Saudi Aramco, Saudi Government, Saudi Arabia discussed on Biz 1190 Overnight featuring Bloomberg Radio
Looking pretty flat when it comes to Asian stocks. If petered out a little bit, but pretty much flat on your regional benchmark here at the moment after the decent games that we saw on Monday here. So there is this sense of consolidation when it comes to stocks, despite the fact that yields are backing up again when it comes to global bond markets key to note, though, is some key crucial levels that we are reaching for the sense sensex. We are at record highs right now from the right now thirty eight thousand eight hundred ninety or so hang sang as well. After entering into that bull run. We are slightly higher by about a tenth of one percent, but engine closer thirty thousand level as well. And really join the ranks like China in that bull market run and GP's interesting to know just now that we did see a pretty strong bond auction there, despite the fact that these bonds are looking a little bit expensive at eight and negative eight basis points, I should say the strongest bid to cover ratio we've seen in thirteen years, which is quite remarkable. We are seeing yields just lower by about. One basis points here. Take a look at this terminal chart, though, we take a look at the risk on rally that we've seen and everyone's saying that look the Chinese PM my turning that really is lifting all boats here to what extent that actually means the same datum previous stimulus cycles, perhaps as a little bit different this time around because China this time is focusing a little bit more on domestic demand and boosting that so perhaps is not going to benefit as much on Chinese stimulus than it has four. And we certainly are seeing that here this robust violent rally that we saw the beginning of the year and yellow here is China the rest of the white there is emerging markets as well. Some of the boars we'll show you some of the movers that we're watching in particular. We have earnings obviously front and center rocker ten is one that we're watching though we're following something about four and a half percent in Tokyo here today, this is after we saw list the stock price there, go below its IPO price after that debut. So ragged time being one of the big shareholders. They are falling out of favor as well. While Joe auto earnings came out, it seems that the Chinese auto slowdown here really weighing on earnings here stock down some four percent galaxy entertainment one of the big movers on the Hang Seng here today, the Macau gaming revenue for March wasn't as bad as what analysts were expecting. They're expecting about a three percent drop. We were slightly higher than that still negative territory by about zero point three percent. But still we are seeing a bit of a relief rally of these casino stocks and Han hi searching for a second day here today, strong profits a surprise profit gain here for the fourth quarter, certainly making the analysts pretty excited their Yussef. Thanks very much for that. Let's get back to this part of the world. Talk about Saudi Aramco's. It is the world's most profitable company. But that's still might not be enough to persuade investors that the energy behemoth is worse the kingdom's aspirational figure of two trillion dollars. Now, you financially tales the skulls by Moody's Investor Service show, the company paid slightly more than fifty eight billion dollars in dividends to Saudi the Saudi government last year working back from that Aramco's valuation would be closer to one point two trillion. Investors judge it by the same metrics as the other oil giants out there. Let's bring in our middle. East finance reporter Matthew Martin, Matthew. I was looking at some of the other numbers. Saudi Aramco loses apparently ten thousand barrels a day of oil accidents leaks. What have you zero point one percent of total output? Apparently, they have too much oil to make a big deal out of that the other parts of the accounts. What exactly are we stringing together for the valuation? Well, what you can tell from looking through the accounts. This gives us the first time ever a really detailed look at some of the Aramco's accounts. So we can see that. They're painting around your nearly sixty billion dollars in dividends to the Saudi government. I'm looking at some of the other numbers in there and applying a dividend yield of about five percent, which is the sort of industry. Standard for energy companies. You can work that back and give around evaluation all's almost one point two trillion dollars. So this is still some way off the magic number of two trillion dollars at Hamad bin Salman has said that he thinks the company should be worth. And we've seen a huge amount of work being put in trying to get the company to evaluation and what we're seeing so far. It's probably just not there yet dividends are incredibly important part of the play overall within the majors. And so to that end. It's not a bad. Benchmark. There is still a pastry. Fifty eight billion dollars is the top line number. But only fifty two billion of that is actually in tax. So again. Could the government do to increase the valuation in terms of is it less take for us a little bit more for you? The investor then there are a few levers that the government still has that it could tweak. We've already seen them while ago. They changed the way the tax regime worked in the royalty payments. So try an Ulta the equation. So you could see the government doing that. Again, the difficulty will be that as the government looks so tweaking that to try to increase the payout that investors will get an of the government will remain the largest investor in Aramco. But as it looks at tweaking those numbers, the government's take probably will be reduced and in a situation where a Saudi Arabia is in deficit and is going out and borrowing in the bond markets, and it has massive investment scheme as well that it wants to go through whether the government will want to tweak the tax regime gain is going to be a