saudi economic chartbook economic chartbook - fourth quarter 2019...the us and the saudi central...

Saudi Economic Chartbook

Fourth Quarter 2019

Hans Peter Huber, PhDChief Investment Officer

[email protected]

Saudi Economic Chartbook Fourth Quarter 2019

Table of Contents:

GDP Data ……………..………….. 2

Monetary and Financial

Indicators …………………………... 3

Fiscal Balance and Government

Debt…………………………...……….6

Private Spending and

Foreign Trade …........................7

Non-Oil Business Climate

Indicators ………………...………... 8

Inflation Indicators ……………... 9

Real Estate Market ….………... 10

Oil Market …….……………………12

Foreign Exchange and

Interest Rates …….……...……..13

Saudi Balance

of Payments ………………………15

Saudi Equity Market ….……. 16

Saudi Economic

Outlook …...............................18

Consumer Price Deflation Ending Due to Stabilizing Housing Rents

CPI Inflation is expected to

turn positive again as hous-

ing rents, which are the

most important item in the

subindex Housing, water&

electricity, are expected to

stabilize in 2020.

source: GASTAT

The Period of CPI Deflation is Ending

The Saudi economy exhibits a distinct growth divergence between the oil

sector and the non-oil sector economy in 2019. While growth of the oil sec

tor has declined due to a crude output reduction, the non-oil private sector

economy has been gaining pace in the course of the year.

The strength of the non-oil economy is illustrated by the point-of-sales

transactions, a proxy for private consumption, which have substantially

picked up and the PMI Composite, a gauge for the business climate, which

has reached a 4-years' high at the beginning of the 4th quarter.

The deflation period for Saudi consumer prices is about to end and inflation

is expected to turn positive again by beginning of next year. This is primarily

due to a stabilization of housing rents after a strong decline in the last two

years (see chart below).

Transaction activity in the Saudi real estate market has continued to recover

during the third quarter. Transaction turnover has climbed by 72% com

pared to the previous year's period, while the number of transactions has

soared by 94%.

The US and the Saudi central bank have cut their key interest rates since July

in three steps by a total of 0.75%. As a consequence, interest rates across

the entire yield curve have generally been in decline in H2 2019.

The Saudi equity market has seen some profit taking in the course of the

third quarter after a strong performance in the first half 2019 due to the in

clusion of Saudi equities in MSCI and FTSE Emerging Market indices. The

market correction has been accompanied by declining trading volumes.

CPI inflation, % yoy , l.h.sc.

CPI inflation, sub-index Housing, water, electricity, % yoy, r.h.sc.

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2012 2013 2014 2015 2016 2017 2018 2019


source: GASTAT source: GASTAT

Real GDP growth Overall economy, quarterly % yoy Real GDP growth Non-oil private sector, quarterly % yoy

Gross Domestic Product (GDP) Overall Economy and Institutional Sectors

In H1 2019 the oil sector GDP contracted by-1.0%

due to the OPEC output cut agreement while the

non-oil private sector economy witnessed strong

growth momentum with +2.9%. Based on our GDP

tracker model, this growth divergence has carried

over into the third quarter where a notable crude oil

output reduction has caused overall GDP growth to

drop temporarily into negative territory.

source: GASTAT, RC source: GASTAT

Real GDP growth Oil-sector, quarterly % yoy Nominal GDP growth Non-oil private sector, quarterly % yoy

GDP deflator Non-oil private sector % yoy

CPI inflation % yoy

Figure 2:

Nominal and Real GDP Non-Oil Private Sector

Figure 1:

Real GDP Overall Economy and Oil Sector

Figure 3:

Monthly GDP Tracker of Overall Economy

Figure 4:

GDP Deflator and CPI Inflation

Real GDP growth Overall economy, quarterly, %yoy

Real GDP growth Tracker Overall economy, monthly, %yoy

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

10/12 10/13 10/14 10/15 10/16 10/17 10/18 10/19


source: SAMA source: SAMA

Monetary base, % yoy Money supply M3, % yoy

Monetary Aggregates, Credit and Commercial Banks’ Deposits

Liquidity in the Saudi economy is sustainably

improving with narrow money supply M1 growing by

7.6% yoy and broad money supply M3 expanding by

4.9% yoy in October. Meanwhile, credit to the

private sector shows a growth rate of 3.5% yoy at

the beginning of Q4. Major credit driver are still

residential mortgage loans which expanded by a

remarkable 33% yoy in Q3 2019.

