Helen | World Finance

‘Fat fingers and algos’ is a thin explanation for sterling crash

Posted on October 11, 2016 by Helen

The ‘hard Brexit’ story appears to have completely blindsided market participants, who up until now were apparently positioned for a comfy, EEA-type deal that now seems a distant prospect. As a result, sterling has paid the price.

Just about every fear indicator is flashing red for sterling. Options volatility is soaring, bid ask spreads are unstable, and market-implied inflation expectations are skyrocketing. On October 7, sterling experienced a flash crash that drove the currency to a 31-year low. Trading conditions on Friday were the most unstable they have been since the day of the referendum result.

Trading conditions for sterling are the most unstable they have been
since the day of the referendum result

One of the leading explanations for this chaos is that the machines did it. But the often-cited ‘fat fingers and algorithms’ explanation for these events wears a little thin. The reality is, regardless of exactly what happened last week, sterling has been on a relentless downwards trend since June, and Friday morning was merely an extension of that. For what it’s worth, my running hypothesis of Friday morning’s events is that an initial collapse in bids – however it was triggered – was compounded by good old fashioned panic, machine or human.

This raises an interesting question: if the thinking machines are exhibiting behaviour that is, for all intents and purposes, akin to fear and panic as well as greed, does it matter who is pushing the button? Perhaps by gazing long enough into the abyss of the human heart, momentum-following and market-making algorithms have found us staring back at them.

But I digress. There has been a significant and unexpected deterioration in the political outlook for sterling over the last two weeks, so the moves in markets are not without justification. The various speeches, interviews and statements to the media have all suggested the UK is squaring up to a ‘hard Brexit’. This has blindsided markets, which were previously priced for a soft deal that would see the UK retain significant EU market access.

UK Prime Minister Theresa May’s attempts to paint soft/hard Brexit as a false dichotomy ring hollow, when the terms her government have set out strongly suggest the UK will lose a material amount of access to European markets. I’d suggest anyone arguing otherwise takes a look at GBP/EUR’s progress.

At this point, picking a bottom for the pound is an exercise in knife catching. You may get it right and impress everyone with a nice parlour trick, but there’s a greater chance of painting your living room red.

It’s not clear how much of Friday morning’s sell-off was a matter of panic and momentum, and how much it reflects genuine deterioration in the outlook for sterling over the previous week. But what is clear is that the pound is extraordinarily vulnerable at the moment, and the potential for further volatile moves is unusually high.

Brexit could benefit EU-Arab banking relations

Posted on October 11, 2016April 11, 2017 by Helen

“Absolutely comfortable”, said Bank of England Governor, Marc Carney, defending his decision to cut interests rates to a historically low level in an attempt to mitigate the impact of Brexit.

UK Prime Minister Theresa May has since indicated the UK Government will not trigger Article 50 this year. With regards to Brexit negotiations, May is required to run head-on against those in the EU, who demand that all four freedoms at the heart of the EU – of people, capital, goods and services – remain sacrosanct.

London’s position as the European continent’s primary financial centre is under threat

Last week, the Minster for Brexit, David Davis, said the negotiation process for disengaging the UK from the EU will take up to three years. However, Chancellor of the Exchequer Philip Hammond has suggested it could take up to six years to complete exit negotiations. David Cameron, meanwhile, did like Pilate and washed his hands of the Brexit matter entirely, and so it seems nobody is ready to give a concrete indication of how long the UK’s exit from the EU will actually take, nor how the UK Government plans to lead this exit.

Competing for the top spot
Following the Brexit vote, London’s position as the European continent’s primary financial centre is under threat.

Shortly after the Brexit vote occurred, Lloyds Bank announced it will be cutting 3,000 jobs and closing 200 branches. HSBC, meanwhile, plans to relocate 1,000 employees to Paris. UBS decided to move 1,500 of its 5,000 employees from London to Frankfurt, and a number of American banks are also rumoured to be considering leaving London, even before the final outcome of Brexit negotiations.

British banks are putting pressure on May to negotiate the UK’s Brexit terms, including keeping the right to sell financial products across the EU (known as ‘passporting’), which could help keep banks in London. In this context, international banks are likely to wait and see if passporting negotiations are at all feasible before deciding where or how to shift jobs out of London.

European cities such as Paris and Frankfurt now battle for London’s financial crown. Paris is already a major hub for London-based HSBC, Europe’s biggest bank, while Frankfurt is the second largest financial centre on the continent. Dublin, meanwhile, offers exiled bankers a similar legal system conducted in the English language.

Cities such as Frankfurt have made considerable efforts to become Europe’s next financial hub, including setting up special hotlines for banks that want to discuss shifting operations out of London. Business France published leaflets outlining the joys of working and living in Paris, as per The Wall Street Journal. Taxation, labour laws, cost of living and lifestyle factors are decision drivers for banks trying to choose a new business-friendly gateway to Europe.

The main contenders
London profits from lower corporate tax rates and more flexible employment laws than Frankfurt and Paris. On the other hand, Frankfurt is the home of the European Central Bank and has a lower cost of living than London and Paris. However, it also has the reputation of being a boring city. Spokespeople from the city deny this, saying: “Frankfurt makes you cry twice: once when you get sent there, and once when you have to leave.”

Whether Dublin, Luxembourg, Amsterdam or other cities will become the new financial hub of the EU is not the major issue. More important, particularly for defending the preservation and existence of the EU, is that a large number of EU members respect the four freedoms of the union; especially the free movement of capital, services, goods and free movement of labour among countries with similar income level.

However, the current free labour movement among the 27 EU countries has become politically controversial, as large number of migrants from lower income countries are emigrating to higher income countries. This has caused some social fear and suspicion, and, as some would argue, led to the Brexit vote in the first place.

We sincerely believe that banks’ clients and customers are a major factor for banks to consider during Brexit negotiations. Clients want banks’ reassurance that there won’t be disruption in their services.

European banks have to push ahead with plans to aggressively penetrate the Arab financial markets

Looking outside the EU
More generally, while London’s role globally will be different after Brexit, it will remain at the centre of world finance. Indeed, London has one of the most advanced Arab banking – in particular, Islamic banking – financial markets in the Western world, and became a key destination for most Arab banks.

It is a fact – without going into detail – that jurisdictions of cities competing to become the new financial hub have to adjust fiscal and regulatory frameworks to enable and ensure playing fields for Arab banking (including Islamic banking) in the EU. Having said that, European banks also have to push ahead with plans to aggressively penetrate the Arab financial markets – especially the GCC markets, which are characterised as cash-rich and for their profitable business opportunities.

The business outlook for European banks worsened after the Brexit vote, which was followed by market volatility and the Italian banking crisis. These underscore the need for European banks to bolster their presence outside Europe and expand their fee income by bringing on new clients and projects from the Arab world, which remains a positive region – more so than any other part of the world.

In conclusion, relationships between the EU and Arab banks are fairly modest, and these have to be developed. We are thankful for the efforts rendered by the Union of Arab Bank to persistently initiate the dialogue to support enhancing the relations.

Substantial appetite for attracting liquidity from Arab countries and increased emphasis on alternative financial solutions after the last financial crisis is the cornerstone to further promising endeavours.

Mourad Mekhail is a former Wall Street banker. He earned his Master of Business Administration in International Economies from Trier University, Germany. Since 2011, Mekhail has served as Advisor to the Board of Directors at Kuwait International Bank, following his previous assignment as Head of International Investment.

How PetroRio bested the 2016 oil price crash

Posted on October 11, 2016October 12, 2016 by Helen

PetroRio is the largest independent company in oil production in Brazil. It is the operator of the Polvo Field, located in the Campos Basin, which boasts Brazil’s seventh largest daily production of barrels of oil equivalent (BOE). PetroRio is the owner of Polvo A fixed platform and a drilling rig, currently in operation in this field. The platform is connected to the FPSO Polvo with capacity to segregate hydrocarbons and water treatment, oil storage and offloading.

The Polvo Field license covers an area of approximately 134sq km, with several prospects with potential for further explorations. Part of the success of PetroRio is the company’s corporate culture, which seeks to increase production through the acquisition of new producing assets, re-development, increased operational efficiency, and the reduction of production costs and corporate expenses. PetroRio’s main objective is to create value for its shareholders, with financial discipline and full respect for safety and the environment.

The company goal is to
reach a production of 100,000 barrels per day by the end
of 2017

Still burning bright
PetroRio stands out among the world’s big energy producers for one simple reason: for PetroRio, 2015 was a good year. Despite the challenges imposed by the oil price collapse, PetroRio achieved impressive results from the beginning of the year, when it initiated an aggressive cost reduction programme that comprised operational optimisations and renegotiations with its entire supplier base.

As a result, operating costs dropped 31 percent in 2015 compared to the previous year, while later in the year the company began a second round of renegotiations that generated further cost savings in the first half of 2016. Polvo Field’s operating costs in 1H16 were in line with the company annual target of $90m, which represents a 17 percent cut compared to the already low 2015 levels, while general and administrative expenses fell 67 percent between 2013 and 2015. In the second quarter of 2016, lifting costs declined to $28.17/bbl, the lowest since the beginning of PetroRio operations (see Fig 1).

