The largest construction project in the world is — no surprise — the massive new air hub planned in Dubai, Al Maktoum International Airport. Here’s a list of the Top Ten, courtesy of The Balance
- Al Maktoum International Airport, Dubai
- Jubail II, Saudi Arabia
- DubaiLand, Dubai
- International Space Station, Space
- South-North Water Transfer Project, China
- London Crossrail Project
- High Speed Railway, California
- Chuo Shinkansen (High Speed Railway), Japan
- Beijing Airport, China
- Great Man Made River Project, Libya
Photo: A view from King George VI Street at Arat Kilo District, Addis Ababa, capital of the the third fastest-growing economy in the world.
The IMF has just published its latest World Economic Outlook, including a downward revision to its earlier global growth forecasts for 2019 to 3.3%.
So, where is the fast growth coming from? Africa mostly, but also South and Southeast Asia.
Here are the Top Ten fastest (forecast) growth economies for 2019 as tabulated by the New Silk Road Monitor from the IMF WEO report (Note: there’s more than 10 because of a few ties)
The Top Ten Fastest Growing Economies – 2019
- Ghana, South Sudan Tie – 8.8%
- Rwanda – 7.8%
- Ethiopia – 7.7%
- Cote D’Ivoire – 7.5%
- India, Bangladesh Tie – 7.3%
- Senegal – 6.9%
- Cambodia – 6.8%
- Lao PDR, Djibouti Tie – 6.7%
- Nepal, Philippines, Vietnam, Benin, Niger Tie – 6.5%
- Mauritania, Myanmar Tie – 6.4%
The Next Ten (11-20) Fastest Growing Economies – 2019
- China, Turkmenistan, Uganda Tie – 6.3%
- Burkina Faso, Panama Tie – 6.0%
- Guinea – 5.9%
- Kenya – 5.8%
- Egypt – 5.5%
- Republic of Congo – 5.4%
- Indonesia, Malta Tie – 5.2
- Dominican Republic – 5.1%
- Central African Rep, Togo, Tajikistan, Guinea Bissau, Timor Leste, Mali – 5%
- Bhutan – 4.8%
Note: Countries with population under 100,000 people not included here. This excludes the island nation of Dominica, expected to post 8% growth, and Cabo Verde at 5%.
The Five Must-Read Stories on the Global LNG Market This Week – April 9-16
Egypt To Nearly Double LNG Export Capacity by 2019
Egypt will nearly double its liquefied natural gas export capacity to 2 billion cubic feet per day by the end of 2019, and also plans to collaborate with Saudi Arabia in exploring hydrocarbon reserves in the Red Sea, reports the Abu Dhabi-based The National.
Russia Sees Arctic LNG as Key to Greater Energy Dominance
Almost 1,500 miles from Moscow, the tiny port of Sabetta nestles in a desolate Russian Arctic peninsula. A former outpost for Soviet geologists, it’s now the site of Russia’s most ambitious liquefied natural gas project, operated by a company that only entered the market just over a year ago.
Several times a week, a giant tanker leaves this remote place carrying the super-chilled fuel to buyers in Europe and Asia. It’s not the only LNG plant beyond the Arctic Circle, but it’s by far the largest.
Novatek PJSC, the main shareholder of the Yamal LNG plant, says plans for further projects will transform Russia into one of the biggest exporters of the fuel within a decade, Bloomberg reports.
World’s Top LNG Buyer Posts an Order From LNG Canada
Japan’s JERA, the world’s top buyer of liquefied natural gas, on Tuesday said it had signed an agreement with a Mitsubishi Corp unit to buy up to 16 cargoes, or 1.2 million tonnes per annum (mtpa), of LNG from the LNG Canada project, Reuters reports.
China Set To Build the World’s Largest LNG Carrier
China’s Hudong-Zhonghua shipyard and classification society DNV GL have agreed a joint development project for a new 270,000 cubic meter LNG carrier – the largest ever ship of this type, Maritime Executive reports.
Saudi Aramco Eyes First Ever LNG Sale With Overture to Pakistan
The world’s largest oil company is moving into the world of liquefied natural gas, offering to supply Pakistan with cargoes of the fuel even though it doesn’t produce any, according to a Pakistan government official.
