GCC new issuance debt value jumps 57.22%

 29 Aug 2017 - 13:24

GCC new issuance debt value jumps 57.22%

Satish Kanady | The Peninsula

The GCC bonds and sukuk market remained strong in 2016 while witnessing a substantial increase in activities triggered by the regional countries’ need to plug their budget deficits. The strong credit quality and low government debt enabled the governments to raise debt in the international market.

With an urgent need to fund the current and forecasted deficits, sovereign debt markets were sought after as a viable solution second year in a row by the GCC governments, in addition to drawing from sovereign reserves.  As a result, the sovereign issues dominated the GCC bonds and sukuk market as their share increased to 64.3 percent in 2016 as compared to 58.26 percent in 2015.  

The total value raised by sovereign issues increased by 73.4 percent as $65.82bn was raised through 25 sovereign issuances over the year as compared to $37.96.  While the share of corporate entities dropped, the total value raised by them increased by 34.62 percent to $36.613bn in 2016, analysts at Kuwait Financial Centre (Markaz)  noted in their latest Fixed Income report.

A total of $167.54bn was raised in aggregate through the primary market in 2016, an increase of 41.20 percent in comparison to $118.6bn raised in 2015. GCC Central Banks (except for UAE and KSA) raised a total of $65.10bn through local issuances to manage liquidity during the year noting a growth of 21.69 percent. 

The sovereign issuances by GCC countries increased considerably, totaling to $65.82bn, compared to $37.95bn in 2015. The total value raised by corporate entities in the GCC increased by 34.62 percent to $36.61bn from the previous year’s $27.19bn. The total outstanding amount of sovereign and corporate issues in the Bonds and Sukuk market stood at $352.08bn by the end of 2016.

GCC Central Banks Local Issuances (CBLIs) including treasury bills, notes, bonds and sukuk denominated in local currencies and issued, by GCC central banks, primarily helped to regulate the level of domestic liquidity.
A total of $65.10bn was raised through CBLIs during the year through 254 issuances, a growth of 21.69 percent from $53.498bn raised during previous year  through 215 issuances. Conventional issuances continued to dominate CBLI issuances while the contribution of sukuks declined from 8.39 percent in 2015 to 5.92 percent in 2016.

“GCC bonds and sukuk market has continued to be significantly active over the past two years...... The total value of new issuances in the GCC bonds and sukuk market in 2016 reached $102.436bn, up 57.22 percent from $65.155bn raised in 2015. Qatari entities raised $19.22bn from  97 issues making up 18.77 percent of the overall market. The sovereign issues by the government raised  $9bn and was the main contributor towards the overall issuance”, the report said.
Conventional issuances continued to dominate the mix as it raised $89.79bn (higher by58.56 percent vs2015) representing 87.66 percent of the total issuances while Sukuk’s raised $12.63bn (higher by 48.28 percent vs 2015) constituting the remaining 12.31 percent. 

During the year 2016, 37.9 percent of the total issuances or 117 GCC bonds and sukuk issuances, with an aggregate value of $58.157bn were listed on exchanges.  Listing on international exchanges accounted for 91.3 percent of the listed issues as 104 issuances totaling $53.10bn were listed on international exchanges. The regional exchanges recorded listing of mere 13 bonds and Sukuk in 2016 with a total value of $5.05bn. Dublin continues to be the most sought after exchange for listing as it recorded 55.84 percent of the total value issuances listed on exchanges in 2016.

The total amount outstanding in the GCC Bonds and Sukuk market in 2016 was $352.08bn. Government issuances replaced financial sector issuances to represent the largest share of total amount outstanding at 39.9 percent with an outstanding amount of $140.71bn.  Corporate issuances constituted 60.97 percent of the total amount outstanding with $214.67bn, while sovereign issuances represented 39.02 percent.

During 2016, five-year credit default swap (CDS) for all GCC sovereign debts narrowed, representing a reduced risk of default. Qatar’s five-year CDS narrowed by 19 percent to reach 75.000 basis points.

Conventional issuances continued to dominate the mix as it raised $89.79bn (higher by58.56 percent vs2015) representing 87.66 percent of the total issuances while Sukuk’s raised $12.63bn (higher by 48.28 percent vs 2015) constituting the remaining 12.31 percent. 

During the year 2016, 37.9 percent of the total issuances or 117 GCC bonds and sukuk issuances, with an aggregate value of $58.157bn were listed on exchanges. Listing on international exchanges accounted for 91.3 percent of the listed issues as 104 issuances totaling $53.10bn were listed on international exchanges. The regional exchanges recorded listing of mere 13 bonds and Sukuk in 2016 with a total value of $5.05bn. Dublin continues to be the most sought after exchange for listing as it recorded 55.84 percent of the total value issuances listed on exchanges in 2016.

The total amount outstanding in the GCC Bonds and Sukuk market in 2016 was $352.08bn. Government issuances replaced financial sector issuances to represent the largest share of total amount outstanding at 39.9 percent with an outstanding amount of $140.71bn. Corporate issuances constituted 60.97 percent of the total amount outstanding with $214.67bn, while sovereign issuances represented 39.02 percent. 

The maturity duration of five to ten years continued to dominate the issuance as the tenor represented 57.3 percent of the total value, raising $58.70bn through 80 issuances. The maturity tenor of 10 years and above gained considerable traction in 2016 as several sovereign issuances were made for a maturity of 10 years and 30 years. This resulted in $31.80bn (30.92percent of the total value) being raised through 33 issues with tenor of greater than 10 years, including 6 perpetual issues raising $1.426bn. For tenor of less than 5 years $11.930bn was raised through 196 issues during 2016.

During 2016, five-year credit default swap (CDS) for all GCC sovereign debts narrowed, representing a reduced risk of default. Qatar’s five-year CDS narrowed by 19 percent to reach 75.000 basis points.