The Institute of International Finance projected non-resident capital inflows to Gulf Cooperation Council (GCC) countries to reach $147.5bn in 2019, constituting an increase of 14.8%, or of $20bn, from $128.5bn in 2018, mainly driven by a rise in portfolio investments. It projected portfolio investment inflows to GCC economies to increase from $55.3bn in 2018 to $80.2bn in 2019, with equity inflows expanding by 3.5 times to $16bn and debt flows rising by 26.6% to $64.2bn this year. It attributed the anticipated increase in portfolio debt inflows to the inclusion of five GCC economies in J.P. Morgan's emerging-markets bond index in January 2019, while it noted that the admission of Saudi Arabia's stock market to the FTSE on March 2019, and its expected inclusion in the MSCI EM Index in May, would raise equity inflows. It added that Saudi Arabia and Qatar issued a combined $19.5bn in sovereign debt in the first quarter of 2019. 

Further, the IIF forecast foreign direct investment inflows to the GCC region at $20.2bn in 2019, which would constitute an increase of 17.5% from $17.2bn in 2018. It projected resident capital outflows from the GCC region to decrease from $256.8bn in 2018 to $234.4bn in 2019, but to exceed non-resident capital inflows. 

In parallel, the IIF forecast total non-resident capital inflows to non-GCC oil-exporting economies in the Middle East & North Africa region, which include Algeria, Iran, and Iraq, at $16.6bn in 2019, and to grow by 56.6% from $10.6bn in 2018. It also anticipated capital inflows to Iraq, which consist of concessional loans to rebuild the country's infrastructure, to represent 50% of aggregate inflows to non-GCC oil-exporters in 2019. In parallel, it forecast resident capital outflows from non-GCC oil-exporting economies at $10.9bn in 2019, which would constitute a decline of 55.5% from $24.5bn in 2018. 
Source: Institute of International Finance

Trading in emerging markets' Credit Default Swaps (CDS) reached $357bn in the fourth quarter of 2018, constituting a drop of 30% from $509bn in the third quarter of 2018 and a rise of 30% from $275bn in the fourth quarter of 2017. Trading reached $488bn in the first quarter and $468bn in the second quarter of the year. The most frequently traded sovereign CDS contracts in the fourth quarter of 2018 were those of Mexico and Brazil at $34bn each, followed by Turkey at $25bn, which significantly dropped from $73bn in the third quarter of 2018. As such, traded sovereign CDS contracts on Mexico and Brazil accounted each for about 9.5% of total trading in emerging market CDS in the covered quarter, followed by CDS contracts on Turkey (7%). The most frequently traded corporate CDS contracts in the fourth quarter of 2018 were those of Mexico's state-oil company Pemex at $1.8bn, which accounted for 0.5% of total trading in emerging markets CDS. Overall, CDS trading totaled $1,822bn in 2018, constituting an increase of 40% from $1,298bn in 2017, as investors speculated on Turkey and Argentina's economic conditions, as well as on elections in countries such as Brazil and Mexico. The survey covered data on CDS contracts for 21 emerging economies and nine emerging market corporate issuers.
Source: EMTA

Moody's Investors Service maintained its 'stable' outlook on Saudi Arabia's banking system for the next 12 to 18 months, due to higher public spending, the stabilization of problem loans, modest credit growth, as well as robust profitability. It indicated that the planned increase in government spending this year will support non-oil real GDP growth, which, in turn, would  stimulate bank lending. As such, it forecast lending to increase by 4% to 5% in 2019 following subdued activity in 2018, supported by a pick-up in loan demand from the private sector, merger and acquisition activity in the corporate sector, and a recovery in the construction sector and in consumer spending. Further, the agency expected the banks' non-performing loans ratio to stabilize at 2% to 2.25% in the next 12 to 18 months, as the government continues its fiscal expansion. But it noted that loan performance in the construction and commerce sectors will continue to face pressure due to structural reforms and the ongoing impact of the recent economic downturn. Still, it considered that the banks' very high levels of loan-loss provisions provide a solid buffer against these pressures. Further, it expected the banks' capital ratios to remain high amid modest credit growth and resilient profitability. It forecast the profitability of Saudi banks to remain stable in the next 12 to 18 months, supported by higher interest rates, low provisioning costs and sound cost controls, which will be offset by pressure on funding costs amid competition for large depositors. 
Source: Moody's Investors Service