Asian Banks Fuel More Than $2 Billion Loan Boom in Middle East
(Bloomberg) -- Middle East borrowers are ramping up loans that are being syndicated in Asia Pacific as they look to diversify fundraising beyond global bond and domestic markets.
More than $2 billion of Middle East deals targeting Asian bank liquidity have launched in recent weeks, including Saudi Electricity's $1 billion loan, Banque Saudi Fransi's $750 million facility and a $500 million financing for Al Ahli Bank of Kuwait.
The growing need for Middle East borrowers, primarily those from the Gulf States, to look beyond domestic capital markets comes as many regional economies press ahead with expensive diversification plans, in an environment where low oil prices are seen challenging growth and finances.
Saudi Arabia is running a fiscal deficit, with oil prices being far below the level of $92 a barrel the International Monetary Fund says it needs to balance its budget. That's led to the government and Saudi companies ramping up borrowing to fund Crown Prince Mohammed bin Salman's $2 trillion transformation program. Meanwhile, Qatar, Kuwait and the United Arab Emirates are among others that have agendas that will require heavy investment over several years to diversify revenues away from traditional energy sources.
'Middle Eastern borrowers, given the significant borrowing requirements, have been much more open to diversifying their lending relationships and willing to tap into the demand from Asia,' said Amit Lakhwani, global head of loan syndicate at Standard Chartered Plc. Asia also offers opportunities to borrow in new currencies or tenors versus what is available to them in the Middle East market, he added.
The volume of loans raised by Middle East borrowers in Asia Pacific touched a six-year high of $5.2 billion in 2024, according to Bloomberg-compiled data. The flurry of recent deals also follow the closing of Qatar National Bank's $2 billion borrowing in March that drew nearly 30 lenders, largely comprising Chinese, Japanese and Taiwanese banks, the data showed.
Such deals have historically done well in Asia. There's a huge demand from Asian banks to join the loans of Middle Eastern borrowers given the dearth of transactions back home. The volume of syndicated facilities — denominated in the US dollar, euro and Japanese yen — slumped 30% to $53 billion so far this year in Asia Pacific ex-Japan, according to Bloomberg-compiled data. That's the lowest tally in at least a decade.
Moreover, not only do companies from the Middle East often have better credit ratings, but such deals are able to offer higher returns versus similarly-rated Asian entities, said Aaron Chow, managing director for loan capital markets, Asia Pacific at Sumitomo Mitsui Banking Corp.
The recent five-year loan of Saudi Electricity, which is rated A by Fitch, pays an interest margin of around 85 basis points over the benchmark Secured Overnight Financing Rate. In contrast, the recent nearly five-year borrowing of South Korea's Shinhan Card, which is rated A by Fitch, offers margin of 80 basis points over SOFR.
Still, some of these deals could experience some headwinds given that banks have internal limits on how much capital can be deployed into a specific country and sector.
More stories like this are available on bloomberg.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
35 minutes ago
- Business Standard
Trump calls US-Japan car trade unfair, floats keeping 25% tariffs
US President Donald Trump floated the idea of keeping 25 per cent tariffs on Japan's cars as talks between the two nations continued with little more than a week to go before a slew of higher duties are set to kick in if a trade deal isn't reached. 'So we give Japan no cars. They won't take our cars, right? And yet we take millions and millions of their cars into the United States. It's not fair,' Trump said during a Fox News interview that aired Sunday. The comments show that the two sides still remain some distance from an agreement and highlight the risk that Trump may stick with the 25 per cent tariff on autos. The interview came out after another round of talks between Tokyo's top trade negotiator, Ryosei Akazawa, and Commerce Secretary Howard Lutnick. Akazawa flew across the world to hold face-to-face talks in Washington, and while they initially met in person, two subsequent discussions took place on the phone. 