Navigating the impact of digital currencies on forex markets
23 July 2024
The financial landscape is undergoing a seismic shift with the advent and increasing adoption of digital currencies, and as they gain traction, their influence on traditional foreign exchange (forex) markets is becoming more pronounced.
This transition presents both challenges and opportunities for traders and investors, particularly in markets like the UAE, which are rapidly evolving.
The integration of digital currencies into traditional forex markets is already reshaping the financial landscape. For traders and investors in the UAE, this transition necessitates a strategic approach to navigate the volatility, manage risks, diversify portfolios and address liquidity issues effectively.
Digital currencies are characterised by a high degree of volatility and can fluctuate within short period of time. This is unlike traditional fiat currencies, which tend to experience gradual value changes influenced by macroeconomic factors.
Market sentiment can have a significant impact, especially on the less liquid digital currencies. Bitcoin, the most well-known digital currency, has seen its value swing wildly, driven by market sentiment in relation to regulatory news and market developments.
High volatility is a double-edged sword – it carries opportunities, but also amplifies risks. It also creates opportunities, and traders leveraging technical analysis and quick decision-making can capitalise on price swings.
Disparities in liquidity across different exchanges can create arbitrage opportunities for savvy traders, but this requires a high level of research, resources and technical knowledge to be adequately exploited.
Digital currencies can also serve as a hedge against fiat currencies.
In the UAE, where the dirham is pegged to the US dollar, digital currencies can be a means to hedge against dollar exposure. At the same time, the volatility can also expose traders to significant losses, so managing this risk requires sophisticated strategies and tools.
Managing risk
The relative novelty of digital currencies means that they can be subject to speculative bubbles, making it challenging to predict long-term value trends.
Effective risk management is therefore crucial when dealing with digital currencies. The high volatility and 24/7 nature of digital currency markets require traders to adopt robust risk management practices, including the traditional tools that more than ever are key to protection and success.
Implementing stop-loss orders helps to limit potential losses by automatically selling a position when it reaches a predetermined price. Proper position sizing ensures that a single trade does not disproportionately impact the overall portfolio, mitigating the risk of significant losses.
When it comes to using such tools in digital currency trading, traders need to factor in that considerable gaps might form between prices and the available liquidity, making it difficult to trigger stop-losses at the desired prices. Therefore, the position sizing should be determined accordingly.
Another aspect to be considered is the relative lack of historical data: unlike traditional forex markets, digital currencies lack extensive historical data, making it harder to apply conventional risk models.
Even the data set of the most established digital currencies, like Bitcoin or Ethereum, which have a longer history, are to be analysed with caution as the older data refers to a completely different market in terms of liquidity, volume of transaction and actual status of the asset.
Additionally, while major digital currencies like Bitcoin and Ethereum enjoy increasingly higher levels of liquidity, many altcoins suffer from low trading volumes.
Low liquidity in certain digital currencies can lead to significant slippage, where trades are executed at prices different from those expected.
Furthermore, the regulatory environment for digital currencies is still evolving, meaning that unexpected regulatory changes can significantly impact market dynamics and trader positions.
Ensuring the use of reputable exchanges with robust liquidity is essential.
UAE potential
The UAE has shown a progressive attitude towards digital currencies, positioning itself as a hub for blockchain innovation and digital asset adoption.
The government’s proactive stance, coupled with a robust financial infrastructure, creates a healthy and reliable environment for integrating digital currencies as an asset for investment portfolios and trading.
The UAE has established comprehensive regulations to govern digital currencies, enhancing market integrity and investor protection. This regulatory clarity attracts global investors and fosters confidence in digital currency markets.
The involvement of institutional players in the UAE – such as banks and financial institutions – in digital currency markets is also set to grow, and this institutional interest will bring additional liquidity and stability and help mitigate some of the volatility and liquidity issues.
The UAE’s infrastructure supports digital currency transactions and innovation, and this is crucial for the efficient functioning of digital currency markets and their integration with traditional forex trading.
In approaching digital currency for trading and investment, it is crucial for traders to understand the characteristics of the various currencies and ensure that exposure is in line with the investors’ risk appetite and tolerance.
As digital currencies continue to evolve, staying informed and adaptable will be key.
The UAE’s supportive regulatory environment and technological advancements position it well to leverage the benefits of this shift while mitigating the associated risks.
By embracing these changes with a well-rounded strategy, traders and investors can leverage the potential of digital currencies to enhance their trading and investment outcomes.
