’ supply of gasoline-powered versions, he said.Carter said the RAV4 hybrid’s appeal has as much to do with features like sporty styling, extra torque and all-wheel drive as it does with its combined 40 miles per gallon fuel economy - 10 mpg above the gas-only model.Toyota plans to shift production of the RAV4 hybrid from Canada to a plant in Kentucky early next year, and also add a plug-in hybrid option from next summer to be imported from Japan. But that growing demand for hybrid versions of the RAV4, Corolla and other Toyota vehicles has come at the expense of its most famous hybrid, the Prius, sales of which are down 21% so far this year.

Jack Hollis, group vice president and general manager of Toyota Motor Sales USA Inc, speaks while standing next to the RAV4 XSE hybrid (left) during the 2018 New York International Auto Show. Toyota plans to shift production of the RAV4 hybrid from Canada to a plant in Kentucky early next year, and also add a plug-in hybrid option from next summer to be imported from Japan.

Filthy air pushes S Korean industry to sell green bonds

BloombergSeoul

South Korea, the country with the

most polluted air among Organi-

sation for Economic Co-operation

and Development members, is

joining a global boom in green

finance.

As dirty air stings eyes and

throats, pressure is mounting on

some of the most heavily pollut-

ing industries to find money for

cleaner technologies.

Energy, power and other bor-

rowers have more than doubled

issuance of so-called environ-

mental, social and green bonds

to 12.9tn won ($10.8bn) this year

from all of 2018.

Oil refiner GS Caltex Corp sold

130bn won of green bonds in

October to fund equipment to

reduce pollution, especially fine

dust.

SK Energy Co sold 500bn won

of bonds in September to fund

production of low-sulphur fuel

for ships.

Korea South-East Power Co is

planning a possible sale of green

bonds in dollars early next year.

Korea is joining in the global

trend of selling sustainable debt

as regulators and investors

increasingly push companies

toward more environmentally

friendly business.

Policymakers in the north-east

Asian nation are also looking for

ways to help smaller firms in a

sluggish economy.

As there’s a growing interest in

sustainable investing, borrowers

could lower their overseas fund-

ing costs when they sell ESG debt,

said June Won, managing director

of capital markets origination at

Citigroup Global Markets Korea

Securities Ltd, the top arranger of

Korean off shore bonds.

Such sales will continue to

increase next year, he said.

Korea’s particulate pollution

is twice the average for OECD

member countries, and the aver-

age South Korean can expect to

lose 1.4 years of life expectancy

because of the air quality, accord-

ing to the Air Quality Life Index’s

recent analysis.

Weekly Market Report

The Qatar Stock Exchange (QSE) index increased by 210.47 points, or 2.07%, during the week, to

close at 10,358.35. Market capitali-sation increased by 2.0% to reach QR573.3bn as compared to QR562.2bn at the end of the previous week. Of the 46 listed companies, 26 companies ended the week higher, while 16 fell and four remained unchanged. Qatar Oman Investment Company (QOIS) was the best performing stock for the week, with a gain of 9.3% on 22.8mn shares traded. On the other hand, Is-lamic Holding Group (IHGS) was the worst performing stock with a decline of 8.8% on 7.3mn shares traded.

Industries Qatar (IQCD), QNB Group (QNBK) and Qatar Islamic Bank (QIBK) were the primary contributors to the weekly index gain. IQCD was the biggest contributor to the index’s weekly in-crease, adding 46.6 points to the index. QNBK was the second biggest contribu-tor to the mentioned gain, tacking on 40.7 points to the index. Moreover, QIBK contributed 31.8 points to the index.

Trading value during the week de-creased by 51.0% to reach QR1,110.9mn versus QR2,266.8mn in the prior week. The banks and financial services sec-tor led the trading value during the week, accounting for 55.5% of the total trading value. The industrials sector was the second biggest contributor

to the overall trading value, account-ing for 16.3% of the total trading value. QNBK was the top value traded stock during the week with total traded val-ue of QR317.0mn.

Trading volume decreased by 4.5% to reach 361.4mn shares versus 378.6mn shares in the prior week. The number of transactions decreased by 20.5% to reach 31,235 transactions versus 39,298 transactions in the prior week. The banks and financial serv-ices sector led the trading volume, ac-counting for 33.4%, followed by the in-dustrials sector, which accounted for 29.2% of the overall trading volume. Aamal (AHCS) was the top volume traded stock during the week with to-tal traded volume of 61.3mn shares.

Foreign institutions ended the week with net buying of QR73.6mn versus net selling of QR44.5mn in the prior week. Qatari institutions remained bullish with net buying of QR110.6mn versus net buying of QR35.6mn in the week before. Foreign retail inves-tors turned negative with net selling of QR10.4mn versus net buying of QR13.1mn in the prior week. Qatari re-tail investors remained bearish with net selling of QR173.8mn versus net selling of QR4.2mn the week before.

Foreign institutions have bought (net basis) $1.4bn worth of Qatari equi-ties in 2019.

This report expresses the views and opinions of QNB Financial Services Co WLL One Person Company (“QNBFS”) at a given time only. It is not an off er, promotion or recommendation to buy or sell securities or other investments, nor is it intended to constitute legal, tax, accounting, or financial advice. We therefore strongly advise potential investors to seek independent professional advice before making any investment decision. Although the information in this report has been obtained from sources that QNBFS believes to be reliable, we have not independently verified such information and it may not be accurate or complete. Gulf Times and QNBFS hereby disclaim any responsibility or any direct or indirect claim resulting from using this report.

DISCLAIMER

The QSE Index closed up by 2.07% from the week before, and closed at the 10,358.35 level. Our thesis has

not changed over the past few weeks, as the index kept moving inside the correc-

tive channel and bounced below the strong resistance (around the 10,600 level). We keep our expected weekly-resistance level at 10,800 points and the 9,700 level as our weekly support.