Banks’ claims on private sector, % yoy, l.h.sc.


Banks’ claims on private sector, % mom, r.h.sc.

Money supply M1, % yoy Money supply M2, % yoy

Banks’ overall customer deposits, % yoy, l.h. sc.

Banks’ overall customers deposits, % mom, r.h.sc.

Figure 2:

Growth Rate Money Supply M2 and M3

Figure 1:

Growth Rate Monetary Base and Money Supply M1

Figure 4:

Growth of Commercial Banks’ Deposits

Figure 3:

Growth of Credit to the Private Sector

-15

-10

-5

0

5

10

15

20

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-10

-5

0

5

10

15

20

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-3

0

3

6

9

12

-5

0

5

10

15

20

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-3

0

3

6

9

12

-5

0

5

10

15

20

10/13 10/14 10/15 10/16 10/17 10/18 10/19



Claims on the private sector as % of total bank deposits Claims on the government as % of total bank deposits

At the beginning of the 4th quarter 2019 the statu-

tory loan-deposit-ratio is still well below 80% which

implies sufficient liquidity in the banking sector. This

is particularly important with a view on the Aramco

IPO in December and its impact on the banks' bal-

ance sheets. Correspondingly, the banks' excess

liquidity amounts to a comparably high level of

18.6% of total assets by end of October.


Gross foreign assets as % of total assets Excess liquidity as % of total assets

Commercial Banks Key Ratios

Net foreign assets as % of total assets

Figure 1:

Private Sector Loan-Deposit-Ratio

Figure 2:

Government Sector Loan-Deposit-Ratio

Figure 3:

Foreign Assets to Total Assets Ratio

Figure 4:

Excess Liquidity to Total Assets Ratio

Statutory private sector loan-deposit-ratio

72.0

76.0

80.0

84.0

88.0

92.0

10/13 10/14 10/15 10/16 10/17 10/18 10/194.0

8.0

12.0

16.0

20.0

24.0

28.0

10/13 10/14 10/15 10/16 10/17 10/18 10/19

0.0

4.0

8.0

12.0

16.0

10/13 10/14 10/15 10/16 10/17 10/18 10/1910.0

12.0

14.0

16.0

18.0

20.0

10/13 10/14 10/15 10/16 10/17 10/18 10/19


source: SAMA


Total foreign currency reserves at SAMA, in bln SAR, l.h.sc. Total government deposits at SAMA, in bln SAR, l.h.sc.

After a recovery phase until May 2019, SAMA for-

eign reserves declined from June to October by 104

bln SAR. This may be seen on the back of a corre-

sponding withdrawal of 83 bln SAR from govern-

ment deposits over the same period which reflects

a more expansionary fiscal policy by the govern-

ment since May. This typically leads to higher im-

ports which causes official reserves to decline.

Investments in foreign securities, in bln SAR Government and gov. institutions deposits at commer-cial banks, in bln SAR, l.h.sc.

source: SAMA

SAMA Balance Sheet: Key Elements of Assets and Liabilities

Figure 1:

Foreign Currency Reserves at SAMA

Figure 2:

Government Deposits at SAMA

Figure 3:

Breakdown of Foreign Currency Reserves at SAMA

Figure 4:

Government Deposits at Commercial Banks

Monthly change in foreign currency reserves at SAMA, in

bln SAR, r.h.sc.

Monthly change in total government deposits at SAMA,

in bln SAR, r.h.sc.

Foreign currencies & deposits abroad, in bln SAR Monthly change in governmental deposits at commercial banks, in bln SAR, r.h.sc.

-100

-60

-20

20

60

100

1,600

1,800

2,000

2,200

2,400

2,600

2,800

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-150

-100

-50

0

50

100

150

600

800

1,000

1,200

1,400

1,600

1,800

10/13 10/14 10/15 10/16 10/17 10/18 10/19

0

500

1,000

1,500

2,000

2,500

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-60

-30

0

30

60

90

200

240

280

320

360

400

10/13 10/14 10/15 10/16 10/17 10/18 10/19


source: MoF source: MoF

Oil revenues

Non-oil revenues

Employee compensation (salaries & wages)

