Research Overview

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Outline

Putting regional developments within a global context

Forward-looking analysis that is ahead of the curve

Ahead of the Curve Our forward-looking perspective places regional developments in a broader context and delivers strategic investment and decision making insights.

Concise and clear bullet points that cut through the noise

Cutting through the Noise Arabia Monitor distils its research into executive-friendly bullet point format, ensuring our views are clear and our analysis concise.

Extensive high-level network for privileged access to insights

Privileged Access Arabia Monitor’s competitive edge is our collaboration with senior decision makers who add valuable insights from a position of authority.

Dr. Florence Eid-Oakden is the CEO and Chief Economist of Arabia Monitor. Dr. Eid has been a professor of economics and finance at the American University of Beirut and a visiting professor at INSEAD and HEC Paris. Formerly Head of MENA research at JP Morgan, she has also worked with the World Bank on Latin America & North Africa and on the buy side as a hedge fund investment professional. She serves on the Board of Directors

for the Arab Banking Corporation International Bank in London and Arab Bankers Association of North America in New York, on the Advisory Board of the Al Faisal University College of Business, Saudi Arabia, and has been a Trustee of the American University in Paris. Dr. Eid holds a Ph.D. in Organization Economics from the Massachusetts Institute of Technology (MIT) with a joint Harvard-MIT doctoral committee. She is fluent in Arabic, English, French and Spanish.

Waleed Shoukry heads Arabia Monitor’s Fixed Income & FX Strategy, specializing in MENA hard & local currency, and fixed income markets. Waleed has created the Arabia Credit Monitor and the Arabia FX Monitor. Previously he was a Director and Emerging Markets Fixed Income/FX Proprietary Trader at Merrill Lynch and an Associate Portfolio Manager of Emerging Debt Markets at Citigroup. Waleed holds a BSc. in Finance & International Business from New York University and an MSc. in Global Finance & Economics from the New

School University. He is fluent in Arabic and English.

80+ years of experience for unparalleled MENA understanding

Dr. Cyrus Sassanpour, Senior Advisor, is concurrently a Fellow at the Centre for Social and Economic Research (CASE), Warsaw, Poland. He had a long career (1983-2009) with the International Monetary Fund (IMF), where he served as the IMF Senior Representative in a number of countries in the Middle East, South Asia, and Central Europe. Previously, he was a senior economist with The United Nations Conference on Trade and Development (UNCTAD) in Geneva, and headed the International Money and Finance Division of The Organization of the Petroleum Exporting Companies (OPEC) in Vienna. Dr Sassanpour has lectured at the Graduate Institute of International Studies in Geneva, and at the London School of Economics and Political Science. He holds a PhD in Economics from Brown University. He is fluent in Farsi and English with working knowledge of Arabic.

Arabic, French & Mandarin speaking analysts add local

perspective

Yifu Jia (Bruce) leads Arabia Monitor's Chinese business development, given his special interest in

combining his academic and cultural backgrounds to support stronger Sino-Arab relations. Yifu lived

in Syria, travelling extensively around the Middle East through a study exchange program and as an

intern for the Damascus based office of a China Petrochemical Corporation (Sinopec) affiliate. He

holds a double BA degree in Arabic Language and Art from Peking University, Beijing, and an MA

degree in Cultural & Creative Industries from King's College, London. He is fluent in English and

Arabic in addition to his native Mandarin in which he helps publish for Arabia Monitor.

Charlene Rahall

Charlene Rahall leads Arabia Monitor’s research on the Levant. Born and raised in Sierra Leone,

West Africa, Charlene also covers MENA and Sub-Saharan Africa relations. She also contributes to

bespoke projects Arabia Monitor is commissioned to carry out. Charlene holds a BSc degree in

Economics from the University of Liverpool. She is fluent in English and Arabic.

Shwan Rasheid

Shwan Rasheid leads Arabia Monitor’s research on Iraq and Morocco, supported by his native

experience in both countries. Shwan also leverages his previous working experience to support

Arabia Monitor’s business development. He has five years of consulting experience, specialized in

projects in the Middle East with particular focus on oil, construction, and development. Shwan holds

a BSc degree in Banking & Financial Management from Cass Business school, and an MA degree in

International Business from European Business School. He is fluent in English, Kurdish, French, Arabic,

and Portuguese.

