Happy almost-THURSDAY, wonderful people. We have a rather busy issue this morning that’s chock-full of M&A (with a bit of debt and investment news to round things out), so let’s get right to it.

HAPPENING TODAY-

The EV Auto Show 2024 is on its second day today and wraps tomorrow. The event is bringing together key industry players, with more than 100 exhibiting companies from 20+ countries. You can sign up for the event here.

WEATHER- Riyadh’s mercury will peak at 40°C, before dropping to a low of 28°C. Meanwhile, a cloudy Jeddah will see a high of 37°C, and a low of 31°C.

PSA-

Updated standards for non-bottled drinking water in the Kingdom target public and private water providers, desalination plants, and networks, the Environment, Water and Agriculture Ministry said on X. The new standards (pdf) require monitoring water quality throughout production, transportation, distribution, and storage to ensure safety. Water must be devoid of substances harmful to public health and the environment, with the new regs setting standards for chemicals, trace elements, heavy metals, microbiology, and other contaminants. Moreover, the new guidelines mandate that all individuals have access to safe drinking water.

WATCH THIS SPACE-

#1- The Capital Market Authority has cleared Saudi’s first Hong Kong-focused ETF for listing on Tadawul, according to a statement. The Albilad CSOP MSCI Hong Kong China Equity ETF is expected to launch on Tadawul by year-end, though no official timeline was disclosed. The story was also picked up by Reuters.

Another HK-focused ETF coming soon? Saudi Awwal Bank’s SAB Invest is reportedly set to launch a second ETF tracking Hong Kong-listed equities before the end of 2024, Bloomberg reports, citing sources with knowledge of the matter. SAB Invest and Albilad’s ETFs are collectively expected to raise nearly USD 1 bn, the business information service says.

Background: The move follows expectations that Saudi regulators would reciprocate Hong Kong’s move to list a Saudi-focused ETF on the Hong Kong exchange in November of last year, with the CSOP Saudi Arabia ETF growing to USD 1.3 bn since due to strong institutional interest.

MARKET WATCH-

#1- EFG Hermes bullish on Tadawul in 4Q: Saudi equity markets are expected to have a healthy final quarter of the year, with volatility and fluctuations remaining “healthy,” EFG Hermes Head of Research Ahmed Shams El Din told Argaam on the sidelines of the firm’s annual conference in London. The fluctuations are driven in part by speculation about when the US Federal Reserve will pull the trigger on interest rate cuts, Shams El Din said, but noted that markets have broadly priced in the cuts.

Undervalued gems? Key sectors such as retail, building materials, and maritime transport remain relatively undervalued in the market and are poised to perform well, especially with a pickup in M&A activity and as population growth and megaprojects boost demand, Shams El Din said. Shams El Din had previously told EnterpriseAM Saudi that real estate and petrochemicals are also interesting sectors.

The market has sufficient depth to absorb more IPOs coming up in the pipeline, Shams El Din said. EFG Hermes’ head of research also sees strong liquidity in the capital and sukuk markets, which positions them well to handle more offerings.

!_InserLine_!

#2- Investors in the Middle East’s equity capital markets are becoming more selective as the region experiences a surge in transactions, EFG Hermes’ co-CEO of investment banking Mohamed Ebeid told Bloomberg “There continues to be decent demand for ECM [transactions], but investors will become a little bit more selective.”

The region has seen 31 ECM transactions worth USD 18.2 bn this year, surpassing last year’s USD 11 bn, according to the news outlet. However, recent IPOs, like Saudi’s Fakeeh Hospital and Abu Dhabi’s Alef Education, showed weaker debuts, highlighting a more selective approach amid tightening liquidity in GCC markets.

Government entities are now stepping in to support local equity funds, who are usually offered more allocations in regional transactions, according to Ebeid.

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THE BIG STORY ABROAD-

Our corner of the world is once again dominating the international news cycle after an Israeli operation that killed nine and injured thousands in Lebanon “marked an extremely concerning escalation,” according to UN Special Coordinator for Lebanon Jeanine Hennis-Plasschaert.

At around 3:30pm in Lebanon, pagers belonging to Hezbollah members began exploding, injuring more than 2.7k and killing nine people — including a child. It is still unclear how Israel — which has not publicly admitted responsibility — conducted the attack, with some outlets reporting that they likely sabotaged supply lines and rigged the Taiwan-made pagers with small explosives prior to their arrival in Lebanon. An official from the armed group described the attack as the “biggest security breach” that Hezbollah has faced in the nearly year since 7 October.

All eyes are now on what happens next, with Hezbollah vowing that Israel would receive “fair punishment” for the attack and an increasingly belligerent Netanyahu saying Israel will pursue a “fundamental change in the security situation in the north” as part of its war aims.

WHILE IN AI NEWS- BlackRock and Microsoft are teaming up to bring us a USD 30 bn AI investment fund to invest in rapidly scaling up the power and digital infrastructure to get ahead of potential bottlenecks in AI’s growth trajectory.

The news comes as the US continues to throw up regulatory hurdles to stop AI tech from getting into Chinese hands, with Microsoft calling yesterday for more “clarity and consistency” on US chip export controls to the Middle as the tech giant seeks to expand its collaboration with Abu Dhabi-based AI company G42. Meanwhile, over in Japan, policymakers are mulling a deal with the US that would curb chip exports to China and prevent Japanese tech companies from falling afoul of new US export controls — though potentially at the cost of Chinese retaliation.

CIRCLE YOUR CALENDAR-

Smart Cities Saudi Expo 2024 runs from 24-26 September at the Riyadh International Convention & Exhibition Center.

The two-day Kingdom Business and Luxury Travel Congress will kick off on Wednesday, 25 September, at the Crowne Plaza Riyadh RDC Hotel and Convention.

TheSaudi Women’s Premier League kicks off on Friday, 27 September with the return of Al Nassr, Al Ahli, Al Shabab, Al Qadisiyah, Al Hilal, Al Ittihad and Eastern Flames. New to the League are AlUla, Al Taraji, and Al Amal.

The three-day Global Logistics Forum will kick off on Saturday, 12 October at Riyadh’s King Abdullah Financial District.

The Industrial Hackathon 2024 is scheduled for 10-11 October, the Saudi Industrial Development Fund spokesperson said on X. The hackathon will pit top Saudi talents against each other to showcase their design, production and sustainability solutions for the local manufacturing sector. Contestants will compete for a pool worth a combined SAR 1.4 mn.

The two-day Global PropTech Summit is happening on 27 October at the Mövenpick Hotel, Riyadh.

The Pakistan Investment Summit and Smart Expo will kick off 2 November at the Jeddah Hilton Hotel.

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