'Japan-US negotiations are at a critical stage, and we will continue to engage in sincere and earnest discussions,' he said in a post on X. Both sides agreed to continue talks this week after the Trump interview took place on Friday, he added. Auto-related stocks on the Topix were down around 0.4 per cent in Tokyo, early Monday afternoon, compared with a 0.8 per cent gain in the overall index. The duty on the car sector has emerged as one of the key sticking points in the talks. Washington is focusing on its large deficit in the sector while Tokyo is trying to protect a key pillar of its economy. In 2024, Japan's trade surplus with the US stood at ¥8.6 trillion ($59.3 billion). Roughly 82 per cent of the gap was due to Japan's surplus in cars and auto parts. US statistics show that the deficit with Japan is the seventh largest among Washington's individual trading partners. Akazawa has repeatedly said that the US's car tariffs are unacceptable, saying that Japan's auto industry has made an enormous contribution to the US economy through the investment of more than $60 billion and the creation of 2.3 million local jobs. Japan has insisted on keeping the sectoral tariffs on cars and other items included in the talks on the wider country-specific levies that are due to go up on July 9. Akazawa has said he will keep the deadline in mind but won't fixate on it as Tokyo aims to settle all trade disputes with a package that addresses the sectoral tariffs, too. Statements released by the Japanese government over the weekend said Akazawa and Lutnick had 'fruitful' discussions and agreed to continue seeking a deal that is beneficial for both the US and Japan. The statements did not touch on what was discussed or what progress was made. The 25 per cent US tariff is already in place on cars and auto parts, along with a 50 per cent duty on steel and aluminum. The separate across-the-board tariffs, now at 10 per cent, will jump to 24 per cent if no deal is reached in time. Without a breakthrough in the negotiations, Japan's economy could be pushed into a technical recession after it shrank in the first quarter. Trump's statements in the interview gave no impression that Japan was any closer to reaching a deal or winning an extended reprieve on the reciprocal tariffs. Instead, Trump flagged that the US can set its trade terms with Japan unilaterally.
Mint
37 minutes ago
- Mint
US dollar index drops 11% in H1 2025: What's ailing the greenback?
The US dollar, the most powerful currency in the world, has had a tough period as it has been on a steady declining trend, ever since Donald Trump took office in January 2025. It has ended the last five months in the red and is on track to close the current month lower as well, a rare occurrence for the greenback, which hasn't seen a six-month losing streak in recent decades. The world's reserve currency has fallen nearly 11% over the past six months against a weighted basket of major currencies. On Thursday, it dropped below the 97 mark, hitting its lowest level since February 2022. Global demand for the US dollar appears to be weakening, as major central banks and non-US investors are showing less interest in dollar-denominated assets than they did earlier. Recent reports suggest that European institutional investors, especially pension funds and insurers, have reduced their dollar exposure to the lowest levels since 2022. Meanwhile, China, the second-largest holder of US debt, is rapidly selling Treasuries in a bid to end dollar dominance. Other major Asian central banks are also shifting away from the dollar to add more gold to their forex portfolios'. This shift in sentiment has been driven, in part, by growing concerns over President Donald Trump's economic policies. While the administration has positioned these measures as a path to renewed prosperity, they have failed to reassure markets. Several of the policies signed and proposed by Trump have received warnings from global institutions and the Federal Reserve itself, citing potential risks to economic growth and inflationary pressures. The traditional flight to safety, where investors sell off riskier assets and move into US Treasury bonds and dollars during periods of global uncertainty, has come under strain. This long-standing trend is rooted in the perception of the United States as the world's largest and most diversified economy, with a consistent track record of debt repayment and historically high credit ratings. However, investor sentiment has deteriorated amid concerns over a widening US government debt and a rise in interest payments, with recent estimates suggesting that US debt, which currently sits at $36.21 trillion, may swell toward 134-156% of GDP over the next decade from the current 120% of GDP. While concerns over widening debt are weighing on investor sentiment, Donald Trump's unorthodox policy measures, such as raising tariffs on imported goods and proposing a massive new spending bill that recently cleared a Senate hurdle, have further dampened market mood. The sweeping reciprocal tariffs on all major trading partners, currently on hold, have disrupted the global trade order that had been in place since World War II. Additionally, Trump has undertaken cost-cutting measures that include reducing federal employment and public spending, which have reportedly affected US IT giants, such as Accenture. He also introduced various new schemes, such as the Gold Card, sometimes referred to as the Trump Card, which gives wealthy foreigners an easier path to US citizenship, which is expected to cost around five million dollars in an aim to increase federal revenue. Meanwhile, global credit rating