His Royal Highness Prince Turki Al Faisal bin Abdul Aziz Al Saud is one of the founders of the King Faisal

Foundation and serves as Chairman of the King Faisal Center for Research and Islamic Studies.

Previously, HRH served as the Director General of the Saudi General Intelligence Directorate (GID)

until August 2001. He is a former ambassador to the UK and Ireland, and was posted in the United

States until his retirement in 2007. Furthermore, HRH is a Trustee of the Oxford Islamic Centre at Oxford

University and the Centre for Contemporary Arab Studies (CCAS) at Georgetown University.

Mr. Victor Chu is Chairman of First Eastern Investment Group, a leading Hong Kong-based direct

investment firm, and a pioneer of private equity investments in China. He is admitted to practice law

in both England and Hong Kong. Mr Chu is concurrently a Foundation Board Member of the World

Economic Forum and board member of the Zurich Insurance Group. Previously he served as director

of the Hong Kong Stock Exchange, and Deputy Secretary-General of the International Bar

Association (IBA). Mr Chu is also a former council member of University College London and the

Foreign Affairs University of China, Chatham House and the Cambridge University East Asia Institute.

Dr. Richard Debs is an Advisory Director of Morgan Stanley, having been the founding President of

Morgan Stanley International. Previously, Dr. Debs served as the Chief Operating Officer of the

Federal Reserve Bank of New York, where he was also an Alternate Member of the Federal Open

Market Committee. Dr. Debs is Chairman Emeritus of the American University of Beirut and now

chairs the university’s Advisory Council. His foundation, R.A Debs Consulting, is renowned for

philanthropic ventures including the US/Middle East Project, and The US-Saudi Business Council.

Internationally reputed Advisory Council

1. About Arabia Monitor

2. Arabia Monitor Views

3. Arabia Monitor News

4. Arabia Monitor Membership

Outline

Our view: (Sample from Q1 2015 MENA Outlook publication)

Enter the rainy days as oil prices plummet

1 Arabia Monitor; IMF. 2 Arabia Monitor; Central Bank of Egypt.

As we enter 2015 with oil prices at recent record lows, the GCC

economies that have become regional engines of growth are redoubling

resolve on both the economic and political fronts.

We expect Saudi Arabia, the UAE, Qatar and possibly Kuwait to pass

budgets in the new year that are either larger or equivalent to their

current budgets, even though the price of oil is firmly below their

break-even prices (with the exception of Qatar and Kuwait’s) (Figure

1). They will support the more vulnerable countries (Bahrain and

Oman), and deliver on their key financial commitments to Egypt.

These countries are unlikely to do much in support of oil prices for a

few quarters to come, despite the whopping losses their equity markets

are already posting, and their heavy retail investor component.

- The GCC street remains more restive since the Arab Spring, but

governments also have tried and tested methods that include

buying into their own stock markets, accelerating public

expenditures where they matter, and even direct “financial

support programs” to their citizens. That’s partly what reserves

are for –- rainy days.

This is all less costly than losing market share in the face of uncertainty

about just how long conventional energy markets will continue to reign

supreme.

And if, along the way, the GCC’s newly reinvigorated political and

security resolve manages to fend off a few challenges (less oil revenue

to ISIS, a less intransigent Russia on Syria, a less meddlesome Iran, and

a delayed threat from unconventional energy producers), well those

will have been convenient double bonuses.

This is a tricky wager, with its own natural inflection point: the

networked GCC street. Only if these governments know their streets

(and security apparati) as well as they think they do, will this pay off.

The next couple of quarters should reveal the answer.

Figure 1 – Oil Price Needed to Balance Budgets (USD per barrel)1

Conflicts in the region and their potential spillovers remain

the most important downside risk to the outlook.

In Yemen, the political situation has continued to

deteriorate over the past month. The Houthi-Ali Abdullah

Saleh alliance appears to be consolidating against a series

of political rivals, as president Hadi is increasingly isolated.

