The Million Dollar Way (The Bakken Oil Blog): Saudi Foreign Exchange Reserves For June, 2020, Posted -- Not Looking Good

Saturday, August 1, 2020

Saudi Foreign Exchange Reserves For June, 2020, Posted -- Not Looking Good

How a strange mind works.

I'm sitting outside out in the open on a foldaway chair, watching a 5-month-old squirming on a small quilt on the grass. And then my mind wanders:

Saudi Arabia IS Saudi Aramco.

Or, Saudi Aramco is Saudi Arabia.

And, then this past week, the market value of one US company overtakes Saudi Aramco as the most valuable company in the world. Think about that. Apple, Inc., becomes the most valuable compnay in the world, and XOM posts its second consecutive quarterly loss. Maybe we'll come back to that.

Then, I wondered, I wondered if Saudi Arabia had posted the latest foreign exchange reserves which come out at the end of the month.

And there it is, the June, 2020, numbers are out. Amazing. On a weekend.

And, not good news for Saudi Arabia. May, 2020, was supposed to be the worst month, but here we go: June, 2020, is actually worse. And I think Saudi did some fancy financial "smoke and mirrors" to prop up the May, 2020, numbers. This has to be very, very scary. For Saudi Arabia. I know the five-month-old down on the lawn me is not worried. LOL.

Here's the graph:

I think this is a big deal. We'll see if anyone else talks about it.

From gfmag, now I understand the "smoke and mirrors" to prop up foreign exchange reserves:

Countries and corporates based in Gulf Cooperation Council (GCC) states are taking advantage of low interest rates and eager investors to issue large amounts of bonds.

Altogether, borrowers from the region raised a record $101 billion through bond placements last year, and this year’s total is likely to set a new record.

The surge comes at a time when syndicated loans are declining, thanks to lower oil revenues and economic weakness caused by effects of the Covid-19 pandemic and governments’ subsequent postponement or cancellation of major projects.

“Even in the current turbulent environment, there is ample market liquidity and interest by global investors for GCC corporate issuers that have business models with strong competitive advantages,” says Rehan Akbar, senior credit officer at Moody’s Europe, Middle East and Africa Corporate Finance Group in Dubai.

“As an example, Equate Petrochemical [based in Kuwait] was able to successfully issue $1.6 billion of bonds in mid-May, even though the petrochemical industry is facing a challenging time.”

Despite the oil-price drop, Saudi Aramco sold $12 billion worth of bonds in April 2019 and attracted $100 billion in offers, demonstrating that investor demand remains strong in light of an ongoing search for relatively safe but higher-yielding securities. Mubadala, Abu Dhabi’s sovereign wealth fund, sold $4 billion in a three-part bond offering in May 2020, attracting orders worth nearly six times that amount. The offering included $2 billion of dual-listed Formosa bonds, sold in Taiwan and listed on the Taipei Exchange, which provides financial products and trading services to the international market.