In 2015, 3.056 million barrels were produced in the Polvo Field (100 percent of the field), with average operating efficiency of 94.4 percent, 1.1 percentage points higher than in 2014. This was an excellent result, considering some operational setbacks the company had to face.

The search for operational excellence is part of PetroRio’s day-to-day activities and the efficiency levels already achieved in the Polvo Field confirm this commitment. During 2015, four off takes were held totalling 1.799 million barrels sold, with revenues of BRL253.1m. PetroRio went through this challenging environment with strong determination and sturdy resilience, presenting a positive EBITDA of BRL150.1m, EBITDA margin of 59.3 percent, net income of BRL110.4m, a strong balance sheet, unlevered and with a comfortable cash position of almost BRL500m at the end of December 2015.

In addition to the cost savings achieved, in December PetroRio completed the purchase of Maersk’s remaining stake of Polvo in order to start a well-succeeded revitalisation programme. After the completion of the first phase in July 2016, which involved an intervention in two producing wells and the revitalisation of a third one that had been abandoned in 2008, a productivity gain of 20 percent was observed.

If maintained in the long run, this improvement has the potential to extend the field’s working life by one year and increase PetroRio’s proven reserve estimates by more than 10 percent, after having already tripled this figure versus the former operator expectations (see Fig 2). Certified developed proven reserves also increased by 45 percent in 2015 and the field useful life was extended by three years compared to the previous report. The company expects a similar gross addition on developed proven reserves in the next certification report after investments made in 2016, and believes one additional upside may come from the outcome of new prospects drilling, mostly sandstone, as new good-quality reservoirs were successfully accessed.

Turning the screws
Last year was a turning point for PetroRio. The company took the bold step of reinventing itself, switching its strategy from an exploration company to instead focus on the acquisition and development of producing fields. As such, PetroRio has undergone significant changes in recent years as part of its development process. Chiefly, this meant increasing oil reserves and obtaining a massive cost reduction, all the while maintaining the highest levels of operational safety. This model is to be executed as part of the company’s expected growth strategy that now relies on the acquisition of producing fields. This successful model implemented in the Polvo Field, which combines cost optimisation, careful reservoir management and a well redevelopment programme should enable the company to obtain additional gains in the new fields to be acquired.

On this topic, it is worth mentioning the Brazilian National Agency of Petroleum, Natural Gas and Biofuels recently granted PetroRio the ‘Operator A’ qualification, which allows the company to perform activities in deep and ultra-deep water, essential for its growth strategy. The current scenario offers good opportunities both in Brazil and abroad, and PetroRio is strategically positioned as one of the sector’s main candidates for value creation given its solid balance sheet, highly qualified technical staff and capital allocation discipline. The company goal is to reach a production of 100,000 barrels per day by the end of 2017. This will be achieved through mergers and acquisitions in order to further dilute fixed costs and capture additional gains when the oil price recovers.

In line with its strategic focus on producing fields and reducing exposure on exploratory risks, PetroRio completed the farm-out of the concessions held by the company in the Brazilian Solimões Sedimentary Basin to Rosneft for $55m, and did not renew the oil exploration licenses in Namibia. Therefore, the company is no longer exposed to commitments with the exploration project in the amount of $150m that would be originated from the automatic renewal of these licenses. Continuing with the process of divesting on non-strategic assets, four aircraft were sold during 2015 for $6.1m. Two others were sold in the first quarter of 2016 leaving only one aircraft, for which the firm is currently
seeking a buyer.

In addition to Polvo Field’s optimisation, another area that should be highlighted is PetroRio’s innovative capacity and entrepreneurial culture. This has proven to be of vital importance as the energy company has now become the first in Brazil to use a new technology for oil containment and collection in case of oil spills. At the same time, the new equipment, Side Collector, increases oil collection capacity, as well as being able to eliminate the need for a second dedicated vessel. This then goes towards promoting the firm’s expected annual cost savings of approximately $3m. This strong culture, focused on results, will consolidate PetroRio as Brazil’s largest independent oil and gas production company.

Lastly, on July 14, PetroRio completed 1,500 days without lost-time injuries on the Polvo A fixed platform, which is equivalent to more than four years or approximately one million working hours. This important milestone demonstrates the company’s commitment to reflecting the principles of economic, environmental and social sustainability in its values and culture.

PetroRio had what can only be described as a successful 2015. In the environment of seemingly unending soft energy prices, many firms around the world have wavered, unsure of how to move forward in this new climate. PetroRio has not been one of them. It has faced the decline head on and used it as an opportunity for reorganisation. Its strong corporate culture has allowed it to make the most of the tough international climate within which it finds itself operating; its hard-headed and practical approach has allowed it to face down the worst of the world’s energy price collapse. PetroRio can now boldly move forward – in spite of prices seemingly not recovering anytime soon – with confidence.

Global energy demand expected to peak by 2030

Posted on October 11, 2016October 12, 2016 by Helen

The World Energy Council has released its World Energy Scenarios 2016 report in collaboration with Accenture Strategy ahead of the World Energy Congress in Istanbul, and has predicted per capita demand energy demand will peak before 2030.

Speaking at the launch of the report, Executive Chair of Scenarios at the World Energy Council, Ged Davis, described the energy industry as undergoing a ‘grand transition’. “Historically people have talked about ‘peak oil’, but now disruptive trends are leading energy experts to consider the implications of ‘peak demand’. Our research highlights seven key implications for the energy sector which will need to be carefully considered by leaders in boardrooms and staterooms.”

The report suggests three possible scenarios for the energy economy and how they would each affect the global energy mix.

The report predicts per
capita energy demand will reach a peak before 2030. It also suggests overall energy demand will double
before 2060

While the report predicts per capita energy demand will reach a peak before 2030, it also suggests that overall energy demand will double before 2060. The report also predicts that solar and wind will continue to make up a greater percentage of the global energy mix. While solar and wind currently make up about four percent of the industry, the report estimates their share could rise to between 20 and 39 percent by 2060.

Subsequently, the report forecasts a fall in the percentage of fossil fuels in the global energy mix. In all three of its scenarios, it also suggests that the global carbon budget will be broken in the next 30 to 40 years. One consistent factor across all three situations is a growing demand for natural gas.

“By 2060, all scenarios point to an increase in demand for gas, as well as a possible peak demand for oil within the 2035-45 timeframe”, said Nuri Demirdoven, Managing Director at Accenture Strategy. “Misspending, including misallocation of capital, has always been a risk for energy assets, and will continue to grow due to fundamental shifts in the industry. Leading companies across all scenarios will be those that adapt quickly and take two urgent steps: rethink the balance of their energy portfolio, and utilize business and digital technologies to transform how they deliver work and organize and manage performance across their businesses.”

GCC Investment & Development Awards 2016

Posted on October 10, 2016August 16, 2017 by Helen

Since 2014, oil prices have fallen from above $100 a barrel to around $50 on the global market. This rapid softening of prices has been felt differently around the world: some market players have benefited, while others have lost out. Generally, those nations that are oil exporters have found themselves on the losing end of the deal – yet not all exporters have passively accepted this decline and become victims of market forces.

Many countries have seen the decline as providing a chance to pursue much-needed economic reforms. Principally, the Arab kingdoms that compose the Gulf Cooperation Council (GCC) have all taken the opportunity to reassess their economies and pursue reforms aimed at fiscal diversification. Necessity is the harbinger of change, and the oil price collapse has made clear that change in these economies is now in fact a necessity. As a consequence, GCC states have begun to implement a whole raft of exciting developments.

Years of rising commodity prices have allowed the GCC states to foster a dependency on oil

Since the 1970s, when global oil prices first began to significantly increase, GCC states have profited handsomely from the natural endowment of black gold their nations sit atop. The money that came from selling oil to a world growing ever hungrier for the stuff has dramatically and positively changed the lives of GCC members. Oil incomes have allowed a construction boom in both commercial and residential properties, and the skylines of the Arabian Gulf are now unrecognisable from those of the 1960s.

Vast oil revenues have also been able to fund generous welfare projects across the region – with, of course, minimal national debt – creating a prosperous life for many. Many Gulf states now have among the highest per capita incomes in the world. The basic essentials of life such as water – not to mention energy itself – can be provided at heavy discounts, while many Gulf states have been able to introduce some of lightest tax regimes in the world, thanks to the strong fiscal positions oil has put them in.

But now, with oil prices at historic lows, reform is on the table. Without discounting the huge and life-changing benefits oil has brought to the citizens of GCC member states, it has not been without its problems – problems the governments of these countries are now keen to tackle and to solve.

Clear as water
Principally, years of rising commodity prices have allowed these states to foster a dependency on oil. Being so lucrative, oil production has often been emphasised to the detriment of other industries. However, GCC member states are now recognising this, and are pursuing an exciting agenda to diversify their economies, placing them on a sound footing for the future.

One of the most exciting sets of reforms to come out of the GCC states is Saudi Arabia’s Vision 2030. The impetus behind the scheme comes from the kingdom’s young and energetic Deputy Crown Prince Mohammed bin Salman. In April, the prince unveiled his plan for bringing wide-ranging reforms to Saudi Arabia, aimed at reducing his country’s dependence on oil by building a solid foundation for a revived private sector and fostering a good business climate.

