Interpreting Middle East Economic News and Analyzing Market Trends

Category: Commentary & Analysis

The next financial crisis and how it will affect GCC countries

 

This is a presentation I gave recently in Dubai discussing my new book titled ‘Islamic Finance and the New Financial System: An Ethical Approach to Preventing Future Financial Crises.” 

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The vanishing petrodollar and its implications on financial markets

 
Petrodollar

Image Source: The Daily Reckoning

It didn’t take long for the effects of falling oils prices to catch up with the global economy.  We’ve reported in the past how falling oil prices will expose the ‘shale revolution’ myth, and we are now starting to see shale companies file for bankruptcy (expect this trend to accelerate through the summer).  Now, however, we are starting to see the effects of vanishing petrodollars from the global financial system. The acceleration of this trend alone can spark another financial crisis.

   

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Forget about Sukuk, it’s time to talk about Salaf Bonds!

HM Treasury Sukuk

This article is re-posted from Islamic Finance News, volume 12 issue 10, published on March 11, 2015.

It would have been unimaginable a few years ago to talk about negative bond yields much less witness this phenomenon happening right before our eyes.  The reality is that today we are seeing an increasing number of bonds in Europe and Japan falling into negative yield territory.  The Wall Street Journal estimates that there are currently $1.7 trillion in bonds trading with negative yields and the number is growing daily.

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Why the price of oil is headed much lower in 2015

   
Oil Prices - Brent up to Feb 9 2015

Source: www.stlouisfed.org

Hope has returned to the oil market after the price jumped over 20% in the past couple of weeks from multi-year lows.  The price of oil, however, has been falling since June 2014.  The price of Brent Crude, the European benchmark, for example, has fallen from a high of $114 in June to a low of $45 in January.  The recent rise to the $60 range has caused many analysts and commentators to celebrate the end of the collapse of oil prices.  I, however, believe that the recent bounce is no more than a ‘dead cat bounce’ on the way down to much lower prices in the near future… and here’s why…

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Rising uncertainty for the sukuk market in 2015

S+P Total Sukuk Market Issuance

Source: Standard and Poor’s Ratings Services

 

 

In 2014 we saw for the first time the rise of non-Islamic sovereign issuers of sukuk.  The governments of Hong Kong, Luxembourg, South Africa and the UK all issued sukuk for the first time in 2014.  This marks the starting point of a trend that is expected to increase in the coming years.  However, with fizzling global growth expectations from the IMF coupled with crashing oil prices, can the sukuk market maintain its momentum?

 

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