Business

AMMAN — The Amman Stock Exchange (ASE) on Monday said Jordan Phosphate Mines Company (JPMC) has completed all required procedures to increase its listed capital from JD/Share 75 million to JD/Share 82.5 million through stock dividends. Accordingly, the ASE will list the new shares on Sunday July 10th, 2016 with a reference price of JD2.87.

ABU DHABI — Two Abu Dhabi-based banks have agreed to merge to create the single largest lender in the Middle East and North Africa (MENA), a statement said on Sunday.

The boards of the National Bank of Abu Dhabi (NBAD) and the First Gulf Bank (FGB) voted unanimously in favour of the merger, which would create a lender with assets worth $175 billion, the banks said in a statement posted on the Abu Dhabi bourse.

The merger — which is expected to take place in the first quarter of 2017 — still requires approval from the general assemblies of both banks, the statement said.

The new bank would become the leading financial institution in the United Arab Emirates, with 26 per cent share of outstanding loans, it said.

It would have a combined market capitalisation of $29.1 billion and offices in 19 countries, it said.

“The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions,” the statement said.

The government of oil-rich Abu Dhabi — one of the seven emirates that make up the UAE — would own a 37 per cent stake in the new bank.

The merger would be executed through a share swap, with FGB shareholders receiving 1.254 NBAD shares for each FGB share.

NEW YORK — Global stocks rose again Friday as worries about the British exit from the European Union continued to recede amid expectations of more stimulus from central banks. 

Equity markets in Paris, London and Frankfurt all gained about one per cent in their fourth straight day of moving up. 

US stocks also pushed higher for the fourth day running, but the S&P 500 mustered a gain of just 0.2 per cent. US markets will be closed Monday for a public holiday.

The European increases came as eurozone unemployment fell to a near five-year low in May, a welcome piece of good news for the struggling single-currency bloc. However, unemployment still stood at 10.1 per cent, well above the level prior to the 2008 financial crisis.

In the US, the Institute for Supply Management reported its purchasing managers’ index for manufacturing activity rose to an unexpectedly strong 53.2 in June from 51.3 in May.

Analysts said that Britain’s June 23 vote to quit the EU, which has unleashed global worries about its impact on the global economy, would probably push central banks to further ease monetary policy.

Bank of England chief Mark Carney hinted on Thursday of more monetary stimulus in the coming months. The Brexit vote is also expected to push back any plans by the US Federal Reserve to hike interest rates.

The Brexit “is not a bullish event”, said Mace Blicksilver, the director of Marblehead Asset Management. 

“But you’ve triggered this massive dose of liquidity.”

Blicksilver said investors are cautious about selling stocks since the market could rally even higher next week now that it is clear that Brexit has not emerged as a Lehman-type event, at least in the near term.

But S&P Global trimmed its 2016 and 2017 US growth forecasts on Friday, warning that “the vulnerabilities surrounding Brexit are far from resolved”.

“All told, we expect the repercussions from Brexit to weigh somewhat on US GDP,” S&P said.

Briefing.com analyst Patrick O’Hare said the growing unknowns emanating from questions about the political complexion of Britain and the EU will drag on the US earnings outlook.

“There is a heightened degree of uncertainty stemming from the Brexit vote and a weaker global economic outlook as a result of it,” said Briefing.com analyst Patrick O’Hare.

Moves by central banks have “helped put a band-aid on the bleeding, yet there still haven’t been any sutures beyond that to close the cut, which will likely remain an open wound for some time,” he said.

On Wall Street, Hewlett Packard Enterprise rose 1.4 per cent after a California jury awarded it $3.1 billion from software giant Oracle in damages after HPE sued Oracle for not providing support services. Oracle lost 0.2 per cent.

Tesla Motors rose 2 per cent despite news that US auto-safety regulators were probing a fatal crash involving a Tesla sedan operating in a self-driving mode. Global Equities Research said the incident was “sad” but a “non-event” from a stock perspective.