Fiscal revenues dropped in the third quarter by -7%

vs. the previous year's period and by -21% vs. the

previous quarter. This has primarily been the result

of lower oil revenues which can partly be explained

by lower oil prices. Fiscal spending has been higher

yoy (+3.5%) but notably lower compared to

Q2/2019 (-19%). As a result, the acumulated fiscal

deficit after 9 months amounts to -38 bln SAR.

source: MoF source: MoF

Net deficit/surplus Outstanding local government debt, in bln SAR

Other current expenditure

Quarterly Fiscal Balance and Outstanding Government Debt

Figure 1:

Quarterly Fiscal Revenues (in bln SAR)

Figure 2:

Quarterly Fiscal Expenditure (in bln SAR)

Figure 3:

Quarterly Fiscal Deficit/Surplus (in bln SAR)

Figure 4:

Outstanding Government Debt (End of Quarter)

Capital expenditure

Outstanding foreign government debt, in bln SAR

5279

101 102 112 101 94129

114

184154 159 169 175

13232

76 2752 32 63

48

113

52

89

6983 76

86

75

84

155

128

153144

164

142

241

166

274

223

242 245261

207

0

50

100

150

200

250

300

350

400

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017 2018 2019

99 103 98 10994 103 107

137113

131110

143121 130 121

5272

48

115

47

7449

139

62

102

85

120

67

103

8624

38

35

37

29

33

35

83

26

48

36

105

29

61

31

175

213

181

261

170

210

191

358

201

281

231

367

218

294

239

0

50

100

150

200

250

300

350

400


2016 2017 2018 2019

-91

-58-54

-108

-26

-47 -49

-117

-34

-7 -7

-125

28

-34 -32

-140

-120

-100

-80

-60

-40

-20

0

20

40


2016 2017 2018 2019

182

260277

317308

341

376

443

484

537550560

611628

656

0

100

200

300

400

500

600

700


2016 2017 2018 2019


source: SAMA source: Thomson Reuters, Nielsen

Point-of-sales transactions, % yoy

3-Month Moving Average, % yoy

TR IPSOS Saudi primary consumer sentiment index, 3MMA, l.h.sc.

The growth rate of point-of-sales transactions has

substantially recovered since a trough by mid-year

and has reached 30% yoy in October. This strong

rebound in consumer spending is underpinned by a

still high consumer confidence of private households.

Meanwhile, non-oil export growth remains in nega-

tive territory, primarily reflecting the challenging glo-

bal market conditions of the petrochemical industry.


Non-Oil exports, % yoy Imports, % yoy

Nielsen Saudi consumer confidence index, quarterly, r.h.sc.

Private Spending Indicators and Non-Oil Foreign Trade

Figure 1:

Point-of-Sales Transactions

Figure 2:

Consumer Sentiment

Figure 3:

Growth of Non-Oil Exports

Figure 4:

Growth of Imports

3-Month Moving Average, % yoy 3-Month Moving Average, % yoy

90

95

100

105

110

115

120

125

52.0

54.0

56.0

58.0

60.0

62.0

64.0

66.0

68.0

11/11 11/13 11/15 11/17 11/19

-20

-10

0

10

20

30

40

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

09/13 09/14 09/15 09/16 09/17 09/18 09/19

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

09/13 09/14 09/15 09/16 09/17 09/18 09/19


source: Markit source: Markit

Emirates NBD PMI Composite

6-Month Moving Average

Emirates NBD PMI Output

By beginning of the 4th quarter, the business cli-

mate indicators of the Saudi non-oil economy still

point towards solid expansion. The PMI Composite

index reached 58.3 in October, a level last seen in

2015. Meanwhile, the PMI New Orders index, which

we consider as the best medium-term proxy for non

oil private sector GDP growth, is consolidating at an

elevated level .

source: Markit source: Markit

Emirates NBD PMI New Orders

Non-Oil Private Sector Business Climate Indicators

Emirates NBD PMI Output Prices

6-Month Moving Average

6-Month Moving Average 6-Month Moving Average

Figure 1:

Purchasing Manager Index Composite

Figure 2:

Purchasing Manager Index Output

Figure 3:

Purchasing Manager Index New Orders

Figure 4:

Purchasing Manager Index Output Prices

50

52

54

56

58

60

62

64

11/13 11/14 11/15 11/16 11/17 11/18 11/19

54

56

58

60

62

64

66

68

70

11/13 11/14 11/15 11/16 11/17 11/18 11/19

48

52

56

60

64

68

72

11/13 11/14 11/15 11/16 11/17 11/18 11/19

46

48

50

52

54

56

11/13 11/14 11/15 11/16 11/17 11/18 11/19



CPI inflation, % yoy CPI inflation, % yoy

The negative CPI inflation has continued to ease

with -0.3%yoy in October after a trough at -2.2%

yoy in February. This can primarily be explained by a

vanishing pressure on housing rents during 2019.

