Download - Monthly Insights - Emirates NBD · Eurozone risks resume Elsewhere the hesitation is more understandable, especially in the Eurozone. Already it appears that the growth momentum at

Monthly 16 July 2014

Monthly Insights This will be the last edition of Monthly Insights until September. We would like to wish all of our readers Ramadan Kareem and Eid Mubarak! Global macro: A month ago we noted that doomsday scenarios regarding oil

prices in the wake of the Iraq crisis appeared overdone, and oil prices have duly fallen. Nonetheless it is still apparent that apprehension about growth prospects remains in many parts of the world, even in the US where the Fed is still reluctant to signal when policy normalization will begin despite improving data.

GCC macro: We have revised up our 2014 growth forecasts for the UAE (to 5.0% from 4.5%) and Saudi Arabia (to 4.7% from 4.2%). Oil production in Saudi Arabia has been higher than expected year-to-date, mainly as a result of geopolitical uncertainty in the wider MENA region. In the UAE, PMI data for H1 2014 suggests that growth has accelerated so far this year. We have also upgraded our Dubai growth forecast to 5.0% from 4.7% in 2014. .

MENA macro: Outside of the GCC, the economic and political backdrop at the start of H2 2014 remains in a state of flux. Just when many of MENA’s net oil importers appeared to be regaining their footing, the recent crisis in Iraq threatens to derail, or at least constrain, the regional recovery.

Fixed Income: Treasury yields crumbled under the weight of high demand with the yield on 10 year US Treasuries declining to 2.52% as risk appetite waned in light of weak Eurozone data and Portugal banking system woes. Auctions are being oversubscribed by more than three times. That said, whatever rates do, the lure of bonds remains irresistible, particularly the safe haven class, as cheap liquidity pools need to be put to work.

Currencies: A month on since our last edition, FX moves have been relatively muted, with the best performing currencies once again being the NZD and the GBP, as well as the CAD, while the worst performers were the SEK and the NOK whose interest rates were cut.

Equities: Following a stellar 2013 global equities managed to hold their ground in 1H 2014 with a 6.8% return, delivering fifth highest return among different asset classes. In terms of geography, GCC equities outperformed global equities with the MSCI GCC countries index adding 9.2% in 1H 2014.

GCC equities were the best performers in 1H 2014

Source: Bloomberg, Emirates NBD Research

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Tim Fox Head of Research & Chief Economist +971 4 230 7800 [email protected] Khatija Haque Head of MENA Research +971 4 230 7803 [email protected] Anita Yadav Head of Fixed Income Research +971 4 230 7630 [email protected] Jean-Paul Pigat Economist +971 4 230 7807 [email protected] Aditya Pugalia Analyst +971 4 230 7802 [email protected]

Content

Global Macro ......................................................................................................... Page 3

GCC Macro ............................................................................................................ Page 5

Non-GCC Macro ................................................................................................... Page 7

Fixed Income ....................................................................................................... Page 9

Currencies .......................................................................................................... Page 12

Equities .............................................................................................................. Page 14

Key Data & Forecast Tables .............................................................................. Page 16

Global Macro A month ago we noted that doomsday scenarios regarding oil prices in the wake of the Iraq crisis appeared overdone, and oil prices have duly fallen back from their June highs with Brent settling at around USD107pb currently. Nonetheless it is still apparent that apprehension about growth prospects remains in many parts of the world, even in the US where the Fed is still reluctant to signal when policy normalization will begin despite improving data.

Oil prices unwind June gains Regional tensions drove oil prices higher in June to reach around USD113pb, causing markets to become concerned about the potential consequences to global growth should prices rise even further. However, we thought that such doomsday scenarios were overdone, not least because we saw the potential for countervailing supply to come onto the market should Iraqi oil output be disrupted. This proved to be the case, with GCC oil production increasing by 330,000 bpd last month, the first rise in output since December 2013, with Saudi Arabia accounting for most of the increase. The increase in GCC output helped to offset declining production in Iraq, where oil production eased to 2.9mn bpd last month from 3.3mn bpd in May, the lowest level of output since September 2013. But apprehension about growth remains

Notwithstanding this oil price reprieve, many parts of the world remain apprehensive about the economic outlook. Global growth forecasts continue to be adjusted lower, with the IMF and World Bank both lowering their forecasts last month. And it is not only the usual suspects of the Eurozone and Japan where significant doubts persist. Even in the US where the economic data continues to show the recovery picking-up momentum, the Federal Reserve projects caution. Despite the US unemployment rate reaching 6.1% in June, and non-farm payrolls rising by 288k, Fed Chair Yellen remains hesitant when it comes to articulating a clear path of policy normalization, still seeing a sufficient amount of slack to justify keeping interest rates at historical lows for a considerable period of time. Our own view chimes more with St Louis Fed President James Bullard, a former monetary policy dove (who appears to have converted into a hawk), who said recently that it is getting ‘harder and harder to justify continued low rates’. Bullard expects inflation will continue to move higher this year and said that it won’t be long before the Fed reaches its goals. Indeed with headline CPI inflation currently above the Fed’s target at 2.1%, and with the core rate bang on it at 2.0%, we think the next few readings could be key to determining how long the Fed waits after QE comes to an end in October before raising rates. Of course the Fed’s preferred inflation measure is the core PCE deflator, which stood at 1.5% in June, but it is still already where the Fed anticipated it to be by the end of the year, leaving it with not much room before it too might begin to overshoot. Bullard concluded by saying that rates could be raised by the end of Q115, a timeline which is also implied in

our own forecasts. In fact our one-year outlook is now allowing for two increases in the Fed funds rate taking it to 0.75%.

US jobs market continues to improve


Eurozone risks resume Elsewhere the hesitation is more understandable, especially in the Eurozone. Already it appears that the growth momentum at the start of the year (which only saw growth of 0.2% q/q in Q1) is starting to slip, with surveys as well as official data showing that Q2 growth looks likely to be poor. Industrial production fell by 1.1% m/m across the Euro area in May, but more worrying has been the loss of momentum in the biggest economy Germany, alongside the ongoing weakness seen elsewhere. German output shrank for three months in a row to May, and with Eurozone inflation remaining resolutely soft at 0.5% in June, it is not surprising that the ECB continues to emphasize its willingness to take more steps to revive growth beyond the ‘bazooka’ it provided only a month ago.

German output falls for 3 straight months

Source: Bloomberg, Emirates NBD Research This is hardly an encouraging environment for the Eurozone’s financial crisis to be making a reappearance, and although the

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latest focus on Portugal’s banks might have been overstated, the ECB’s upcoming Asset Quality Review could bring other banks under the spotlight. Asia outlook still shrouded Meanwhile, the Bank of Japan, while still projecting inflation to reach its 2.0% target next year, downgraded its growth forecast slightly for the current fiscal year from 1.1% to 1.0% at its latest monetary policy meeting. Other private sector projections for the current quarter are also being downgraded more aggressively in the wake of the consumption tax increase, meaning that a bigger improvement will be needed in H2 if these projections are to be met. China’s policy induced slowdown would also seem to have further to go. Growth rebounded slightly in Q2 to 7.5%, up from 7.4% in Q1, but the risk remains that the supply overhang from earlier overinvestment will continue to weigh on growth going forward, despite support measures provided earlier this year. UK data presents tightening doubts Finally, in the UK it is striking that since Bank of England Governor Carney made his hawkish Mansion House speech just over a month ago, the accumulation of strong UK economic data appears to have gone into reverse, at least partially. From disappointing industrial production to the trade balance and retail sales, there would appear to be less urgency to raise interest rates than there appeared to be a month ago. As we were not persuaded then by the arguments to tighten policy in Q4, needless to say we are even less convinced today. India – growth regains focus The new Indian government presented its first budget for FY 2015. It was a work-man like budget which laid greater focus on reviving growth and boosting infrastructure. The budget also tried to open more avenues for foreign investment into the country by raising the FDI limit to 49% in sectors like Defense and Insurance and critically addressed issues like taxation which had impacted foreign investors’ confidence negatively in the recent past. The government retained the previous government’s fiscal deficit target of 4.1% for FY 2015 even though it admitted that the target was ambitious. In fact, the government added that it aims to bring the fiscal deficit down to 3.0% over the next two years. However, the difference between the current government and the previous government lies in the approach to achieving this target. The current government aims to achieve the fiscal deficit target by boosting growth rather than curbing expenditure. This is reflected in 21% increase in budget estimates for planned expenditure compared to a 14% decline in planned expenditure last year. In another move to revive consumer spending and encourage savings, the government offered various tax breaks to individual tax payers and exemptions on saving schemes. Increased consumer spending should have a multiplier effect on the economy and this step is likely to have a positive impact on demand.

One area where the government seems to have missed a trick is in announcing a firm timeline for major reform measures like Goods and Services Tax (GST) and Direct Tax Code (DTC) and how it intends to streamline subsidies. The finance minister later clarified that the current budget is just the first step in the government’s five year term.

Indian government walks a tightrope

Source: Bloomberg, Emirates NBD Research All in all it was a positive budget, the outcome of which is likely to depend on how efficiently the government implements its schemes. The recent economic data, wherein wholesale price inflation slowed to 5.4% in June from 6.0% in May and industrial production jumped to the highest level in 19 months at 4.7% y/y in May, does suggest perhaps that growth has bottomed out. However, weak monsoons as predicted by the Met department remain an overhang for government finances and economic growth in FY 2015. Tim Fox +9714 230 7800 Aditya Pugalia +9714 230 7802

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GCC Macro We have revised up our 2014 growth forecasts for the UAE (to 5.0% from 4.5%) and Saudi Arabia (to 4.7% from 4.2%). Oil production in Saudi Arabia has been higher than expected year-to-date, mainly as a result of geopolitical uncertainty in the wider MENA region. In the UAE, expansion in the non-oil sector exceeded expectations in 2013 and PMI data for H1 2014 suggests that growth has accelerated so far this year. We have also upgraded our 2014 Dubai growth forecast to 5.0% from 4.7%.