Libya has sunk into further turmoil after the Supreme Court

ordered the internationally recognised parliament in Tobruk

to be dissolved. This ruling has divided the country further,

and adding fuel to fire is continued regional backing of

opposing sides. Libya will get worse over 2015 before it sees

a chance of getting better over time as Libyans get tired of

fighting.

Our view: (Sample from Q4 2014 MENA Outlook publication)

A tale of two regions

1 Arabia Monitor; IMF. 2 Arabia Monitor; Central Bank of Egypt.

Three years into the Arab Spring, Arabia Monitor conducts a comparison this

quarter between the MENA region and Latin America (LA) during the period

when that region was transitioning to democracy, thirty years ago. We find

that the pace of change in the MENA region is actually rapid, when compared

to the transition in LA.

This tale of two regions also reveals that the MENA region has not got a day

to lose in promoting the creation of “citizenship” through both rights and

responsibilities, but starting with education in the broadest sense, about

what “transition” means.

To help us gain a granular understanding of the relevance to MENA of the

transition in LA, we conducted a Special Feature dialogue with H.E. Jorge

Alvarez Fuentes, the Ambassador of Mexico to Egypt, who has served in the

Arab world since 2007, after having lived and experienced the transition in

Latin America.

Ambassador Alvarez Fuentes helps us shed light on the role and impact of

various political and social movements during transition, including radical

and terrorist movements, but also the Catholic Church in both conciliatory

and hostile roles at various times in various countries.

“It is all negotiable”, we are told, including when allies in opposition to old

regimes become adversaries on the direction of travel under new regimes.

Patience, and “voice” are key ingredients, even through setbacks;

transitions are not only non-linear, they also have the nasty habit of rolling

back at times.

We also examine how terrorist movements, in LA were included in political

processes, despite religious cleavages that at times militated against that.

We take a deep dive into a comparison between Brazil on the eve of its

transition and Egypt in recent years, to draw lessons for this important

economy in our region. It turns out that in Brazil, the military led the

political reform process, eventually sizing down its own role in the economy

and society.

On the theme of two regions, never before has our region been less of a

monolith. Between countries at war (Iraq, Syria, Libya) and thriving economies

(Saudi Arabia, the UAE, Morocco). Today MENA is itself a tale of two regions.

The uncertainty about Syria’s future and Iraq’s unity and recent

developments in Yemen have not led investors to downplay opportunities

offered by other countries in the region. During the first week of the

attacks there was no significant sell off in regional GCC equity and fixed

income markets. Instead, markets have reflected seasonality and

technicals surrounding the annual Hajj holiday.

The GCC economies continue to prosper on the back of strong

government balance sheets, high public spending and low government

debt. Saudi Arabia’s debt to GDP is expected to be less than 2.5% by

year-end, one of the lowest in the world. Its economy in 2014 is set to

grow at 4.5% in real terms this year and private sector growth is above

5.5%. Saudi FX reserves are close to 90% of GDP. This means that Saudi

Arabia has strong cushions even as oil prices dip below USD 100pb.

To many, Lebanon seems vulnerable to an impending crisis. However, its

banking system continues to be liquid and stable, despite perennial

budgetary shortfalls, and its fixed income market has done well this

year. Egypt’s worst days are probably behind it even if plenty of

challenges remain, a budget deficit above 11% of GDP being one of

them. Egypt’s equity market has rallied over 40% YTD and its debt

markets have been among the best performing in MENA and EM this year.

We are not oblivious to risk. The international coalition against ISIS will

take time to score irreversible gains, and in the meantime we live with the

risk of reprisals, in both Arab and Western capitals.

That this risk has not yet been factored into regional markets also

speaks to the tale of two regions.

If and when it does, will the region become more of a monolith and see

risk premia rise across the board and equity markets collapse? Probably

not across the board, given the differentiation with which both

international and regional investors now look at MENA markets.

This differentiation helps MENA leverage the economics to buttress the

transition, as Latin America did.