Housing rents dominate the sub-index Housing,

water, electricity and are the single most important

item in the CPI (21%) . As a result, CPI inflation is

expected to turn positive by beginning of 2020.


CPI inflation, sub-index Transport, % yoy

WPI inflation, % yoy

Consumer and Wholesale Price Inflation

CPI inflation, sub-index Furnishings, household equipment &

maintenance, % yoy

CPI inflation, sub-index Food and beverages, % yoy

CPI inflation, sub-index Housing, water, electricity, gas

and other fuels, % yoy

Figure 1:

Consumer Price Inflation All Items

Figure 2:

Consumer Price and Wholesale Price Inflation

Figure 3:

CPI Inflation Food & Housing

Figure 4:

CPI Inflation Furnishings & Transportation

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

10/13 10/14 10/15 10/16 10/17 10/18 10/19

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

10/14 10/15 10/16 10/17 10/18 10/19

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

10/14 10/15 10/16 10/17 10/18 10/19

-8.0

-4.0

0.0

4.0

8.0

12.0

16.0

20.0

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019


source: MOJ, RC

The year 2019 has so far shown a considerable re-

covery of real estate activities. In Q3, the total

transaction value ascended by +72% compared to

the previous year, the number of transactions

picked up by +94%. This rebound has been more

pronounced in the residential area where the trans-

action value soared by +83% and the number of

transactions almost doubled (+99%).

source: MOJ, RC source: MOJ, RC

Total value of quarterly transactions, %yoy

Number of quarterly transactions, %yoy

Real Estate Market: Transaction Activity

Riyadh Region

Makkah Region

Eastern Region

All Other Regions



source: MOJ, RC



Figure 1:

Quarterly Real Estate Transactions Overall Country

Figure 3:

Quarterly Commercial Real Estate Transactions

Figure 4:

Breakdown of Transaction Value by Regions (Q3 2019)

Figure 2:

Quarterly Residential Real Estate Transactions

-50%

0%

50%

100%

150%

200%

Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

-50%

0%

50%

100%

150%

200%

Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

-100%

-50%

0%

50%

100%

150%

200%

Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

45.2%

19.4%

12.1%

23.2%



Real estate land prices were little changed in Q3

2019 compared to the previous quarter with -0.7%

in the residential area and +0.1% in the commercial

segment. Compared to the previous year's period

they were only moderately lower (residential -3.7%,

commercial -1.2%). This underpins our view that

the Saudi real estate market is about to bottom out

and stabilize after a protracted decline since 2015.


Residential villas price index

Residential price index Residential land price index

Commercial land price index Commercial price index

Real Estate Market: Price Indices

Residential apartments price index

Commercial centers price index

Commercial shops & galleries price index

Figure 1:

Residential and Commercial Price Indices

Figure 2:

Residential and Commercial Land Price Indices

Figure 3:

Residential Villas and Apartments Price Indices

Figure 4:

Commercial Shops and Centers Price Indices

70.0

75.0

80.0

85.0

90.0

95.0

100.0

105.0

Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

70.0

75.0

80.0

85.0

90.0

95.0

100.0

105.0

Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

80.0

85.0

90.0

95.0

100.0

105.0

Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

80.0

85.0

90.0

95.0

100.0

105.0

Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19


source: JODI source: JODI

Saudi Arabian crude oil production, in 1000 bd.

Saudi Arabian total oil refinery output, in 1000 bd.

Saudi crude oil production temporarily dropped to

9.1 mbd in September due to an outage caused by

the attacks on Aramco infrastructure during that

month. As a consequence, OPEC output declined to

a multi-year low at 29.1 mbd. On the other hand,

Saudi refinery output and exports were not affected

by these events. Meanwhile, oil prices recovered

above 60USD (Brent) in the course of November.

source: JODI, Bloomberg source: Bloomberg

Brent oil price OPEC crude oil production, in 1000 bd

WTI oil price

Oil Market Statistics: Production, Exports, Refinery and Prices

Saudi Arabian crude oil export, in 1000 bd. Saudi Arabian total oil refinery export, in 1000 bd.