The New Silk Road Weekly Saudi Arabia Chronicle
A compendium of the key numbers, quotes, and stories reflecting the economy of Saudi Arabia, curated from global and domestic news sources.
Sources: News Agencies, Financial Times, Bloomberg, CNBC, Reuters, Arab News, Saudi Gazette, The National
Demand for Saudi Aramco’s inaugural international bond has skyrocketed to some $100 billion by mid-Tuesday, according to news reports. This represents an oversubscription of ten times the original bond offering, reflecting intense international investor interest in the world’s largest oil company.
The IMF forecast for Saudi Arabia’s economic growth in 2019, announced in the latest World Economic Outlook. This marks a downward revision of its previous forecast of 2.4%, in line with a broader global downward revision in growth.
The international benchmark Brent crude futures price as of Tuesday, April 8. This marks the highest Brent price since November 2018.
Saudi Aramco’s net income for 2018.
12.2 Million bpd
US Crude oil production in March, a global record. Additionally, the US exported more than 3 million barrels per day, a US record. The U.S has increasingly become a competitor in global oil markets and new US shale discoveries exert downward pressure on global oil prices.
The amount Saudi Aramco agreed to pay to buy a 70% stake in state petrochemicals firm Saudi Basic Industries Corporation (SABIC) from Saudi Arabia’s Public Investment Fund (PIF).
SG 33 and SG 34
The new flight listing for the daily SpiceJet flight from Hyderabad to Jeddah (33) and Jeddah to Hyderabad (34), marking the first Indian budget carrier flying direct to Saudi Arabia. On April 20, SpiceJet will add a new daily flight between Jeddah and Kozhikode.
Saudi Arabia’s non-oil private sector witnessed strong growth in March as evidenced by a high reading on a monthly purchasing manager’s index compiled by Emirates NBD Bank. The Dubai-based lender’s Saudi Arabia Purchasing Managers’ Index – a reflection of operating conditions in the non-oil private sector economy – climbed to 56.8 in March. A reading above 50 shows expansion, while below 50 indicates contraction. Emirates NBD said the current figure was the highest since December 2017
On reports that Saudi Arabia would abandon the dollar in oil sales
“Recent reports claiming that Saudi Arabia is threatening to sell its oil in currencies other than the dollar are inaccurate and do not reflect Saudi Arabia’s position on the matter.”
“The Kingdom has been trading its oil in dollars for decades and that has served well its financing and monetary needs. Furthermore, the Kingdom remains committed to be a stabilizing force to energy markets and does not want its key priority to be out at risk, including changes to the financial terms of oil trading relationships around the world.” Khalid Al-Falih, Minister of Energy, Saudi Arabia (Editor’s note: The rumors began to circulate as the U.S Congress debates “NOPEC” legislation targeting the global oil grouping led by Saudi Arabia)
UAE Energy Minister on oil sales in non-dollar terms
“The trading in the US dollar is something that you don’t change overnight. I think that [has been] a norm in the industry for years and years so let’s not jump into some of those ideas … Opec did not claim that they will change the currency in trading.” UAE Minister of Energy and Industry Suhail Al Mazrouei speaking on the sidelines of the Middle East Petroleum & Gas Conference (MPGC) in Dubai.
On Saudi Arabia’s strong PMI reading
“The average PMI reading for the first quarter of 2019 was 56.5, indicating the strongest quarterly expansion in the non-oil private sector since the fourth quarter 2017.” Khatija Haque, head of Mena research at Emirates NBD.
Global Media on the Saudi Aramco Bond Sale
The Aramco deal is one of the most hotly anticipated debt deals of the year, marking the first time the Saudi oil giant has tapped the international bond market, reports Bloomberg. When Qatar, a rival Middle East nation, sold $12 billion in bonds earlier this year, it got a record $50 billion in orders, evidence of investor appetite for debt of rich, oil-producing nations.
The deal is largely seen as Plan B to raise money for the country’s economic agenda after the initial public offering of Aramco, slated for 2018, was postponed until at least 2021. In effect, Saudi Crown Prince Mohammed bin Salman is using the company’s pristine balance sheet to finance his ambitions.
