Arab stock markets improved by 5.6% and Gulf Cooperation Council equity markets increased by 6.6% in the first 11 months of 2018, relative to decreases of 2.3% and 3.9%, respectively, in the same period of 2017. In comparison, global equities regressed by 4.8%, and emerging market equities declined by 13.3% in the covered period. Activity on the Khartoum Stock Exchange jumped by 213.4% in the first 11 months of 2018, the Qatar Stock Exchange grew by 21.6%, the Tunis Bourse surged by 16.3%, the Abu Dhabi Securities Exchange expanded by 8.4%, the Saudi Stock Exchange increased by 6.6%, and the Damascus Securities Exchange improved by 4%. In contrast, activity on the Beirut Stock Exchange declined by 26.3% in the first 11 months of 2018, the Dubai Financial Market dropped by 20.8%, the Iraq Stock Exchange regressed by 14.2%, the Muscat Securities Market retreated by 13.5%, the Amman Stock Exchange dropped by 12.4%, the Egyptian Exchange regressed by 11.3%, the Casablanca Stock Exchange decreased by 9.4%, the Palestine Exchange declined by 8.3%, the Boursa Kuwait contracted by 2%, and the Bahrain Bourse retreated by 0.2% in the covered period. In parallel, activity on the Tehran Stock Exchange increased by 71.4% in the first 11 months of 2018.    
Source: Local stock markets, Dow Jones Indices, Byblos Research

The Financial Action Task Force (FATF), the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT), indicated that the majority of Iran's action plan to address its significant AML/CFT deficiencies remains incomplete. In this context, it called on authorities to criminalize terrorist financing, identify and freeze terrorist assets, ensure an adequate and enforceable customer due diligence process, as well as guarantee the full independence of the Financial Intelligence Unit. It added that authorities should ensure that wired transfers contain complete information on the originator and beneficiary, and that banks are establishing a broader range of penalties for violations of money laundering offenses. Still, the FATF extended until February 2019 the suspension of the imposed counter measures used by international financial institutions against Iran. It called on Iran to bring into force the necessary legislation in line with FATF standards, or it will take further steps to protect against the risks that arise from the deficiencies in Iran's AML/CFT regime. The FATF said that Iran will remain on its list until the full action plan is completed. It considered that, until then, terrorism financing risks originating from Iran will continue to pose a threat to the international financial system. As such, the FATF reiterated its call on all jurisdictions to advise their financial institutions to apply enhanced due diligence to business relationships and transactions with natural and legal persons from Iran.
Source: Financial Action Task Force

S&P Global Ratings classified Turkey's Banking Industry Country Risk Assessment (BICRA) in 'Group 9', and its economic and industry risk scores at '8' and '9', respectively. The BICRA framework evaluates global banking systems based on economic and industry risks facing the banking sector, with 'Group 10' including the riskiest banking sectors. Other countries in BICRA's 'Group 9' include Azerbaijan, Cambodia, Kenya, Tunisia, Uzbekistan, Vietnam, Egypt and Mongolia. The agency indicated that Turkey's economic risk score reflects its "very high risks" in economic imbalances and credit risks in the economy, as well as its "high risk" in economic resilience. It said that the economic risk assessment reflects the country's volatile economic growth, institutional challenges, wide current account deficits, and high external financing needs. It noted that the banks' very high credit risk is due to the rapid growth in lending and to the high share of lending in foreign currency, which reached about 40% of total loans following the depreciation of the Turkish lira. It added that the trend for economic risk is 'negative' as it anticipated Turkey's economy to contract by 0.5% in 2019 amid persistent high inflation, heightened political and geopolitical tensions, as well as wide current account deficits. In parallel, S&P indicated that the industry score reflects the country's "extremely high risk" in its system-wide funding, "very high risk" in its institutional framework and "high risk" in its competitive dynamics. It noted that the high industry risk and 'stable' trend reflect the banks' elevated reliance on short-term external debt, which leaves the latter vulnerable to changes in investor sentiment. 
Source: S&P Global Ratings