GCC oil output rises in June In our last Monthly Insights, we wrote that in the current geopolitical environment, oil prices pose an upside rather than a downside risk to the GCC countries. The June figures for OPEC oil production have confirmed this view, with GCC oil output rising by 330,000 bpd – the first increase in output since December 2013. As we also indicated was likely in last month’s piece, Saudi Arabia was the main driver for the higher oil production in June, accounting for 70% of the increase in GCC supply. The UAE increased oil production by 100,000 bpd last month, the first increase significant in the UAE’s oil production since August last year according to Bloomberg estimates.

GCC oil production

Source: Bloomberg, Emirates NBD Research GDP growth forecasts revised higher While we had expected some increase in oil output in the UAE this year, we had assumed zero expansion in Saudi Arabia’s hydrocarbon sector in 2014. We have thus revised up our forecast for Saudi Arabia’s GDP growth to 4.7% from 4.2% previously. We have also revised up our 2014 growth forecast for the UAE to 5.0% from 4.5%, but this is due to an improved outlook for the non-oil sector, rather than expectations of sharply higher oil production. The PMI data for the UAE year-to-date have been much stronger than last year, averaging 57.6 in H1 2014 (H1 2013: 54.7). Both external and domestic demand appears robust, and firms are

optimistic about future order growth. In addition, indicators for the hospitality sector suggest that momentum there remains positive, with high levels of hotel occupancy even as room rates rise and new supply comes onto the market. Finally, we have revised up our expectations for growth in the construction sector in Dubai as our previous forecast now appears overly cautious. Consequently, our forecast for Dubai’s 2014 growth is now 5.0% from 4.7% previously. Inflation forecasts revised down Despite an improved growth outlook for many countries in the GCC, inflation has been lower than expected year-to-date. The common theme across the GCC has been low food inflation in H1 2014, which has been sufficient to offset some of the impact of rising housing and other services costs, particularly as food accounts for a substantial share of the CPI basket. We have revised our 2014 inflation forecasts down for Saudi Arabia (to 3.0% from 4.0%), Qatar (to 3.6% from 4.0%) and Bahrain (to 3.0% from 4.3%). We also note that risks to our Omani inflation forecast (2.5%) remain on the downside, despite the recent removal of price controls on all but a handful of basic products.

GCC inflation rates

Source: Haver Analytics, Emirates NBD Research

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Non-GCC Macro Outside of the GCC, the economic and political backdrop at the start of H2 2014 remains in a state of flux. Just when many of MENA’s net oil importers appeared to be regaining their footing, the recent crisis in Iraq threatens to derail, or at least constrain, the regional recovery. Markets most at risk from seeing direct negative spillovers are Jordan and Lebanon, not least because of their proximity to the growing security vacuums across their borders. Yet the implications from Iraq’s crisis could reach well beyond the Levant, particularly if foreign investors become increasingly hesitant about the broader region’s long-term stability. Oil Importers Judging by financial markets however, investors appear to have remained relatively sanguine on the outlook for MENA’s net oil importers. Sovereign yields on benchmark bonds in Morocco, Tunisia and Egypt were trading at, or very near, record lows at the start of July. In mid-June, Morocco even successfully tapped markets to raise EUR1.0bn in 10-year bonds at only 215bps above mid swaps, which was the first time in four years the country sold euro-denominated notes.

Real GDP Growth

Source: Haver Analytics, Emirates NBD Research The narrowing in sovereign yields in recent months has been driven by a combination of domestic and external factors. In terms of the latter, the global hunt-for-yield has certainly played a large role in increasing demand for MENA debt. However the most important factor has undoubtedly been due to pledges of foreign assistance, both in the form of direct aid transfers, but also bond guarantees. Egypt is the most notable example of where external aid has played the key role in underpinning a resurgence in confidence, having received transfers estimated at USD10.5bn between July 2013 and March 2014. Over the same time period, Egypt’s 5-year Credit Default Swap (CDS) narrowed from 925bps to trade at a multi-year low of 310bps currently. For comparison, the 5-year CDS for Pakistan and Venezuela – both of which

possesses identical long-term credit ratings from Moody’s and S&P – are currently trading at 660bps and 914bps respectively. Without such foreign aid inflows, MENA’s net oil importers would be in a considerably more precarious position than they currently find themselves in. On the surface, budget shortfalls appear to have improved, with Egypt’s fiscal deficit narrowing 7.6% in nominal terms in the first eleven months of its last fiscal year (running July-June). Strip away foreign grants however, and the deficit has actually expanded 14.9% y/y. The same is true in Jordan, where the fiscal shortfall excluding grants jumped 28% y/y in Q114. The key risk in this regard centers on complacency, as it cannot be assumed that foreign aid inflows will continue in perpetuity.

Hotel RevPAR

Source: STR Global Emirates NBD Research Note: Average Jan-May It is in this context that recent moves to reform energy subsidies have taken place. Although hiking domestic energy prices is fraught with short-term risks – including higher inflation, lower growth, and public discontent – the long-term benefits should outweigh these costs, in our view. Tunisia has raised petrol prices over 6%, while Jordan appears to be continuing its gradual subsidy reforms by hiking prices by a more modest 1%. The most drastic changes have come from Egypt however, where authorities raised prices of some energy products by up to 78% in early July. As energy subsidies account for over 18% of total government spending in the case of Egypt, such bold reforms should help significantly lower spending this year, assuming there is no offsetting surge in cash transfers (as was the case during Iran’s subsidy reforms). Oil Exporters For MENA’s non-GCC oil exporters, the first half of 2014 has largely been a disappointment. Expectations at the start of the year were quite high that Libya, Iraq and Iran would begin gradually ramping up oil production, providing additional supply to global energy markets. Latest data from Bloomberg would show these expectations were overly optimistic however. In H1, combined oil

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production from these economies was in fact 11% lower compared to the same period in 2013, while spare capacity is now estimated at approximately 2.1mn b/d, or roughly 7% of current OPEC production.

Goods Exports

Source: Bloomberg, Emirates NBD Research There have been some signals out of Libya in recent days that two of the country’s largest ports – Ras Lanuf and Es Sider – were set to reopen after being closed for nearly one year. As with most positive developments out of Libya over the past several years however, we would caution that decisions could be swiftly reversed, and as a result, we are not yet expecting a full-scale resumption in output from the North African country in Q3. It is within this grouping of economies where we have made the most significant revisions to our 2014 real GDP growth projections. In the case of Iraq, although the majority of oil production is still secure in the south of the country, developments over the past several weeks are undoubtedly going to result in a collapse in fixed investment and lower consumption this year. As a result, we have lowered our growth projection to 1.8%, from 8.7% previously. In the case of Libya, the downward revisions are even more pronounced, and we are now expecting headline GDP to contract 25.0%, although the scale of losses will be difficult to determine in such a volatile political environment.

Jean-Paul Pigat +971 4 230 7807

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Fixed Income Treasury yields crumbled under the weight of high demand with the yield on 10 year US Treasuries declining to 2.52% as risk appetite waned in light of weak European data and Portugal banking system woes. Auctions are being oversubscribed by more than three times. That said, whatever rates do, the lure of bonds remains irresistible, particularly the safe haven class, as cheap liquidity pools need to be put to work. Performance of corporate bonds spreads across the globe was mixed with spreads in North America being range bound, those in Europe widening somewhat, while emerging markets continued to tighten marginally. Global Bonds The month saw stronger than expected US payroll figures. However, weak economic data out of Europe/UK plus negative headlines surrounding payment default by Portugal’s largest bank, Banco Espirito Santo kept a lid on risk appetite of the fixed income investor. Escalating violence in Iraq and Ukraine were further confidence eroders. The flight to safety saw 10 year yields on US Treasuries get lowered by 8 bps and France by 9 bps to close the month at 2.52% and 1.64% respectively. Short dated German bund yields are close to zero while 10-year German Bund yields were lower by 15 bps on the news about Month-on-month drop in industrial output. In the UK, although mortgage lending exceeded expectations and house price rises were strong, the unexpected fall in factory output in May, dampened the expectation of any interest rates hikes and saw 10-year Gilt yields down by about 8 basis points on the month.

Yields on sovereign paper

Source: Bloomberg, Emirates NBD Research During the month S&P released a report on global sovereign credit quality sighting that average sovereign credit rating has fallen by about one notch since 2008 to between 'BBB' and 'BBB-' compared with just below 'BBB+' in 2008. This mildly declining trend can partly be explained by eroding credit quality but it is also because most of the new sovereign ratings assigned recently tend to be in the lower rating categories in the so-called emerging or frontier markets, such as in sub-Saharan Africa, whose sovereigns

predominantly carry ratings in the 'B' category. Negative outlooks outnumber positive outlooks in all regions of the world. Among the 129 rated sovereigns,23 had negative (including large economies like India and Japan) and five had positive outlooks. During the month, OAS (option adjusted spreads) on global investment grade corporates were range bound between 92 and 95 bps while global HY spreads were wider by circa 16 bps (reaching 364 bps) as sentiment was hit by fears over the problems in European region. In fact European HY corporate spreads were wider by 45bps to close the month at 322bps.

Global Bond Indices

OAS (bps) 1M change 1Y change

Global Dev Sov 17 1 -12

Global IG Corp 94 1 -35

Global HY Corp 364 16 -122

US IG Corp 104 0 -46

US HY Corp 373 9 -119

EUR IG Corp 83 3 -33

EUR HY Corp 322 45 -122

Source: Bloomberg, Emirates NBD Research Emerging-Market Bonds Emerging markets had a positive month. Despite flight-to-safety into treasuries and bunds, EM sovereign and corporate bond spreads over treasuries were tighter by 9 and 4 bps to 251 bps and 292 bps respectively as money flowed from European names into emerging market issuers.

USD EM Index

OAS (bps) 1M change 1Y change

EM composite 275 -7 -71

EM Sov 252 -8 -57

EM Corp 290 -6 -80

EM IG Corp 200 -4 -71

EM HY Corp 517 -14 -129

Source: Bloomberg, Emirates NBD Research Indian Govt (BBB-/Baa3) announced 2015 budget with few surprises. The budget has nothing in it to alter S&P’s negative view on India’s credit rating as yet. In Indonesia, The race between Joko Widodo and Prabowo is very closely contested. Indonesian market remains in stand-by mode until official result is announcement on July 22.