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Acciona confirms $500m Facility E deal
5 December 2024
Spanish contracting firm and utility investor Acciona has been awarded a contract to design and build a seawater reverse osmosis (SWRO) plant as part of Qatar’s Facility E independent water and power project (IWPP) in Ras Abu Fontas.
According to the company, the plant will have a capacity of 500 million litres a day, equivalent to supplying 2 million people with drinkable water, and has a budget of around $500m (€475m).
MEED previously reported that the integrated facility’s water desalination package will have a capacity of 110 million imperial gallons a day (MIGD), while the power generation plant will have the capacity to generate 2,415MW of electricity.
The contract Acciona won is part of the $2.8bn overall engineering, procurement and construction (EPC) package of the Facility E IWPP, which South Korea’s Samsung C&T will implement.
Japan's Sumitomo Corporation leads a consortium that will develop and operate the Facility E IWPP. The team includes fellow Japanese utility developer Shikoku Electric, Seoul-headquartered Korea Overseas Infrastructure & Urban Development Corporation (KIND) and Korea Southern Power Company (Kospo).
The total project cost is roughly $3.7bn.
Japan’s Mitsubishi Power will supply the gas turbines for the power plant.
The four developer consortium members, along with Qatar Electricity & Water Company (QEWC) and QatarEnergy (QE), will establish a project company.
According to Sumitomo, the equity distribution between the project company shareholders is:
- Sumitomo Corporation: 17%
- Shikoku Electric: 11%
- Kospo: 6%,
- KIND: 6%
- QEWC: 55%
- QE: 5%
MEED understands that the new target commercial operation date for the Facility E IWPP project has been moved to 2029.
According to Acciona, Qatar achieved its first milestone in reverse osmosis technology at its Ras Abu Fontas 3 plant, with a capacity of 165,000 cubic metres a day (cm/d).
It is understood that Acciona also built the Umm Al-Houl 1 and 2 desalination plants in Doha, which each have a production capacity of 284,000 cm/d.
The state utility’s transaction advisory team includes UK-headquartered PwC and Clyde & Co as financial and legal advisers, respectively, led by Belgrade-headquartered Energoprojekt as technical adviser.
Facility E is Qatar’s fifth IWPP scheme. Completed and operational IWPPs include three projects in Ras Laffan – known as Facilities A, B and C – and Facility D in Umm Al-Houl.
Awarded in 2015 and completed in 2018, Facility D was developed by a Japanese consortium of Mitsubishi Corporation and Tokyo Electric Power Company (Tepco). South Korea’s Samsung C&T was the EPC contractor.
Related read: Facility E award marks key milestone
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GCC grows stronger together
5 December 2024
Commentary
Colin Foreman
EditorRead the December 2024 edition of MEED Business Review
The 2020s have so far been a tumultuous decade, with ongoing conflicts in the Levant and Ukraine still dominating the global news cycle.
The decade began with the Covid-19 pandemic battering economies, and with many nations struggling to recover, populist governments with protectionist policies have shunned globalisation.
The decline of US-led globalisation has coincided with the rise of China as the world’s largest economy, and over the past decade Beijing has begun to assert itself more actively on the international stage with its Belt and Road Initiative.
At the same time, climate change has become increasingly difficult to deny.
As the new world order establishes itself, it poses challenges and opportunities for the GCC. Complex issues will not be resolved quickly, and the GCC has chosen to confront them together. After signing the Al-Ula Accords in January 2021, there has been a renewed sense of togetherness across the GCC that has manifested itself in several important ways.
Simply exporting oil from a port to international markets no longer works
Politically, the GCC has more weight on the international stage if it acts together. Economically, as the GCC diversifies away from exporting hydrocarbons with the development of new industries and services, it will need to be better integrated. Simply exporting oil from a port to international markets no longer works. The GCC economies of the future need to be intertwined with their neighbours and global supply chains.
This requires more infrastructure. One article of the Al-Ula Accords commits the GCC to develop its railway network.
Regional integration also supports the fight against climate change. For power grids to operate more efficiently, the GCC needs to connect its electricity grids so that when areas have a surplus of power, they can support other areas.
These projects will build resilience, which should shield the GCC from much of the upheaval the world faces today.