agencies have taken note of Trump's recent policy shifts, with Moody's in May downgrading the US sovereign credit rating by one notch to 'Aa1,' citing sustained fiscal deficits and increasing interest burdens, and the agency also shifted its outlook on the US from 'negative' to 'stable,' reflecting the structural fiscal challenges now facing the world's largest economy. Trump's policies not only dampened the consumer sentiment in the US but also created an unfavorable environment for companies to make future investments, as they are afraid that Trump would make alterations or announce new policies, according to the market experts. On the other hand, Trump himself prefers a weaker dollar, as he believes it would give US exports a competitive edge in the global market. He had earlier accused several countries of artificially inflating the dollar to make their products cheaper compared to those made in the US. Apart from the economic concerns, the recent expectations that a larger rate cuts coming in the second half of the 2025 has further added pressure to the dollar. While US federal reserve chair Jerome Powell is awaiting further clarity on the economy before making another rate cut decision, he is reportedly facing increasing pressure from Donald Trump to resume rate cuts in order to accelerate growth. Although the Fed has largely ignored Trump's public criticism so far, expectations are growing that the president could influence the central bank through informal channels. Wall Street has been buzzing with speculation about a potential 'shadow chair' — someone Trump might position as a vocal critic of the Fed's current stance until Powell's term ends in May 2026. On Thursday, traders increased their bets on rate cuts this year, with the probability of three reductions rising to about 60%, up from strong expectations of just two cuts earlier in the week, according to CME Group data. Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
India.com
37 minutes ago
- India.com
Rs 26654420000000 worth gold hidden inside houses, Turkey government unable to retrieve it because...
Rs 26654420000000 worth gold hidden inside houses, Turkey government unable to retrieve it because… Turkey is currently dealing with tremendous pressure due to several reasons, but one of the primary concerns is the rapid increase in the country's current account deficit. The Middle Eastern country's current account deficit reached USD 20.3 billion between January and April this year. It is believed that a significant portion of gold is kept in households, remaining outside the banking system and untraceable by the government. Why Is Gold Kept In Homes? In Turkey, it's a decades-old tradition in which people prefer to keep gold and jewellery at home. This practice is known as under-the-pillow savings. When the government feels economic uncertainty, the government appeals to people for their help. The countrymen then use their personal gold. But normally, this gold remains out of the reach of banks and untraceable for the government. Rs 2665442 Crore Worth Gold Not Deposited In Banks According to an estimate by Turkey's central bank, there is about USD311 (approx 265442 crore) worth of physical gold kept in houses, and not deposited in the banks. Notably, this amount is many times more than the gold reserve of the central bank, which is currently, nearly USD 86.5 billion. Why Is Investing In Gold So Popular In Turkey? Similar to India, in Turkey, people also like to invest in gold and consider it a safe investment. During weddings, people also likes to give and take gold in the form of jewellery. In 2023, the Middle East country ranked fourth in the world in the consumption of gold jewellery, followed by China, India and the US. Turkey's economic downturn, marked by a sharply depreciating lira and soaring inflation (reaching 85 percent in 2022), has altered consumer gold purchasing habits. Investment-oriented gold coins and bars have replaced jewellery as the preferred form of gold acquisition. Distance From Banks And Fear Of Tax Another major reason is tax avoidance by the people. In Turkey, bank deposits are taxed, and details regarding the large transactions reach the government. On the other hand, gold kept in houses by the people is tax-free. Notably, when the government implemented a tax of 0.2 percent on gold purchases through banks in the month of March, the majority of the population started ignoring the formal system, buying gold in cash. Witnessing this, the Turkish government has made it mandatory to show an identity card for purchasing jewellery worth more than USD5,274. The sale of gold bars without a certificate has also been banned by the government to curb the practice. In 2016, President Erdogan requested people to deposit money and gold in banks so that the country's currency could be strengthened. The government even started the 'Gold Conversion System' under which people can deposit their gold in the bank through government-authorised jewellers. This scheme started in 2022.