Technical analysis of the QSE index

Definitions of key terms used in technical analysis

Candlestick chart – A candlestick chart is a price chart that displays the high, low, open, and close for a security. The ‘body’ of the chart is portion between the open and close price, while the high and low intraday movements form the ‘shadow’.

The candlestick may represent any time frame. We use a one-day candlestick chart (every candlestick represents one trading day) in our analysis.

Doji candlestick pattern – A Doji candlestick is formed when a security’s open and close are practically equal. The pattern indicates indecisiveness, and based on pre-ceding price actions and future confirmation, may indicate a bullish or bearish trend reversal.

Source: Qatar Exchange (QE)

Source: Bloomberg

Source: Qatar Exchange (QE)

Source: Qatar Exchange (QE)

QSE Index and Volume

Weekly Index Performance

Qatar Stock Exchange

Top Five Gainers

Most Active Shares by Value (QR Million)

Investor Trading Percentage to Total Value Traded

Top Five Decliners

Most Active Shares by Volume (Million)

Net Traded Value by Nationality (QR Million)

BUSINESS13Gulf Times

Sunday, December 8, 2019

BUSINESS

Gulf Times Sunday, December 8, 201914

US business plagued by trade confusion as new tariff s loomBloombergNew York

As US-China trade talks undergo more advances and setbacks than a ping-pong match, South

Carolina businessman John Ling is in-creasingly pessimistic that any mean-ingful trade deal will be reached under President Donald Trump.

“I’m becoming very doubtful there will be any deal that would solve the current problem,” said Ling, a consult-ant for Chinese companies doing busi-ness in the US.

The past week has cast the outlook for a trade deal between the US and China into deeper confusion. Trump rattled markets on Tuesday by sug-gesting a phase-one trade deal may have to wait until after the 2020 elec-tions. Then, two days later, the presi-

dent said the talks are “moving right along” and people familiar with the negotiations told Bloomberg News the sides are close to agreeing on a pact.

On Friday, White House economic adviser Larry Kudlow said a deal is coming down to the fi nal stages but he acknowledged “delicate” propos-als like Chinese farm purchases are still being discussed. Meanwhile, the Trump administration is leaving open the prospect of slapping tariff s on an-other $160bn of Chinese goods in just over a week on Dec 15 if nothing chang-es.

Trump has a history of indulging in brinkmanship to dial up the pressure in trade negotiations, especially as dead-lines approach.

In September, Trump said he wouldn’t be satisfi ed by a partial deal with China - only weeks before he and President Xi Jinping announced the

outlines of the stage-one trade deal.Even if that’s his strategy to win

concessions, it’s doing little to help companies that import from China who say they can’t plan for next year when they don’t know what’s coming next week or month.

Importers in the US pay the duties when the products enter the country - often passing the cost onto consumers - even though Trump insists the tariff s are paid by China.

“I’m very frustrated, absolutely,” Curt Christian, a Nashville, Tennes-see-based furniture importer, said on Thursday after days of back-and-forth headlines and seesawing markets. “I don’t know how to plan.

That’s the issue.” Christian already lost a furniture business in the early 2000s, when a wave of cheap Chinese imports decimated much of the US wood furniture industry. He eventually

picked himself up and created a new company, Function First Furniture, that supplies furniture to university dormitories and student housing de-velopers. His revenue is in the tens of millions of dollars.

What burns him is that he supports the Trump administration’s intentions to level the playing fi eld with China, Christian said.

However, he needs more time to cope with the fallout from tariff s. While he imports some furniture from Vietnam and Malaysia, 70% still comes from China. “Give me time to move, because I can’t just take $35mn worth of prod-uct and move it overnight,” he said. “You can’t just turn a battleship.”

Other companies give similar tes-timonies of being unable to shift in-vestment plans or factories when they don’t know how long the trade war will last. New York-based Delta Children’s

Products imports cribs from China and elsewhere in Asia and has seen those sales fall since the tariff s took eff ect, said President Joe Shamie. But so too have sales of its US-made mattresses, he said.

He would consider moving more production out of China if he knew what to expect. Instead, he’s afraid to act because a deal to slash tariff s could come at any time.

“Imagine you’re about to buy a house, and there’s a rumour the house might be half-price tomorrow. How do you know what to do?”

Jay Foreman, who heads a Boca Ra-ton, Florida-based toy company, likes to joke that he’s about 25 miles from Trump’s Mar-a-Lago resort and he’d love to discuss trade with the president over lunch.

For now, he’s watching the news about the trade war, including Trump’s

tweets, “like it’s my blood pressure and my cholesterol.”

Foreman’s company, Basic Fun!, makes some of America’s most iconic toys under licence, including Lincoln Logs and Tonka trucks, and relies on China for 90% of its production.

For now, all of his Christmas season merchandise is already in the US tariff , but he’s fretting over the 15% tariff s that may go into eff ect this month for merchandise crossing the ocean.

He expects to have to eventually bump up the price of all his products at least 15%, if not more.

“Imagine you have 180 employees and 100 containers that are due to ar-rive any day for the next three weeks, and dozens and dozens the rest of the year - and we don’t know if it’s going to cost us 15%, 20%, 25%, because this administration is so unpredictable,” Foreman said on Friday.

Year set for highest share of daily stock gains since 1995BloombergNew York

Between Donald Trump’s trade tweeting, an about-face at the Fed, the buckling and unbuck-

ling of the yield curve, trading stocks in 2019 seemed like a never-ending ordeal of volatility and confusion. Op-erative word being “seemed.”

