Debt market sees growth rebound in GCC

August 14, 2014 - 12:00:00 am

By Satish Kanady

DOHA: The GCC debt markets in 2014 had an active second quarter, particularly in corporate bonds and sukuk. The region’s noteworthy issuances include Commercial Bank of Qatar issuing $750m bond. On the sovereign front, Qatar Central Bank (QCB) issued three government bonds amounting to $261m, $577m and $261m in Q2, 2014.

UAE corporate bond issuances were dominant in the second quarter, where sizeable issuances from DP World Limited, issuing a $1bn 10-year bond, and Etisalat issuing two $500m

bonds in five and ten year tranches and two $1.6bn bonds in seven and twelve year tranches, pwc said in a research

note yesterday.

In its monthly economic update report issued yesterday, NBK noted GCC’s non-financial saw record debt issuance in 2Q14. “GCC debt market saw growth rebound in 2Q14 supported by a large increase in issuance by the non-financial sector. Issuance activity was dominated by the UAE which saw healthy activity in both the private and public sectors. GCC sovereign rates remained relatively stable despite the heightened geopolitical risk in the region”, NBK analysts Chaker El Mostafa and Nemr Kanafani said in a

joint note.

The GCC’s ability to shield itself from the regional instability was again on display in the second quarter, as market interest rates appeared largely unaffected by recent geopolitical development. Dubai yields continued to decline to their lowest levels in a year, with the yield of 5-6 year bonds reaching 3.27 percent.

Meanwhile, sovereign rates for similar Abu Dhabi and Qatari tenors remained steady at 1.97 percent and 2.02 percent respectively, NBK analysts said.

Growth in the total stock of bonds of GCC rebounded in the first half of this year, following a slowdown in the previous quarter, as outstanding bonds increased by 10.4 percent year-on-year to reach $265bn.

The net increase in the stock of outstanding debt was $11bn on the back of a healthy pick-up in private sector activity in both Saudi Arabia and the UAE.

Saudi Arabia’s stock of debt has experienced noticeable gains over the last year, expanding by 37 percent year-on-year to almost $60bn and fast approaching Qatar.

The UAE maintained the lead with the largest stock of debt, with outstanding issues rising by 9 percent year–on-year; this was consistent with its two-year average growth.

The NBK notes said exceptional non-financial sector activity carried GCC issuance to its highest in three years. Of the $22bn in new issuance during Q2, 14, $12bn stemmed from the non-financial corporate sector.

On the region’s IPO market performance, the pwc noted the second quarter of 2014 started off and ended on a high, with a total of seven IPOs, compared to two in Q1, 2014.

The total value of seven IPOs in Q2, 14 was $902m, a slight decrease of 5 percent compared to Q1, 14, although this is a considerable increase compared to the same quarter last year

where a total of three IPOs raised $48m.

The Peninsula