Figure 1:

Saudi Crude Oil Production and Exports

Figure 2:

Saudi Crude Refinery Output and Exports

Figure 3:

OPEC Crude Output

Figure 4:

Oil Prices

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

09/13 09/14 09/15 09/16 09/17 09/18 09/19

0

500

1,000

1,500

2,000

2,500

3,000

3,500

09/13 09/14 09/15 09/16 09/17 09/18 09/19

29,000

30,000

31,000

32,000

33,000

34,000

09/12 09/13 09/14 09/15 09/16 09/17 09/18 09/19

20

30

40

50

60

70

80

90

11/15 11/16 11/17 11/18 11/19


source: Bloomberg source: Bloomberg, JP Morgan

12-month forward exchange rate USD/SAR

The FX-forward premium for USD/SAR continues to

trade at historically low levels, illustrating the stable

macro framework of the Saudi economy at this

juncture. Meanwhile, the SAR effective exchange

rate gradually weakened from August to November,

following a moderate decline of the USD. From a

longer-term perspective, however, the SAR effec-

tive exchange rate is still trading at elevated levels.

source: Bloomberg source: Bloomberg, JPMorgan

SAR Real (CPI-adjusted) trade-weighted exchange rate index

SAR Nominal trade-weighted exchange rate index

Foreign Exchange: Forward Rates and Effective Exchange Rate Index

12-month forward exchange rate USD/SAR

SAR Nominal trade-weighted exchange rate index

SAR Real (CPI-adjusted) trade-weighted exchange rate index

Figure 1:

12-Months Forward Exchange Rate SAR/USD

Figure 2:

SAR Nominal and Real Effective Exchange Rate

Figure 3:

12-Months Forward Exchange Rate SAR/USD in the

Long Term

Figure 4:

SAR Nominal and Real Effective Exchange Rate in the

Long Term

3.73

3.75

3.77

3.79

3.81

3.83

3.85

11/15 11/16 11/17 11/18 11/19

104

108

112

116

120

124

128

11/15 11/16 11/17 11/18 11/19

3.65

3.67

3.69

3.71

3.73

3.75

3.77

3.79

3.81

3.83

3.85

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

80

90

100

110

120

130

140

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018


source: Bloomberg source: Bloomberg

3-months SIBOR (Saudi Interbank Offered Rate)

5-year Swap rate SAR

In the second half of 2019, the Federal Reserve cut

its FED fund target rate so far three times from

2.50% to 1.75%. Accordingly, SAMA reduced the

official repo rate and the reverse repo rate each by

75bp to 2.25% resp. 1.75%. Against this back-

ground, USD and SAR interest rates across the en-

tire yield curve continued their decline which had

already started by end of last year.


30-year maturity Reverse repo rate SAMA

5-year maturity 3-month SAIBOR (Saudi Interbank Offered Rate)

5-year Swap rate USD 3-months US LIBOR (London Interbank Offered Rate)

Interest Rates: Money Market, Capital Market and Central Bank Rates

3-month SAIBOR (Saudi Interbank Offered Rate)

3-month US LIBOR (London Interbank Offered Rate)

Figure 1:

3-Months SAIBOR vs. USD LIBOR

Figure 2:

5-Year Swap Rate SAR vs. USD

Figure 3:

KSA USD-Bonds Yield Spread to US Treasuries

Figure 4:

Central Bank Rate and 3-Months SAIBOR

10-year maturity

SAMA official repo rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

11/15 11/16 11/17 11/18 11/19

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

11/15 11/16 11/17 11/18 11/19

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

12/16 06/17 12/17 06/18 12/18 06/19

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2004 2006 2008 2010 2012 2014 2016 2018



Current account balance, quarterly, in bln SAR Foreign workers’ remittances, quarterly, in bln SAR

(remittances outflow as part of Current account balance)

Foreign workers' remittances continued to decline

in 2019 as a result of the expat exodus in the last

years. They amounted to 56.1 bln SAR in H1 2019

vs. 64.3 bln SAR in H1 2018. Meanwhile, the lower

current account balance in Q2 was mitigated by a

sharply improved financial account balance which

ended in a balance of payment surplus and, hence,

an increase in foreign reserve assets of 50 bln SAR.