EM countries had mixed policy meetings during the month. Malaysia raised rates by 25 bps to 3.25% while Peru and Hungary lowered the rates by 25bps (to 3.75%) and 10 bps respectively. Peru also had its credit rating raised by two notches to A3 on the back of prudent fiscal management, socio-economic improvements and expectations of faster economic growth. Bank of Korea (BoK) revised inflation and GDP forecasts for 2014 lower and held rates steady at 2.5%, Banco de Mexico left policy rates unchanged at 3%. Ukrainian forces and pro-Russian insurgents continued hostilities, which has rekindled concerns that further economic sanctions will be imposed on Russia. The Central Bank of Russia held rate at 7.5% and announced measures to reduce currency intervention, notably by widening the ruble’s trading corridor, which is seen as a step towards allowing increased currency flexibility over time. Earlier in the month the fear about potential new debt default by Argentina were high. However, most investors are now expecting Argentina to be able to get refinancing. S&P downgraded the country’s foreign currency rating two notches to CCC- from CCC+. GCC market Secondary Market The medium to long term view on the GCC region is constructive, although volatility has been high in recent weeks owing to macro and geopolitical issues. Widened credit spread seem to offer an attractive entry point and institutional investors’ enquiries are skewed towards bids at present although very little is actually being done. Investor sentiment is more evident in the CDS market, however, it should be noted that owing to low liquidity in CDS market, trading level can vary wildly on small trades. Sovereign CDS held ground but CDS on most corporate were wider by four to 15 bps. Dubai Holdings protection at 309bps was wider by 47 bps on the month and DP world was wider by 8 bps to 149bps - partly due the news relating to possibility of losing concession to operate the Djibouti port. Earnings season is upon us and so far results from debt issuers have been positive. Banking sectors are benefiting from healthy economic growth in the region and are reporting high single to double digit growth in earnings. QNB, Arab National Bank, BSFR etc have announced healthy numbers while QIBK beat estimates. That said we expect minimal impact on spreads as most of the good news is already factored in the price. Despite GCC banks trading tight to their other EM peers, they trade at substantial premium compared to their developed market peers of the same rating.

Yield on 2017 maturity bank bonds

Source: Bloomberg, Emirates NBD Research In view of Ramadan, activity has been low, but trading was reasonably two way in short dated papers such as COMQAT 19s, ADCBUH 19s, ALHILA perp, DIBUH 17s, RAKBNK 19s during the month. In the industrial space, bids were seen in EMIRAT 25, QTEL 18s and TDICUH. Low yield in the home market is making GCC investors more active in external markets such as Indian credits and some Indonesian and Malaysian sukuk issues. Indian bank names, SBI perp, BOI 18s, BOB 22s, Canara 18s were in demand by both institutional as well as retail clients. Due to the ongoing events in Iraq, its CDS spread widened by 81 bps during the month to 379bps. Credits like DANAGAS and TAQA that have exposure to Iraq continue to be closely watched. As per the recent ruling in a London Court, the Kurdish government is required to continue to make payments to Dana Gas while an arbitration case remains unresolved.

Yield on TAQAUH 4.125 10/25/17


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Source: Bloomberg, Emirates NBD Research Primary Market With Ramadan now underway, issuance in the primary market is expected to remain muted over the next 1-1.5 months. According to Thomson Reuters’ data, bonds issued during the first half of 2014 fell 16% cent from the same period last year, to USD22.0 billion, mainly attributed to a slow first quarter. IG corporate debt totaled USD16.4 billion and accounted for 90% of the first half total. The UAE was the most active nation accounting for 55% of activity, followed by Saudi Arabia with 28%. International Islamic debt issuance declined 17% year-on-year to reach USD14.1 billion, the lowest first half total since 2011. Anita Yadav +9714 230 7630

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Currencies A month on since our last edition, FX moves have been relatively muted, with the best performing currencies once again being the NZD and the GBP, as well as the CAD, while the worst performers were the SEK and the NOK whose interest rates were cut. We had recommended both the NZD and the GBP a month ago on the basis of their relatively hawkish central banks, but more on the crosses than against the USD. However, with the USD still treading water as Treasury yields remain pressured, both currencies have continued to make headway against the greenback as well, with GBP in particular having had a very strong month. However, we are now nearing what we would consider to be the limit for both currencies in the short term.

Monthly performance against the USD


NZD/USD backs-off from historic highs

Source: Bloomberg, Emirates NBD Research In the Kiwi’s case with inflation only edging up to 1.6% y/y in Q1, from 1.5% in Q1, this casts doubt on the need for another rate hike at the upcoming RBNZ meeting on July 23rd. The NZD has duly

backed-off sharply from its post-float high of 0.8843 reached in August 2011 making a period of retracement now look more likely. Strong GBP squeezing UK exports and output GBP too has come close to our 3-month forecasts at 1.72 and is beginning to feel overextended, especially as the strong pond is beginning to have an impact on UK data. UK industrial production fell by -0.7% m/m in May and trade figures for the same month showed the overall deficit widening from GBP2.1bn in April to GBP2.4bn against expectations that it would narrow to GBP1.6bn. In light of this recent data we think that market expectations for an interest rate hike in the UK before the end of the year have probably got ahead of reality, with our own forecast being for rates to be raised at a round the same time as the US Fed, probably sometime in H115. EUR/GBP and other crosses would be our prepared vehicle for playing ongoing GBP strength, especially as we think that the USD itself will snap back at some point in H215 reflecting the realization that QE is coming to an end and that an interest rate rise by the Fed is probably only just around the corner.

UK Trade deficit squeezed by strong GBP


USD treading water as Fed’s thinking evolves The Fed’s FOMC minutes from the June meeting showed the Committee to be relatively upbeat about the US economy which is expected to bounce back from Q1’s sharp contraction, with most members seeing balanced risks on growth, jobs and inflation. There was no indication of any policy change occurring any time soon, with officials still seeing more slack in the economy than implied by the unemployment rate. Against this background the pace of QE is likely to continue at USD10bn per meeting, but is likely to end in October with a USD15bn cut. Fed Chair Janet Yellen also delivered a relatively balanced assessment of monetary policy in her semi-annual testimony, reiterating that rates will be held low for a considerable period after QE has come to an end, but also signaling confidence about the economy overall, suggesting that the Fed could move sooner and more rapidly than expected if the economy improves faster than

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Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

UK Trade Balance

expected. That may be a truism, but it is still shows that the Fed’s thinking is evolving and is no longer looking only at the downside risks. The USD rallied on Yellen’s comments, and we expect it to pick-up further once inflation pressures start to build momentum. On that basis CPI data next week could have a greater impact on the USD if inflation continues to push above the Fed’s 2.0% target. EUR holds up despite growing risks The most surprising feature of the last few weeks is the continued inertia of EUR/USD, following the ECB’s easing steps a month ago, its more dovish rhetoric recently, weaker Eurozone economic data, and now in the face of renewed concerns about the health of the Eurozone financial system. In part EUR/USD’s steadiness reflects the ongoing stability of US bond yields at low levels, which are preventing the USD from taking off against the single currency as well as also handicapping it against the JPY and other currencies. However, it is the EUR’s failure to react to disappointing news from the Eurozone itself that is most surprising, and not for the first time this year. Comments from ECB officials that the ECB stands ready to implement QE if inflation expectations fall further have largely fallen on deaf ears, while weak production figures out of Germany, France, Italy and Spain have also been largely ignored. Increasingly prominent voices are being heard calling for the ECB to push the EUR down to promote growth, and even Mario Draghi has been warning about the risks to the recovery from the EUR’s appreciation. The latest pressures on the financial system emanating from Portugal did bring about some pressure on the single currency, yet it still remains within the recent 1.35-1.37 dollar range. However, we still believe that the risks to the single currency are to the downside and we retain our forecasts looking for it to fall to USD1.30 by the end of the year. USD/JPY wilts alongside US yields This year we have continued to overestimate the ability of USD/JPY to rally, and the latest weeks have been no exception with a promising recovery in early July turning off again as US interest rates once again wilted. Even though Japan’s growth expectations for Q2 are being revised lower, the BOJ still appears optimistic that its monetary policy to date will work to restore growth in H214 and beyond without further stimulus being needed. As we are less sure about this we think the BOJ will be brought back to the easing table eventually, but for the moment it remains to be convinced. That leaves US interest rates as the main driver of USD/JPY sentiment for the foreseeable future. As we would be surprised if US 10-year yields were to fall much further below 2.50%, our feeling is that the recent lows in USD/JPY, around 101, should also be protected before both US yields and USD/JPY began to rally in conjunction later in the year. Tim Fox +9714 230 7800

Equities Global equities consolidated their gains over the past month as better than expected macroeconomic data from developed markets coupled with a balanced approach from the US Fed boosted equities. However, we did see divergent performances across geographies as the Eurozone stumbled, the US consolidated and GCC markets remained volatile. The MSCI World index rallied +1.1% 1m boosted by gains in the MSCI Emerging Markets index (+1.4% 1m) and the MSCI GCC Countries index (+2.7% 1m). While the ongoing concerns in Iraq along with a potential financial risk in the Portuguese banking system remain an overhang on equity markets, investors are expected to keep their focus firmly on the ongoing Q2 2014 earnings season. Earnings growth will be keenly watched given concerns over equity valuations. 1H 2014 – Equities hold their ground Following a stellar 2013 global equities managed to hold their ground in 1H 2014 with a 6.8% return, delivering fifth highest return among different asset classes. According to market data, REITs delivered the highest return in 1H 2014 of 18.1% followed by Emerging Market Debt (7.4%) and Commodities (7.1%). Within the equity space, frontier market equities outperformed. The MSCI FM index gained 16.6% in 1H 2014 followed by MSCI G7 index (4.9%) and MSCI EM index (4.8%). In terms of geography, GCC equities outperformed global equities with the MSCI GCC countries index adding 9.2% in 1H 2014 followed by the MSCI US index (6.1%), the MSCI Europe index (3.4%) and the MSCI Asia Pacific index (3.1%). All returns are in USD terms. Developed Markets This past month we saw divergent performance in developed market equities. While the US and Japanese equities built on their previous month gains, European equities stumbled a bit. While the S&P 500 index added +1.9% 1m and the Nikkei gained +3.1% 1m, the Euro Stoxx 600 index dropped -2.5% 1m. Despite rallying c.10% in two months, the Nikkei (-5.5% ytd) remains one of the few developed market equity index in negative territory for the year. Valuations – A growing concern Given the sustained rally in developed market equities in 1H 2014, valuations in most developed markets appear stretched. The S&P 500 index is currently trading at 15.8x 12m forward earnings compared to its 10-year average of 13.9x. Similarly, the FTSE 100 index is trading at 14.0x 12m forward earnings compared to its 10-year average of 11.3x. The Topix index is one of the few major equity markets which is trading lower than its historical average. It is currently trading at 14.3x 12m forward earnings compared to its10-year average of 16.7x. However, when the valuations for these markets are looked at relative to global markets, most of them are trading at a discount.