The 84-page plan’s most revolutionary move has been to open up the Saudi state oil company Aramco to public investment. The oil-producing behemoth is worth roughly $2trn, and, according to Vision 2030, roughly five percent of it will be offered up to investors in a planned IPO. Allowing Aramco to be traded publically will lead Saudi Arabia into a more open and transparent age. As the prince noted: “Aramco’s IPO would have several benefits, the most important of which is transparency.” Public listing will mean “Aramco would have to announce its earnings every quarter. It will be observed by all Saudi banks, all analysts and Saudi thinkers, as well as all international banks and think tanks”.

Transparency in general is a core aim of the kingdom’s reform plan. As the official Vision 2030 statement noted: “We shall have zero tolerance for all levels of corruption, whether administrative or financial. We will adopt leading international standards and administrative practices, helping us reach the highest levels of transparency and governance in all sectors. We will set and uphold high standards of accountability. Our goals, plans and performance indicators will be published so that progress and delivery can be publicly monitored.” Increasing transparency in the country will help to create a better environment for business, investment and entrepreneurialism.

Facing outwards
Saudi Arabia is also increasingly courting foreign investment as a means of bolstering its non-oil economy. The aim, according to Vision 2030, is to increase foreign direct investment in the country from the 3.8 percent of economic output it currently accounts for, to 5.7 percent in total. To achieve this, the Saudis hope to advance their country as a major centre of financial and capital markets that are open to the rest of the world.

“To this end, we will continue facilitating access to investing and trading in the stock markets. We will smooth the process of listing private Saudi companies and state-owned enterprises, including Aramco”, the plan said. Alongside this, so-called ‘special zones’ will be created in order to encourage both domestic and international investment. The King Abdullah Financial District – currently under construction – will be transformed into “a special zone that has competitive regulations and procedures, with visa exemptions, and directly connected to the King Khalid International Airport”.

Oil dependency has also meant the public sector has come to dominate the economy, crowding out private enterprises. As the report noted: “Although we believe strongly in the important role of the private sector, it currently contributes less than 40 percent of GDP.” This issue will also be addressed in order to create more commercial opportunities.

As the Vision 2030 document explained: “To increase its long-term contribution to our economy, we will open up new investment opportunities, facilitate investment, encourage innovation and competition, and remove all obstacles preventing the private sector from playing a larger role in development.” Reforms will be implemented to pave “the way for investors and the private sector to acquire and deliver services – such as healthcare and education – that are currently provided by the public sector”.

The goal will be to “shift the government’s role from providing services to one that focuses on regulating and monitoring them”. Saudi Arabia “will seek to increase private sector contribution by encouraging investments, both local and international, in healthcare, municipal services, housing, finance, energy and so forth”.

These reforms and aims, it is hoped, will create ample new investment opportunities for both national and international firms across the Gulf. While Saudi Arabia offers the most comprehensive vision of reform and renewal, many GCC states are implementing reforms aimed at building a strong, healthy and vibrant economy.

In the World Finance GCC Investment and Development Awards 2016, World Finance recognises a number of the firms that are spearheading the GCC member states’ diversification revolution, and are therefore set to take maximum opportunity from these changes.

World Finance GCC Investment & Development Awards 2016

Best Investment Management Company
Alistithmar Capital, Saudi Arabia

Best Investment Banking Company
KAMCO Investment Company, Kuwait

Best Diversified Investment Company
Jazan Development Company, Saudi Arabia

Best Direct Investment Company
Gulf Capital, UAE

Best Sovereign Wealth Fund
Qatar Investment Authority, Qatar

Best Fund Management Company
National Investments Company, Kuwait

Best Custodian
SICO Funds Services Company BSC (c), Bahrain

Best Private Equity Company
KFH Investment, Kuwait

Best SME Finance Programme
Al Dhameen Programme
Qatar Development Bank, Qatar

Best Islamic Bank
Kuwait International Bank, Kuwait

Best Structured Finance Company
Dubai Islamic Bank, UAE

Best Personal Finance Programme
Sharjah Islamic Bank, UAE

Best Project Finance Programme
National Bank of Kuwait, Kuwait

Best Employee Development
Abu Dhabi Islamic Bank, UAE

Best Customer Experience
Saudi Hollandi Bank, Saudi Arabia

Best Investor Relations
Union National Bank, UAE

Best Corporate Social Responsibility
Dolphin Energy, UAE

Best Remittance Company
QIG Financial Services, Qatar

Best Integrated Solar Energy Company
QSTec, Qatar

Best Real Estate Development Company
DEYAAR, UAE

Best Architectural Project Design & Management
Omrania & Associates, Saudi Arabia

Best Hotels & Resorts Development Company
IFA Hotels & Resorts, Kuwait

Best Financial Centre
Bahrain Financial Harbour, Bahrain

Best Healthcare Provider
Dubai Health Authority, UAE

Best Pharmaceutical Company
SAJA Pharmaceuticals Company, Saudi Arabia

Best Luxury Car Dealer
Al Ghassan Motors, Saudi Arabia

Best Fashion & Lifestyle Retailer
Alhokair Fashion Retail, Saudi Arabia

Best Industrial Development Company
Industries Qatar, Qatar

Best Real Estate Development Project
Capital Market Authority Headquarters
Al Ra’idah Investment Company, Saudi Arabia

Best Infrastructure Power Development Project
Qurayyah IPP
Acwa Power, Saudi Arabia

Best Transport Infrastructure Development Project
Dubai Canal Project
Roads & Transport Authority, UAE

Best Economic Infrastructure Development Project
Sohar Port & Freezone, Oman

Individual Awards

Business Leadership & Outstanding Contribution to the GCC Economy
Mohammad Abdullah Abunayyan
Chairman of Acwa Power, Saudi Arabia

Chairman of the Year
Abdullah Ali Obaid AlHamli
Chairman of DEYYAR, UAE

Corporate Finance Deals of the Year 2016

Posted on October 10, 2016August 7, 2019 by Helen

The instability that has so characterised the global economy in recent times has made the conditions for both businesses and investors hard to predict. Risk-taking is less common and financial gambles are few and far between, out of fear of a volatile operating environment that has already taken so many prisoners.

As much as caution remains the defining sentiment of the corporate world, the promise of an economic recovery has done a great deal to give buyers the confidence to seek out acquisitions.

The promise of an economic recovery has done a great deal to give buyers the confidence to seek out acquisition

Accumulated cash reserves have played their part in the last couple of years, and the healthcare, media and technology, and telecoms sectors in particular have sparked something of a deal spree of late. Global mergers and acquisitions (M&A) reached record levels in 2015, with the volume of deals hitting $5trn, according to JPMorgan Chase. This was thanks in large part to growing activity in Asia and the overall globalisation of the market.

While activity has slowed down slightly this year, with global M&A volume until April 2016 sitting at $986bn – compared with $1.24trn the previous year – it remains relatively buoyant. With the majority of corporations having gone through a period of relative inactivity, a string of recent deals has underlined the merits of corporate financing, particularly in commodities, where consolidation has proved effective in combatting overcapacity.

That’s especially true of the oil and gas industry, where the number of deals has surged over recent times on the back of sliding oil prices. Consolidation has been the response to high debt levels in the sector – almost 10 times earnings before interest, tax, depreciation and amortisation, according to a recent report by McKinsey – enabling production firms to remain competitive at a challenging time. “Healthy companies may have been slow to start deals, but they’ll clearly want to be on the lookout to strengthen their competitive positions as new opportunities emerge”, the report noted.

Despite signs of buoyancy, however, the current market isn’t without its complications. According to a report by Deloitte: “These improvements notwithstanding, headwinds remain. The market may be challenged by an unexpected extension of the prolonged low interest rate environment, heightened regulatory scrutiny of potential transactions, and cautious acquirers and sellers – with valuations varying widely based on fundamental differences pertaining to each target.”

Such heightened regulation around mergers has become especially evident in the US, with regulators tightening their policies and cracking down on deals in order to combat anti-competitive activity and protect national security. According to Steven Epstein, Partner and Co-Head of the Mergers and Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP: “Antitrust regulators have more frequently been applying increased scrutiny to transactions, requiring more broad-based remedies as a condition of granting approvals, and more often commencing litigation to block transactions.”

The report added that merger reviews by the Committee on Foreign Investment in the US around security concerns have also increased, even among corporations not directly linked to known security risks. Indeed, a quick glance at some of the collapsed deals over the past year shows evidence of the current framework.

Geopolitical effects
Elsewhere, geopolitical risks have had their part to play in the current shape of the market. Last year’s Paris terrorist attacks and tensions between Saudi Arabia and Iran earlier on in 2016, combined with various other political battles, have contributed to an environment of uncertainty.

M&A activity in the Middle East slowed at the start of 2016, with outbound transactions dropping 85 percent year-on-year to Q1 2016, marking the lowest level for that period in six years. Over in the UK, M&A activity slumped in anticipation of the Brexit vote, and even now the market continues to struggle from lower levels of investor confidence, with activity in the country this year reaching its lowest point since 2011, according to Dealogic.