In fact, going by one measure, the frequency of up days, you have to go back a quarter century to fi nd a market in which it was easier to sit quietly and hold equities than this one. While it has felt like a bumpy ride, the S&P 500 has climbed on 58.9% of days this year, an almost unheard of proportion.

Two stretches explain the data. First was January and February, when - af-ter nearly dying at Christmas - the bull market roared back via the biggest quarterly rally in a decade. The second is now, a period of sustained strength that beats any in two years and has some pundits worried everything is overheating.

“It’s just a slow and steady climb,” said Christopher Ailman, chief invest-ment offi cer at the California State Teachers’ Retirement System. “That’s actually good, that’s exactly what we want.”

Not that investors have behaved that way. Money has rushed out of equities and into bonds all year long as reces-sion fears rang and tariff s lashed mar-kets. All good things must come to an end, so the saying goes, and scars from the fi nancial crisis are still evident over a decade later. Why celebrate, when you can worry about how good it’s been? Before this week, the S&P 500 had gone 37 straight days without an intraday decline of 1%, the longest streak since January 2018.

Inside of three months, the bench-mark has jumped 9%, gaining in eight of the last nine weeks. With 139 days coloured green, the frequency of gains is 5 percentage points higher than the average over the last 25 years.

An environment of bliss, it would seem. And yet sceptic minds wonder if it’s too much - a last-gasp before the

wind is sucked out. Gains have been too uniform, too robotic.

There was a moment in late Novem-ber when the S&P 500 had been up over the previous one, two, four, eight, 12, 26, 39, and 52 weeks. According to Sundial Research’s Jason Goepfert, that might seem like “blow-off top

conditions,” but in data going back to 1928, out of 21 similarly steep ascents only three gave way to a 10% correc-tion at any point in the year that fol-lowed.

Ned Davis, of the namesake research fi rm, compared the most recent run to so-called blow-off s of bull markets

past and found that the pace of gains since mid-August rings of a “potential warning.” But in a research note this week he acknowledged, “what looks like a ‘blow-off ’ at the time, may later turn out to be just another leg of a bull market.”

In a way, all the worry is why strat-egists across Wall Street are confi -dent there’s more to come. While Jeff Mills, the chief investment offi cer at Bryn Mawr Trust, wouldn’t be sur-prised to see a 5% pullback, he doesn’t sense an end any time soon. The latest run strikes Michael Antonelli, mar-ket strategist at Robert W Baird & Co, more as a break-out from a period of consolidation.

Tracie McMillion, the head of global asset allocation strategy at Wells Fargo Investment Institute, has a similar view. Roughly 600 investors attended her fi rm’s Global Investment Sympo-sium at the Plaza Hotel in New York City this week, and prudence was a common topic.

“It’s that thread of caution through all of the speakers that we’re hearing

from that tells us that we’re probably not at the top,” she said in an interview at Bloomberg’s New York headquar-ters. “You don’t typically see that at a blow-off top. You typically see every-one wanting to move into the markets. They’re not asking the question about, ‘Is it too late?’ They’re saying, ‘How much more can I put in’?”

The S&P 500 gained 0.2% last week, after the benchmark surged 1% on Fri-day on the back of a better-than-ex-pected jobs report. With the S&P 500 up 26% this year, the second best gain this decade, investors now turn to a Federal Reserve meeting next week and the looming December 15 US-China tariff deadline.

“What the markets are priced for is the continuation of middling eco-nomic data, well contained infl ation and a Federal Reserve that at least for the meantime sits on the sidelines,” said David Donabedian, chief invest-ment offi cer of CIBC Private Wealth Management, which oversees roughly $60bn. “We still view this as an un-loved bull market.”

Phoenix to buy ReAssure from Swiss Re in $4.3bn dealBloombergLondon

Phoenix Group Holdings Plc

agreed to buy Swiss Re AG’s

UK unit ReAssure Group Plc,

extending an acquisition streak

with the biggest deal in the

European insurance industry

this year.

The transaction values

ReAssure at £3.25bn ($4.3bn)

and will see Zurich-based Swiss

Re receive £1.2bn in cash and

shares in Phoenix, accord-

ing to a statement on Friday.

Bloomberg News had reported

Thursday that the two firms

were in talks.

Shares of Swiss Re climbed

as much as 3% in Friday’s trad-

ing and were up 2.6% in Zurich.

Phoenix was down 2.3% in

London, after initially rising as

much as 2.7%.

Phoenix, with a market value

of £5.3bn, has been buying up

portfolios from legacy insurers

under pressure from rising

costs.

The acquisition marks

a turnaround in Swiss Re’s

fortunes after it called off a

London initial public off ering

of ReAssure in July because of

weak demand from institutional

investors. Friday’s deal values

the business at the top of the

range Swiss Re had sought in

the failed listing.

“This is exactly the kind of

deal that Phoenix has been

looking for,” Paul De’Ath, an

analyst at Shore Capital, wrote

in a note to clients. “This ce-

ments Phoenix as the leading

life consolidator in Europe and

paves the way for further deals.”

Swiss Re will get Phoenix

shares equal to a 13% to 17%

stake in the company and

will be entitled to a seat on its

board, according to Friday’s

statement.

ReAssure has been buying

closed life insurance business-

es, which aren’t taking on new

customers and instead manage

existing policies until they

mature. Such firms benefit from

greater scale, which enables

them to lower costs.

The ReAssure deal is Phoe-

nix’s biggest-ever acquisition,

surpassing its £3bn purchase

of Standard Life Aberdeen Plc’s

insurance unit last year, data

compiled by Bloomberg show.

Phoenix is strengthening its

position as the biggest life insur-

ance and pensions consolidator

in Europe.

The company will have

£329bn of assets under admin-

istration and more than 14mn

policies after the ReAssure

purchase is completed. The deal

will generate £800mn of cost

and capital savings and support

Phoenix’s plans to increase its

3% dividend.