For example, the FTSE 100 index is trading at a discount of 9.0% relative to the MSCI World index which is currently trading at 15.4x 12m forward earnings. Similarly, the DAX index is trading at a discount of 13.3% and the Topix index at a discount of 7.2% relative to the MSCI World index. The S&P 500 index is the only major equity market index which is trading at a premium (3.0%) to the MSCI World index. Emerging Markets On a broad level, emerging market equities marginally outperformed global equities over the past month and so far in 2014. The MSCI Emerging Market index gained +1.4% 1m and +6.1% ytd compared to a rally of +1.1% 1m and +5.2% ytd in the MSCI World index. India – The force behind outperformance India’s Nifty is the best performing emerging market equity index with a +19.4% gain ytd. The rise in Indian equity markets is primarily driven by expectations of a major program of structural reforms following the massive mandate to the new government. The recent budget (see Pg.4) does offer some hope in that direction. The expectation of investors from the new government has translated itself into big inflows from foreign investors including large blocks from non-EM dedicated investors. According to data available, foreign investors have invested USD 11.3bn into Indian equities so far in 2014 with 40% of that amount been invested since the election results in May 2014. While the fundamental story in India seems to be improving with slight moderation in inflation and a pick-up in industrial activity, weak monsoons could be a drag in the short term. According to estimates India is currently witnessing a 41% deficit in monsoon rains and that is likely to have an adverse impact on food prices, the primary driver behind high inflation in the country. If inflation spikes back up then it is likely to have a negative impact on an already ambitious fiscal deficit target of the government which could result in lower government expenditure which would be a drag on economic growth. Valuations – EM relatively better off Despite outperforming global equities so far in 2014, emerging market equities seem to be trading at reasonable valuation relative to historical averages compared to developed market equities. According to Bloomberg, the MSCI Emerging Market index is trading trading at a 12m forward PE of 11.3x compared to its 10-year historical average of 11.0x. While on a broad level, valuations seem reasonable, there remain markets among emerging markets which are currently trading at seemingly stretch valuations. For example, India which is currently trading at a 12m forward PE of 16.5x compared to its 10-year average of 15.4x. Similarly, South Africa is currently trading at a 12m forward PE of 14.6x compared to its 10-year average of 11.4x. While challenges for emerging market equities remain especially in terms of normalization of the monetary policy in the US, relatively cheap valuations amid a high possibility of earnings revision due to a cyclical upturn in global economic growth could see emerging market equities sustain their 1H 2014 performance into 2H 2014.

MENA equities It was a month of two halves for MENA equities. If the first half saw sharp declines accompanied by extreme volatility, the second half was all about smart recovery in stock prices amid a calmer trading environment. Eventually, the S&P Pan Arab Composite index rallied +2.4% 1m, outperforming the MSCI World index which rallied +1.2% 1m. The DFM index was the best performing GCC equity market with a gain of +7.0% 1m followed by the Qatar Exchange index (+5.0% 1m) and the MSM index (+3.8%). On a ytd basis, GCC equities are the best performing markets in the world The Bloomberg GCC 200 index had rallied +14.2% ytd compared to a gain of +5.2% in the MSCI World index, +6.1% in the MSCI Emerging Market index and +5.2% in the MSCI G7 index. The DFM index (+41.4% ytd) and the Qatar Exchange (+26.2% ytd) are among the top three performing equity markets in USD terms. Q2 2014 earnings – A key factor The Q2 2014 earnings season is currently underway with Saudi and Qatari companies reporting ahead of their regional peers. According to market data based on consensus analysts’ estimates, GCC companies are expected to report a growth of +8.5% y/y and +8.4% q/q in Q2 2014 earnings. These numbers reflect consensus analysts’ estimates for 141 companies across the GCC representing 75% of the total market capitalization. On a country level, only Qatari equities (-10.0% y/y) are expected to report a decline in Q2 2014 earnings. Kuwaiti equities are expected to report the highest y/y increase in Q2 2014 earnings with a rise of +33.0% followed by Bahraini stocks (+30.0% y/y), Saudi companies (+12.0% y/y) and the UAE equities (+9.2%). It must be noted here that data for Kuwaiti and Bahraini companies are distorted on a broad level due to sharp increases in a couple of large companies. However, the picture changes slightly when we look at estimates of only major companies in these markets. The combined net profit of 12 major companies on the DFM index is likely to increase +22.0% y/y in Q2 2014 (versus +38.0% y/y increase in Q1 2014). Similarly the combined net profit of 47 major companies in Saudi Arabia is likely to grow +10.0% y/y (versus +7.0% y/y increase in Q1 2014). However, the combined net profit of12 leading companies on the ADX index and 10 major companies in Qatar are likely to decline -1.0% y/y and -12.0% y/y respectively in Q2 2014. GCC Fund Flows – Foreigners remain invested Despite enhanced volatility in GCC equities, foreign investors were net buyers for a ninth consecutive month investing USD 79mn in June 2014. On a cumulative basis, foreign investors have put in c. USD 2.4bn into GCC equities in H1 2014. On a ytd basis the Qatar Exchange has seen maximum inflows (c. USD 1.6bn), followed by the UAE stock indices (c. USD 900mn). The Tadawul is the only major GCC stock index which has seen an outflow (c. USD 700mn) in 2014. It was also evident that foreign investors enhanced their investments into non-MSCI stocks post the formal inclusion of the

UAE and the Qatar indices into the MSCI Emerging Market index. According to market data, the percentage of foreign inflows into MSCI stocks were 95% of their total flows in the first five months of 2014 but it declined to 57% in June 2014. In fact in June 2014, MSCI stocks underperformed the broader indices. For example, the MSCI EM stocks on the DFM dropped -24.2% in June compared to a decline of -22.5% in the DFM index. Similarly the MSCI EM stocks in Qatar dropped -19.1% in June compared to a decline of -16.1% in the Qatar Exchange. Aditya Pugalia +9714 230 7802

GCC in Pictures

GCC Oil Production and Reference Price


Inflation


Money supply (ex Government. deposits)


Purchasing Managers’ Index

Source: Markit/ HSBC, Emirates NBD Research

CDS Spreads

Source: Bloomberg

Private sector credit

*UAE data is total bank loan growth, not private sector credit Source: Haver Analytics, Emirates NBD Research

90

95

100

105

110

115

120

12

13

14

15

16

17

18


US

D /b

bl

mn

bpd

Oil production OPEC Reference Price

Excludes Bahrain and Oman

0

1

2

3

4

5

Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14

% y

/y

Qatar UAE KSA

-10

0

10

20

30

40

50


% y

/y

KSA UAE Qatar

50

52

54

56

58

60

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14

UAE KSA

0

100

200

300

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14

bp

Abu Dhabi KSA Dubai

0

5

10

15

20

25


% y

/y

Qatar UAE KSA

MENA in Pictures

Inflation


Unemployment


M1 Money Supply


FX Reserves


CDS Spreads


Goods Exports


-2

0

2

4

6

8

10

12

14

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

JordanMoroccoTunisiaEgypt

% y

/y

5

6

7

8

9

10

11

12

13

14

15

Q109 Q409 Q310 Q211 Q112 Q412 Q313

MoroccoEgyptJordan

%

-5

0

5

10

15

20

25

30

35

Feb-10 Oct-10 Jun-11 Feb-12 Oct-12 Jun-13 Feb-14

EgyptMoroccoTunisiaJordan

% y

/y

-60

-40

-20

0

20

40

60

80


TunisiaEgyptJordanMorocco

% y

/y

0

100

200

300

400

500

600

700

800

900

1000

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

EgyptLebanon

bps

-20

-10

0

10

20

30

40

50

60


JordanMoroccoEgyptTunisia

% y

/y 3

mm

avg

FX–Major Currency Pairs & Interest Rates

Interest Rate Differentials–EUR


Interest Rate Differentials-CHF


Interest Rate Differentials-CAD


Interest Rate Differentials-GBP


Interest Rate Differentials-JPY


Interest Rate Differentials-AUD


1.20

1.25

1.30

1.35

1.40

-0.6

-0.4

-0.2

0.0

Jul-13 Oct-13 Jan-14 Apr-14 Jul-14

German 2yr yield - US 2yr yield FX (rhs)

0.85

0.90

0.95

1.00

0.0

0.3

0.5

0.8


US 2yr yield - CHF 2yr yield FX (rhs)

0.95

1.00

1.05

1.10

1.15

-1.2

-0.8

-0.4

0.0


US 2yr yield - CAD 2yr yield FX (rhs)

1.45

1.50

1.55

1.60

1.65

1.70

1.75

-0.2

0.0

0.2

0.4

0.6


GBP 2yr yield - US 2yr yield FX (rhs)

90.0

95.0

100.0

105.0

110.0

0.00

0.10

0.20

0.30

0.40

0.50


US 2yr yield - JPY 2yr yield FX (rhs)

0.85

0.90

0.95

1.00

1.05

1.10

1.8

2.3

2.8

3.3

3.8


AUD 2yr yield - US 2 yr yield FX (rhs)

Major Equity Markets

MENA Equity Markets


European Equity Markets


Asian Emerging Equity Markets


US Equity Markets


Latin American Equity Markets


Emerging Europe Equity Markets


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15-Jun 20-Jun 25-Jun 30-Jun 5-Jul 10-Jul 15-Jul