How the legal framework for deals might change once the UK’s negotiations with the EU have been made remains to be seen; regulatory changes for international mergers will likely depend on whether the UK remains a member of the European Economic Area, but until the negotiations are concluded, it’s likely the UK and its potential investors will continue to experience challenges.

Optimists predict overseas players may well be able to pluck opportunity from the weak currency, however, by snapping up bargain deals and helping to prevent an all-out slowdown in the short term. A large pool of cheap financing has propped up the UK market so far, and Asian investors in particular have been eyeing up UK assets.

The Asia-Pacific region has continued to power through with its successful spate of M&As, with volume from the region hitting $1.5trn in 2015 – almost twice the amount seen in 2013. China has dominated the scene, despite concerns from some that slumped growth there could cause a slowdown.

In the first four months of 2016, Chinese investors announced 70 percent of the biggest cross-border buyouts from Asia, according to JPMorgan Chase. The volume of Chinese M&A transactions reached $735bn last year – almost triple the sum seen in 2013 – thanks to a rising middle-class, a favourable regulatory and funding framework, and vast experience in completing cross-border deals. That is a powerful combination when combined with China’s overall shift towards technology-driven investments – a factor that means North America and Europe are its prime targets.

New technologies
It’s not just in the M&A market that change is causing ripples: across the broader sphere of corporate finance, digitalisation is bringing its own implications to bear, and with new technologies, financial structures are changing. For example, recent research by Accenture found 80 percent of traditional finance services will be carried out by cross-functional integrated teams by 2020.

Such technologies are of course bringing ample opportunity alongside the challenges. The increasing use of big data in financial departments means it is becoming easier than ever to predict performance, seek out potential new markets, and assess (and track) financial risks. Companies are already seeing the benefits as well as the drawbacks.

It is by making the most of those benefits and adapting to these changes that corporations will succeed in today’s climate, and it is herein that the World Finance Corporate Finance Deals of the Year recipients have thrived, weathering the storm that was the financial crisis and retaining their competitiveness during times of volatility.

By overcoming geopolitical challenges and making the most of the opportunities that the current M&A market presents, our award winners offer an insight into what it takes to succeed in today’s market and the ways in which the industry is likely to change in the coming years. They provide an example to which the wider industry should pay heed, thriving in the face of uncertainty and plucking opportunity from instability.

World Finance Corporate Finance Deals of the Year 2016

International Bond Deal of the Year
Terrafina

Corporate Issuer of the Year
Southern Copper Corporation

Cross-Border M&A Deal of the Year
Al Ahli Bank of Kuwait

Equity Deal of the Year
Teva Pharmaceutical Industries

Local Currency Deal of the Year
YDA Construction

Capital Markets Deal of the Year
Rönesans Holding

Sovereign Bond of the Year
United Mexican States

Sovereign Issuer of the Year
Republic of Peru

Quasi-Sovereign Bond of the Year
Pemex

Refinancing Deal of the Year
Gruma

Multisource Financing of the Year
Fibria

Green Bond Deal of the Year
Asian Development Bank

Global Debt Issuance of the Year
African Development Bank

High Yield Bond of the Year
Coltel

Cross-Border Deal of the Year
Itau Chile and CorpBanca

M&A Deal of the Year
Haitong Securities and BESI

Islamic Bond Deal of the Year
Emirates Islamic

Perpetual Bond Deal of the Year
ICTSI

Multi-Currency Deal of the Year
Naspers

IPO of the Year
Nemak IPO

World Finance Real Estate Awards 2016

Posted on October 10, 2016 by Helen

The mere fact real estate is a hard asset lends it a distinct advantage over other, more abstract alternatives. Subdued economic growth with the odd spat of volatility means that, while conditions are less than advantageous for financial markets, they have supported growth in the real estate sector.

Where investors in years past have ploughed their money into high-risk, high-reward opportunities, an uneven recovery has given rise to a more cautious approach that may well squeeze profits – though by no means dampen enthusiasm – for the real estate sector.

Institutional investors are only now starting to pull back from these opportunistic investments, with interest rates and cap rates on the rise. Investors are gravitating towards low risk deals, even if that means lower returns, and are generally waiting on markets to improve before they resort to their old ways. The focus for now at least is on real estate fundamentals, and on leveraging what cost efficiencies they can in what remains a tight operating environment.

Property and real estate act as the building blocks on which budding and healthy economies are built

These shifts make for a highly complex – and sometimes confusing – marketplace. Yet real estate is on the up. Volatility is highlighting the industry’s relative safety, and money typically invested in commodities is being diverted, with rising prices in key cities across the globe becoming by far the better option.

Cushman & Wakefield is of the opinion that new sources of capital, unsatisfied demand and strong supply of debt are all likely to result in global real estate trading, whereas volatility elsewhere is having a significant impact.

What’s more, given the real estate market makes up such a key component of the global economy – even more so in times of high volatility – the companies operating in this space will have the world’s attention fixed on them. Having rebounded considerably over the past year, the real estate market is expected to strengthen further over the coming months, in large part due to the winners of this year’s World Finance Real Estate Awards.

The 2016 awards have been presented to the most impressive names in the business, and as governments around the world attempt to stimulate their economies through fiscal reform, we pay tribute to the private property and construction firms that are doing their bit.

Where’s hot?
In its recent Emerging Trends in Real Estate report, PwC wrote: “For real estate, 2016 will see investors, developers, lenders, users and service firms relying upon intense and sophisticated coordination of both their offensive and defensive game plans. In an evermore competitive environment, with well-capitalised players crowding the field, disciplined attention to strategy and to execution is critical to success.”

Although there are challenges to be faced for the real estate sector, investors are generally bullish about its prospects. In fact, real estate is something of a rarity in that it’s one of a few sectors where solid and consistent returns are near enough guaranteed – not just in emerging markets, but in mature ones too.

Most equities are either flat or negative, and a variety of factors have inflicted pains on financial markets, including an end to quantitative easing in the US, the slowdown in China and the collapse in oil prices. Real estate represents a relative safe haven, as it is one of very few sectors where investors are unanimously confident. San Francisco, New York and Los Angeles are the US’ hot spots, whereas in Europe London is by far and away the most popular destination, followed by Paris and Frankfurt. In the Asia-Pacific region, Japan and Australia have come out on top, with Tokyo, Sydney and Melbourne making up the top three locations.

Looking at the situation as it stands, it’s clear the foundations have been laid for what promises to be a fruitful period for property and real estate.

According to a survey conducted by Inman, 30 percent of respondents said they were extremely optimistic about the housing market, while 42 percent said they were somewhat optimistic. In contrast, only six percent said they were somewhat or extremely pessimistic. When asked about their optimistic outlook, one respondent noted: “After being somewhat reserved in my optimism in 2015, I do believe that 2016 will be very good. If interest rates continue to be under six percent, shadow inventory remains low and in check, unemployment remains under 10 percent, local economies continue to strengthen, and inventory is adequate, consumers will have the confidence to get off the fence and make their moves in purchasing and selling.”

Better building blocks
One area in which investors are taking a notable interest is in commercial real estate, where the benefits are more prominent than arguably any other sector. In major markets around the world, commercial property prices have risen substantially, and positive changes in fundamentals and rising expectations of growing cash flow have push prices upwards.

“Commercial real estate is one of the safest investments because prices and values generally do not change at the drop of a hat”, according to a recent Deloitte report. “Commercial real estate is also a tangible asset, and as such, it is easier to see and understand what is going on with individual properties or with the asset class overall.”

The lingering concern is a housing boom in more developed markets could impact affordability and seriously compromise appetite for real estate. The latter stage of this decade could therefore see growth continue but at a slower pace, meaning real estate investors must look to niche areas of the sector if they are to preserve capital and promote sustainable growth.

Stephen Phillips, President of Berkshire Hathaway HomeServices, insisted in an interview with Business Insider that the market is at a turning point with regards to the gap between prices and wages. New builds and intelligent investment will go some way towards rectifying the gulf in wages and prices.

Property and real estate act as the building blocks on which budding and healthy economies are built. As governments seek to make their economies and infrastructure fit for a modern world, real estate and construction firms are helping to drive this vital area of growth.

The World Finance Real Estate Awards offer an insight not only into what it takes to succeed in today’s market, but into the ways in which the industry is likely to change in the coming years. By looking at a wide cross-section of performance indicators, the judging panel at World Finance, together with our readers, have picked out the brightest names in the business.