Aramco, the world’s top oil producer, earlier this month received an “A+” rating from Fitch and an “A1″ rating from Moody’s in its first ever credit ratings, following 2018 earnings that dwarfed those of international oil majors, reports CNBC.
Saudi Arabia has already seen formidable success in its recent tapping of the bond market: It issued $7.5 billion in sovereign bonds in January which drew an impressive $27 billion in orders. Saudi Arabia has “A1” and “A+” ratings from agencies Moody’s and Fitch, respectively, a sign of reliability and low risk for investors.
The Financial Times
Investors have been lured in by the disclosure of hefty profits for the oil company, backed by a high, “single-A” credit rating, the FT reports.
Aramco has told investors that credit rating agency Moody’s would have given it a top-notch triple-A credit rating, if it was not for the close links to the Saudi state. Saudi Aramco provided the Saudi government with 63 per cent of its revenues in 2017 but the government still runs a deficit, and some investors fear further cash could be diverted away from the company, to the detriment of bondholders.
“It is a rare issuer and if you look at the pure credit of the issuer it is extremely attractive,” said Tim Jagger, head of emerging-market debt at Columbia Threadneedle. “But the fate of this company is inextricably tied to the fate of the sovereign and we know the sovereign is running a large fiscal deficit.”
The oil company has been meeting fund managers behind the scenes for several months to lay the groundwork for this debut bond sale. It even enlisted the help of veteran investor Mohamed El-Erian, chief economic adviser at Allianz and a former chief executive of bond giant Pimco, to consult on “technical aspects” of the $10bn offering.
New Silk Road Weekly China Chronicle
A compendium of the key numbers, quotes, and stories shaping China, curated from global and domestic news sources.
Sources: News Agencies, Shanghai Daily, China Daily, Beijing Review
The World Trade Organization revised downward its projections for trade growth for 2019. Originally, it forecast 3.7% growth. In 2018, its initial forecast of 4.4% trade growth fell to an actual trade growth of 3%.
China foreign exchange reserves as noted in March, the highest since August 2018. This marks the fifth straight month of growth in China foreign exchange reserves, a signal that hopes remain high that a trade deal will ultimately be reached between the U.S and China.
China stock market rally as of April 8, 2019. In the beginning of April, Chinese stocks notched their best performance in a year. The CSI 300 index, composed of major companies listed in Shanghai and Shenzhen, has reached its highest level since March 2018.
The percentage of gas imports provided to China by Qatar over the past decade
The latest Asian Development Outlook 2019, ADB’s flagship economic report, said China’s economy is forecast to grow 6.3 percent in 2019 and 6.1 percent in 2020. The ADB report noted that consumption was the main driver of growth in 2018, contributing 5 percentage points, underscoring China’s move away from investment-led growth toward a more sustainable consumption-driven model.
The number of unicorns – start-up companies with a valuation of more than $1 billion – that have emerged in Beijing since 2012, according to CB Insights. Shanghai, on the other hand, accounts for 11 unicorns in that same time period. Over the past six years, Beijing’s startup companies alone have received $72 billion in funding, ranking the second highest in the world.
On the threat of U.S tariffs on auto imports
“US-China trade is about 3 percent of global trade. Automobile trade globally is about 8 percent of global trade. So you can imagine that the impact of automobile tariffs is going to be bigger than the impact of the US-China trade conflict.
“I think it’s pretty clear that any automobile tariff would likely have bigger knock-on effects through the global economy than what we see from the US-China conflict.” WTO Chief Economist Robert Koopman
On growth in China
“Growth [in China] remains remarkably robust, underpinned by resurgent global demand, stimulus-boosted infrastructure spending, and a deleveraging program that remains more honored in the breach than the observance.” Tom Orlik, Bloomberg chief Asia economist
On climate change and natural gas
“There is no realistic achievable plan to address the climate change problem that doesn’t involve natural gas.” Mike Wirth, Chairman and CEO, Chevron, speaking at the 19th International Conference & Exhibition on Liquefied Natural Gas in Shanghai
China’s foreign exchange reserves, on the back of a $9 billion boost in March.
The value of China’s gold reserves
China stock rally this year
Yuan rise against the dollar this year, after falling 5.3% last year.