Qatar Oman DubaiSaudi Arabia Egypt MoroccoAbu Dhabi Bahrain Kuwait

-10%

-8%

-6%

-4%

-2%

0%

2%


FTSE 100 Dax Euro Stoxx 600Cac FTSEMIB IBEX

-4%

0%

4%

8%


Taiwan JakartaVietnam SensexSouth Korea Shanghai

0%

2%

4%

6%


S&P 500 Dow Jones Nasdaq Composite

-6%

-3%

0%

3%

6%


Mexico Brazil Chile Colombia

-8%

-4%

0%

4%


Poland Istanbul 100 Russia RTS$

Major Equity Markets

MENA Equity Indices PE/ROE 2014E


D. Market Equity Indices PE/ROE 2014E


E. Market Equity Indices PE/ROE 2014E


MENA Equity Indices PB/ROA 2014E


D. Market Equity Indices PB/ROA 2014E


E. Market Equity Indices PB/ROA 2014E


y = -0.3104x + 18.949 R² = 0.025

0.0

8.0

16.0

24.0

32.0

7.0 9.0 11.0 13.0 15.0 17.0 19.0

BE

st R

OE

201

4

BEst PE 2014

DSM

DFMGI ADSMI

MADEX

MSM Tadawul

ISE 100 EGX 30

y = 1.0079x - 3.0557 R² = 0.3238 8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

10.0 15.0 20.0 25.0

BE

st R

OE

201

4

BEst PE 2014

Nasdaq

AS51 Index

FTSE 100

Dow Jones

SMI

Nikkei

S&P 500

Cac

Dax

Stoxx 600

y = 0.4338x + 10.936 R² = 0.1273

0.0

5.0

10.0

15.0

20.0

25.0

0.0 5.0 10.0 15.0 20.0

BE

st R

OE

201

4

BEst PE 2014

Karachi

Nifty

Jakarta

Sensex

Vietnam

Bovespa

HSI Shanghai

Jo'burg

Micex

y = 3.1442x - 3.8312 R² = 0.4782

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

0.0 0.5 1.0 1.5 2.0 2.5

BE

st R

OA

201

4

BEst PB 2014

DFMGI

ADSMI

Tadawul

ISE 100

MSM DSM

EGX 30

MADEX

y = -4.1536x + 9.3928 R² = 0.3234

-14.0-12.0-10.0-8.0-6.0-4.0-2.00.02.04.06.0

0.5 1.5 2.5 3.5 4.5

BE

st R

OA

201

4

BEst PB 2014

FTSE 100

S&P 500

Dow Jones

SMI

Nasdaq

Nikkei

Dax

Stoxx 600

Cac

AS51 Index

y = 0.3864x + 2.0796 R² = 0.0852

0.0

4.0

8.0

0.5 1.5 2.5 3.5

BE

st R

OA

201

4

BEst PB 2014

Karachi Nifty

Jakarta Sensex

Bovespa

HSI

Vietnam

Shanghai

Jo'burg Micex

Key Economic Forecasts - GCC

United Arab Emirates 2011 2012 2013 2014f 2015f

Nominal GDP $bn 347.7 372.6 402.6 424.6 452.8

Real GDP % 4.9 4.7 5.2 5.0 4.8

Current A/C % GDP 17.2 21.6 16.9 12.5 12.2

Budget Balance % GDP 4.1 8.5 7.6 7.8 6.9

CPI % 0.9 0.7 1.1 3.0 3.5

Saudi Arabia

Nominal GDP $bn 669.5 734.0 745.3 769.1 796.1

Real GDP % 8.6 5.8 3.8 4.7 4.0

Current A/C % GDP 23.5 22.3 17.6 16.7 13.3


CPI % 4.0 2.9 3.5 3.0 4.2

Qatar

Nominal GDP $bn 169.8 189.9 202.5 216.4 233.7

Real GDP % 13.0 6.1 6.5 6.3 6.9

Current A/C % GDP 30.6 32.8 29.2 25.1 19.7


CPI % 1.9 1.9 3.1 3.6 4.5

Kuwait

Nominal GDP $bn 166.4 189.3 184.5 187.2 194.0

Real GDP % 10.1 8.0 3.6 3.0 3.0

Current A/C% GDP 40.3 41.6 38.8 43.6 40.9


CPI % 4.9 3.2 3.0 3.5 4.0

Oman

Nominal GDP $bn 69.4 77.4 79.6 87.2 91.7

Real GDP % 4.1 5.7 4.7 4.0 3.6

Current A/C % GDP 12.9 10.5 9.8 7.2 4.8

Budget Balance % GDP -0.6 -0.4 1.3 -0.1 0.0

CPI % 4.0 2.9 2.1 2.5 3.0

Bahrain

Nominal GDP $bn 29.2 30.4 32.8 34.9 37.0

Real GDP % 1.8 3.5 5.5 4.3 3.7

Current A/C % GDP 11.1 7.3 7.8 6.9 5.6

Budget Balance % GDP -0.3 -2.0 -3.3 -4.0 -6.2

CPI % -0.4 2.8 3.3 3.0 3.0

GCC (GDP weighted average)

Nominal GDP $bn 434.8 474.6 485.7 501.6 521.2

Real GDP % 8.0 5.8 4.5 4.7 4.4

Current A/C % GDP 24.0 24.8 20.7 18.9 16.2


CPI % 3.0 2.3 2.7 3.1 4.0 Source: Haver Analytics, National sources, Emirates NBD Research

Key Economic Forecasts - MENA

Egypt* 2011 2012 2013e 2014f 2015f Nominal GDP $bn 235.6 262.3 268.1 281.3 308.7

Real GDP % 2.5 3.3 2.1 2.1 3.3

Current A/C % GDP -3.7 -6.2 -3.4 -2.3 -1.5


CPI % 10.1 7.2 9.5 11.0 10.0

Jordan

Nominal GDP $bn 25.3 27.2 29.6 31.7 34.9

Real GDP % 2.6 2.7 3.0 3.2 4.0

Current A/C % GDP -11.7 -17.3 -11.4 -6.6 -3.8


CPI % 4.4 4.8 5.5 4.1 6.2

Lebanon

Nominal GDP $bn 40.1 42.6 46.5 50.7 55.7

Real GDP % 1.6 1.5 1.2 1.2 3.1

Current A/C % GDP -10.9 -8.3 -7.9 -8.2 -7.6


CPI % 5.0 6.6 4.2 2.0 6.0

Tunisia

Nominal GDP $bn 46.0 45.2 46.5 51.0 55.9

Real GDP % -0.2 4.1 2.8 3.1 3.6

Current A/C% GDP -7.4 -8.2 -8.5 -8.3 -7.1


CPI % 3.5 5.6 6.2 6.0 5.8

Morocco

Nominal GDP $bn 99.2 95.9 103.7 107.6 118.9

Real GDP % 5.0 2.7 4.2 2.4 5.5

Current A/C % GDP -8.0 -9.7 -7.6 -7.2 -6.0


CPI % 0.9 1.3 1.8 4.0 5.0

MENA (GDP weighted average)

Nominal GDP $bn 156.2 174.5 177.5 185.5 203.6

Real GDP % 2.6 3.0 2.6 2.2 3.8

Current A/C % GDP -6.2 -8.0 -5.7 -4.7 -3.7


CPI % 6.6 5.6 6.8 7.8 7.9 Source: Haver Analytics, National sources, Emirates NBD Research *Egypt data refers to fiscal year (July-June)

Key Economic Forecasts - Global

US 2011 2012 2013 2014f 2015f

Real GDP % 1.8 2.8 1.9 3.0 3.5

Current A/C % GDP -3.0 -2.8 -2.4 -2.5 -2.1


CPI % 3.2 2.1 1.5 2.0 2.0

Eurozone

Real GDP % 1.6 -0.3 0.1 0.5 1.5

Current A/C % GDP 1.4 2.0 2.7 2.0 2.5


CPI % 2.8 2.3 1.5 1.5 1.6

UK

Real GDP % 1.1 0.3 1.7 2.5 2.0

Current A/C% GDP -1.5 -3.8 -4.5 -2.8 -2.9


CPI % 4.5 2.8 2.6 2.0 2.0

Japan

Real GDP % -0.5 1.5 1.5 2.0 1.5

Current A/C % GDP 2.1 1.0 0.7 1.8 1.3


CPI % -0.3 0.0 0.4 1.5 1.7

China

Real GDP % 9.3 7.7 7.7 7.0 7.3

Current A/C % GDP 1.8 2.3 2.0 2.3 2.2

Budget Balance %GDP -1.1 -1.7 -1.9 -2.0 -2.0

CPI% 5.4 2.6 2.6 3.0 3.2

India*

Real GDP% 7.7 4.8 4.7 4.8 5.5

Current A/C% GDP -3.8 -5.4 -2.8 -2.3 -1.5


CPI % 8.9 9.3 10.9 8.0 7.5 Source: Bloomberg, Emirates NBD Research *For India the data refers to fiscal year (April – March)

FX Forecasts

FX Forecasts - Major Forwards

Spot 15.07 1M 3M 6M 12M 3M 6M 12M

EUR/USD 1.3568 1.34 1.32 1.30 1.28 1.3573 1.3579 1.3598

USD/JPY 101.6800 103.0 105.0 109.0 112.0 101.6169 101.5240 101.3029

USD/CHF 0.8957 0.91 0.93 0.96 0.98 0.8950 0.8942 0.8918

GBP/USD 1.7143 1.70 1.72 1.68 1.72 1.7130 1.7109 1.7050

AUD/USD 0.9370 0.92 0.90 0.88 0.85 0.9310 0.9250 0.9145

USD/CAD 1.0759 1.10 1.11 1.13 1.15 1.0783 1.0807 1.0853

EUR/GBP 0.7915 0.79 0.77 0.77 0.74 0.7924 0.7937 0.7975

EUR/JPY 137.9700 138 139 142 143 137.9696 137.9690 137.9679

EUR/CHF 1.2153 1.22 1.23 1.25 1.25 1.2148 1.2142 1.2127

EUR/NOK 8.4249 8.35 8.30 8.20 8.20 8.4567 8.4872 8.5432

EUR/SEK 9.2567 9.10 9.00 8.90 8.80 9.2635 9.2705 9.2870

NZD/USD 0.8768 0.86 0.85 0.83 0.82 0.8691 0.8609 0.8447

FX Forecasts - Emerging Forwards

Spot 15.07 1M 3M 6M 12M 3M 6M 12M

USD/SAR* 3.7505 3.75 3.75 3.75 3.75 3.7505 3.7512 3.7538

USD/AED* 3.6730 3.67 3.67 3.67 3.67 3.6723 3.6720 3.6711

USD/KWD 0.2822 0.282 0.285 0.282 0.28 0.2920 0.3023 0.3239

USD/OMR* 0.3850 0.38 0.38 0.38 0.38 0.3839 0.3830 0.3812

USD/BHD* 0.3770 0.376 0.376 0.376 0.376 0.3787 0.3800 0.3833

USD/QAR* 3.6405 3.64 3.64 3.64 3.64 3.6428 3.6439 3.6476

USD/EGP 7.1499 7.05 7.05 7.20 7.25 7.2898 7.4774 7.8724

USD/INR 60.1350 58.50 58.00 57.00 56.00 60.1427 60.1529 60.1733

USD/CNY 6.2079 6.25 6.20 6.20 6.20 - - - Data as of 15 July 2014 Source: Bloomberg, Emirates NBD Research