SINGAPORE/HONG KONG — United Overseas Bank (UOB) became Singapore’s first lender to temporarily halt mortgage loans for London properties, as other Asian banks flagged potential investment risks in the wake of Britain’s vote to leave the European Union.

Brexit has spooked global markets and pushed the pound to multi-year lows, sparking worries about the health of a London property market that has previously attracted huge interest from Asian investors seeking stable returns.

“We will temporarily stop receiving foreign property loan applications for London properties,” a spokeswoman for Singapore’s No. 3 lender said in an e-mail. “Given the uncertainties, we need to ensure our customers are cautious with their London property investments”.

While UOB’s move is a first, volatility and uncertainty since the June 23 vote about Britain’s economic prospects has encouraged many Asian banks to flag potential risks of London property dealings to customers. The Singaporean dollar has gained 10 per cent against the pound since the referendum, eroding the value of assets held in Britain.

A raft of Asia’s lenders said on Thursday they were issuing reminders to clients of the risks, though they were still offering loans for London properties.

Singapore’s top two lenders — DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp — said London mortgage loans were still available, as did Malaysian lender CIMB and Hong Kong’s Bank of East Asia .

“For customers interested in buying properties in London, we would advise them to assess the situation carefully before committing to their purchases as there could be potential foreign exchange and sovereign risks,” Tok Geok Peng, the executive director of secured lending, consumer banking group at DBS Bank said in an email.

OCBC, meanwhile, said it was monitoring the situation carefully.

At Bank of East Asia, deputy chief executive officer Brian Li told Reuters, “We will continue to provide mortgage loans to our clients, though we are warning our customers of the increased risks arising due to volatility in financial markets.”

“We have a reasonable exposure to London property market, but we believe the risks are manageable at this stage,” Li said.

Negative outlook

JLL, a global real estate consultancy, said there were 1.3 million residential transactions in 2015 in London. In a typical year, overseas investors in London make up about 15 per cent of new transactions, a percentage that rises to up to 40 per cent in central zones of the British capital.

“Singapore is one of the most important markets for London residential property,” said Adam Challis, the head of Residential Research, JLL UK. It did not provide a breakdown of transactions by Singaporean buyers.

Other risks for Singaporean banks have been exacerbated in recent months by an economic slowdown in Asia and rising bad debts in energy-related industries.

Moody’s Investors Service on Thursday revised the outlook on Singapore’s banks to negative from stable. This reflected the “weaker operating conditions” against the backdrop of softer regional economic and trade growth, Moody’s Vice President and Senior Credit Officer Eugene Tarzimanov said.

Property consultants say data on the number of properties purchased by Singaporeans in Britain is not tracked that closely. Banks do not disclose lending data for British property purchases.

Analysts said Brexit could slow the sale of British properties in Asia as buyers turned cautious.

“There have been London properties available for the last few months before the Brexit. The question is whether these properties can still continue to receive buyers in the short-term,” said Alice Tan, the head of consultancy and research at Knight Frank Singapore.

UOB, which runs an international property loans programme that also covers properties in Australia, Japan, Thailand, Malaysia and Singapore, said it would review the market regularly to determine when it could resume its property loan offering.

AMMAN — Jordan plans to introduce a programme of far-reaching structural reforms to counter economic challenges, Finance Minister Omar Malhas said in a recent interview with Oxford Business Group (OBG).

Exogenous shocks had taken their toll on Jordan’s economy, with public debt now at a “critical” level, he told the OBG.  

“We cannot continue with the same economic model,” he acknowledged. “We need to adapt it to fit with modern times.”

The full interview will appear in The Report: Jordan 2016, OBG’s forthcoming report on the Kingdom’s economy. The publication will also contain a detailed, sector-by-sector guide for investors, alongside contributions from leading personalities, according to an OBG statement.

Malhas said the new fiscal measures would target boosting the gross domestic product (GDP) and improving the country’s competitiveness in a bid to attract higher levels of foreign investment.

The Kingdom is also looking to decrease its reliance on foreign aid, targeting self-sufficiency by 2018.

 “This is an important issue for Jordan, since last year, our revenue reached only 94 per cent of the total expenditure,” the minister noted. 

