• Deputy Crown Prince drives shake-up for Vision 2030 King Salman of Saudi Arabia issued over 50 decrees yesterday (07 May), shaking up the government and other authorities as his son, Deputy Crown Prince Mohamed bin Salman, prepares to implement sweeping economic changes as part of the Vision 2030 plan announced last month. The most important changes, in our view, came at two of KSA’s most important institutions: the Oil Ministry and SAMA, the Central Bank.
• Promotions at SAMA and Oil Ministry don’t mean business as usual Khalid al-Falih, formerly CEO of Aramco, replaces Ali al-Naimi at the Oil and Minerals Ministry - the portfolio has been broadened to include energy and industry. This puts al-Falih at the centre of an investment-intensive period of economic change. The Vision 2030 calls for the sale of 5% of the Ministry’s key asset, Saudi Aramco, within two years, a doubling of non-oil exports, a massive increase in mining activity by 2020 and a rapid build-up in renewable energy generation. Ahmed Al Kholifey, former Deputy Governor for Research, replaces Fahad al-Mubarak at SAMA at a time when banks are lending to the central government, for the first time in over a decade, and project finance is becoming more important.
• Appointments follow rapid CMA changes, but bigger tasks lie ahead After the Vision 2030 announcement, the CMA was first out of the gate, with proposed changes to settlement and QFI rules. These were relatively easy shifts (though retail investors will miss same-day settlement). The tasks facing newly-appointed officials will be more difficult, since they will have to overcome bureaucratic obstacles and other vested interests as they seek to implement the Vision 2030 goals. We take yesterday’s announcements as a signal of intent rather than a sign that the whole government will be able to work with the same speed as the CMA.
• Financing remains critical; stay Underweight for now The Vision 2030 programme requires heavy investment at a time when oil prices are still well below the KSA budget breakeven. Officials have pointed to significant savings to be made after years of waste, but we think that markets need more clarity on financing source. External deficits since 2014 have largely been financed from foreign reserves, down over USD140bn from the peak. We conservatively forecast a 2016 fiscal deficit of USD91bn (using a USD35/bbl oil price estimate). We believe the short-term impact of austerity will put pressure on equity owners in the short run, and we stay underweight KSA. We like Dallah and Al-Othaim, both in the MENA Top 20 List, as plays on selected Vision 2030 themes.

Simon Kitchen
Mohamed Abou Basha
Mohamed Al Hajj