August 2018

GCC WACC – H1 2018

Capital Markets Research Report

Pages : 16
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Executive Summary

Subsequent to our note published in February 2018, we have updated the values of equity risk premium and cost of capital to reflect the changes in current operating environment. Calculation of risk free rates for GCC countries was previously done by computing the inflation differentials between the country and U.S, and summing it with U.S risk free rate, as most of the GCC countries had not issued sovereign bonds. However, in the recent past all the GCC countries have issued bonds in order to bridge the deficit in their budgets. However, due to the absence of active trading of the locally issued bonds, the yield data obtained from bonds is often stale. Hence, we have used the summation of the 10yr U.S treasury yield and country specific sovereign risk premium to compute the risk free rate.

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