Saudi Balance of Payments

Figure 1:

Current Account Balance

Figure 2:

Foreign Workers’ Remittances

Figure 3:

Financial Account Balance

Figure 4:

Contribution to Balance of Payments (in bln SAR)

Current account balance

Errors & omissions

Financial account balance

Net change in foreign

reserve assets

Financial account balance (excluding changes in foreign

reserve assets), quarterly, in bln SAR

(+ capital inflows, - capital outflows)

-100

-50

0

50

100

150

200

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2013 2014 2015 2016 2017 2018 2019

-40

-36

-32

-28

-24

-20

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2013 2014 2015 2016 2017 2018 2019

-125

-100

-75

-50

-25

0

25

50

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2013 2014 2015 2016 2017 2018 2019

-200

-150

-100

-50

0

50

100

150

200

-200

-150

-100

-50

0

50

100

150

200

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2013 2014 2015 2016 2017 2018 2019


source: Bloomberg source: Tadawul

Tadawul All-share index Average daily traded value for Tadawul, in mln SAR

The Saudi equity market was subject to a notable

correction in the third quarter as investors started

to take profits after the strong market performance

due to the inclusion of Saudi equities in major EM

indices (MSCI, FTSE). After the end of the index in-

clusion period, trading volumes also considerably

declined with the average daily traded value drop-

ping below 3bln SAR in the last two months.

source: Tadawul source: Tadawul

Tadawul: Saudi Equity Market Statistics

10-Week Moving Average

Retail Foreign institutionals (Swap & QFI)

Domestic institutionals HNWI & IPI

Figure 1:

Tadawul All-Share Index

Figure 2:

Tadawul Average Daily Traded Value

Figure 3:

Weekly Net Purchase by Ownersip (in bln SAR)

Figure 4:

Weekly Net Purchase by Ownersip (in bln SAR)

40-Week Moving Average

-10

-8

-6

-4

-2

0

2

4

6

8

10

11/17 02/18 05/18 08/18 11/18 02/19 05/19 08/19 11/19

in bln SAR

-10

-8

-6

-4

-2

0

2

4

6

8

10

11/17 02/18 05/18 08/18 11/18 02/19 05/19 08/19 11/19

in bln SAR

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000

11/15 11/16 11/17 11/18 11/19

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

11/15 11/16 11/17 11/18 11/19



TASI quarterly EPS in SAR, l.h.sc

Despite the correction phase in Q3, TASI still ex-

hibits a positive total return YTD by end of Novem-

ber (+3.9%). Amongst the major sectors, Banks

managed to outperform (+8.8%), while Materials

clearly underperformed the market (-5.9%). Corpo-

rate earnings continued to decline compared to the

previous year in the third quarter. This caused the

valuation for TASI to remain at elevated levels.


PE ratio TASI, 12-month trailing earnings

Long-term average

TASI 4Q trailing EPS in SAR, r.h.sc.

PE ratio TASI, 12-month forward earnings

Long-term average

Tadawul: Saudi Equity Market Statistics

Figure 1:

Performance TASI Sectors November 2019YTD

Figure 2:

Quarterly Earnings TASI

Figure 3:

Valuation TASI: PE-Ratio Trailing

Figure 4:

Valuation TASI: PE-Ratio Forward

Performance in % YTD, including dividends

250

300

350

400

450

500

550

0

25

50

75

100

125

150

Q3/11 Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19

8

10

12

14

16

18

20

22

24

26

11/09 11/11 11/13 11/15 11/17 11/19

6

8

10

12

14

16

18

11/09 11/11 11/13 11/15 11/17 11/19

-22.2

-13.7

-10.2

-10.0

-8.9

-5.9

-5.9

0.0

0.2

3.9

5.0

6.9

8.1

8.8

9.0

13.0

13.9

15.6

19.9

20.2

36.4

-30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0

Media

Consumer Durables & App.

Pharma, Bio & LS

Diversified Financials

Real Estate

Materials

Healthcare Equip&Svc

Capital Goods

Insurance

TASI

Food & Beverages

Food & Staples Retailing

Retailing

Banks

Commercial & Prof. Svc

REITS

Telco Services

Energy

Consumer Services

Transportation

Utilities


Saudi Economic Outlook

Oil, Inflation and Interest Rates GDP and Fiscal Indicators

source: GASTAT, SAMA, RC source: GASTAT, SAMA, Bloomberg, RC

The Saudi economy exhibits a distinct growth diver-

gence between the oil sector and the non-oil sector

economy in 2019. As a result, growth of the overall

economy will turn out to be subdued for this year.