Source: Agencies, Shanghai Daily
The Nikkei Asian Review has an excellent cover story on the phenomenon – and there is no other way to describe it – of Jio, the company that brought low-cost mobile services to tens of millions of Indians. The story highlights the vision of Mukesh Ambani, India’s richest man, who has used his money-spinning Reliance Industries — focused on energy and petrochemicals — to finance his forays into the worlds of retail, telecoms and content. At the heart of the strategy was his Jio mobile service that gave tens of millions of Indians free mobile service for six months, dramatically pushing prices lower across the board while expanding connectivity.
One Mumbai-based venture capitalist went so far as to call Ambani “India’s Elon Musk” for his vision and few will disagree that widespread mobile usage is transforming the world’s soon-to-be most populous country.
Some highlights of the story below:
Once known simply as the richest man in India, Ambani is now known for the dramatic way he has reinvented his family’s business in recent years. He has shifted Reliance Industries from heavy industrial operations such as energy and petrochemicals to softer businesses including telecoms, media content and retail.
In the process, Ambani is also reshaping India. Since its launch in 2015 and its first sales the following year, Jio has started to reduce the yawning disparities between city and countryside, privilege and poverty, connections and capability.
While his rise in business may have been built on controversy, today Ambani is perhaps the only national champion and true visionary the country has.
“Lots of baggage of the past has been erased by the efforts of the last five years,” said one venture capitalist in Mumbai. “He is our answer to Elon Musk. He is the only one in India willing to take a moonshot.”
Since Ambani entered the telecoms business, revenues in the Indian mobile market have shrunk by 35% in just over two years, thanks almost exclusively to the low prices and six months of free service offered by Jio, according to data from UBS. That is because Reliance has far deeper pockets than any of its rivals and has used its cash flow from petrochemicals and energy to subsidize newer initiatives under Jio, said Rohit Prasad, a professor of economics at MDI in Gurgaon.
To read the full story, go here
And for a deeper dive into India’s smartphone revolution, see Ravi Agrawal’s excellent book in the New Silk Road Monitor library.
KUALA LUMPUR: The Malaysian government is considering whether to shut, sell or refinance national carrier Malaysia Airlines (MAB), Prime Minister Tun Dr Mahathir Mohamad said on Tuesday.
The government was studying options for the national carrier, and a decision should be made “soon”, Mahathir said, when asked about analysts’ suggestions the airline be shut down or spun off.“It is a very serious matter to shut down the airline,” Dr Mahathir told a news conference at Parliament.
“We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or we should refinance it. All these things are open for the government to decide.”
The airline has been trying to transform its operations and return to profitability by 2019 as it recovers from two disasters in 2014, when flight MH370 disappeared in what remains a mystery and flight MH17 was shot down over eastern Ukraine.
Jonathan Fulton, author of China’s Relations with the Gulf Monarchies and a Professor at Zayed University in Abu Dhabi, has a great new piece out in the Washington Post’s Monkey Cage analysis section on the growing Gulf Cooperation Council (GCC) geopolitical and security ties with Asia. My earlier summary piece focused more on the geo-economic ties, and my piece published simultaneously in the Arab News and Asia Times posited an Eastward Shift 2.0.
Jonathan makes a compelling argument that the movement of the global economic center of gravity eastward means an inevitable geopolitical diversification eastward as well.
Why Saudi Arabia Is Turning to Asia
By Jonathan Fulton, The Washington Post (Monkey Cage)
Late last month, Saudi Crown Prince Mohamed bin Salman (MBS) visited Pakistan, India and China. Given the poor state of Saudi-U.S. relations, it is tempting to see this trip as a response to criticism in the United States of the murder of Saudi journalist Jamal Khashoggi.
The underlying story of this trip is not about the United States and Saudi Arabia. It is about the ongoing structural shift in geopolitics, as the global economic center of gravity moves east and Asia and the Middle East draw closer together.
Jonathan makes some great points in the piece and he has been a pioneer in the field of exploring China-GCC political and security ties. Read the entire piece here.
And follow Jonathan’s work on Twitter @jonathandfulton
Michael O’Sullivan, the Chief Investment Officer of the International Wealth Management Division at Credit Suisse, is one of the smartest people I know on global macro issues and the intersection of markets, geopolitics, and the global economy. He also has a bent for history, and his weekly letters to clients and friends (my bank account puts me in the latter category) is always a great tour d’horizon of the issues, big and small, shaping markets.
