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Reuters blog archive

from Breakingviews:

Jumbo $6 bln bank IPO shows Saudi too big to miss

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Saudi Arabia’s jumbo bank offering shows the soon-to-open emerging market is too good to miss. The kingdom’s top lender by assets is planning to sell shares worth $6 billion, making it the biggest-ever initial public offering in the Middle East and second only to China’s Alibaba in the world this year. For most outsiders, it’s a reminder of the opportunities that will open up when foreign investors are granted direct access to the country’s $584 billion stock market next year.

In keeping with past privatizations, the government is pricing National Commercial Bank to fly. The IPO price values NCB at 2 times its book value at the end of 2013 – below the average of 2.2 times for the kingdom’s 11 other listed banks, according to Eikon. The discount looks even more generous given NCB’s 18.8 percent return on equity last year. The sector average is just 13.4 percent.

Though the offer is only open to Saudi nationals, a few outsiders may be able to get in early by investing indirectly through swap agreements. These are expensive and lack voting rights, hence constitute less than 5 percent of the total market. Foreign investors may miss out on the initial pop, but NCB will still look attractive even if its shares surge the maximum permitted 10 percent on their debut.

from Global Investing:

Russia: There’s cheap and then there is “near-death” cheap

Russia's equity market has always been cheap, argues USAA's Wasif Latif, but at present levels it is just too cheap to ignore. Russia's economic decline, driven by not only falling oil prices, its main source of income, but also Western sanctions over its intervention in Ukraine has caused a major sell-off that Latif and other asset managers believe is an overshoot. This has brought Russia's benchmark dollar-denominated RTS stock index to its lowest level since March and before that, a level not seen since Sept. 2009.

"We're not looking for it to go way up, but looking for it to go up from its near-death cheap to its normal-cheap condition," said Latif, head of global multi-assets at USAA Investments.

from The Great Debate:

Five questions for America on Syria

A pair of U.S. Air Force F-15E Strike Eagles fly over northern Iraq

When the United States began bombing Islamic State and Jabhat al-Nusra positions in Syria last month, it entered into a conflict that has been grinding on for more than three years. Here are five major questions America needs to answer as the fighting unfolds in the weeks ahead:

1. What happens when the United States runs out of targets to strike? America will soon discover that there are only so many checkpoints, buildings, convoys and command-and-control structures to hit. The Islamic State is a terrorist insurgency, not a national army, so U.S. military planners are going to run out of points on a map to strike. While the group certainly does seize, hold, and administer territory, it doesn’t tend to mass troops or maintain significant administrative infrastructure yet that can be targeted from the skies.

from The Great Debate:

Germany exports massive amounts of arms, hypocrisy

A MG3 automatic weapon that is part of a German military aid shipment for Kurdish forces in Northern Iraq is on display for the media at a storage facility of the Bundeswehr armed forces in Waren 

Who is the world’s No. 3 arms exporter, after the United States and Russia? Surprise. It is Germany, a country bound by law to supply only allies and peaceable folks like (neutral) Switzerland or Sweden. Off limits are “areas of tension” -- bad neighborhoods that actually need the stuff.

Yet somehow, Israel and Saudi Arabia, both living in the world’s powder keg, are among Germany’s best customers. So are Algeria, Qatar and  the United Arab Emirates.

from Breakingviews:

Iraq troubles are unlikely to bring new oil crisis

By Fiona Maharg-Bravo

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The continued violence in Iraq looks like a harbinger of a sharp cutback from the world’s seventh-largest oil producer. But the bulk of Iraq’s production is still secure. Even though the Middle East has clearly become less stable, it will still take a cascade of problems to create a big oil price shock.

from MacroScope:

ECB uncertainty

For European markets, Germany’s March inflation figure is likely to dominate today. It is forecast to hold at just 1.0 percent. The European Central Bank insists there is no threat of deflation in the currency area although the euro zone number has been in its “danger zone” below 1 percent for five months now.

Having appeared to set a rather high bar to policy action at its last meeting, this week the tone changed. Most notable was Bundesbank chief Jens Weidmann, normally a hardliner, who said printing money was not out of the question although he would prefer negative deposit rates as the means to tackle an overly strong euro.

from The Great Debate:

The religion-fueled fight in Syria

The second round of peace talks in Geneva between representatives of Bashar Al-Assad’s regime in Syria and rebel forces has ended with both sides blaming each other for the lack of progress. Beyond the finger-pointing, however, lies a growing danger to the goal of a negotiated settlement. The civil war’s religious divides are widening, making compromise unthinkable.

Representatives of the Syrian regime went to Geneva solely with the hope of convincing the opposition to let President Bashar al-Assad stay in power so he can forge an alliance against jihadist forces fighting in Syria, most notably the al Qaeda affiliates Jabhat al-Nusra and the Islamic State in Iraq and the Levant. Their argument -- one that many, including former U.S. Ambassador to Iraq Ryan Crocker, have made -- was that Assad is better than any likely alternative.

from David Rohde:

Dooming the Syria talks before they begin

The United States won a short-term diplomatic victory over Iran this week. Under intense pressure from American officials, U.N. Secretary-General Ban Ki-moon withdrew an invitation for Iranian officials to attend the Syria peace conference.

Disinviting Tehran is the latest example of the Obama administration’s continual search for easy, risk-free solutions in Syria. As the conflict destabilizes the region, however, Washington must finally face the hard choice: Either compromise with Iran, or decisively support and arm the rebels.

from The Great Debate:

Is there a ‘right’ path for the U.S. in Syria?

Key parties to the conflict in Syria are meeting in Switzerland on Wednesday. The participants have been downplaying expectations that the “Geneva II” peace conference -- which will bring together for the first time representatives from the Assad government and various rebel groups along with major international players -- will resolve the conflict, or even bring about a ceasefire.

For the U.S. government, the crucial issue at this meeting and beyond is determining if and how to intervene and provide support in a conflict where there may no longer be real “good guys,” or supporters of U.S. national interests, to back. This is particularly important given Washington’s interwoven interests throughout the region -- not only in Syria, but in Iraq, Iran, Lebanon, Turkey and beyond.

from Ian Bremmer:

Why Saudi Arabia and the U.S. don’t see eye to eye in the Middle East

Give credit to Vladimir Putin and his New York Times op-ed on Syria for sparking a new tactic for foreign leaders hoping to influence American public opinion. In recent weeks, Saudi Arabian political elites have followed Putin’s lead, using American outlets to express their distaste with the West’s foreign policy, particularly with regard to Syria and Iran. In comments to the Wall Street Journal, prominent Saudi Prince Turki al-Faisal decried the United States for cutting a preliminary deal with Iran on its nuclear program without giving the Saudis a seat at the table, and for Washington’s unwillingness to oppose Assad in the wake of the atrocities he’s committed. Saudi Arabia’s ambassador to Britain followed with an op-ed in the New York Times entitled “Saudi Arabia Will Go It Alone.” The Saudis are clearly upholding the vow made by intelligence chief Bandar bin Sultan back in October to undergo a “major shift” away from the United States.

In light of the recent actions of the Obama administration, many allies are also frustrated and confused, and even hedging their bets in reaction to the United States’ increasingly unpredictable foreign policy. But of all the disappointed countries, none is more so than Saudi Arabia -- and with good reason. That’s because the two countries have shared interests historically -- but not core values -- and those interests have recently diverged.

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