The non-oil private sector continues to gain pace

since the beginning of this year, which has caused us

to upgrade our growth outlook for this part of the

economy from 2.4% to 2.9% in 2019 and from 2.7%

to 3.2% in 2020.

On the other hand, oil sector GDP growth has been

downgraded from -1.2% to -3.2% for this year as a

consequence of a notable oil output reduction in the

course of 2019. For next year, we expect a gradual

recovery by +1.9%.

As a result, the overall economy will expand by 0.1%

this year and by 2.4% in 2020.

Our revised crude output estimates also imply lower

petroleum exports which affects the trade balance

and the current account balance accordingly. Howev-

er, our new export projections still translate into a

strong current account surplus of 4.6% of GDP in

2019 and 4.4% in 2020.

The average Brent oil price is expected to be gradu-

ally lower next year on the back of a potentially over-

supplied global market in H1 2020.

Average CPI inflation for 2019 is forecasted at -1.2%.

We expect the Saudi inflation rate to turn positive at

the beginning of 2020 and forecast an average infla-

tion rate of 1.4% for next year.

In particular, we expect the decline of housing rents

as the major driver for the current CPI deflation to

fade in 2020 on the back of an anticipated stabiliza-

tion of the Saudi residential real estate market.

SAIBOR rates have considerably declined throughout

2019 on the back of three rate cuts by the FED and by

SAMA. We expect one final rate cut in 2020 and fore-

cast 3M SAIBOR to drop below 2.0% in the course of

next year.

We forecast the unemployment rate for Saudi na-

tionals to decline to 12.1% in 2020. Combined with

an expected increase of the Saudi labor force partici-

pation rate to 43.1%, this implies that the Saudi

economy will create approximately 170k-190k new

jobs for Saudis in the year 2020.

Facts and Forecasts at a Glance

2017 2018 2019f 2020f

Real GDP Growth

Overall economy -0.7 2.4 0.1 2.4

Non-oil Private sector 1.5 1.9 2.9 3.2

Government sector 0.7 2.9 2.0 1.6

Oil sector -3.1 3.1 -3.2 1.9

Fiscal Balance and Government Debt

Fiscal Balance in bln SAR -238 -174 -154 -191

Fiscal Balance in % GDP -9.2 -5.9 -5.5 -6.6

Government debt in bln SAR 443 560 690 815

Government debt as % GDP 17.2 19.0 24.4 28.2

Trade and Current Account

Trade Balance in bln SAR 369 639 485 474

Trade Balance in % GDP 14.3 21.7 17.2 16.4

Current Account in bln SAR 39 271 129 127

Current Account in % GDP 1.5 9.2 4.6 4.4

2017 2018 2019f 2020f

Oil Prices and Production (yearly average)

Brent price (USD pb) 54.8 71.7 65.0 64.0

WTI price (USD pb) 50.9 64.9 56.0 57.0

OPEC Basket price (USD pb) 52.4 69.8 64.0 63.0

KSA oil production (mln bd) 9.9 10.3 9.7 9.8

Inflation and Interest Rates (year end)

CPI Inflation (yearly average) -0.84 2.47 -1.20 1.40

3M SAIBOR SAR 1.90 2.98 2.15 1.85

Reverse Repo Rate 1.50 2.50 1.75 1.50

Official Repo Rate 2.00 3.00 2.25 2.00

Labor Market (yearly average)

Unemployment rate total in % 5.9 6.0 5.9 5.8

Unemployment rate Saudi in % 12.8 12.8 12.4 12.1

Labor force part. total in % 54.9 56.0 56.2 56.5

Labor force part. Saudi in % 40.8 42.0 42.5 43.1


Disclaimer

The information in this report was compiled in good faith from various public sources believed to be reliable.

Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the

forecasts, opinions and expectations contained herein are fair and reasonable, Riyad Capital makes no represen-

tations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad

Capital does not represent that the information in this report is complete or free from any error. This report is not,

and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly,

no reliance should be placed on the accuracy, fairness or completeness of the information contained in this re-

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rities or other assets referred to in this report.

Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment

as at the date of this report only and are therefore subject to change without notice. There can be no assurance

that future results or events will be consistent with any such opinions, forecasts or projections which represent

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The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by

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