Interest Rate Forecasts

USD Swaps Forecasts Forwards

Current 3M 6M 12M 3M 6M 12M

2y 0.66 0.75 0.80 1.05 0.83 1.05 1.51

5y 1.79 1.95 2.10 2.30 1.94 2.09 2.40

10y 2.66 3.05 3.25 3.35 2.75 2.85 3.04

2s10s (bp) 200 230 245 230 192 181 153

US Treasury Forecasts

2y 0.48 0.60 0.65 0.90

5y 1.69 1.80 1.95 2.15

10y 2.55 2.90 3.10 3.25

2s10s (bp) 207 230 245 235

USD LIBOR Forecast

3m 0.23310 0.25 0.35 0.55

EIBOR Forecast

3m 0.70714 0.70 0.70 0.75

Policy Rate Forecasts

Current% 3M 6M 12M

FED 0–0.25 0.25 0.25 0.75

ECB 0.15 0.10 0.10 0.10

BoE 0.50 0.50 0.50 0.75

BoJ 0.10 0.10 0.10 0.10

SNB 0.25 0.25 0.25 0.25

RBA 2.50 2.50 2.50 2.50

RBI (repo) 8.00 8.00 7.75 7.00

SAMA (r repo) 0.25 0.25 0.25 0.25

UAE (1W repo) 1.00 1.00 1.00 1.00

CBK (dis. rate) 2.50 2.50 2.50 2.50

QCB (o/n depo) 0.75 0.75 0.75 0.75

CBB (1W depo) 0.50 0.50 0.50 0.50

CBO (o/n repo) 2.00 2.00 2.00 2.00 Prices as of 15 July 2014 Source: Bloomberg, Emirates NBD Research

Global Equities Market Watch

Index Last Close

Avg Daily Value

Traded 30d

Mtd % chg

Ytd % chg

%memberabove

200d MA

BEst PE BEst PB BEst

Dvd Yld

Dow Jones Industrial Average Index 17,061 4,554 1.4 2.9 100 15.2 2.8 2.3

S&P 500 Index 1,973 26,948 0.7 6.8 86 16.6 2.6 2.0

Nasdaq Composite Index 4,416 17,441 0.2 5.7 50 21.5 3.4 1.1

FTSE100 Index 6,710 6,026 -0.5 -0.6 55 14.1 1.9 3.7

DAX Index 9,719 3,918 -1.2 1.8 70 13.6 1.7 2.9

CAC 40 Index 4,305 4,117 -2.7 0.2 65 15.0 1.5 3.3

Swiss Market Index 8,574 2,228 0.2 4.5 60 16.7 2.6 3.3

Nikkei Index 15,395 11,124 1.4 -5.6 68 17.4 1.5 1.7

S&P/ASX 200 Index 5,511 3,484 2.3 3.1 66 15.2 2.0 4.6

Stoxx Europe 600 Index 338 30,781 -1.0 3.1 61 15.3 1.7 3.4

Dubai Financial Market General Index 4,766 428 21.5 42.2 64 18.5 2.0 2.3

Abu Dhabi Sec Market General Index 4,928 131 8.4 14.9 64 13.6 1.9 3.8

Tadawul All Share Index 9,798 1,958 3.0 14.8 84 15.5 2.2 3.1

Istanbul SE National 100 Index 81,245 1,402 3.5 19.8 77 11.6 1.4 2.7

Egyptian Exchange Index 8,604 65 5.4 26.8 83 12.9 1.4 2.0

Kuwait Stock Exchange Index 7,105 60 1.9 -5.9 20 - - -

Bahrain Bourse All Share Index 1,471 1 3.1 17.8 - - - -

Muscat Securities Index 7,167 13 2.3 4.9 62 11.8 1.6 4.3

Qatar Exchange Index 13,100 126 14.0 26.2 95 14.9 2.3 4.0

MADEX Free Float Index 7,542 10 0.4 1.7 71 13.5 2.0 4.6

Hong Kong Hang Seng Index 23,460 2,474 1.2 0.7 70 10.9 1.3 3.6

Shanghai Composite Index 2,070 12,025 0.9 -2.3 58 8.2 1.1 3.7

Korea Stock Exchange Index 2,013 3,617 0.6 0.1 64 - - 1.2

BSE Sensex 25,229 110 -0.4 19.5 97 16.1 2.6 1.6

Nifty 7,527 1,417 -0.8 19.8 96 15.6 2.5 1.6

Karachi Stock Exchange Index 29,684 64 0.3 17.8 82 8.3 1.8 5.6

Taiwan SE Weighted Index 9,569 3,502 1.0 10.1 68 15.6 - 2.9

Bovespa Brasil Sao Paulo SE Index 55,974 1,971 5.3 8.7 70 11.7 1.4 3.9

Micex Index 1,476 956 -0.5 -2.3 62 5.5 0.7 4.4

FTSE/JSE Africa All Share Index 51,735 1,348 1.6 11.8 79 15.5 2.2 3.1

Vietnam Ho Chi Minh Stock Index 589 63 2.6 17.5 78 14.0 2.2 2.9

Jakarta SE Composite Index 5,071 357 5.0 19.9 55 16.4 2.9 2.0

FTSE Bursa Malaysia KLCI Index - 262 0.0 0.9 - - - -

Mexican Stock Exchange 43,960 456 2.9 2.9 86 21.1 2.7 1.4 Prices as of 15 July 2014 Source: Bloomberg, Emirates NBD Research

GCC Equities

Company Price LLC Market Cap (USD mn)

PE 2013

BEst PE 2014

ROE 2013

BEst ROE 2014

PB 2013

ROA 2014

Dvd Yld 2013

BEst DvdYld 2014 RSI

Avg Value Traded 3m (USD mn)

UAE

Etisalat 11.55 24969.0 13.0 11.5 17.5 18.4 2.3 8.3 6.0 6.3 64 7.0

du 5.80 7218.7 15.5 14.3 27.1 25.8 4.3 13.2 2.9 6.0 57 3.3

Agthia 5.60 914.8 16.6 16.4 13.5 15.5 2.1 8.7 2.3 2.0 46 0.8

Aldar 3.80 8241.5 8.1 15.3 18.3 12.0 1.3 5.9 2.5 2.0 53 69.3

Deyaar Development 1.29 2060.8 37.8 57.0 3.9 3.2 1.4 2.4 0.0 - 60 24.1

Emaar Properties 9.72 19181.0 18.2 23.7 7.7 8.2 1.4 4.1 2.0 1.4 56 80.3

DIB 7.34 7901.0 13.0 13.3 13.8 20.8 1.5 1.5 4.7 3.9 58 36.4

NBAD 14.70 18954.8 12.6 14.2 14.4 15.4 1.7 1.5 2.9 2.7 50 7.7

FGB 17.30 18369.2 11.8 12.9 15.8 18.6 1.8 2.6 5.3 5.1 59 14.9

ADCB 7.90 12035.2 10.3 11.3 15.1 17.4 1.4 1.8 4.6 4.2 53 9.8

DFM 3.45 7666.8 70.6 44.0 3.7 7.6 2.5 3.6 2.0 2.3 53 26.4

Dubai Investments 3.43 3578.0 10.8 - 9.4 - 1.0 6.6 2.8 - 56 25.3

Dana Gas 0.78 1476.3 10.6 8.8 6.3 6.0 0.6 4.5 - - 56 8.2

Tabreed 1.84 335.5 30.0 20.8 6.1 - 0.3 3.2 - 2.7 57 4.0

Air Arabia 1.44 1804.2 17.2 14.1 7.7 8.8 1.3 4.8 4.7 5.1 62 14.7

Aramex 3.23 1215.8 16.0 13.9 13.5 14.7 2.1 9.8 3.8 4.2 54 1.5

DP World 20.00 16600.0 23.0 25.8 7.7 7.3 1.7 3.9 1.3 1.2 53 9.6

Arabtec 4.86 5887.5 17.9 42.4 8.9 8.9 1.6 3.5 3.5 0.8 59 183.3

Depa 0.68 418.0 - 16.3 -8.6 4.5 1.1 -4.1 0.0 - 45 0.6

Drake & Scull 1.57 989.2 19.7 17.5 5.9 7.3 1.1 2.4 - 1.1 50 18.6

Saudi Arabia

Etihad Etisalat 83.34 17111.1 9.9 9.7 29.8 26.1 2.7 15.7 5.5 6.2 40 35.6

Saudi Telecom 71.28 38013.0 10.8 12.7 18.4 19.9 1.9 11.7 4.2 3.9 67 19.4

Zain KSA 10.26 2954.9 - - -21.7 -17.6 1.5 -6.1 0.0 0.0 60 59.5

Sahara Petchem 23.17 2711.0 15.0 15.5 10.3 11.4 1.5 6.7 4.3 4.0 71 18.5

Sabic 116.57 93248.5 13.2 12.5 16.8 16.9 2.1 7.5 4.5 4.8 51 115.8

Sipchem 35.39 3460.1 18.8 17.4 10.9 11.7 2.0 3.9 3.9 4.1 78 6.5

Saudi Kayan 15.05 6019.5 - 39.8 -2.4 3.1 1.7 -0.7 - 3.4 41 77.8

Yansab 68.77 10314.7 15.7 13.3 18.9 19.2 2.8 11.7 4.1 5.7 41 12.0

Chemanol 16.24 522.2 25.4 19.6 4.6 6.2 1.2 2.5 - 3.3 42 11.9

APPC 48.09 2102.9 12.0 13.8 25.9 22.7 3.0 17.2 3.1 4.8 71 11.4

Company Price

LLC

Market Cap

(USD mn)

