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April 19, 2020
In the COVID-19 crisis, who are the few global winners amidst plenty of losers?
The COVID-19 outbreak in China and its spread to almost all countries of the world has profoundly affected the global economy and businesses. Many sectors of the economy have come to a complete halt and others are operating at greatly reduced capacity. This has been reflected in the stock markets around the world which have fallen hugely in a short span of time. Amidst this sea of gloom, there have been certain companies who have emerged unscathed and may be...
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April 13, 2020
GCC policy interventions to mitigate the economic impact of COVID-19
The Coronavirus has spread across the GCC countries, besides its immediate impact on the public health and the well-being of the residents and citizens, the outbreak will likely have significant economic consequences across the region. As the key economic activities in the region’s critical non-oil sectors like tourism, transportation is curtailed, we can expect a greater macroeconomic implication. In response to the crisis, the gulf region has introduced number of new economic measures to mitigate the impact of the coronavirus...
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April 9, 2020
The importance of Circuit Breakers in curbing volatility
Stock markets around the world and the GCC have responded to the COVID-19 pandemic with massive volatility, as traders have been panic selling out of fear driving the indices down. The Boursa Kuwait All Share Index (BKAT) saw huge falls on March 8 and March 9 when the BKAT fell 9.1% and 9.4% respectively due to the oil price crash and coronavirus fears. Due to this, Boursa Kuwait has announced that from March 15, the security circuit breaker would be...
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April 8, 2020
Parallels between COVID-19 and global financial crisis
Markets worldwide have experienced unprecedented volatility in the wake of the coronavirus outbreak. Though the mortality rates of those affected is much lower than that of Severe Acute Respiratory Syndrome (SARS) or the Middle East Respiratory Syndrome (MERS), Coronavirus disease – 2019 (COVID-19) being highly contagious has spread to over 190 countries and resulted in over thirty thousand deaths, majorly in Italy, Spain and China . Considering the severity of the outbreak, the World Health Organization (WHO) has declared it...
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April 7, 2020
The oil price war – Saudi Arabia and Russia adding more fuel to the fire
At a time when economies worldwide have been put under stress and are contemplating the negative impact of COVID-19, the last thing they would have wanted was a price war between two of the world’s largest oil producers. Coming into the year 2020, the overarching theme was a dip in global oil demand that would need strict supply restrictions to balance the Oil markets. However, with Russia’s non-cooperative stance and Saudi Arabia’s subsequent retaliation, oil prices have tumbled down to...
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February 12, 2020
Islamic Liquidity Management – The Journey So Far
This article was first published in Islamic Finance news dated December 2019. Globally, the assets under Islamic finance industry have surpassed the USD 2.4tn mark. Digitalization which has emerged as a revolutionary trend in financial system is becoming popular in Islamic finance industry as well. Islamic banks account for over 70% of industry’s total assets, as of latest available. Islamic liquidity management instruments are still at their infancy, and there are very few instruments that meets the industry needs and...
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January 14, 2020
Secondary Market of Sukuk: An Overview
This article was first published in Islamic Finance news Volume 17 Issue 1 dated the 8th January 2020 Sukuk are useful instruments, both for issuers as well as investors. They can be an alternative source of funds for governments and conventional institutions, a liquidity management tool for Islamic banks and institutions whose investments must be Shariah compliant and a source of portfolio diversification for conventional institutions. However, in order to benefit from the advantages of Sukuk, the primary and secondary...
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December 16, 2019
Regulations governing liquidity risk in Islamic Banking
This article was first published in Islamic Finance news Volume 16 Issue 48 dated the 4th December 2019 Given the systemic importance and the pivotal role played by banks in a country’s economy, banking regulations are of paramount importance for all stakeholders. Guidelines and regulations enable all banks to maintain stability and monitor their risk. In the context of Islamic Banking, liquidity risk is challenging because of limited availability of Shariah compliant short term liquidity instruments and a shallow markets...
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December 4, 2019
GCC Companies: High Cash Holdings and Shareholder Returns
Investors look at various parameters to understand and evaluate a company’s attractiveness. One such item in the balance sheet is the level of cash that a company holds. If the cash balance has been consistently growing, it is generally considered to be a good indicator that the company is performing well and is therefore able to accumulate cash reserves on its balance sheet. However, it is essential to determine the cause behind growth in cash flow and reason for holding...
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November 21, 2019
What affects the liquidity position of Islamic banks?
This article was originally published in Islamic Finance News (IFN). Maturity transformation is the primary business of banks and which by definition is the conversion of a bank’s short-term liabilities into longer-term investments through loans and advances. The very nature of a bank’s business model requires them to hold a mix of liquid liabilities with illiquid assets. While the primary target of banks is to strive for profitability by optimal utilization of available funds, they also have to maintain an...