Must-read sections in the December 2024 issue of MEED Business Review include:
> AGENDA:
> Cooperation strengthens Gulf markets
> Transport links stitch GCC together> CURRENT AFFAIRS:
> Arab-Islamic summit demands Gaza ceasefire
> Kuwait hopes new oil minister can push projects forwardINDUSTRY REPORT:
MEED's 2024 ranking of regional EPC contractors
> Italian firms are top EPC contract winners
> Contractors battle chronic problems> CONSTRUCTION: Saudi Binladin Group makes a comeback
> DATA CENTRES: Khazna expects to build more 100MW-scale data centres
> GREEN HYDROGEN: Abu Dhabi bullish on green hydrogen
> INTERVIEW: Sener eyes role in evolving Middle East infrastructure
> LEGAL: Navigating energy disputes through international arbitration
> BAHRAIN MARKET REPORT:
> COMMENT: Bahrain’s projects sector drags on economy
> GOVERNMENT & ECONOMY: Bahrain’s economic growth momentum falters
> BANKING: Bahrain banking works to scale up
> OIL & GAS: Bapco Energies sets sights on clean energy goals
> POWER & WATER: Manama jumpstarts utility sector
> CONSTRUCTION: Bahrain construction struggles to keep pace
> INDUSTRY: Alba positions for the future> MEED COMMENTS:
> Riyadh may turn to different CEOs to run its projects
> Warming Riyadh-Tehran ties herald regional shift
> Decarbonising steel is hard to resist
> Saudi Arabia power sector unlikely to disappoint> GULF PROJECTS INDEX: Gulf projects market returns to strong growth
> OCTOBER 2024 CONTRACTS: Region sets stage to break records this year
> ECONOMIC DATA: Data drives regional projects
> OPINION: Middle East faces a reckoning
> BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts
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Mubadala acquires stake in $17bn US healthcare platform
5 December 2024
Abu Dhabi-based Mubadala Investment Company has agreed to purchase a minority stake in Zelis, a US-based healthcare technology solutions provider.
Mubadala Investment Company is the lead investor, alongside a group of investors including Norwest and HarbourVest, both US-headquartered private equity firms.
Parthenon and Bain Capital remain the majority owners of Zelis.
Mina Hamoodi, head of Healthcare Investments at Mubadala, said the deal is “the largest investment that we have made in the healthcare space”.
In October, Bloomberg reported that Mubadala was nearing a deal to buy a minority stake in the private equity-backed company, reportedly valued at $17bn at the time.
“Zelis is helping to streamline the US healthcare financial experience, which is complex and in need of technology-driven solutions that can unlock efficiencies and create better outcomes for everyone engaged in the care journey,” said Hamoodi.
Zelis is “modernising the healthcare financial experience” by providing a connected platform that bridges the gaps and aligns interests across payers, providers and healthcare consumers.
The platform serves over 750 payers, including the US’ top five national health plans, BCBS insurers, regional health plans, third-party administrators and self-insured employers, and millions of healthcare providers and consumers.
Goldman Sachs & Co and JP Morgan Securities served as financial advisers and Kirkland & Ellis acted as legal advisers to Zelis.
Evercore served as financial adviser and Akin Gump Strauss Hauer & Feld acted as legal counsel to Mubadala.
The transaction closed on 26 November.
Photo credit: PIxabay (for illustrative purposes only)
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Saudi Arabia seeks Taif airport PPP interest
5 December 2024
Saudi Arabia’s Matarat Holding, through the National Centre for Privatisation & PPP (NCP), has invited firms to express interest in bidding for a contract to develop and operate a new international airport in Taif in the country’s Mecca province.
The new Taif International airport will be located 21 kilometres southeast of the existing Taif airport, with a capacity to accommodate 2.5 million passengers by 2030.
Matarat and NCP expect to receive expressions of interest from companies by 10 January 2025.
The invitation is open to interested private sector entities via a public-private partnership (PPP) model under a 30-year build-transfer-operate (BTO) contract, including the construction period.
The BTO project scope includes the new airport. The proposed design features a runway with a full-length parallel taxiway connecting to a single commercial apron.
The scope includes facility buildings, utility networks, car parks and access roads, as well as provisions for additional expansions to meet future subsystem requirements.
The new Taif International airport is expected to meet the projected increase in demand by 2055 and contribute to the economic development of Taif city and its surrounding areas, in line with the kingdom’s National Aviation Strategy.
It is also expected to meet the needs of Umrah pilgrims as a viable alternative within the region’s multi-airport system, which includes King Abdulaziz Airport in Jeddah, Prince Mohammed Bin Abdulaziz Airport in Medina and Prince Abdulmohsen Bin Abdulaziz Airport in Yanbu.
Other airport PPPs
Three other airports, in addition to the Taif International project, comprise the first stage of Saudi Arabia’s latest plan to modernise and privatise its international and domestic airports.
