Monday, August 22, 2016

Aramco's mother-of-all IPOs; Ford self-driving cars by 2021; Sad plight of Mongolian currency

1 Aramco’s mother-of-all IPOs (Matein Khalid in Khaleej Times) It will be the mother of all initial public offerings, unquestionably the biggest financial deal in history. Saudi Aramco is a $2 trillion colossus, the largest oil and gas producer on earth, owner of one fifth of the kingdom’s oil reserves.

Saudi Aramco financed the epic transformation of Saudi Arabia into the powerbroker of Opec, the biggest economy in the Arab world and the geopolitical future of the Middle East. Saudi Aramco pumps more crude oil than Exxon Mobil, Shell, BP and Chevron combined.

The privatisation IPO of Saudi Aramco is central to Deputy Crown Prince Mohammed bin Salman’s Vision 2030 strategy, which is nothing less than a blueprint for the kingdom’s post Oil Age economy. Alibaba’s IPO in New York and Shanghai raised $25 billion but the Saudi Aramco IPO will raise at least $100 billion.

The crash in crude oil prices since 2014 and the geopolitical crises in the Arab world since 2011 have only intensified the need for the Saudi government to boost its economic growth rate, diversify its non-oil consumer services and industrial base and attract foreign capital to the kingdom.

Not since the reign of the late King Faisal bin Abdul Aziz, which coincided with the black gold bonanza of the early 1970s just after the Arab-Israeli war in the Sinai and the Golan Heights, has the economic momentum of the kingdom portend change on such seismic a scale. Saudi Arabia’s economic transformation creates once in a lifetime investment opportunities for prescient investors.

The IPO of Saudi Aramco would be a milestone moment in the history of postwar finance, an event as transformational as Sir Sigmund Warburg’s eurobond new issue for Italy’s Autostrade or the evolution of the Shariah-compliant (sukuk) debt markets in the 1990s. Ever since Chevron geologists first struck oil in a Dammam salt dome in 1937, Saudi Aramco has been the financial umbilical cord of the kingdom, generating for 90 per cent of budget revenues.

2 Ford self-driving cars by 2021 (Gulf News) Ford Motor Company has vowed to have self-driving cars on the road for ride-sharing services by the year 2021. The US automaker said it was fuelling the effort with ramped up investments in technology and by doubling the size of the team at its autonomous-car campus in Silicon Valley.

“We see autonomous vehicles as having as significant an impact on society as Ford’s moving assembly line did 100 years ago,” said Ford chief executive Mark Fields. As part of its mission, Ford joined Chinese internet giant Baidu to pump a combined $150 million into Velodyne, a US firm specialising in self-driving car sensors.

California-based Velodyne said the cash infusion will enable it to quickly expand the design and production of “LiDAR” high-performance sensors for autonomous vehicles. Baidu, an investor in on-demand ride service Uber, said that it was testing a fleet of self-driving vehicles in China as part of a vision for promoting safe use of the technology on a global scale.

Ford’s first fully autonomous vehicle will not have a steering wheel, gas pedal or brake pedal, according to the carmaker. The self-driving vehicle is being designed for services such as on-demand ride services, Ford said.

3 The sad plight of Mongolian currency (Leisha Chi on BBC) Even Genghis Khan himself might find it hard to conquer this battle. Mongolia's currency is on its longest losing streak on record as the government grapples to contain an economic crisis.

Back in 2011, a mining boom helped make it the world's fastest-growing economy with growth in gross domestic product of around 17.5%. But the tugrik lost about 7.8% of its value this month, making it the world's worst-performing currency.

The landlocked country has substantial untapped reserves of valuable minerals like gold, copper and coal. But then commodity prices collapsed. And so did demand from China, which buys 90% of Mongolia's exports. The government has since admitted that the country is "in a deep state of economic crisis".

Due to its cash shortage, Mongolia has borrowed massively and now owes dinosaur-sized interest payments of a debt load of nearly $23bn. This has fuelled speculation that Mongolia could face a sovereign default or need a bailout.

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