“Unfortunately, we remain exposed to exogenous shocks. However, we are hoping that the economy will grow at a higher percentage than it did last year.” Changes to Jordan’s income tax law were among the reforms expected to help raise revenue, he added.

Structural reforms will include over 20 actions that are being mandated by the International Monetary Fund in order for Jordan to meet the criteria to receive support via the international organisation’s Extended Fund Facility (EFF).

Malhas expressed confidence that the EFF would help Jordan to achieve stronger economic growth. “We are targeting an EFF programme of at least three years which combines fiscal measures with structural reforms,” he said. “The main goal is to reduce Jordan’s debt to 77 per cent of GDP by 2021, so we’re discussing how we can achieve that.” 

The Report: Jordan 2016 will deal with the country’s developments in the areas of infrastructure, banking and macroeconomics. 

WASHINGTON/TOKYO — Toyota Motor Corp. has recalled 3.37 million cars worldwide over possible defects involving airbags and emissions control units.

The automaker on Wednesday said it was recalling 2.87 million cars over a possible fault in emissions control units. That followed an announcement late on Tuesday that 1.43 million cars needed repairs over a separate issue involving airbag inflators.

Some of the automaker’s gasoline-electric hybrid Prius models contain both of the potential defects, taking the total number of vehicles affected by the recalls to 3.37 million.

No injuries have been linked to either issue.

Toyota on Wednesday said evaporative fuel emissions control units in models produced from 2006 to 2015 including the Prius, Auris compact hatchback and its popular Corolla models were prone to cracks, which could expand over time and lead to fuel leaks.

Late on Tuesday it recalled Prius models and Lexus CT200h cars made from 2010 to 2012 over airbag inflators that could have a small crack in a weld, which could lead to the separation of the inflator chambers.

The inflator could partially inflate and enter the vehicle interior, increasing the risk of injury, Toyota said.

Sweden-based auto safety gear maker Autoliv Inc. confirmed on Wednesday that it supplied the airbag inflators involved in the recall.

The company said it was aware of seven incidents where a side curtain airbag has partially inflated in parked Toyota Prius cars, but no injuries were reported.

Autoliv has benefited from an early recall involving faulty airbag inflators made by Japan’s Takata.

The company said in a regulatory filing in April that it was investigating six incidents related to its airbags and a possible recall could cost it between $10million-$40 million, net of expected insurance recoveries. 

Autoliv said on Wednesday it expected the cost of recall to be at the lower end of the range.

The company’s US-listed shares were down 4.7 per cent at $105.00 in premarket trading. The stock fell as much as 16 per cent to 765 Swedish kronas on the Stockholm Stock Exchange, their lowest since December 2014.

Toyota Motor’s US listed shares were down 1.2 per cent at $98.69 in premarket trading.

AMMAN —  Amman Stock Exchange (ASE) has conducted the periodic quarterly review of the ASE index constituents to ensure that its General Price Index reflects the market performance and the trading activity of the listed companies, ASE CEO Nader Azar said on Wednesday.

By this rebalancing, the activity of listed companies in terms of trading during the last quarter has been reviewed, he said. The ASE has also conducted its screening process for all listed companies using the full market capitalisation of the companies and the number of trading days during last quarter, he added.

As a result of this review, eleven companies had been excluded from the index sample and other eleven companies had been added. 

The companies that had been excluded from the index sample were: Future Arab Investment, Arab International Hotels, Petra Education, Jordan Loan Guarantee Corporation, Zara Investment, Alisraa for Islamic Finance and Investment, Jordan Poultry processing and Marketing, Alsharq Investments Projects, National Chlorine industries, Transport and Investment Barter, and Comprehensive Land Development and Investment.

As for the companies that had been added to the index sample, they were: Alia- The Royal Jordanian Airlines, Taameer Jordan Holdings, Amoun International for Investments, First Insurance, Real Estate Development, Middle East Insurance, Philadelphia International Educational Investment, National Poultry, Al-Eqbal Printing and Packaging, Jordan French Insurance and Jordan Insurance  according to the ASE website.

