debt

Malaysia’s debt burden – graphic of the day

Lurking beneath Malaysia’s solid investment-grade sovereign rating is a risk posed by a $14 billion investment fund that is not even generating enough cash from operations to cover interest costs. The government says it only guarantees around 14% of the debt. It is the potential strain on Malaysia’s debt position from these contingent liabilities that raises concern.

malaysia debt

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Islamic Finance in Saudi Arabia: syndicated financing vs. sukuk

Today’s sukuk are referred to in most writing as Islamic bonds, but in reality they could perhaps be more appropriately referred to as Islamic investment certificates, or more accurately “Trust Certificates” or “Participation Securities”. This difference is a sensitive and critical one; equity- or debt-based sukuk should not simply be referred to and governed as an alternative for conventional[1] interest-based securities (or bonds). We do not seek to develop financial products that imitate fixed-rate conventional instruments, interest-based bonds, and floating-rate notes as understood in the Western economy, but rather to build an innovative approach to engineer classes of assets that are consistent with sharia objectives.

In this current decade the Kingdom of Saudi Arabia is witnessing exceptional economic growth stimulated by an aggressive public spending plan. This has led to huge financing requirements for both the government and private sectors. KSA also has one of the largest investor bases in the region with total assets under management exceeding $22.7 billion. The increasing requirement of long-term financing and huge local investor appetite provides an excellent opportunity to develop a vibrant Islamic debt capital market (DCM) in the country.

The Saudi sukuk market is small compared to other countries with comparable economic indicators. Though it has seen some large sukuk issues, the number of local currency issues listed on Tadawul is only seven from three issuers (SABIC, Saudi Electricity Company & Saudi Holland Bank). The size of the total outstanding sukuk is $8.1 billion. The need to have a well-developed DCM was felt more than ever during the 2008 financial crisis when bank lending to the private sector slumped to 3.6 per cent in July 2009, the lowest rate in more than six years. Despite several interventions by the Saudi Monitory Agency (SAMA), banks became very reluctant to provide long-term financing and increased their margins across the board. This left businesses with no other option except to abandon or reschedule their projects.

Further development of the sukuk market in Saudi Arabia requires proactive involvement of the government authorities in addressing some of the key issues faced by the DCM issuers and investors.

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Credit ratings – graphic of the day

Irish bond yields dipped today after Moody’s raised the country’s rating by two notches on Friday, citing strong growth dynamics. At around 120% of GDP, Ireland still has one of the most bloated government debt burdens in the euro zone. Today’s graphic shows the long-term sovereign debt ratings for some of the world’s major economies.

credit ratings

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Chinese debt stress – graphic of the day

Chinese companies owe just over $1 trillion in domestic bonds, of which 15.8% is coming due this year. A Reuters analysis of more than 2,600 Chinese companies found credit metrics worsening across a range of industries. Today’s graphic show short-term debt to cash for each mid and large cap company listed on the Chinese stock exchange.

china debt

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Weekly Investment Banking Scorecard

deals intelligence

US Dollar denominated investment grade corporate debt totals $236.6 billion so far in 2014, up 11% compared to a year ago and the strongest year-to-date period since records began in 1980. Non-US Issuers have raised $85.8 billion in the US investment grade debt markets this year, accounting for 37% of overall volume and an increase of 34% compared to year-to-date 2013. Companies from France, the United Kingdom and Japan account for nearly 15% of year-to-date activity.

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France’s vital signs – graphic of the day

France’s economic picture is among the weakest of the main rich nations. Today’s graphic uses five charts to show how France has a lethal combination of high social expenditure, low average working hours, a heavy debt burden, increasing unemployment and decreasing consumer confidence. Make sure to check out the Reuters special report on how Peugeot and France ran out of gas.

France

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European unemployment rates – graphic of the day

The euro zone unemployment rate was flat in August after easing in July for the first time in two years, showing the budding economic recovery was starting to have a positive impact on the labor market. Today’s graphic breaks down the unemployment rates for all the European countries.

unemployment

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Confusing signal on US profit growth?

Many investors are still uneasy about the long term health of the US economy, in part, because the Federal Reserve still feels the need to maintain its easy money policies. A strong economy usually means robust profit growth, but projections for S&P profit growth this year are falling. Watch this video to see how using Thomson Reuters Eikon can help you track what may lie ahead for earnings.

Read more on the Thomson Reuters Eikon blog.

European bank bailouts – graphic of the day

After approving more than 5 trillion euros of state aid to its financial system over the past five years, the European Union has switched the burden of bank bailouts away from taxpayers and onto shareholders, bondholders and big depositors. Today’s graphic breaks down the amount of aid given to financial institutions in the EU by instrument type and country.

bank bailouts

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U.S. federal deficit and debt – graphic of the day

Federal lawmakers are debating whether to raise the U.S. debt ceiling. Opponents argue that the U.S. debt as a percentage of GDP has ballooned to unsustainable levels. Meanwhile, the federal budget deficit has fallen sharply in the last few years. Today’s graphic shows the change in the federal budget deficit and debt as a percentage of GDP.