World Finance Real Estate Awards 2016

Asia
Property Company of the Year
Mah Sing Group Berhad

Best Residential Developer
Paramount Land

Best Mixed Use Developer
KT Group

Best Retail Developer
CapitaLand

Best Office Developer
Cheung Kong Hodings

Best Advisor
CBRE

Best Industrial Developer
Soilbuild Group Holdings

Best Leisure Developer
Dailan Wanda Group

Most Innovative Developer
Frasers Centrepoint

Most Socially Responsible Developer
Soilbuild Group Holdings

Outstanding Contribution
KT Group

Property of the Year
Capitol Grand

Best REIT
Soilbuild Business Space REIT

Middle East
Property Company of the Year
United Real Estate Company

Best Residential Developer
Dar Al Arkan Real Estate Co

Best Mixed Use Developer
Alfardan Group

Best Retail Developer
Emaar

Best Office Developer
SODIC

Best Advisor
Colliers International

Best Industrial Developer
Barwa Real Estate

Best Leisure Developer
United Real Estate Company

Most Innovative Developer
TDIC Abu Dhabi

Most Socially Responsible Developer
Emaar Properties

Outstanding Contribution
Emaar Properties

Property of the Year
Abdali Mall

Best REIT
Emirates REIT

Europe
Property Company of the Year
Optimum Asset Management

Best Residential Developer
Aristo Developers

Best Mixed Use Developer
Dana Holdings

Best Retail Developer
Westfield

Best Office Developer
HB Reavis

Best Advisor
CBRE

Best Industrial Developer
Prologis

Best Leisure Developer
Aerium

Most Innovative Developer
NEF Real Estate

Most Socially Responsible Developer
Prologis

Outstanding Contribution
Trigranit

Property of the Year
Okhta Mall

Best REIT
Altsria REIT

Latin America
Property Company of the Year
TGLT

Best Residential Developer
TGLT

Best Mixed Use Developer
IRSA

Best Retail Developer
Grupo MRP

Best Office Developer
Odebrecht Realizacoes Immobiliarias

Best Advisor
Jones Lang LaSalle

Best Industrial Developer
Global Logistics Properties

Best Leisure Developer
Odebrecht Realizacoes Immobiliarias

Most Innovative Developer
Odebrecht Realizacoes Immobiliarias

Most Socially Responsible Developer
Mexico Retail Properties

Outstanding Contribution
TGLT

Property of the Year
Alto Comahue Shopping Centre

Best REIT
Fibra Uno

North America
Property Company of the Year
Westfield Group

Best Residential Developer
Holland Partner Group

Best Mixed Use Developer
Silverstein Properties

Best Retail Developer
Westfield Group

Best Office Developer
Cadillac Fairview

Best Advisor
JLL

Best Industrial Developer
DCT Industrial

Best Leisure Developer
Hyatt Group

Most Innovative Developer
Trinity Development Group

Most Socially Responsible Developer
Ivanhoe Cambridge

Outstanding Contribution
Diamond Group

Property of the Year
Millennium Tower

Best REIT
Gramercy Property Trust

Africa
Property Company of the Year
The Billion Group

Best Residential Developer
Berman Bros

Best Mixed Use Developer
Rabie Property Group

Best Retail Developer
The Billion Group

Best Office Developer
Growthpoint Properties

Best Advisor
CBRE

Best Industrial Developer
Abland

Best Leisure Developer
Marriott International

Most Innovative Developer
McCormick Property Development

Most Socially Responsible Developer
McCormick Property Development

Outstanding Contribution
The Billion Group

Property of the Year
Garden City Mall

Best REIT
Vukile Property Fund

World Finance Banking Awards 2016

Posted on October 10, 2016May 16, 2017 by Helen

In keeping with a more-than-five-year trend in which those slow to change have fallen by the wayside, the banking sector has this year been awash with major regulatory and technological change. Virtually unrecognisable from that of a few years ago, this is a new era for banking: one in which the customer lies at the heart of every decision, and sustainability as opposed to profitability is key. Survival – it seems – rests on the ability of banks big and small to keep pace with the rate and scale of the transformation, and nowhere else is this more visible than among the banks featured in this year’s World Finance Banking Guide.

Trust in the banking sector has been restored, and customer-centricity has emerged as an absolute requirement if banks harbour any hopes of survival. People – not profitability – can make or break a business, and many a major name has committed to that sentiment in the hope of pushing ahead of its rivals. New operating strategies have emerged to put customers and employees at the centre of businesses, and technology has proven decisive in the sector’s transformation.

Aside from restoring faith in the sector, technology has paved the way for new and innovative names, and while they can hardly compete with industry stalwarts on scale, a technology-first mentality has opened the door to a range of new opportunities. Investment in IT is no longer an option but a requirement for any bank with aspirations of becoming a market leader. And as much as these investments have proven costly, the benefits to both bank and customer cannot be understated.

Elsewhere, a raft of regulatory reforms has done a great deal to redefine the operating environment. While the burden has, for some, proven too much to bear, others have treated this new regulatory system as an opportunity to stand out from the crowd. Of course, the debate over whether these reforms are beneficial at all will rage on, but the overhaul itself is proof of the fact that banking is a changed proposition.

As much as markets have regained a foothold this past year, stability rests in large part on the banking sector and its ability to push money into and around the economy. This is a banking sector that rests on a threefold commitment to customer service, compliance and innovation, without which this new economic landscape would not exist. The guide provided with this issue takes a look at how banking in all its various forms is spearheading these latest developments, and realising a more sustainable measure of prosperity.

As ever, we’ve scoured the globe for the names that have truly set their markets alight and the ones that have not only exceeded expectations, but also delivered where others have failed. Our research team, together with input from our readers, has delved into the markets to find out which individuals and institutions have pushed the envelope and provided the very best in leading financial services.

With our in-house judging panel, we have selected the finest performers of the year – a challenging task with many tightly contested categories. In the supplement, readers will find insight into each of the year’s leading institutions, as well as those individuals who have made a real difference on each continent. Once again, congratulations to our winners, who we hope to see much more of in the months and years to come.

World Finance Banking Awards 2016

Best Retail Bank, Angola
Banco de Fomento Angola

Best Banking Group, Azerbaijan
PASHA Bank

Best Commercial Bank, Azerbaijan
PASHA Bank

Best Banking Group, Bolivia
Banco Mercantil Santa Cruz

Best Investment Bank, Brazil
BTG Pactual

Best Banking Group, Brunei
Baiduri Bank

Best Commercial Bank, Canada
BMO Bank of Montreal

Best Banking Group, Chile
Banco de Crédito e Inversiones

Best Private Bank, Chile
Banco de Crédito e Inversiones

Most Sustainable Bank, Chile
Banco de Crédito e Inversiones

Best Banking Group, Cyprus
Eurobank Cyprus

Best Banking Group, Dominican Republic
Banco Popular Dominicano

Best Commercial Bank, Dominican Republic
Banco de Reservas

Best Retail Bank, Dominican Republic
Banco de Reservas

Best Investment Bank, Dominican Republic
Banco de Reservas

Best Banking Group, France
Crédit Mutuel

Best Commercial Bank, Germany
Commerzbank

Best Banking Group, Ghana
Zenith Bank Ghana

Best Private Bank, Greece
Eurobank

Best Retail Bank, Greece
Eurobank

Best Commercial Bank, Hungary
ING Bank Hungary Branch

Best Banking Group, Jordan
Jordan Islamic Bank

Best Commercial Bank, Kenya
Co-operative Bank of Kenya

Most Sustainable Bank, Lebanon
Bankmed

Best Banking Group, Lebanon
Bankmed

Best Private Bank, Liechtenstein
Kaiser Partner

Best Banking Group, Macau
ICBC (Macau)

Best Commercial Bank, Mozambique
Banco BCI

Best Commercial Bank, Myanmar
Kanbawza Bank (KBZ Bank)

Best Retail Bank, Myanmar
Kanbawza Bank (KBZ Bank)

Best Banking Group, Myanmar
Ayeyarwady Bank

Best Private Bank, Myanmar
Ayeyarwady Bank

Most Sustainable Bank, Myanmar
Ayeyarwady Bank

Best Banking Group, Nigeria
Guaranty Trust Bank

Most Sustainable Bank, Nigeria
Access Bank

Best Banking Group, The Philippines
Rizal Commercial Banking Corporation

Best Commercial Bank, The Philippines
Rizal Commercial Banking Corporation

Best Investment Bank, Portugal
CaixaBI

Best Commercial Bank, Portual
ActivoBank

Most Sustainable Bank, Saudi Arabia
Arab National Bank

Best Private Bank, Spain
Banca March

Best Commercial Bank, Sri Lanka
Sampath Bank

Best Retail Bank, Sri Lanka
Sampath Bank

Most Sustainable Bank, Sri Lanka
People’s Bank

Best Banking Group, Sri Lanka
People’s Bank

Best Commercial Bank, Taiwan
Mega ICBC

Best Retail Bank, Turkey
Garanti Bank

Best Banking Group, Turkey
Akbank

Best Private Bank, US
Brown Brothers Harriman

Best Commercial Bank, US
Bank of the West

Banker of the Year, Asia
Aung Ko Win at Kanbawza Bank (KBZ Bank)

Banker of the Year, Middle East
Dr. Robert Maroun Eid at Arab National Bank

Banker of the Year, Europe
Jose Maria Ricciardi at Haitong Bank

World Finance Global Insurance Awards 2016

Posted on October 10, 2016November 22, 2016 by Helen

Traditional operating models in the insurance sector are facing intense pressures to either embrace advances, or fall foul of disruption. Higher customer expectations, macro economic volatility and the transition to digital have all contributed to an existential crisis for insurers, with many forced to confront the fact the ground on which their value proposition was built has since shifted.