As part of the process, the ASE calculated the free float for all listed companies at the ASE based on the data available at the Securities Depository Centre  website. The review also includes the reduction of the weights for some companies to maintain the 10 per cent cap that applied to index constitutes.

Azar explained that the index sample includes one hundred companies which are the most active in the ASE and the highest in terms of market capitalisation. The full market capitalisation of the index constituents’ represent 90.9 per cent of the total market capitalisation of the companies listed at the ASE. The free float market capitalisation of the index constitutes’ represents 93.6 per cent of the total free float market capitalisation of the listed companies at the ASE.

Accordingly, the index constituents will be modified on July 3rd and interested parties can access to the constituents of the index with the new weights through the following link: 

http://www.exchange.jo/en/constituents

RIYADH — Two Saudi Arabian industrial giants said on Tuesday they will jointly study a project to make chemicals from oil, as the world's largest crude exporter seeks to diversify its economy.

Saudi Aramco, the state oil company, said it has signed an agreement with Saudi Basic Industries Corp. (SABIC), one of the largest global manufacturers of petrochemicals, fertilisers, plastics and metals.

They will conduct "a feasibility study on the development of a fully integrated crude oil-to-chemicals complex to be located in Saudi Arabia”, Aramco said in a statement.

The agreement contains principles of cooperation that will form the basis of a joint venture if the study reaches a positive conclusion, the company said.

It added that the project is consistent with the kingdom's wide-ranging Vision 2030 plan announced by Deputy Crown Prince Mohammed Bin Salman in April.

The plan aims to wean the kingdom off oil, which remains its main revenue source even though global prices have fallen by around half since 2014.

At its heart is a plan to float less than five percent of Saudi Aramco on the stock market. The proceeds would help form what will become the world's biggest state investment fund, with around $2 trillion in assets.

Petrochemical production, some of it derived from natural gas byproducts, is already a focus of Saudi Aramco's move away from simple oil extraction.

But Aramco President Amin Nasser said the agreement with SABIC reflects a goal of substantially increasing the production of oil-based petrochemicals.

"This agreement will help spur a new era of industrial diversification, job creation and technology development in Saudi Arabia," Nasser said in the statement.

SABIC's Chief Executive Officer Yousef Al Benyan said that by working together the two firms can drive advances that will make oil a viable petrochemical "feedstock", or raw material.

He expressed hope that the agreement with Saudi Aramco "will ultimately lead to a new era for the kingdom, driving strong economic growth, creating many new opportunities for aspiring young Saudis, and playing a significant role in the kingdom's economic transformation”.

LONDON — Shares in EasyJet dived Monday after the no-frills airline warned that Britain’s vote to quit the EU would hurt its business over the coming months.

London upmarket estate agency Foxtons had also warned that profits would be hit this year after Britain’s shock referendum vote to quit the EU.

The grim news sent Foxtons’ share price tumbling by more than a fifth of its value and stoked worries that Brexit could spark a slump in the London’s property market, which has benefitted from record-low interest rates from the Bank of England for more than seven years.

Prior to Brexit, there were already signs that the high-end London property market was slowing after the government hiked taxes on transactions aimed at preventing a bubble.

Around (11:00 GMT), Foxtons shares nosedived to a loss of almost 22 per cent at 105.50 pence.

The British carrier said last week’s referendum result would create uncertainty in the economy and among consumers, impacting its second-half performance that ends in September.

The news sent EasyJet’s share price plunging with a loss of nearly 19 per cent at 1,065 pence around midday — making it the biggest faller on London’s benchmark FTSE 100 index, which was down 1.7 per cent overall.

“Easyjet is the biggest loser... as the airline industry suffers amidst fears that the rapid depreciation of the pound may weigh on consumer choice when deciding on their upcoming summer holidays,” said David Cheetham, market analyst at traders XTB.

The British pound tumbled Monday to the lowest level in almost 31 years at $1.3194 on Brexit fallout.