PE

2013

BEst

PE

2014

ROE

2013

BEst

ROE

2014

PB

2013

ROA

2014

Dvd

Yld

2013

BEst

DvdYl

d 2014

RS

I

Avg Value

Traded 3m

(USD mn)

Safco 158.28 14068.2 16.5 15.4 36.9 40.8 6.3 32.4 7.7 6.7 42 6.8

Maaden 35.88 8849.7 17.8 25.0 8.9 5.6 1.5 2.8 0.0 0.0 55 56.0

Tasnee 34.39 6133.9 19.0 13.3 9.8 13.1 1.9 2.5 4.5 4.9 70 18.3

Almarai 71.22 11394.3 21.0 24.2 17.0 18.4 3.1 7.0 1.9 1.7 57 11.7

Othaim 107.49 1289.8 14.6 22.0 25.9 25.9 3.5 10.2 - 1.7 55 17.3

Alhokair 107.43 6015.6 14.0 25.3 36.2 37.4 4.3 18.6 2.4 1.7 77 9.3

Jarir Marketing 197.75 4745.6 21.9 23.2 59.4 62.1 12.2 31.2 3.5 3.6 44 7.7

Savola 70.94 10100.7 18.6 18.9 19.0 19.6 3.5 7.1 3.2 2.9 57 6.1

Dar Al Arkan 13.30 3830.1 15.6 17.3 4.1 4.6 0.6 3.0 - 0.0 59 121.1

Emaar Economic City 16.03 3633.2 41.4 47.1 3.5 3.6 1.4 1.9 0.0 - 48 15.3

Al Rajhi Bank 67.53 29260.7 14.7 13.7 19.9 20.0 2.9 2.7 3.4 4.3 48 57.0

Samba 39.98 12792.6 10.0 10.0 13.6 13.2 1.3 2.2 3.3 3.5 46 10.7

Riyad Bank 18.15 14518.8 11.1 13.0 12.0 12.6 1.3 2.0 5.0 4.3 48 8.8

Bank Aljazira 32.61 3478.1 17.3 16.3 12.1 11.6 2.0 1.2 0.0 1.4 62 11.8

Saudi Electricity 16.02 17798.3 - 22.8 - 5.2 - - - 4.4 53 18.2

Saudi Arabian Amiantit 18.38 566.1 15.4 12.7 7.2 8.6 1.1 2.4 6.5 5.5 54 10.8

Saudi Cable 12.59 255.1 - 21.3 -28.8 3.9 1.4 -6.6 0.0 - 41 9.8

National Shipping Co 33.21 2789.4 11.9 15.7 13.3 - 1.5 6.5 3.5 3.2 46 19.8

Qatar

ORDS 134.90 11868.6 17.1 12.8 9.8 12.4 1.8 2.7 2.9 3.4 50 9.8

Industries Qatar 179.00 29744.8 12.8 13.7 25.0 23.7 3.0 23.0 6.5 6.4 53 14.8

Barwa Real Estate 42.75 4569.1 7.4 - 10.3 - 0.8 2.9 6.7 - 66 19.9

QNB 177.90 34190.8 12.7 11.9 19.0 19.4 2.3 2.3 4.1 3.8 52 16.1

CBQ 70.00 5709.0 10.9 10.7 10.4 13.0 1.1 1.7 2.8 3.0 68 7.2

Doha Bank 58.90 4179.9 9.2 10.6 13.9 15.3 1.3 2.1 7.7 7.1 53 6.2

QIB 107.00 6944.5 12.2 17.8 11.4 12.3 1.4 1.8 5.8 4.0 70 8.3

QEWC 189.00 5710.3 13.1 14.0 24.5 23.1 3.0 12.3 4.1 4.0 56 7.3

QGTS 23.10 3553.1 15.3 15.8 23.9 - 2.6 2.4 5.4 5.1 57 8.8

Oman

Bank Muscat 0.69 3923.1 8.8 9.4 13.3 12.5 1.1 1.9 3.9 4.2 64 3.0

Kuwait

NMTC - 2928.6 11.7 10.6 9.4 9.3 1.1 4.9 7.1 7.7 40 0.1

Zain 640.00 9809.7 12.3 10.5 13.5 14.1 1.8 7.2 7.2 8.3 49 4.4

Company Price LLC

Market Cap (USD mn)

PE 2012

BEst PE 2013

ROE 2012

BEst ROE 2013

PB 2012

ROA 2012

Dvd Yld 2012

BEst DvdYld 2013 RSI

Avg Value Traded 3m (USD mn)

NBK 980.00 16664.6 16.8 14.0 9.7 13.2 1.6 1.4 3.4 3.4 53 7.9

Burgan Bank 520.00 3197.8 42.3 12.4 4.2 12.6 1.8 0.3 1.3 2.5 42 3.5

Kuwait Projects 720.00 3758.8

2137

9.3 18.0 7.2 - 1.5 0.5 3.2 2.8 63 3.4

Agility 780.00 3189.4 15.6 15.9 5.3 6.5 0.8 3.3 5.8 5.1 50 5.6

Egypt

Telecom Egypt 13.61 3250.2 8.5 9.1 10.5 9.1 0.9 9.1 6.8 9.4 50 1.5

Sidi Kerir Petchem 18.97 1393.3 6.9 9.2 48.7 38.9 3.1 34.7 10.5 10.1 67 0.8

TMG Holding 9.37 2705.0 21.8 23.4 2.3 3.0 0.5 1.1 0.0 0.0 62 4.7

Palm Hills 4.23 797.9 11.6 15.6 7.2 8.2 0.9 1.7 0.0 - 54 8.5

CIB 38.11 4799.6 9.8 10.7 26.5 26.8 2.5 2.9 3.1 3.3 65 5.7

EFG Hermes 15.01 1204.2 - 17.8 -6.1 4.9 0.6 -0.9 - 1.0 53 4.5

El Ezz Steel Rebars 724.73 1355.0 8.9 8.5 31.0 - 2.7 5.8 9.3 10.3 56 0.1

El Swedy Electric 35.01 1094.2 74.4 14.5 2.0 10.3 1.5 0.7 - 2.4 56 0.5

Ghabbour Auto 31.00 559.4 39.9 15.9 6.7 12.8 2.3 1.9 - 4.2 26 0.4

Oriental Weavers 50.00 629.5 8.8 11.1 11.0 13.4 0.9 5.6 5.8 5.0 57 0.5

OCIC 269.00 7862.7 - - - - - - - - 25 0.0

Global Telecom 5.23 3838.0 - 10.3 - 5.2 - -38.5 - 0.0 46 4.5

Prices as of 15 July 2014 Source: Bloomberg, Emirates NBD Research

Emirates NBD GCC Cash Bonds/Sukuk*

Security Name S&P Rating CCY Bid Bid ytm% 1 week ago 1 month ago 3 month ago

Emirate of Abu Dhabi 2019 AA USD 121.5790 1.9371 122.0720 122.4860 122.0190

Kigndom of Bahrain 2022 BBB USD 112.0380 4.3204 112.1740 113.5640 109.4230

Waha Aerospace 2020 AA USD 106.0790 2.8198 106.4660 106.6040 106.4510

CBB International Sukuk 2014 BBB USD - - - 100.0820 100.8780

CBB International Sukuk 2018 BBB USD 116.2250 2.3174 116.2880 116.4380 114.8210

Mumtalkat 2015 BBB USD 102.9450 1.8300 103.2850 103.5580 103.6880

BHRAIN 5 1/2 03/31/20 BBB USD 109.0200 3.7254 109.4020 110.8800 108.3120

Dubai Government 2014 - USD 101.5600 0.8646 101.8430 102.1210 103.0080

Dubai Government 2014 - AED 100.8360 1.5406 - - -


Dubai Government 2017 Sukuk - USD 109.2900 1.4767 109.3950 109.4580 107.9030



Dubai Government 2022 Sukuk - USD 120.1840 3.4670 120.5830 121.0390 118.6170

Dubai DOF Sukuk 2023 - USD 99.0890 4.0021 99.0640 100.0580 -

Dubai Government 2043 - USD 93.9040 5.6842 94.2200 93.8220 -

DEWA SUKUK 2018 BBB USD 102.5000 2.2766 102.6060 102.4730 -

Islamic Development Bank 2014 AAA USD 100.5000 -0.0991 - 100.6780 -

Islamic Development Bank 2015 AAA USD 102.0000 0.1933 - - 102.3750

Islamic Development Bank 2016 AAA USD 103.0000 0.7097 - 103.2820 103.5820

MDC - GMTN B.V. 2014 (Mubadala) AA USD - - - - -

MDC - GMTN B.V. 2016 (Mubadala) AA USD 104.9460 0.8903 105.2320 105.4430 105.6040

MDC - GMTN B.V 2019 (Mubadala) AA USD 125.4790 2.0186 125.7950 126.4130 124.8730

MDC - GMTN B.V. 2021 (Mubadala) AA USD 115.5000 2.9490 115.8330 116.0840 113.3960