Consolidators have benefited

as the insurance industry shifts

away from capital-intensive

legacy products, shunning for

example policies with guaran-

teed returns that are risky for

the insurers.

Companies like Phoenix buy

these old insurance portfolios,

bring down costs and some-

times change the investment

strategy. Phoenix also manages

corporate pension assets and

writes new policies.

Bank of America Corp was

lead financial adviser to Phoe-

nix. The company was also ad-

vised by Citigroup Inc and HSBC

Holdings Plc. Swiss Re worked

with Morgan Stanley and Fen-

church Advisory Partners.

Swiss Re chief financial

off icer John Dacey said in July

after pulling the IPO that there

was “no pressing need” to di-

vest the shares at a price which

didn’t reflect its full value.

While the sale will result in a

pretax charge of about $300mn

to be booked in the fourth

quarter, he said in a Bloomberg

TV interview on Friday that the

board will discuss the possible

impact on dividends and share

buybacks early next year.

The firm had planned to use

proceeds from the IPO to help

fund share repurchases.

Tariff deadline keeps focus on Wall St trade as 2019 draws to closeReutersNew York

The stock market looks set to end 2019 the way it began the year — highly sensitive to headlines from

President Donald Trump’s global trade war.

Stocks pulled back from record highs to start December, undermined by com-ments from Trump and others in his ad-ministration suggesting any deal to re-solve the trade dispute between the United States and China would not come soon.

But the market rebounded at the end of the week on Friday’s strong US jobs and a change in tone from Trump.

Wall Street could see more volatil-ity ahead of December 15, when the next tranche of US tariff s on Chinese imports is set to take eff ect.

At the start of the week, investors said equity prices were factoring in that those tariff s would be delayed if not cancelled as Beijing and Washington work on a “phase one” trade deal. But subsequent tough talk from Trump offi cials has shaken those expectations somewhat.

“Until we get some fi nality on this, the day-to-day is going to move on headlines that suggest progress or lack thereof,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.

While the dispute between the world’s two largest economies commands the spotlight, other trade issues also have drawn investor attention.

They include a recent delay in ratifi ca-tion of the North American Trade pact, potential US tariff s on imported autos and Trump’s issuing surprise levies on steel imports from Brazil and Argentina.

Optimism over a US-China truce has helped push the major Wall Street in-dexes to all-times highs recently, with the benchmark S&P 500 logging a gain of more than 20% so far in 2019.

But as the latest swings show, lack of a resolution to a trade dispute that has lasted nearly two years continues to weigh on the market. “The problem is the uncer-

tainty that the trade war process has on business decisions,” said Art Hogan, chief market strategist at National Securities in New York. “Without some sort of short-term truce, company spending gets frozen and that’s where it aff ects the economy and the market.”

The tariff s on $156bn in Chinese im-ports that could take eff ect December 15 are largely on consumer goods, including cellphones, laptop and desktop comput-ers, toys and clothing.

UBS economists estimate those tariff s would drag on US gross domestic product by either 0.1% or 0.2% in each of the four quarters next year.

UBS projects overall GDP growth to average 1.1% in 2020, with tariff s gener-ally weighing heavily in the fi rst half of the year. Aside from the fallout from the tar-

iff s themselves, “the next read from them going into eff ect is that trade discussions are not going well,” said Walter Todd, chief investment offi cer with Greenwood Capital in South Carolina.

Political tensions over US support for protesters in Hong Kong and over Bei-jing’s treatment of its Uighur Muslim mi-nority have also raised concerns about the prospects for an initial trade deal.

“Without a phase one plan on getting something signed early in the new year, I think the market is susceptible for a pull-back,” said Robert Pavlik, chief invest-ment strategist at SlateStone Wealth LLC.

The focus will remain on trade into next week, even as the Federal Reserve holds its last meeting of 2019, with the US cen-tral bank expected to keep interest rates steady after three cuts earlier in the year.

“The Fed chairman pretty much out-lined that the bar is very high to raise rates,” SunTrust’s Lerner said.

However, he added, if some of the tar-iff s result in a sharp slowdown, “the Fed would have to act eventually” by cutting rates.

Investors will also be looking for signs of strength in the holiday shopping sea-son, given that consumer spending is seen as a key pillar holding up overall economic growth.

There is a strong incentive to push off the tariffs “as long as people are at the negotiating table,” said Carol Schleif, deputy chief investment officer at Ab-bot Downing in Minneapolis. “Presi-dent Trump definitely doesn’t want a downbeat consumer going into the election cycle,” she said.

Traders work on the floor of the New York Stock Exchange (file). Wall Street could see more volatility ahead of December 15, when the next tranche of US tariff s on Chinese imports is set to take eff ect.

BUSINESS15Gulf Times

Sunday, December 8, 2019

Deutsche Bank’s bonuses and the key questionsfacing CEO Sewing

BloombergNew York

As Deutsche Bank AG nears its

end-of-year decision on bonuses,

one question looms large for chief

executive off icer Christian Sewing:

How much can he aff ord to pay

to keep top investment bankers?

Sewing may use performance-

based pay to induce top rainmak-

ers to stay as he seeks to defend

businesses such as deal-making

and stock and bond issuance after

big cutbacks elsewhere.

But his pledge to reduce costs

by $6.4bn as part of his sweeping

revamp limits how much he can

shell out.

His challenge – retaining key

employees at a diff icult time while

not antagonizing shareholders

– mirrors the predicament of his

predecessor John Cryan two years

ago, when top investment bankers

were clamouring for higher bo-

nuses after deep cuts in the prior

year had led to defections. Cryan

relented, a decision that contrib-

uted to a loss at the bank. He was

ousted a few months later.