Despite this, too many have been unwilling to change, and those wedded to a business-as-usual outlook have been left to rot by the wayside. Deloitte said in a recent report: “We believe the industry’s hesitance to take bolder, faster steps toward transformation may be the result of reliance on a series of what we call ‘orthodoxies’ – core presumptions about the strength and uniqueness of an insurer’s traditional value proposition and business models. Many insurers have treated these orthodoxies as entry barriers effectively insulating them from being disrupted in a significant way by internal or external upstarts.”

The consensus is that issues to do with capacity and competition are unlikely to change much – if at all – in the coming years, and while these and other challenges remain, an improved outlook for the global economy bodes well for the sector as a whole. Technology is perhaps the defining focus of our times, and the transition to digital this past year alone has empowered some businesses while handicapping others. Now as ever, the standout performers are those most willing to embrace change.

Now as ever, the standout performers are those most willing to embrace change

The recipients of this year’s World Finance Global Insurance Awards are made up of the most impressive names in the business, and as governments around the world attempt to stimulate their economies through fiscal reform, we pay tribute to the insurance firms doing their bit to restore order.

The World Finance Global Insurance Awards offer an insight not only into what it takes to succeed in today’s market, but into the ways in which the industry is likely to change in the coming years. By looking at a wide cross section of performance indicators, the judging panel at World Finance has picked out some of the brightest names in the business.

Insurance goes digital
According to Shaun Crawford, Global Insurance Leader at EY: “Many insurers are investing in digital platforms that strengthen their relationships with customers across all product classifications and geographies. Their goal is to empower both businesses and consumers to better shop for insurance, making products more transparent [and] easier to understand and compare.”

The result is a sharper focus on data analytics, cloud computing and modelling techniques to map risks or strategic priorities. More than that, investment in digital platforms means insurers have been able to more easily streamline processes, while at the same time improve collaboration and regulatory compliance. While insurance historically has been a rather opaque and rarely understood product, evolving technological platforms have boosted familiarity with insurance on the consumer’s part.

Crucially, insurers no longer have a monopoly on pricing and risk assessment, now disruptive trends have allowed greater numbers access to data and analytic capabilities. Disrupt or be disrupted is the name of the game.

According to a 2016 PwC report: “So far, incremental innovation has helped insurers meet most new customer expectations. But, with the demands of the shared economy, usage-based models, Internet of Things, autonomous cars and wearables, they have an opportunity to do more radical innovations and experiment with new business models. In this context, customers have a need for new insurance solutions, and established carriers (i.e. incumbents) have an opportunity to provide tailored products and services for different segments.”

The upshot is insurers must cater to consumers in a way they have not experienced up until now. An inability to keep pace with changing consumer appetites, therefore, can break a business, and technology – perhaps more than any other factor – is the difference between success and failure.

Industry acquisitions
Aside from technology, one of the drivers sparking real and progressive changes in the insurance sector is consolidation. JLT Specialty noted in a recent report that the soft insurance market has accelerated its mergers and acquisitions (M&A) activity this past year. This trend, at least in the immediate future, is unlikely to have much of an effect on the oversupply of capacity, and so the climate will remain highly competitive, provided there is no significant drop off in claims activity. Far from alone in this capacity, insurance is just one of many sectors to have embraced M&A as a means of boosting revenue growth, breaking new markets and increasing operating efficiencies.

On the one hand, this M&A spree is indicative of a soft insurance market, though it’s also a symptom of growing confidence in the sector’s ability to perform, and perform well. “Positive macro conditions, including an improving economy and low interest rates, encouraged company boards and executives in insurance, healthcare, technology, food and beverage, transportation, and other industries to look for ways to put accumulated capital to work”, according to a Deloitte report on the matter. “M&A is often an effective way to spur growth and expand market share, and it proved to be a popular choice for companies of all sizes.”

Of course, all this is part and parcel of insurers’ efforts to appease the customer, for whom enhanced interaction, new offerings and data competence are the expectation. However, while the situation for insurance on the whole is positive, the situation varies greatly from place to place.

Regional variations
In the Asia-Pacific region, for example, the outlook for life and non-life insurance is looking promising, in spite of an economic slowdown. The opportunity for insurers here rests with the country’s emerging middle class; a rise in household incomes has caused this development to come about. Here, as with most places, technology is driving mobile and web-based sales, and the majority of customers appear willing to embrace new, digital channels.

In Europe, stagnant growth and a general reluctance to invest in businesses means insurers are up against significant challenges. As much as the situation has handicapped the majority, the situation means the incentive to focus on the customer is growing. This sentiment, combined with sharper regulatory scrutiny, will give rise to consumer-centric products across the continent.

In the US, meanwhile, while the opportunities are not distributed evenly across the industry, insurance sales are driven by an economic recovery and expectations that interest rates will increase.

The 2016 World Finance Global Insurance Awards offer an insight into the latest industry developments – not just in Asia, the US and Europe, but across the globe. Looking at the recipients, it is clear there have been many developments in this past year. Without the work of this year’s award winners, the industry would likely not be in the position it is today.

World Finance Global Insurance Awards 2016

Argentina
General – Caja de Seguros
Life – BNP Paribas Cardif

Australia
General – Insurance Australia Group
Life – BT Financial Group

Austria
General – UNIQA Insurance Group
Life – Sparkassen Versicherung

Bahrain
General – Bahrain Kuwait
Life – Life Insurance Corp

Bangladesh
General – Green Delta Insurance Company
Life – MetLife Alico

Belgium
General – Ethias
Life – Argenta

Brazil
General – Allianz
Life – Brasilprev

Bulgaria
General – Armeec Insurance
Life – SiVZK (TUMICO)

Canada
General – Intact
Life – Manulife

Caribbean
General – General Accident
Life – Scotia Life

Chile
General – Sura Insurance
Life – Consorcio Seguros

Colombia
General – Liberty Seguros
Life – Bolivars

Costa Rica
General – Assa
Life – Adisa

Cyprus
General – Royal Crown Insurance
Life – CNP Cyprialife

Denmark
General – Top Danmark
Life – Sampension

Egypt
General – Misr Insurance
Life – Suez Canal Insurance

Finland
General – Op Pohjola
Life – Nordea Life Assurance

France
General – Covea
Life – AXA

Germany
General – HDI-Gerling
Life – Zurich

Greece
General – INTERAMERICAN
Life – NN Hellas

Hong Kong
General – AXA General Insurance
Life – HSBC Insurance (Asia)

Hungary
General – Allianz Hugaria
Life – Magyar Posta Életbiztosító

India
General – ICICI Lombard
Life – Max Life Insurance

Indonesia
General – Jasa Indonesia
Life – PT Asuransi Jiwasraya

Jordan
General – Middle East Insurance Company
Life – Jordan Insurance

Italy
General – Unipol Assicurazioni
Life – Poste Vita S.p.A.

Kazakhstan
General – Nomad Insurance
Life – JSC Kazkommerts-Life

Kenya
General – CIC General Insurance
Life – Britam Life Assurance

Kuwait
General – Gulf Insurance Group
Life – Gulf Insurance Group

Liechtenstein
General – Vienna Insurance Group
Life – Baloise Life

Luxembourg
General – AXA Assurance
Life – Swiss Life

Malaysia
General – Etiqa Insurance
Life – AIA

Malta
General – Gasanmamo
Life – HSBC Life

Mexico
General – GNP
Life – Seguros Monterrey New York Life

Myanmar
General – IKBZ Insurance
Life – IKBZ Insurance

Netherlands
General – Achema
Life – Srlev NV

New Zealand
General – TOWER
Life – Asteron Life

Nigeria
General – Zenith General Insurance
Life – FBNInsurance Limited

Norway
General – SparBank 1
Life – Nordea Liv

Oman
General – Oman United Insurance
Life – National Life

Pakistan
General – Adamjee Insurance
Life – EFU Life

Panama
General – Assa
Life – Pan America Life

Peru
General – Rimac Seguros
Life – Pacifico Seguros

Philippines
General – Standard Insurance
Life – Pru Life

Poland
General – UNIQA
Life – MetLife TUnZiR

Portugal
General – Allianz Seguros
Life – Ocidental Seguros

Russia
General – Alfa Strakhovanie
Life – Renaissance Zhizn Insurance Company

Saudi Arabia
General – Bupa
Life – Medgulf

Serbia
General – Generali Osiguranje Srbija
Life – Generali Osiguranje Srbija

Singapore
General – QBE Insurance
Life – AIA Singapore

South Korea
General – Samsung
Life – Hanwha Life

Sri Lanka
General – Sri Lanka Insurance Corp
Life – Ceylinco Life Insurance

Sweden
General – Trygg-Hansa
Life – Alecta

Switzerland
General – Swiss Mobi
Life – Swiss Life

Taiwan
General – Cathay Century Insurance
Life – Fubon Life Insurance

Thailand
General – The Viriyah Insurance Pcl
Life – Thai Life Insurance

Turkey
Non-Life – Zurich Sigorta
Life – Anadolu Hayat Emeklilik

UK
General – Allianz
Life – Legal & General

US
General – Progressive Corporation
Life – Lincoln Financial Group

Vietnam
General – Baoviet
Life – Baoviet Life

World Finance Oil & Gas Awards 2016

Posted on October 10, 2016October 10, 2016 by Helen

The past year has been a momentous one for the oil and gas industry. Ever since the price of oil started to slide from historic highs in 2014, commentators have been asserting that the commodity has finally bottomed out.