question that will ultimately be up to Mohammed bin Salman. And how much he really wants to push this two trillion. Magic number. It's been a very busy few weeks four Saudi awry. Armco and for SABIC as well. I mean, an investor on the sidelines looking at this is going to say, well, clearly the making a lot of progress. They're moving ahead. The train is headed in the right direction. Where does that leave the IPO for Aramco? Well, I think again, you know, it's going to be up to Mahama been so mad and how much does he really committed to this two trillion number. We've seen him in interviews. I think at least two or three times he has come out and said that around here is going to be worth that amount. The Savak acquisition is going to be is part of the rationale of trying to create Aramco into a more diversified company. Push it downstream pressure into other areas, the energy industry to try it increases valuation. The Savak acquisition alone, though is probably not gonna be enough to push up to two trillion dollars. So we're I think we're still seeing an Aramco IPO at at some years off. Okay. Well, certainly they're going to get the dollars in after the Savak to anticipate accent that gives them the window that they need Massey. Thank you so much that is our Middle East finance supporter. Matthew Monness bring into the conversation director of capital markets at FFA private Bank in Dubai. She John's Yousef, and so the valuation. Matthew says two trillion is still a long way away. But the prophet numbers. There's no doubt about it. They are really quite splendid at one hundred eleven million one hundred eleven million. That's that's the data that we got yesterday. What do you make of the reveal the big rigging? Now. The earnings are very good earnings. Definitely can everyone was expecting that. I'll at least not many my politics. Sorry. Everyone was expecting good results from Adam Cornell. These come surprising. They they're definitely very good news for everyone, and especially for the markets and the Saudi and Saudi and specifically specifically Savak if we're going to look at it at this point. Because when we're looking at the company, which is acquiring another. And in this case, it's acquiring Savak making such huge profits and Savak being the top company profitable, profitable wise. Profitability wise in the towel. It's something that would does investor's attention. There are two big companies that are actually if in their own sectors. Let's put it that way. 'cause we can't compare to SABIC, but and we see that kind of acquisition happening indefinitely triggers some sort of positive sentiment confidence to investors to invest in the energy sector in the Saudi market that this point in time. Marie the idea of a lot of capital flowing into the hands of the Saudi government, and that they might redeployed and other ways you consider that Saudi government entities own quite a lot of stock onto Dowell me. Could this be perhaps a sign that some of the capital gets directed into back into Saudi equities are now the thing is when we look at cash or whatever liquidity available with government doesn't always have to be invested in the stock markets in particular in Saudi we've heard a lot a lot about infrastructure. Enhancements and stuff like that doesn't always have to be. It could get to. And specifically now if we look at the public investments on the efforts, it's also something they getting liquidity. And and this gives them the long-term sort of investment, whether the government or to the investment funds in order to be able to go further with their infrastructure is and their stability around economically. Now, we know you like a Bank. Let let let's give it to the Eubanks. We've done a couple of pieces of not we have we we have Adleman Christie who is our banks research analyst he's talking about profitability. And this is what I want to gauge your sensitivity to this. He reckons profitability is can slow down this year from around eleven percent, maybe five to seven percent who were is the weakest link in the Bank chain. Who the weakest are? Now, we've definitely seen a lot of consolidation. So we're gonna just get away from those 'cause when's consolidation happens. We see a lot of strength and the entities. I'm not gonna talk ABC be. I'm not gonna talk and be at the stage. Not although they have a lot of things going on at this point in time. But to probably look at the smaller banks where we have seen a lot of some issues or some things that we actually of concern to investors. I'm not gonna name in parts of anything. It's going to be a bit tricky at this point in time. But as Yoda Porter's, oh, your analysts have mentioned, we have we have been extremely bullish on the banking sector. And we we are not trying to withdraw dot at this point in time. But there's always the point in time where you need to slow down with your investments and tried to look on profit-taking and the being bit conservative on how you look at certain things we've seen banks going extremely rallying and the pastor quarter or so and it's about time. I think we start. Booking profits and monitoring what's going to happen, especially with the new changes that are going to take place. Closing thoughts on crude oil and how that might play into some of your calls for some of the Gulf equities. That's creeping back up argue this is this is good news now. Now, we have seen a bit of civility around that even with the changes in the oil prices were still a bit comfortable with how how the effect is going down on the Gulf equities in particular. And if we look at the oil and gas sectors in particular and the region, whether it's in the Saudi Arabia where but we believe that investors and governments and companies have sort of absorbed dot sort of change and the code and in the production that we're seeing around Mary always great to get your input. As you say, let's see what the realistic valuations for Saudi Aramco when it all comes to pass. Mary Salem, director of competent marketed FFA probably.