EasyJet on Monday said recent changes to exchange rates and higher fuel prices on the back of recovering crude were expected to “add around £25 million [$33 million, 30 million euros] of additional cost” in the current financial year.

EasyJet is a British low-cost airline carrier based at London Luton Airport. It operates domestic and international scheduled services on over 700 routes in 32 countries. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. 

The broader London stock market also sank Monday on worries over fallout from Britain’s surprise vote on June 23 to leave the 28-nation European Union.

“The run up to the EU referendum led to significant uncertainty across London residential markets and the decision to leave Europe is expected to prolong that uncertainty,” Foxtons said in an official statement to the London Stock Exchange.

“Whilst it is too early to accurately predict how the London property sales market will respond, the upturn we were expecting during the second half of this year is now unlikely to materialise.”

Foxtons added that both its 2016 revenues and operating profit — as measured by earnings before interest, tax, depreciation and amortisation — would be “significantly lower” than in 2015.

LONDON — Global economic policy urgently needs rebalancing, the Bank for International Settlements (BIS) said on Sunday, as the world faces a “risky trinity” of high debt, low productivity growth and dwindling firepower at the world’s big central banks.

The BIS, an umbrella body for major central banks, said in its annual report that the global economy was highly exposed even before Thursday’s vote by Britain to leave the European Union.

“There are worrying developments, a sort of ‘risky trinity’, that bear watching,” Claudio Borio, the head of the BIS monetary and economic department said. 

“Productivity growth that is unusually low, casting a shadow over future improvements in living standards; global debt levels that are historically high, raising financial stability risks; and room for policy manoeuvre that is remarkably narrow.”

He said the global economy cannot afford to rely any longer on the debt-fuelled growth model that has brought it to the current juncture.

Despite sub-zero interest rates and trillions of dollars of stimulus, Europe and Japan’s central banks are struggling to lift inflation and growth. Markets have grown accustomed to that support, but they are growing concerned the firepower is mostly spent.

“Should this situation be stretched to the point of shaking public confidence in policymaking, the consequences for financial markets and the economy could be serious.”

In an apparent nudge to the US Federal Reserve, it said policymakers needed to put more focus on raising rates when they have the chance so that they have room to cut them again when the next downturn comes.

“This is especially important for large jurisdictions with international currencies, as they set the tone for monetary policy in the rest of the world,” the BIS said.

More broadly, it urged a global change in attitude in both fiscal and monetary policy. Fiscal policy should be designed to cope with financial boom and bust more systematically; monetary policy needed to monitor booms and busts from a systemic risk view, to keep the financial side of the economy on an even keel.

“There is an urgent need to rebalance policy in order to shift to a more robust, balanced and sustainable expansion.”

“We need to abandon the debt-fuelled growth model that has brought us to this predicament. It is essential to relieve monetary policy, which has been overburdened for far too long.”

Bank warnings

Leaning towards Europe, the report also called for crisis-hit countries to reform their banks, via dividend cuts or even injections of tax payer money, and for a wave of mergers to reduce excess capacity.

An early warning model was also flashing red for China’s banks: the deficits in the ratios of credit to gross domestic product and debt service if interest rates were to jump. Canada and Turkey were in those danger zones, too.

Separate figures showed Germany was the only country last year whose big banks saw a decline in net income as a percentage of total assets.

The BIS’ foreign exchange reserves data, which are considered the most accurate in the world, showed a $668 billion decline globally last year. China accounted for $513 billion of that, presumably as it sought to sure up the yuan.

Middle East countries burnt through $140 billion of their reserves as oil prices dropped. Japan and Malaysia which saw big currency declines last year, of $20 bilion and $21 billion.

Another section of the report showed that while exchange rate declines could help lift growth in some countries, in others, such as emerging markets where debt is high and in a foreign currency like the dollar, it can do the opposite.

“As the saying goes: It’s the stocks, not the shocks,” said BIS’ head of research, Hyun Song Shin. “Addressing the overhang of foreign currency-denominated debt stocks would be one element of securing better macro outcomes in emerging market economies.”