The Central Bank of the UAE raised its benchmark interest rates by 25 basis points following a rate hike by the US Federal Reserve, which indicated further moves are likely this year and next.
The UAE's banking regulator pushed the interest rate higher by 25 bps on its certificate of deposits, that are used as a monetary policy instrument through which changes in interest rates are transmitted to the financial institutions, the central bank said on Wednesday. The rate rise is effective from Thursday, which is also when the repo rate on borrowing short-term liquidity from the central bank against certificates of deposits goes up by 25 bps.
Saudi Arabia's central bank said it was raising its reverse repo rate by 25 bps to 2.25 per cent, and its repo rate by the same margin to 2.75 per cent. Bahrain's central bank raised its interest rate on its one-week deposit facility to 2.5 per cent from 2.25 per cent. Kuwait said it is keeping its key discount rate unchanged at 3 per cent. Unlike other GCC states which peg their currency to the greenback, Kuwait links its dinar to a basket of currencies.
The Fed on Wednesday increased its target range for the federal funds interest rate by a quarter point, to between 2 per cent and 2.25 per cent. The move reflects the continued strength of the economy as growth and job numbers remain strong and inflation remains near the Fed’s 2 per cent target rate. The unemployment rate in the US reached 3.9 per cent in August, an 18-year low, while annual inflation reached 2.7 per cent in the same month.
Arabian Gulf central banks don’t always raise or cut rates on each specific occasion when the Fed does, but they broadly follow it over the long run.
This is the Fed's third rate rise this year and the eighth increase since 2015. The central bank rate is now at the highest level since October 2008, just after the collapse of Lehman Brothers.
US president Donald Trump who opposes higher interest rates was quick to attack the Fed.
"I am not happy about that," he said at a press conference in New York. "I'd rather pay down debt or do other things, create more jobs, so I'm worried about the fact that they seem to like raising interest rates. We can do other things with the money. But they raised them."
Mr Trump's position was markedly different when he was a presidential candidate, attacking then Fed Governor Janet Yellen and the US central bank for keeping interest rates low after the 2008 financial crisis and contributing to what he said was a "big, fat, juicy bubble".
The Fed is increasing rates, ignoring the escalating trade war among the world’s two biggest economies, which is threatening to derail the growth outlook of the global economy. After the US administration said it was slapping tariffs on $250 billion worth of Chinese goods, Beijing retaliated this week and said there is little hope of restarting trade talks with Washington.
The International Monetary Fund, the World Bank and the World Trade Organisation, however, have all urged both United States and China to exercise restraint in their tit-for-tat rounds of tariffs.
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Read more:
UAE Central Bank follows Fed and raises key interest rate by 25 basis points
Most GCC Central banks likely to mimic Fed as it prepares to raise interest rates
Fed lifts rates, steepens path through 2020 for more hikes
UAE Central Bank raises interest rates by 25 basis points
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David Kohl, the chief currency economist at Julius Baer said the bank in the coming year expects Fed to continue raising rates, despite the escalation in trade conflict. The Fed will do it as long as the growth impact is rather muted while the inflationary effects become more apparent in the US economy.
The Bank of Singapore estimates another rise by the US central bank in December, three more in 2019 and one in 2020 which "would leave policy in slightly restrictive territory," with interest rates at 3.4 per cent by 2020 compared to a neutral rate of 3 per cent.
Being a net importer of most goods and services with the exception of hydrocarbons, the Gulf region, which is home to about a third of the world’s proven oil reserves, is not severely impacted by the trade war. However, the Fed rate hikes will be consequential for the region's energy dependent economies. In the wake of an oil slump that began in 2014 and lower borrowing rates GCC sovereigns turned to capital markets to raise funds to meet their spending needs.
Crude prices, which fell below $30 a barrel in the first quarter of 2016, have risen significantly and breached $80 per barrel mark this month, reducing funding needs of GCC states. However, governments will still need to tap debt markets in order to fuel their economies.