Deutsche Bank decides on bo-

nuses in December and January,

and pays them out in March.

Here are the key questions Sew-

ing has to weigh over the coming

weeks:

How can Deutsche Bank balance departures with hires?

More than a dozen high-profile

executives from the investment

banking units that Sewing wants

to keep have joined rivals since

May, when the CEO dropped the

first big hint that he was going to

take an ax to the business. Many

top performers are only staying

because compensation is still

comparatively good, even though

morale has slumped after years

of piecemeal cuts to the business,

according to people familiar with

the matter.

The bank points to new hires

and says that attrition in the

investment bank is actually down

compared with the prior two

years.

It has hired almost 30 manag-

ing directors and directors in cor-

porate finance since the beginning

of the year, investment bank head

Mark Fedorcik said by phone.

“We pay for performance and our

clients and team understand and

appreciate our strategy and areas

of strength,” he said.

How much money canSewing spend?

Deutsche Bank spent €1.9bn

($2.1bn) last year on bonuses. The

bank has said the size of the pool

this year will reflect the shrinking

workforce, which is down 5% so

far, and the fact that it has shut-

tered equities trading. European

investment bankers more gener-

ally are facing smaller bonuses

this year.

The CEO maintains that the

bank still has the means to com-

pensate top talent even as it under-

takes one of the most radical re-

structurings in its history. “We will

compensate our people according

to their operating performance,”

he said in July after announcing

18,000 job cuts and a retreat from

equities trading. The bank will pay

“in a competitive way.”

What businesses will Sewing focus on?

Fedorcik said his corporate

finance unit seeks to grow advi-

sory and debt origination and he

pointed to several recent hires

including Paolo Cicchinewhile

promising more next year. He’s

also vowed to keep a sizeable

equity capital markets business

despite shuttering equities trad-

ing. However, that unit – along

with M&A advisory – has been

particularly hard hit by departures

since May.

As for securities trading, equi-

ties is essentially gone but the

bank wants to remain strong in

fixed-income trading, a business

overseen by Ram Nayak. The

lender has highlighted credit and

foreign exchange and the unit has

recently added a few people.

How has the investment bank performed?

While the CEO has vowed to

at least stabilise the investment

bank, revenue was down 11% in

the first nine months of the year

and pretax profit plummeted

47%. The units where most of the

departed executives used to work

are no exceptions. Income from

helping companies raise money

through share sales is down 40%

over the period. The business of

advising companies on deals did

better, rising 3%.

The malaise is being reflected

in a comparison with peers.

Deutsche Bank slipped to 15th

rank in advising on mergers and

acquisitions this year, from 11th in

2018 and eighth the year before,

according to data compiled by

Bloomberg. It has fallen to 12th

place in global equity off erings,

from eighth.

“When I look at our revenues

and where we’re heading from a

2019 perspective, I’m very confi-

dent versus where we were in ’18,”

said Fedorcik.

What other options does Sewing have?

The bank in the past increased

the spread between bonus pay-

ments for top performers and the

rest as a way to save money while

making sure the most important

people stay.

To replace expensive execu-

tives who leave, Deutsche Bank

brought in more junior hires.

There’s also an internal debate

about how many departures can

be filled through reassigning

bankers from other parts of the

business, the people familiar said,

asking not to be identified discuss-

ing internal deliberations.

Steel rules for cars stall advance of revised Nafta accordBloombergWashington

The rules governing the use of steel and aluminium in cars have emerged as the latest obstacle to completing a revised Nafta deal between the US, Mexico and Canada in time for congressional approval by year end.The three nations are discussing the fine print of the agreement that requires 70% of steel and aluminium in vehicles to come from the continent in order to receive duty-free treatment, according to half a dozen people familiar with the talks, who asked not to be named because they’re private. Mexico and the US administration are seeking to agree on changes to the text as early as Friday before presenting a proposal to House Democrats.Last week the US put on the table a demand to count only steel and aluminium slab towards the 70% threshold that originate in North America, the people said. That would complicate qualification for cars produced in Mexico, whose slabs often originate in Brazil, Japan and Germany. The proposal was floated as a demand from the United Steelworkers union last year, according to two of the people.On Monday, President Donald Trump announced plans to reinstate tariff s on steel and aluminium from Brazil and Argentina, nations he accused of devaluing their currencies to the detriment of US farmers.Rules for cars are at the heart of Trump’s bid to replace the North American Free Trade Agreement with the so-called US-Mexico-Canada Agreement, or USMCA, that gives more incentive to manufacture in the US They were among the most diff icult and painstaking issues to resolve in the negotiations last year.“The USMCA rule of origin is challenging to comply with, but we can meet this additional requirement,” said Matt Blunt, President of the American Automotive Policy Council which represents the

Big Three US Automakers. “Passage of USMCA remains our highest priority.” The countries are now pushing for Congress to approve the deal before the 2020 presidential campaign dominates the agenda. But the demand by Democrats, who control the House, for greater protections for Mexican workers, is also holding up its progress.Nancy Pelosi said on Thursday evening on CNN that she remains “optimistic“ that the USMCA can be completed. But she added it will only be brought for a House vote when there are strong enforcement provisions in the text.Chairman Richard Neal said that despite the hang up on steel and aluminium he was optimistic the agreement could be sealed and it’s still “very possible” that the House could vote on it this year. He said he spoke to Mexico’s chief negotiator, Jesus Seade, Friday morning.“It think it is going to be ironed out,” the Massachusetts Democrat said of the steel and aluminium dispute.On labour issues, Seade said on Wednesday that there are still details to work out, but that bringing in US inspectors to monitor Mexican companies is unacceptable and off the table. Seade returned to US Trade Representative Robert Lighthizer’s off ice for more talks on Friday morning.A letter from Mexico’s industrial chamber known as Concamin sent to Seade on Wednesday and obtained by Bloomberg News said that the changes the US is seeking on steel and aluminium are unacceptable and impossible for the nation’s automakers, would threaten their competitiveness and destroy two decades of supply chain integration.If the USMCA deal isn’t passed by Congress, then Nafta would remain in place. But that runs the risk of Trump, who has frequently criticised the 1994 agreement, attempting to withdraw the US, as he threatened to do in the past. That could wreak chaos on the highly integrated regional economy and annual trade of more than $1tn.