The other planned airport PPP schemes are in Abha, Hail and Qassim.
Matarat and NCP recently prequalified three consortiums and one company that can bid for a contract to develop and operate a new passenger terminal building and related facilities at Abha International airport.
The companies that have been prequalified to bid for the Abha airport PPP contract are:
- GMR Airports (India)
- Mada TAV: Mada International Holding (local) / TAV Airports Holding
- Touwalk Alliance: Skilled Engineers Contracting (local) / Limak Insaat (Turkiye) / Incheon International Airport Corporation (South Korea) / Dar Al-Handasah Consultants (Shair & Partners, Lebanon) / Obermeyer Middle East (Germany/ Abu Dhabi)
- VI Asyad DAA: Vision International Investment Company (local) / Asyad Holding (local) / DAA International (Ireland)
Located in Asir province, the first phase of the Abha International airport PPP project is set for completion in 2028. It will increase the airport terminal area from 10,500 square metres (sq m) to 65,000 sq m.
The contract scope includes a new rapid-exit taxiway on the current runway, a new apron to serve the new terminal, access roads to the new terminal building and a new car park area.
The scope also includes support facilities such as an electrical substation expansion and a new sewage treatment plant.
The transaction advisory team for the client on the Abha airport PPP scheme comprises UK-headquartered Deloitte and Ashurst as financial and legal advisers, respectively, and ALG as technical adviser.
Previous tenders
The Taif, Hail and Qassim airport schemes were previously tendered and awarded as PPP projects using a BTO model.
Saudi Arabia’s General Authority of Civil Aviation (Gaca) awarded the contracts to develop four airport PPP projects to two separate consortiums in 2017.
A team of Tukey’s TAV Airports and the local Al-Rajhi Holding Group won the 30-year concession agreement to build, transfer and operate airport passenger terminals in Yanbu, Qassim and Hail.
A second team, comprising Lebanon’s Consolidated Contractors Company, Germany’s Munich Airport International and local firm Asyad Group, won the BTO contract to develop Taif International airport.
However, these projects stalled following the restructuring of the kingdom’s aviation sector.
The latest plan entails transferring the ownership of 35 airports from Gaca to the Public Investment Fund (PIF).
This is in line with transforming Gaca, which previously managed and operated the airports, into a legislator and regulator.
The construction, operation and management work for the airports is being referred to Matarat, prior to being transferred to PIF.
Matarat Holding Company is a subsidiary of Gaca.
Saudi Arabia has already privatised airports, including the $1.2bn Prince Mohammed Bin Abdulaziz International airport in Medina, which was developed as a PPP and opened in 2015.
Related read: Saudi Arabia to issue third national carrier licence
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Oman and Belgium expand hydrogen collaboration
5 December 2024
Hydrogen Oman (Hydrom) and the Belgian Hydrogen Council (BHC) have signed a memorandum of understanding (MoU) to further strengthen their collaboration in green hydrogen.
According to an official statement, the MoU sets the stage for enhanced cooperation across the hydrogen value chain, reflecting the “shared commitment of both nations to advance the global hydrogen economy”.
Signed in the presence of Sultan Haitham bin Tarik, the MOU seeks to align policies, promote knowledge exchange and technological advancements, as well as explore opportunities across hydrogen production, infrastructure, transportation and utilisation.
In 2023, Hyport Duqm, an alliance between Oman’s OQ Alternative Energy and Belgium’s DEME, signed a 47-year project development agreement with Hydrom for a project to produce and export green hydrogen.
This was further supported by the 2023 declaration of intent between Oman’s Ministry of Energy and Minerals and Belgium’s Ministry of Energy to advance hydrogen certification and trade frameworks.
The first joint milestone under the MoU will focus on key areas of collaboration including knowledge sharing, technology development, and infrastructure planning for hydrogen production, shipping, and terminal facilities.
It will also expand on pathways to broader cooperation with other European countries as a part of the MoU promise to address legislative challenges and explore new opportunities for research and development.
Salim bin Nasser Al-Aufi, Oman’s Minister of Energy and Minerals and Chairman of Hydrom, said, “Oman’s potential capacity as a hub for green hydrogen production, combined with Belgium’s role as a promising hydrogen-based industrial hub and strategic connection point to European markets, will strengthen energy security and create a seamless hydrogen supply chain.”
Tom Hautekiet, Belgian Hydrogen Council chairman, noted that Oman’s competitive renewable energy resources and Belgium’s strategic position as a hydrogen hub for Europe will enable “a powerful platform for innovation, investment and growth in the hydrogen economy”.
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