After touching below $30 a barrel – a 70 percent decline from pre-slump highs – at the start of the year, the price of oil did see some recovery. However, Brent crude has scarcely been able to rise much above $50 a barrel. When – if ever – oil will rebound to pre-2014 levels is anyone’s guess.

Major producers such as Saudi Arabia and Iraq are still pumping out the commodity at record levels, and much-hyped OPEC talks looking to make agreements on slashing production levels have consistently burned out. What is certain, however, is that this seemingly new – or perhaps endless – low for oil is shaking up the entire global energy industry.

While many rigs have closed and firms have gone bust, US shale is still roaring ahead

Americanising oil
After two years of depressed prices, shale oil in the US finally started to feel the pinch in 2016. While American unemployment rates have largely fallen over the last year, it saw upticks at the start of 2016 in states dominated by the shale oil industry: Texas, Oklahoma and North Dakota all saw unemployment claims rise by 25 percent in January 2016 compared to a year earlier. Much of this can be put down to the oil industry shedding jobs, as low prices have squeezed many producers out of the market.

However, while many rigs have closed and firms have gone bust, US shale – for both oil and gas – is still roaring ahead. Those firms that have been forced out of the market were the ones that were only able to survive in the era of low interest rates and pre-2014 high prices. Stronger firms are still shaking up the global oil and gas market. Shale – as is now well known – has pushed the US away from being a major energy importer, instead putting it in the position where it not only produces energy for domestic demands, but also exports it.

This was signified at the end of 2015, when the US lifted its restriction on the export of crude oil. According to the EIA: “In the first five months of 2016, US crude oil exports averaged 501,000 barrels per day – 43,000 barrels per day (nine percent) more than the full-year 2015 average.” The destination of these exports has also seen huge changes: prior to the restrictions being lifted in December 2015, the majority of exported crude went to Canada. However, as the EIA noted: “In March 2016, total crude oil exports to countries other than Canada exceeded those to Canada for the first time since April 2000.”

Shale gas production has also seen the US export more of its liquid natural gas. February 2016 saw the US ship its first large export, destined for Brazil. Cheniere Energy, the US firm that carried out the shipment, said this represented a turning point for gas exports from the US, with energy company predicting “the US will be one of the biggest three suppliers of [liquefied natural gas] by 2020”.

Capital cutbacks
The collapse in oil prices has had major ramifications for business investment in the oil and gas industry. Low prices have meant high cost investments are no longer seen as profitable or possible. Projects have been cut left, right and centre, either because they no longer seem viable or as an attempt to rein in excessive spending.

Since the beginning of crude’s price slip, nearly $400bn-worth of projects have been delayed, pushed back or cancelled in the oil industry. According to a 2016 study by the energy consulting firm Wood Mackenzie, oil companies have put 68 major projects on hold. This means, according to estimates, roughly 27 billion barrels of oil will not be produced as originally planned. Since June 2015, the amount of investment spending that has been deferred due to the price crunch has almost doubled.

When it comes to gas, the slump in oil has been producing cuts in capital spending. In 2014 and early 2015, China’s large natural gas shale fields were an exciting prospect to many. The country was recognised as having the largest shale natural gas reserves in the world, and its growing energy demands meant the fuel’s development and use was a lucrative prospect. International energy firms flooded into the country, in the hope of developing the field, primarily located in the Sichuan basin.

However, once the dip in revenue from collapsed oil prices became more evident, this interest soon waned. Since 2015, many international energy firms have pulled out, delayed or shelved plans to invest in the country’s vast shale gas fields. As Bloomberg reported: “China missed its annual shale gas target of 6.5 billion cubic metres last year, and earlier reduced its 2020 production goal to about a third of its original estimate.” In the meantime, the country’s shale boom remains on the rocks.

Going forwards, once energy firms have readjusted to wherever oil prices stabilise, the large funds needed for investing in China’s shale gas potential should be forthcoming. The country’s proven shale reserves – the largest in the world – aren’t going anywhere, and the world’s insatiable demand for energy is likewise destined to stay put.

Interest in Iran
One of the most watched trends in the oil sector in 2016 has been the lifting of sanctions on Iran. The Islamic Republic is now tipped to make a major splash in the oil market as it absorbed back into the global economy. According to the Economist Intelligence Unit, Iran will start exporting up to 700,000 barrels a day by the end of 2016.

However, it will take a number of years before the country is able to return to pre-sanctions levels of production and exporting. A number of stumbling blocks still exist: financial firms are still reluctant to get involved in Iran, potentially hurting its oil sector, while banks in Europe and the US are treading carefully after several high-profile firms received fines for previously flouting sanctions against Iran. A number of sanctions remain in place by the US, restricting the ability of banks to do business with those labelled as sponsors of terrorist groups such as Hezbollah – and Iran’s opaque business structure makes doing business with those classified as such a distinct possibility. These factors will also hamper Iran’s ability to broker shipping deals for oil exports.

At the same time, Iran’s oil facilities are in need of upgrades. The quickest way to achieve this would be through foreign investment from energy firms. However, concerns over the climate for business in Iran could to deter this, along with Iran’s complex rules on foreign ownership of assets.

The new norm
The world oil and gas industry is now adapting to a new normal: low prices. This has shaken up the sector, with the price squeeze seemingly set to continue. While a decade ago talk was of ‘peak oil’ and hydrocarbon demand outstripping supply, today the opposite is the case. World demand is steadily growing, and newly discovered fields and new extraction techniques mean the world is producing more gas and oil than ever before.
The new regime of low prices in 2016 has forced weaker producers out of the market and shelved less viable projects, creating a meaner, leaner and more efficient oil and gas industry. World Finance takes a look at those players who are contributing to this exciting new market in the World Finance Oil and Gas Awards 2016.

World Finance Oil & Gas Awards 2016

Best Fully Integrated Company
Africa – Sonangol
Asia – PetroChina
Middle East – Saudi Aramco
Eastern Europe – Rosneft
Western Europe – Eni
Latin America – Ecopetrol
North America – Hess Corporation

Best Independent Company
Africa – Oando
Asia – Loyz Energy
Middle East – Dana Gas
Eastern Europe – Irkutsk Oil Company
Western Europe – Premier Oil
Latin America – Pluspetrol
North America – Jones Energy

Best Exploration & Production Company
Africa – Sasol Exploration and Production International
Asia – PTTEP
Middle East – Genel Energy
Eastern Europe – Novatek
Western Europe – Independent Oil and Gas
Latin America – PetroRio
North America – Occidental Petroleum

Best Downstream Company
Africa – Engen Petroleum
Asia – Thai Oil
Middle East – Gulf Petrochem
Eastern Europe – Mol Group
Western Europe – Varo Energy
Latin America – YPF
North America – Valero Energy

Best Upstream Service & Solutions Company
Africa – Nigerdock
Asia – Serba Dinamik
Middle East – Saipem
Eastern Europe – Grupo Servicii Petroliere
Western Europe – Aker Solutions
Latin America – Weatherford
North America – Schlumberger

Best Downstream Service & Solutions Company
Africa – Kenol Kobil
Asia – Petronas
Middle East – ENOC
Eastern Europe – Litasco
Western Europe – Repsol
Latin America – Puma Energy
North America – Kinder Morgan

Best Drilling Contractor
Africa – PIDWAL
Asia – COSL
Middle East – Saipem
Eastern Europe – Exalo Drilling
Western Europe – Maersk Drilling
Latin America – San Antonio International
North America – Noble Drilling

Best Investment Company
Africa – Helios Investment Partners
Asia – Kerogen Capital
Middle East – Mubadala Development Company
Eastern Europe – Alfa Group
Western Europe – Blue Water Energy
Latin America – EIG Global Energy Partners
North America – EnCap Investments

Best EPC Service & Solutions Company
Africa – Amec Foster Wheeler
Asia – Chiyoda Corporation
Middle East – Consolidated Contractors Company
Eastern Europe – RusTechnip
Western Europe – Amec Foster Wheeler
Latin America – CFPS Engenharia E Projetos
North America – McDermott International

Best Sustainability Company
Africa – SPDC
Asia – PTT Public Company Limited
Middle East – ADNOC
Eastern Europe – Irkutsk Oil Company
Western Europe – Total
Latin America – Pacific Exploration and Production
North America – Cenovus Energy

Best Oil & Gas Port Facility
Africa – Port Harcourt
Asia – Port of Singapore
Middle East – Ras Laffan Port
Eastern Europe – Kozmino Port
Western Europe – Port of Rotterdam
Latin America – Guanabara Bay
North America – Houston Fuel Oil Terminal

Best CEO
Africa – Aidan Heavey, Tullow Oil
Asia – Datuk Wan Zulkiflee Wan Araffin, Petronas
Middle East – Amin Nasser, Saudi Aramco
Eastern Europe – Igor Sechin, Rosneft
Western Europe – Claudio Descalzi, Eni
Latin America – Juan Carlos Echeverry, Ecopetrol
North America – Steven J Kean, Kinder Morgan

US trade deficit widens

Posted on October 6, 2016October 11, 2016 by Helen

The US trade gap widened in August, according to the latest figures from the US Commerce Department. The new data shows the US’ trade deficit grew to $40.7bn, a $1.2bn increase over July’s revised figures. The US trade deficit in July stood at $39.5bn, revised from its previous figure of $39.47bn.

