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Tuesday, 17 May 2016

Financial Troubles Stir Saudi Arabia


Saudi Arabia’s Credit Rating Lowered  

While strong when compared with other sovereign credit ratings, Saudi Arabia’s fiscal health remains under threat from low oil prices, Moody’s said. Moody’s Investors Service said the drop in crude oil prices, off more than 50 percent since the middle of 2014, has undermined the economy and finances for Saudi Arabia. As a result, the long-term rating for the country was lowered one notch from Aa3 to A1. According to Moody’s, Saudi Arabia’s nominal gross domestic product declined around 13 percent last year and should shrink another 5 percent in 2016. Though crude oil prices have recovered strongly so far this year, the ratings agency said it will be another three years before the Saudi economy returns to […] 

“You can’t grow at 6 percent and have your balance sheets grow faster,” Fink said in a Bloomberg Television interview with Angie Lau on the sidelines of a forum in Hong Kong on Tuesday. “In the future, I would prefer seeing the economy growing 6 percent with some form of deleveraging,” he said.

While he argued that the bull market has run out of steam, a point I’ve been making for a couple of years based on my belief that we entered a bear market in 2014 as the Fed ended its last bout of quantitative easing (QE) in October 2014, he pointed to a very important point: Investors are operating in an environment where the riskless rate of return is so low that it is increasingly difficult to generate positive returns on their capital.

The latest policies have had two effects. First, un-employment, workforce participation rate have not increased through the “recovery”. The outcome is reduced social mobility or even mocing down the social scale (from middleclass to poor). Social mobility is a social contract which maintains social cohesion, without it social unrest will quickly ensue. Secondly, the great recession has seen the middle-class shrink, the effect of this is that the demand for goods and servcies has shrunk. Without a demand for goods from a growing middle class; trade, tax collection and jobs will not recover. Disasters such as hyper/high inflation, deflation and resources scarcity become more likely in this environment.

India to lead global auto sales growth in 2016
Autocar UK along with the expert help of IHS Global, whose international network of car industry analysts mine deep into market data, has put together some key findings of the global automotive industry.

As per the findings, China dominates the global auto market for volume of sales; however India is slated to be the global stand-out for growth in 2016. Currently, India’s new car market is expanding at twice the rate of China. But who would also have predicted that growth in the Italian market would exceed China’s?

indiaCompact crossovers and SUVs are also shaping up as the success story of 2016, bucking the total market trend in four of the seven major regions. One place not to be selling new cars, however, is Brazil, where economic woes have knocked the market for six.

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