Ericsson pays $1bn to settle corruption probeBloombergNew York

A unit of Ericsson AB pleaded guilty to foreign bribery and the parent com-pany agreed to pay more than $1bn

to resolve a long-running US corruption in-vestigation involving payoff s in Asia and the Middle East.

The Stockholm-based company admit-ted to a years-long campaign of corrup-tion aimed at solidifying its grip on the telecommunications business, US Attorney Geoff rey S Berman in Manhattan said in an-nouncing the settlement that outlined tens of millions of dollars in illicit payments in fi ve countries.

“Through slush funds, bribes, gifts and graft, Ericsson conducted telecommunica-tions business with the guiding principle that ‘money talks,’” Berman said in a writ-ten statement announcing the settlement.

From 2000 to 2016, Ericsson conspired with others to violate the US Foreign Cor-rupt Practices Act, paying bribes, falsifying books and records and failing to implement reasonable internal accounting controls, the Justice Department said. The company bribed government offi cials through third-party agents and consultants, it said.

The settlement includes a $520mn crimi-nal penalty imposed by the US Justice De-partment and a civil payment of about $540mn to the Securities and Exchange Commission. As part of a deferred-prosecu-tion deal, an Egyptian subsidiary of the com-pany pleaded guilty to a conspiracy charge.

“This is a refl ection of some hugely em-barrassing and unacceptable behaviour in the past, and of course that is something we as a company are ashamed of and I person-ally am ashamed of,” Ericsson’s chief ex-ecutive offi cer Borje Ekholm said in a phone interview.

“But the settlement also allows us to put

an end to a very long and wide-ranging process so now we can move forward and build a much stronger company for the fu-ture.” The company will add an independent monitor to ensure its compliance with an-ti-bribery laws as part of the settlement in federal court in New York, which had been expected.

The government, in its settlement an-nouncement after the close of US markets, outlined bribery spanning the globe.

By way of a subsidiary, the company made approximately $2.1mn in bribe payments between 2010 and 2014 to high-ranking government offi cials in Djibouti to obtain a contract with the state-owned telecom-munications company, it said. An Ericsson subsidiary entered into a sham contract and approved fake invoices to conceal the pay-ments, it said.

In China, Ericsson subsidiaries caused tens of millions of dollars to be paid to con-

sultants and service providers over 16 years through 2016, the government said. Some of that went to fund a travel expense account in China that covered gifts, travel and en-tertainment for foreign offi cials, it said. The government outlined $45mn in off -the-book payments to create slush funds to win business in Indonesia, and described other off -the-book schemes in Vietnam and Ku-wait aimed at winning business.

In September, Ericsson said it had set aside 12bn kronor ($1.2bn) to cover US pen-alties. Ericsson has said it’s been cooperat-ing with US investigators since 2013.

The Justice Department said Ericsson earned a 15% reduction in penalties for its cooperation. However, it said Ericsson didn’t receive full credit for cooperation because it didn’t disclose some allegations of corruption, didn’t produce certain docu-ments and failed to take adequate discipli-nary measures against some employees.

Workers walk outside the Ericsson factory in Boras, Sweden. A unit of Ericsson pleaded guilty to foreign bribery and the parent company agreed to pay more than $1bn to resolve a long-running US corruption investigation involving payoff s in Asia and the Middle East.

Morgan Stanley’s drive into a lucrative niche in FX market hits hurdleBloombergLondon

Morgan Stanley’s drive into a lu-crative niche in the foreign-exchange market has hit a major

road block.The fi rm has more than doubled its ac-

tivity since 2016 to overtake rivals such as Goldman Sachs Group Inc in the bazaar for currency-linked derivatives known as FX options. Now, Morgan Stanley is probing whether traders improperly val-ued the esoteric securities, concealing as much as $140mn in losses, Bloomberg reported last week, citing people familiar with the matter.

The world’s biggest stock brokerage adopted a “go big or go home strategy” in the business, said Mark Williams, a fi nance lecturer at Boston University’s Questrom School of Business. “Dou-bling their OTC FX option trading book in only three years, given an already size-able market presence, speaks to Morgan Stanley’s aggressive risk appetite.”

While a potential loss would hardly be catastrophic for a broader fi xed-income trading business that generated $5bn in revenue last year, it contrasts with chief executive offi cer James Gorman’s ef-fort to fashion a steadier, less risky fran-chise. His approach has allowed Mor-gan Stanley to close a market-value gap with Goldman Sachs that was more than $50bn after the fi nancial crisis.

Four years ago, Morgan Stanley’s then-equities chief Ted Pick also took control of the fi rm’s fi xed-income unit with a pledge that it would stop trying to be “all things to all people” and pick spots in the bond and currency markets where it could fi nd adequate returns.

The bank had long struggled to com-pete in the area of interest rates and foreign exchange, known collectively as macro trading, where larger commercial banks benefi ted from the activity of their corporate clients.

Morgan Stanley tapped Senad Prusac, who had risen up through the FX op-tions unit, to lead global macro trading and fi nd the bank’s niche in that world. Prusac left Morgan Stanley this year and was recently replaced by Jakob Horder, IFRE reported in September. Oversee-ing the operation was fi xed-income head Sam Kellie-Smith, whose LinkedIn pro-fi le also cites a background in FX options trading.