I asked him if I could republish his most recent letter, sent on March 3. The bold and italics marks are mine. See below:
In 1900 the UK stock market made up 25% of the world market, the US accounted for 15%, Russia made up 6.3%, Austria nearly 6%, and South Africa 3.3%. From then, the rise and fall of nations has left its mark on financial markets. Austria no longer has an empire and is a financial minnow now, while the 1917 Revolution in Russia saw its stock market expire and only make a comeback in the 1990s. The 20th century has been the American century and its share of the world stock market is 53% today. In 1900 Japan was a frontier market, whose later boom saw it swell to the high teens in terms of stock market size. It now accounts for 8% of the world market.
Similarly, only a decade or so ago China was a stock market fledgling, today it represents 3.4% of the world equity market. The accelerated inclusion of Chinese stocks in the MSCI emerging markets benchmark will provide a channel for China’s share of financial markets to increase, and relative to its GDP, there is much room for growth. My own sense is that once China’s necessary phase of deleveraging is over (it could take over five years), it will begin to deepen its financial markets and the elaboration of this financial infrastructure will be one of the most exciting periods in finance in the next ten years.
What about the UK? Today its internationally oriented stock market is only 5.3% of world markets, down from the 25% mentioned earlier. Similarly in 1900, one pound was worth close to 5 US dollars, a somewhat more impressive exchange rate than today’s 1.33. Readers of David Kynaston’s excellent books on the City of London will get a flavor of how economically powerful the UK was at the turn of the 20th century, and how vital London was as a global financial center. This has changed. Brexit, which I do feel is a response to relative economic and geopolitical decline, is expected by many to further curb the power of the City.
Some solace may however be at hand as we now have a degree of clarity on the path Brexit could follow in coming weeks. On last Monday we issued an Investment Alert on Brexit, which, because events were evolving rapidly, I had to revise three times. Essentially, the legal and parliamentary procedural channels at Westminster provide for an extension of Article 50 if the UK Prime Minister’s deal is not voted through in mid-March. Politically, the risk that the Brexiteers might miss the Brexit train, and the opening up of the political center creates a set of incentives that could well lead to a deal.
The road toward a deal also depends on the guidance of the UK Attorney General around the backstop and the ways in which the government begins to frame the future relationship between the UK and the European Union. Sterling’s latest leg higher underpins the sense that a chaotic no-deal Brexit is now much less likely, and we maintain our constructive view on the GBP.
Moving on from Brexit, the reason for starting this week’s note with financial market history is that last week we launched our 11th CS Global Investment Returns Yearbook (more on the Yearbook in a subsequent post). My Credit Suisse Research Institute colleague Richard Kersley remarked that in the context of recent market volatility, the long run analysis of stock market history is a good guide to understanding the future. One such example is emerging market equities, which since 1950 have outperformed developed market equities by just over 1% per year.
Emerging markets (EM) are still growing up in terms of their market structure in the sense that hard to access stocks (like China A-shares until recently), free float restrictions and often poor liquidity have meant that a broad range of investors have often found it hard to replicate EM growth in portfolios. Still from a portfolio point of view, one point the Yearbook makes is that the relative volatility of emerging markets has fallen in recent years (perhaps because developed countries are themselves more shaky), and the relatively low correlation between emerging and US market equities means that EM offers a source of broad diversification.
One area where the research in the Yearbook, running back through the past 119 years, is inconclusive is whether poor years in the equity market are followed by good ones. This is often the case for emerging markets but for larger developed markets we don’t see a “positive serial correlation,” as academics might put it.
As we now head into March, the global rebound of the past two months has been extraordinary, and reassuring to the degree that it signals a slowdown rather than a breakdown in the economic cycle. There are other issues to worry about, however, which we have flagged in this note in recent weeks, including record high debt levels, a shaky market micro-structure, the need to leave Quantitative Easing behind and generally poor productivity. I have not mentioned geopolitics and policy volatility, to which markets have become inured. So, as markets have moved energetically higher, we prefer to strike a more circumspect, prudent tone and maintain our neutral view on global equities.