But the rising cost of borrowing for the Gulf issuers is expected to dent investor appetite for GCC credit as liquidity tightens, said Mohammed Damak, senior director and global head of Islamic finance at S&P.
Oil price stabilisation has brought some fiscal stability in the region which has about $350bn worth of funding requirements at the government level between 2018 and 2021. These financing requirements could be met either by drawing down on assets or issuing debt at the sovereign level, Benjamin Young, associate director and sovereign and international public financing ratings at S&P said.
The rising cost of borrowing and tightening liquidity will make it more challenging for some countries, who don't have the fiscal buffers enjoyed by some of their regional peers, to bridge their budget gaps.
The effect of rising interest rates will also be felt by the corporate and financial institutions which have turned to capital markets in the past few years to raise funds. However, Abdulfattah Sharaf, the group general manager and chief executive of HSBC in the UAE expects debt issuance - sukuk, bonds and export credit agency-backed deals – at least in the UAE, to remain stable even with the Fed rate hikes.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Company%20profile
%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20WonderTree%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%20April%202016%3Cbr%3E%3Cstrong%3ECo-founders%3A%3C%2Fstrong%3E%20Muhammad%20Waqas%20and%20Muhammad%20Usman%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Karachi%2C%20Pakistan%2C%20Abu%20Dhabi%2C%20UAE%2C%20and%20Delaware%2C%20US%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20Special%20education%2C%20education%20technology%2C%20assistive%20technology%2C%20augmented%20reality%3Cbr%3EN%3Cstrong%3Eumber%20of%20staff%3A%20%3C%2Fstrong%3E16%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3EGrowth%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Grants%20from%20the%20Lego%20Foundation%2C%20UAE's%20Anjal%20Z%2C%20Unicef%2C%20Pakistan's%20Ignite%20National%20Technology%20Fund%3C%2Fp%3E%0A
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
How to donate
Send “thenational” to the following numbers or call the hotline on: 0502955999
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BIGGEST CYBER SECURITY INCIDENTS IN RECENT TIMES
SolarWinds supply chain attack: Came to light in December 2020 but had taken root for several months, compromising major tech companies, governments and its entities
Microsoft Exchange server exploitation: March 2021; attackers used a vulnerability to steal emails
Kaseya attack: July 2021; ransomware hit perpetrated REvil, resulting in severe downtime for more than 1,000 companies
Log4j breach: December 2021; attackers exploited the Java-written code to inflitrate businesses and governments
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Bareilly Ki Barfi
Directed by: Ashwiny Iyer Tiwari
Starring: Kriti Sanon, Ayushmann Khurrana, Rajkummar Rao
Three and a half stars
Company Profile
Company name: NutriCal
Started: 2019
Founder: Soniya Ashar
Based: Dubai
Industry: Food Technology
Initial investment: Self-funded undisclosed amount
Future plan: Looking to raise fresh capital and expand in Saudi Arabia
Total Clients: Over 50
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
Killing of Qassem Suleimani
'The Ice Road'
Director: Jonathan Hensleigh
Stars: Liam Neeson, Amber Midthunder, Laurence Fishburne
2/5
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press
Match info
Costa Rica 0
Serbia 1
Kolarov (56')
MATCH INFO
Day 2 at Mount Maunganui
England 353
Stokes 91, Denly 74, Southee 4-88
New Zealand 144-4
Williamson 51, S Curran 2-28
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
If you go:
Getting there:
Flying to Guyana requires first reaching New York with either Emirates or Etihad, then connecting with JetBlue or Caribbean Air at JFK airport. Prices start from around Dh7,000.
Getting around:
Wildlife Worldwide offers a range of Guyana itineraries, such as its small group tour, the 15-day ‘Ultimate Guyana Nature Experience’ which features Georgetown, the Iwokrama Rainforest (one of the world’s four remaining pristine tropical rainforests left in the world), the Amerindian village of Surama and the Rupununi Savannah, known for its giant anteaters and river otters; wildlifeworldwide.com