The strategy has largely paid off , with Morgan Stanley gaining market share even while it cut headcount and reduced capital dedicated to the fi xed-income business.

Analysts expect Morgan Stanley to end 2019 with 10% more fi xed-income trading revenue than in 2015, while ri-

val Goldman Sachs’s total is set to drop about 20% in the same period.

FX options, a small corner of the $6.6tn-per-day currency market, pro-vided some of the growth. In early 2016, Morgan Stanley had fewer of the secu-rities than any other major Wall Street bank, according to a Bloomberg analysis of US Federal Reserve fi lings. By last year, the fi rm had eclipsed Goldman Sachs and Bank of America Corp and trailed only Citigroup Inc and JPMorgan Chase & Co, the fi lings show.

FX options can be a flexible and cheap way to speculate on curren-cies and hedge against losses, accord-ing to Beat Nussbaumer, who helped lead foreign-exchange businesses at firms including Commerzbank AG and UniCredit SpA. Daily trading volume has climbed 16% since 2016 to about $294bn, according to the Bank for In-ternational Settlements.

But the instruments can be hard to value and can magnify losses. The trades now in question were tied to the Turkish

lira, a currency that whipsawed investors in 2018 and earlier in 2019 amid mount-ing political tensions, the people said. Those swings roiled a number of fi rms and Morgan Stanley is grappling with how its losses happened and whether there were eff orts to cover them up. At least four traders have been swept up in the probe, including 27-year-old associ-ate Scott Eisner in London, Bloomberg has reported. Morgan Stanley declined to comment on the matter.

Investment banks tailor FX options based on client requests and they’re trad-ed directly between parties, or over-the-counter, rather than through exchanges. While this makes them more opaque, it also makes them more lucrative, accord-ing to Nussbaumer.

The biggest investment banks shared about $2.9bn in revenue from FX options in 2018, a 40% increase from 2017, only to see income fall this year, according to data from Coalition Development Ltd.

Even before the Morgan Stanley epi-sode, sudden moves in currencies have

triggered blowups. Citigroup lost more than $150mn in 2015 when the Swiss cen-tral bank let the franc trade freely against the euro, Bloomberg reported at the time. In 2016, Taiwanese banks were fi ned af-ter selling leveraged structured products that bet on a rising Chinese yuan, which saddled clients with losses after the cur-rency plunged.

Morgan Stanley purchased FX option trades with a notional amount of about $718bn at the end of September, accord-ing to the Fed fi lings.

That compares with $512bn in the same period in 2017 and $320bn in 2016, the fi lings show. At the end of the fi rst half of 2019, the fi rm’s FX options pur-chased, net of those it sold, was $48bn, three times that of any other US bank, according to Javier Paz, an analyst with Forex Datasource, an independent con-sulting fi rm.

“They’re punching above their weight,” said Paz. “This is the repurpos-ing of their expertise in equity options into currency markets.”

The corporate logo of Morgan Stanley is seen on a building in San Diego, California. Morgan Stanley is probing whether traders improperly valued the esoteric securities, concealing as much as $140mn in losses, Bloomberg reported last week, citing people familiar with the matter.

BUSINESSSunday, December 8, 2019

GULF TIMES

Brexit uncertainty likely to persist beyond UK election: QNBBrexit uncertainties are “likely to persist beyond” the UK general election, which is set to take place on December 12, QNB has said in its weekly economic commentary. In June 2019, QNB noted that Brexit uncertainty has been a persistent drag on the UK economy since the June 2016 referendum when the UK narrowly voted to “Leave” the EU rather than “Remain” in the EU. In that article it had anticipated that a general election, or second referendum, would be necessary.The outlook for economic growth is one of the main determinants of the strength of a currency. The British pound (GBP) fell sharply after the 2016 referendum and remains 17% below the average of the previous 5 years (see chart). This illustrates the market concern about the negative impact of Brexit on the outlook for the UK economy, QNB noted. Since QNB’s last article, Boris Johnson

has taken over as the British Prime Minister (PM) and renegotiated the deal with the EU on the Withdrawal Agreement. However, he was unable to push it through the British Parliament by the October 31 deadline. After losing numerous votes in Parliament, PM Johnson was forced to request a further extension of the Brexit deadline to the 31 January 2020. The hardest form that Brexit could take is often referred to as “No-deal”, whereas remaining in the EU is eff ectively the softest form of Brexit. PM Johnson’s deal with the EU on the ‘Withdrawal Agreement’ implies a harder Brexit than most of the options being considered during the summer of 2019. That alone would imply a weaker outlook for the UK economy and British currency (GBP).However, GBP has rallied 7% since early October 2019 when PM Johnson failed to push his deal through Parliament and

called a general election to be held on December 12. “In our view, much of the “No-deal” tail

risk was priced out of both FX spot and options markets,” QNB said. The Conservatives and Labour parties

have dominated British politics for many years. However, fractures into “Leave” and “Remain” camps run through both main parties, making future voting patterns less predictable than ever. The main parties have diff erent views for Brexit. So QNB has considered three scenarios.First, if a Conservative government were to be elected with a workable majority, then Brexit would move forward faster, with PM Johnson’s deal likely to be passed soon after the election.Second, if a Labour government came to power, then PM Corbyn would attempt to renegotiate a new Withdrawal Agreement. He would then call for a second referendum, which would prolong uncertainty but also open up a path to “Remain”.Third, the election may result in a hung parliament or weak minority government, barely able to forge a coalition. While this would raise the

possibility of a second referendum, it could also bring “No-deal” back on the table and prolong uncertainty.Back in June, opinion polls suggested that a general election would lead to a hung parliament with Labour as the largest party. However, the most recent opinion polls are indicating a clear majority for the Conservatives. Indeed, the latest prediction by pollster YouGov is that the Conservative party would win 359 seats and deliver Prime Minister Johnson a working majority of 68.“PM Johnson’s promise to “Get Brexit Done” is a powerful slogan for the election. However, a trade deal with the EU could not be discussed before the a Withdrawal Agreement is implemented and will likely be even more diff icult to negotiate. “Therefore trade negotiations and Brexit uncertainty are likely to drag on well beyond the December 2020 deadline set by PM Johnson in all three scenarios,” QNB said.