TDIC Finance Ltd 2014 AA USD 101.5700 - - - -

TDIC Finance Ltd 2014 AA USD 101.0440 0.7558 101.2650 101.5030 102.1690

JORDAN 3 7/8 11/12/15 BB- USD 100.5570 3.4329 100.9180 101.0540 100.5120

State of Qatar 2014 AA USD - - - - -

State of Qatar 2015 AA USD 101.7050 0.5613 101.8540 102.0760 102.6860



QATAR 9 3/4 06/15/30 AA USD 161.4050 4.3563 162.1150 162.0820 157.0660

QATAR 4.5 22 AA USD 109.8740 3.0185 110.0860 110.6290 108.9240






Rakia Capital 2014 A USD 100.0000 7.6940 Not

100.5000 102.3750

Rakia Capital 2016 A USD 106.6510 0.8253 106.5720 107.1850 106.9570

IPIC GMTN 2015 AA USD 103.0200 0.8138 103.2440 103.3370 103.4320

INTPET 4 7/8 05/14/16 AA EUR 107.3680 0.7671 107.6950 107.8640 108.0150

INTPET 5 7/8 03/14/21 AA EUR 125.2580 1.8061 125.2860 124.4110 122.2600

IPIC GMTN 2017 AA USD 106.2660 1.3011 106.4250 106.4750 106.5390

IPIC GMTN 2020 AA USD 111.7220 2.9515 111.6380 111.7120 110.5440

IPIC GMTN 2022 AA USD 114.7500 3.2927 114.8360 114.7000 112.7870

Abu Dhabi Commercial Bank 2014 A USD 100.8980 0.5394 101.0340 101.2430 101.8940

Abu Dhabi Commercial Bank 2016 A USD 105.9640 1.4641 106.1490 106.2640 106.1080

ADIB Sukuk Perpetual - USD 104.1740 6.8169 104.6050 104.5860 -

ADIB Sukuk 2015 - USD 103.5040 0.9954 103.7200 103.8540 103.8590

ADIB Sukuk 2016 - USD 105.0810 1.5761 105.2750 105.4520 105.4370

Commercial Bank of Qatar 2014 A- USD 101.3660 0.7795 101.5570 101.7700 102.4850

Commercial Bank of Qatar 2019 BBB+ USD 119.3110 3.4928 119.6010 119.7450 119.6850

DIB Sukuk 2017 - USD 107.4900 2.0402 107.6010 107.8500 107.0190

DIB TIER 1 SUKUK - USD 101.7960 6.6304 102.0260 - -

Emirates NBD Bank 2017 - USD 105.7360 2.4060 106.1650 106.4340 106.3900

Emirates NBD Bank 2023 - USD 103.3610 4.8163 103.8940 - -

Emirates Islamic Bank 2017 - USD 106.3460 2.0908 106.5340 106.7370 106.4710

Emirates Islamic Bank 2018 - USD 105.7890 2.3992 105.8710 106.0930 104.9030

National Bank of Abu Dhabi 2014 AA- USD 100.4960 0.9095 100.7200 100.9520 101.4770



SIB Sukuk 2016 BBB+ USD 105.6050 1.6172 105.8910 106.0770 105.8350

Qatar Islamic Bank 2015 - USD 103.6840 0.7927 103.9510 104.0020 104.0000

HSBC Bank Middle East 2015 - USD 102.3270 1.1193 102.5460 102.6240 102.6170

HBME Sukuk Co LTD (HSBC) 2016 - USD 104.2340 1.2686 104.5470 104.5910 104.5000

FGB Sukuk Company 2016 - USD 104.6370 1.4705 104.8870 105.1930 105.1820

FGB Sukuk Company 2017 - USD 105.5310 1.7671 105.7470 105.9120 105.6070

QNB Finance LTD 2015 A+ USD 102.8590 0.9390 103.0840 103.1340 103.3150

QNB Finance LTD 2017 A+ USD 104.4050 1.6282 104.6710 104.6350 104.3560

Saudi British Bank 2015 A USD 102.7040 0.9155 102.9630 103.0020 103.3010

UNBUH 3.875 16 - USD 105.2510 1.5443 105.6210 105.6640 105.4610

BSFR 4 1/4 03/15 - USD 102.3140 0.8852 102.6960 102.8640 103.3120

BBK 4 1/2 10/28/15 - USD 103.2990 1.8564 103.6390 103.8750 103.6170

ADCBUH 0 05/09/16 - USD 97.7500 2.5998 98.5000 98.5000 98.2500



MASQUH 0 01/24/17 - USD 93.9580 3.8576 95.2830 94.5310 94.9610

ABCORP 0 04/04/17 - USD 91.8820 4.7565 94.6070 - 89.9520

BGBKKK 7 7/8 09/29/20 - USD 114.0000 5.1982 114.6700 117.0170 116.9250

QATDIA 5 07/21/20 - USD 112.1800 2.7818 112.4260 112.6880 111.5880

NBADUH 0 03/15/16 - AED 96.5000 3.1085 97.0000 96.9590 97.1210

Dubai Holding Comm Op 2014 - EUR - - - - -

Dubai Holding Comm Op 2017 - GBP 103.4300 4.5231 103.8590 104.4770 104.9570

Al dar Sukuk Funding II 2013 - AED - - - - -

Atlantic Finance Limited 2014 BB USD - - - - -

Dar Al-Arkan 2015 - USD 103.7790 4.0235 103.8470 104.4640 104.7980

EMAAR (PYRUS) LTD 2015 - USD 170.5630 -30.5081 - - -

EMAAR Sukuk LTD 2016 BBB- USD 112.8020 2.0397 113.0160 113.3040 113.8820

EMAAR Sukuk LTD 2019 BBB- USD 113.5350 3.4268 113.6020 113.5180 112.5540

Anka Sukuk (Nakheel 2016) - AED 111.0000 4.4433 111.5020 111.4140 110.3060

MAFUAE 5.85 17 BBB USD 109.4240 2.0305 109.7060 109.9050 109.8600

MAFUAE 2019 5.25% - USD 108.4300 3.3874 108.6240 108.7560 108.1770

DEWA Funding Limited 2013 - AED - - - - -

DEWA Funding Limited 2015 - USD 105.6010 1.0089 105.8640 106.4190 107.0240



Emirates Airlines 2016 - USD 105.0000 2.3887 105.3350 105.3340 105.4400

Emirates Airlines 2023 - USD 98.3750 4.0992 98.4120 98.6730 -

Emirates Airlines 2025 - USD 98.5000 4.6817 98.6540 98.5530 -

Jafz Sukuk Limited 2019 - USD 114.8280 3.6717 115.0600 115.3930 115.0040

Dana Gas Sukuk Ltd 2012 - USD - - - - -

DP World Sukuk Limited 2017 - USD 110.5000 2.5297 110.7120 111.2200 111.0700

DP World Sukuk Limited 2037 - USD 111.5260 5.9245 111.6870 111.7080 109.3540

Dolphin Energy Ltd 2019 - USD 111.2040 3.3864 111.3030 110.9920 111.3200

Dolphin Energy Ltd 2021 - USD 113.5650 3.4098 113.8780 114.1620 112.8290

Abu Dhabi National Energy 2013 - USD - - - - -

Abu Dhabi National Energy 2014 A- USD 100.5720 0.9162 100.7460 100.9740 101.5950








TAQAUH 6 1/2 10/27/36 A- USD 120.0000 5.0000 121.0940 120.7870 120.0520

QGTS 6.067 12/31/33 AA- USD 110.5000 5.2018 110.3300 110.2100 106.7470

QGTS 6.267 12/31/33 A+ USD 110.5000 5.3885 110.4310 110.6120 108.1540

Qtel International Fin 2014 A- USD - - - - 100.7550

Qtel International Fin 2016 A- USD 104.7140 1.2256 104.9750 105.0250 104.9440



QTELQD 5 10/19/25 A- USD 106.8060 4.2323 107.0500 107.2790 104.4580

Ras Laffan LNG III 2014 A USD 101.0570 -0.0144 101.0860 101.4370 102.1870

Ras Laffan LNG III 2019 A USD 120.3050 2.5486 120.4610 120.4020 119.0740

RASGAS 5.298 09/30/20 A USD 109.1000 3.6420 109.2560 109.4440 108.4700

RASGAS 5.832 09/30/16 A USD 106.5010 2.7528 106.6030 106.7060 106.7060

RASGAS 5.838 09/30/27 A USD 111.0510 4.7034 111.0050 110.9110 108.8580

SABIC Capital 2015 A+ USD 102.7500 0.8359 102.8900 103.0730 103.0960

KWIPKK 8 7/8 10/17/16 BBB- USD 113.5200 2.6151 113.8800 115.3280 114.7430

KWIPKK 9 3/8 07/15/20 BBB- USD 124.5600 4.6284 125.1890 127.6950 125.6120

*Prices as of 16 July 2014 Source: Emirates NBD Sales & Structuring. Prices are indicative only.

Emirates NBD Equity Reverse Convertibles*

Underlying Stock CCY Current

Price/Strike

Coupon to Investor(flat at maturity)

Investment Tenor

3M 6M 12M

Aldar Properties AED 3.70 10.63% 11.55% -

Abu Dhabi National Energy Co.(TAQA) AED 1.15 7.37% 8.34% -

Arabtec Holding Co. AED 4.29 16.61% 17.34% -

Emaar Properties PJSC AED 9.54 7.37% 8.86% -

Aramex AED 3.225 4.98% 6.14% -

Abu Dhabi Commercial Bank AED 7.95 9.27% 10.48% -

*Prices as of 14 July 2014.Please note all prices above are indicative and subject to internal approvals. Source: Emirates NBD Sales & Structuring What is a Reverse Convertible? A Reverse Convertible is a structured product which allows the investor to benefit from a high return based on the view that the underlying will not decline below its initial level. Mechanism At maturity, there are 2 scenarios:

- If the underlying closes at or above its initial level, then investor receives 100% of the capital invested and the coupon - If the underlying closes at or below its initial level, then investor receives 100% of the capital invested and the coupon minus the

negative performance of the underlying from initial level. In this scenario, investor may incur capital loss. Scenario analysis (ex: Aldar Reverse Convertible on 6 months):

- If Aldar is above its initial level in 6 months, then investor receives 100% + 10.63% = 110.63% of the capital invested - If Aldar declined by -5% from the initial level in 6 months, then investor receives 100% + 10.63% – 5% = 105.63% of the capital

invested - If Aldar declined by -20% from the initial level in 6 months, then investor receives 100% + 10.63% – 20% = 90.63% of the capital

invested

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Download - Monthly Insights - Emirates NBD · Eurozone risks resume Elsewhere the hesitation is more understandable, especially in the Eurozone. Already it appears that the growth momentum at

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