Impressive track record of accurate calls

GCC – “We expect Saudi Arabia, the UAE, Qatar and possibly Kuwait to pass budgets in the new year that are either larger or equivalent to their current budgets, even though the price of oil is firmly below their break-even prices.” – December 2014

Lebanon – “As in the previous 14 attempts to elect a new president for Lebanon, the lack of parliamentary quorum prompted Parliament Speaker Nabih Berri to postpone the voting session to 19 November. We expect the presidential vacuum to extend into early 2015.” – November 2014

Saudi Arabia – “Lower oil prices are not expected to materially affect government expenditures, at least over the short term.”– November 2014

Syria – “Though Syria’s new constitution, passed by referendum in February 2012, imposes a two-term limit on the presidency, it is not retroactive; Assad could legally remain in power until 2028 through two seven-year terms.”– May 2014

Iran – “Our baseline scenario is that the interim deal would be extended for a further six months as parties continue to bridge the gap between their positions. An extension until January 2015 would allow the Iranian government to benefit from the partial easing of sanctions for most of 2014/2015.” – May 2014

* Arabia Monitor’s Credit and FX Monitor views do not constitute trade recommendations

MENA/EM sovereign credit was the best-performing risky

fixed income asset class in 2014

Macro themes for MENA sovereign credit

Looking more closely at credit returns, we find that idiosyncratic factors have dominated relative performances. The JPM EMBI Global

Emerging Debt Index is down 4.7% Dec MTD and up +3.5% YTD.

MENA sovereign benchmark bonds have also widened by 2.6% Dec MTD and up 8.3% YTD. The top Dec 2014 MENA bond performers Leb21s

(+0.1%) and ADhabi19s(+0.1%). MENA bond laggards were Iraq28s (-12.5%) and Egypt20s (-3.1%).

MENA sovereign CDS outperformed MENA sovereign bonds, down 0.2% Dec MTD and +4.3% YTD. The top Dec 2014 MENA 5yr CDS performers

were Iraq (+0.4%) & Lebanon (+0.1%). MENA 5yr CDS laggards were Dubai(-0.7%) & Bahrain (-0.6%).

MENA sovereign sukuk bonds have also widened 1.3% Dec MTD and +5.9% YTD. The top Dec 2014 MENA sukuk bond performers were Dubai17s

(-0.7%) and & Qatar18s (-0.8%). MENA sukuk bond laggards were Dubai22s (-2.4%) & Qatar23s (-1.3%).

Figure 1 – MENA 5yr CDS Levels1 Figure 2 – MENA Benchmark Bonds Z-Spread1

Wealth of research for in-depth analysis

(Sample publication titles)

Country Views: Monthly Updates:

Regional Views:

Saudi Arabia: The lingering question of unemployment Tunisia: Democracy triumphs

Egypt: Fuel Subsidies – Taming the dragon Iran: Reflections from Tehran

Trials and tribulations of cheap oil – December 2014

GCC Oil Exporters: Best performers amid year of

turmoil – November 2014 Back to school – September

2014

No summer holiday for parts of MENA – August 2014

Weathering the Oil Price Storm: A look at the 2015 GCC

budgets Sino-Qatari Deals: A GCC

“win-win”

MENA business confidence gravity defying

What can MENA learn from the Latin American transition?

A prominent opinion former throughout international media

Dr. Florence Eid

delivers a

keynote

speech at the

ONS

conference,

Norway –

August 2014

Sino-Saudi links boost

global economy – Dr.

Florence Eid Article in

China Daily

Which Countries Can Withstand

Low Oil Prices? - Dr. Florence

Eid interviewed by Bloomberg -

December 1, 2014

MENA and China: Joined at

the hip - Caijing Magazine,

China - October 13, 2014

New Opportunities in

the Arab World – Dr.

Florence Eid on

Caixin Weekly

Economic Review

1. About Arabia Monitor

2. Arabia Monitor Views

3. Arabia Monitor News

4. Arabia Monitor Membership

Outline

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Arabia Monitor is an independent research firm specializing in macroeconomic and geopolitical studies on the

Middle East & North African region, which we view as the new emerging market. Our forward looking perspective

allows us to place recent developments in the region within a broader context and a long-term view. Our analysis is

based on the macroeconomic and financial balance sheet of Arab countries to deliver unique strategy insights and

forecasts to businesses across a wide range of sectors.

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