Citibank New York honours QIIB with ‘Citi Straight Through Processing award 2019’Citibank New York granted ‘Citi Straight Through Processing (STP) award 2019’ for foreign payments to QIIB, in recognition of its “professionalism and exceptional performance” in foreign payments.QIIB deputy CEO Jamal Abdullah al-Jamal received the award from Amir Khan, Citi Bank Qatar CEO at a ceremony held at the bank headquarters in the presence of Sayyed Mohamed Kheir Barhuma, head (Operations), Sayed Assem Mahmoud, head (Central Operations) and Najib Ahmed Nasreddine, head (International operations). On behalf of Citibank the event was attended by Mehsen al-Mahdi – head of Citibank banking correspondence, Salman Hashimi, AVP / correspondent banking group off icer, and Manish Seebal, customer service off icer.Citibank granted the award to QIIB on the basis of its exceptional performance

achieved in terms of foreign payments and ability to meet the best international industry standards.On the occasion al-Jamal stated, “We are delighted to receive the STP excellence award for foreign payments again from Citibank New York. This confirms that QIIB’s viability and leadership are consolidated in different banking sectors, namely technology. We have channelled our investments into high level banking technology, and no doubt foreign operations are pillars in our activity that we conduct under the highest global standards”.“Foreign payment operations are crucial for banks, in addition to technology and professional cadres able to handle foreign payment operations that require direct transfer of funds without any human interference. In fact, this has to be done in a way that guarantees their access

to targeted beneficiaries timely and reliably and without any error or delay”, he added.Al-Jamal highlighted QIIB’s “close relationship and partnership with the Citibank, a partnership that benefits our clients and facilitates foreign payment services according to the best global banking standards”.Khan also expressed his “satisfaction” at QIIB receiving the award once again this year. “In fact, foreign payments through QIIB are increasing in terms of quality and professionalism, especially with support of competent staff and the quality technology used”.Khan aff irmed that “the business relationship between Citibank and QIIB will continue and strengthen in future. All the necessary ingredients for such a strong relationship are there and we hope that this will reflect positively on both the parties”.

Al-Jamal with the QIIB and Citibank team at the bank headquarters at Grand Hamad Street in Doha. Citibank New York granted ‘Citi Straight Through Processing award 2019’ for foreign payments to QIIB, in recognition of its “professionalism and exceptional performance” in foreign payments.

Qicca concludesarbitrationprogrammeThe Qatar International Centre

for Conciliation and Arbitration (Qicca) concluded last week the

‘Qualification and Preparation of the Arbitrators Programme’, which was held in co-operation with the Cen-tre for Continuing Education at Qatar University following the completion of six phases of the programme. Qicca board member for International Rela-tions Sheikh Dr Thani bin Ali al-Thani handed over certificates to the trainees following the completion of the sixth

stage of the programme titled ‘Practi-cal Trial’. A statement issued by Qicca said participation in the programme included the registration of partici-pants in the centre’s list of arbitrators.

Sheikh Thani said the programme covered all aspects of commercial ar-bitration, including practical applica-tion, the importance of qualification, and preparation of arbitrators.

Sheikh Thani also said registration is now open of the next edition, which will kick off in January 2020.

Qicca board member for International Relations Sheikh Dr Thani bin Ali al-Thani handing over certificates to the participants.

Participants of the programme during one of the sessions.

Nebras Power celebrates 5 years of incorporationNebras Power has celebrat-

ed its fifth year of incor-poration in a ceremony

held recently, it was announced in a statement.

As a part of the celebration, HE the Minister of State for Energy Affairs and the managing director and CEO of Qatar Petroleum Saad bin Sherida al-Kaabi held a meet-ing with Nebras Power chairman Fahad bin Hamad al-Mohannadi in the presence of Nebras Power CEO Khaled Mohamed Jolo and

the Nebras executive team. Dur-ing the meeting, al-Kaabi praised the company’s success in invest-ing in power generation projects in international markets.

Al-Kaabi assured his support for Nebras Power, which stems from the importance of support-ing Qatari companies in help-ing them to achieve the highest levels of success and to increase their competitiveness in their in-dustries.

The minister also urged the ex-

ecutive management to continue to set benchmarks and to achieve the mission envisioned by its stakeholders and partners.

Al-Mohannadi said he was pleased with Nebras Power’s achievements in its short history during which it attained the ob-jectives set by the board of direc-tors and the goals of its founders.

Jolo also lauded the milestones of the company over the course of five years at various levels, in-cluding the financial level, where

the company achieved a steady increase in profits and assets.

Additionally, he highlighted the expansion of its investment portfolio, which has climbed to 14 assets in seven countries.

Nebras Power has also wit-nessed significant accomplish-ments in its strategic part-nerships with international developers and financial insti-tutions that are operating in the power generation and water de-salination sectors.

HE the Minister of State for Energy Aff airs and the managing director and CEO of Qatar Petroleum Saad bin Sherida al-Kaabi joins Nebras Power chairman Fahad bin Hamad al-Mohannadi, Nebras Power CEO Khaled Mohamed Jolo, and the Nebras executive team during the meeting held recently.