The extent of the trade deficit’s expansion in August was unexpected, with economists polled by Reuters anticipating that the figure would fall to $39.3bn. However, while the US trade gap widened – a particularly contentious issue in the current US election cycle – the data points towards some positive trends within the US economy.

While the US trade gap widened, the data points towards some positive trends within the US economy

Exports increased by $1.5bn over July’s revised figures, standing at $187.9bn. This put exports at their highest level since July 2015, suggesting that the effect of the dollar’s appreciation on international demand has waned.

Goods took the largest share of the export increase, rising by $1.2bn to $125.3bn. The export of industrial supplies and materials increased by $1.4bn, although this rise was offset by declines in other areas. The export of civilian aircraft exports fell by $0.8bn, while the export of other capital goods increased.

This surge in exports was eclipsed by an even greater increase in US imports. However, this reported increase still spells good news for the economy: US imports grew by $2.6bn, compared with July’s figures, indicating strong demand within the US economy. In particular, capital goods imports increased by $1.2bn, suggesting a strengthening of US business sentiment.

IMF warns governments over rising global debt levels

Posted on October 6, 2016October 11, 2016 by Helen

The International Monetary Fund (IMF) encouraged governments to implement measures to reduce global debt to a level that is more in line with global GDP. Following the release of its October 2016 Fiscal Monitor report, the IMF said swift government intervention is necessary to combat the current global debt level of $152trn – 225 percent of global GDP. Two thirds of global debt is held in the private sector.

Speaking at a press conference following the release of the report, Vitor Gasper, director of the IMF’s fiscal affairs department, said $152trn is a record amount in global debt. “A crucial message from the fiscal monitor is that when private debt is on an unsustainable path, it is important to intervene early on in the process to make sure financial crises and recessions can be prevented.”

Swift government intervention is necessary to combat the current global debt level of $152trn – 225 percent of global GDP

Overall, debt has not yet fallen from the levels reached during the 2008 global financial crisis. According to the IMF report, slow economic growth since this event has resulted in debt levels not being reigned in.

To combat this spending, the IMF suggested governments lead programmes to restructure debt and tax deals in order to encourage creditors to extended repayment periods. While combating debt levels has traditionally fallen under the responsibility of central banks, the IMF has suggested more active government policies may be more effective in the long term.

“Fiscal policy can do more, as the case may be, to restore nominal growth, facilitate adjustment, and build resilience”, Gaspar said. He also explained that global markets are diverse, and there is not a suitable one-size-fits-all approach. Instead, a comprehensive, consistent and coordinated effort is needed from governments.

Also highlighted in the IMF report was the uneven distribution of debt across the world. High levels of debt were concentrated in advanced economies and some large emerging markets, like China.

The release of the Fiscal Monitor report immediately followed the release of the IMF’s World Economic Outlook, in which it predicted global growth would slow to 3.1 percent in 2016.

IMF cuts growth forecast following advanced economy slowdown

Posted on October 5, 2016October 10, 2016 by Helen

On October 4, the International Monetary Fund (IMF) unveiled its latest World Economic Outlook report, in which it announced that it was lowering its global growth forecast for 2016. Due to slowed growth in the US and other advanced nations, the fund now expects global growth to slow to just 3.1 percent in 2016, before picking up again slightly, to 3.4 percent, in 2017.

This revised forecast reflects lower-than-expected growth in the US, and economic uncertainty in the EU following Britain’s shock referendum vote earlier this year. Recovery from the 2008 financial crisis has also proved slower than previously anticipated, further depressing global growth.

“Our expectations for future growth and productivity have fallen in light of recent disappointing outcomes”, said the IMF’s Economic Counsellor, Maurice Obstfeld.

Due to an economic slump in the US and other advanced nations, the fund now expects global growth to slow to just 3.1 percent in 2016

“Declining growth rates, along with increased income inequality and concerns about the impact of migration, contribute to political tensions that block constructive economic reforms and threaten a rollback of trade integration.”

While advanced economies across the globe are predicted to suffer from subdued growth, the UK in particular is set to experience a significant downturn in the wake of its historic Brexit vote. According to the IMF, UK growth will slow to 1.8 percent this year, before shrinking further to 1.1 percent in 2017. This dramatic downturn would see the UK’s economy growing at less than half its pre-Brexit rate.

The US, meanwhile, is suffering from low levels of imports and poor business investment, leading the IMF to lower its growth forecast to 1.6 percent, down from 2.2 percent in July.

Despite sluggish growth in advanced economies, it is anticipated that emerging markets and developing economies will experience an economic acceleration for the first time in six years. While a downturn in oil prices and a spike in civil conflicts have blighted Middle Eastern economies, resilient growth in Asia has offset stagnation in emerging markets.

India is set to outpace all other major global economies in terms of growth, with its GDP projected to rise by 7.6 percent in 2017. Furthermore, Russia and Brazil are expected to emerge from recession next year, and so the IMF predicts that growth in developing economies will continue to flourish.

As advanced nations such as the US and the UK look to combat their recent economic stagnation, the IMF has advised that governments should invest in education, infrastructure and technology, while seeking to maintain easy monetary policies.

Global manufacturing sector expands at a modest rate

Posted on October 4, 2016October 6, 2016 by Helen

Global manufacturing saw a modest expansion in September, according to the JP Morgan Global Manufacturing PMI. The composite index, produced by JP Morgan and IHS Markit, recorded a slight uptick in world manufacturing growth at 51.0, up from August’s 50.8. Although 2016 Q3’s average headline reading now stands at 50.9 – the highest since the last quarter of 2015 – it remained under the long-run survey average.

Growth for September was primarily carried by a growth in consumer and intermediate goods, with the investment goods sector experiencing a minor contraction.

The manufacturing sector in particular has felt the impact of the current slowdown in global trade growth, it was noted. “Part of the reason for the ongoing below long-run average expansions in new work and production”, the index report noted, “was the continued lacklustre trend in international trade volume”.

The manufacturing sector in particular has felt the impact of the current slowdown in global trade growth

Employment in manufacturing around the world expanded marginally – the second such expansion in the past three months. The US, Europe, Japan and India all saw gains in manufacturing employment, while China, South Korea, Brazil and Russia saw manufacturing job loses.

In general, conditions for manufacturing in Europe were among the strongest. The eurozone experienced a rapid expansion, with Germany, Austria and the Netherlands spearheading the economic union’s growth. The UK also saw strong expansion, with manufacturing at a 27-month high. Growth increased modestly in Poland, the Czech Republic and Russia. The US, however, experienced subdued growth.

The September Markit Manufacturing PMI for the US was also released, which reported a headline figure of 51.5. Although above the world’s average for growth, the figure represents a three-month low for manufacturing expansion in the US economy. Output and new orders in particular suffered from a slower pace of expansion. Employment in manufacturing, however, increased at a sharper pace than in August, although the “pace of staff hiring remained weaker than the average since the jobs rebound began in early-2010”, according to the report.

Chinese RMB officially joins the IMF’s reserve currency list

Posted on October 3, 2016October 6, 2016 by Helen

For the first time since 1999, a new member has joined the International Monetary Fund’s (IMF’s) list of reserve currencies. China’s yuan (RMB) is the first new currency to join the list since the euro was launched, and represents a significant moment in the development of China as a global economic power.

The US dollar, the yen and the British pound are the other currencies in the IMF’s Special Drawing Rights (SDR) basket; the currencies the IMF hands out in loans. The RMB was added to the pile on October 1, the same day the founding of the People’s Republic of China is celebrated.

The RMB’s inclusion in the SDR supports China’s efforts to reduce the world’s dependence on the US dollar as the default reserve currency

“The inclusion into the SDR is a milestone in the internationalisation of the renminbi, and is an affirmation of the success of China’s economic development and results of the reform and opening up of the financial sector”, said the People’s Bank of China in a statement, as reported by Reuters. Its inclusion on this list supports China’s efforts to reduce the world’s dependence on the US dollar as the default reserve currency. The IMF rejected China’s application for the RMB to join the SDR in 2010.

The weighting of the SDR basket is still overwhelmingly in favour of the US dollar, at 41.73 percent. The euro is second at 30.93 percent, with the RMB now making up 10.92 percent. The decision to include the RMB on the list of global reserve currencies was announced in 2015, so this week’s finalisation should not have an immediate impact on global markets.

Despite the development of the currency over the last decade, the decision was not met with universal support. Some critics have argued the RMB does not meet the IMF’s requirements of being freely usable and widely traded. The RMB is currently the world’s fifth most-used currency in terms of value of payments.

In August last year, the RMB suffered a surprise devaluation, prompting accusations that the Chinese Government was engaging in currency manipulation. US presidential nominee Donald Trump said he would label China a currency manipulator if he wins the election.

For more information on the RMB’s potential as a global currency, click here to view a previous World Finance report.