Markaz: GCC aggregate bonds and sukuk market increased 10% in H1

CBK raised 48.59% of the total GCC CBLI issuance

KUWAIT: Kuwait Financial Centre “Markaz”, in its recent research report titled GCC Bonds & Sukuk Market Survey, has highlighted the trends pertaining to bonds and sukuk issuances in the GCC region during the first half of 2018. The report stated that the aggregate primary issuance of bonds and sukuk by GCC entities, including Central Banks Local Issuances, GCC Sovereign and Corporate Issuances, totaled $95.25 billion in H1 2018, a 9.64 percent increase from the total amount raised in H1 2017. Qatar led the GCC issuances in terms of total value raised.

Central Bank Local Issuances are Fixed Income securities issued by GCC central banks in local currencies and with short maturities for the purpose of regulating levels of domestic liquidity. During H1 2018, a total of $32.77 billion was raised by the GCC central banks, namely by the Central Bank of Kuwait, Bahrain, Qatar, and Oman. (The only publically available information is from the Central Bank of Bahrain, the Central Bank of Kuwait, the Central Bank of Oman, and the Central Bank of Qatar). The Central Bank of Kuwait raised the highest amount with KD 4.77 billion ($15.88 billion), representing 48.59 percent of the total amount raised by CBLIs through 22 issuances, followed by the Central Bank of Bahrain, which raised a total of BHD2.99 billion ($7.95 billion).

GCC bonds and sukuk market

The GCC bonds and sukuk market is composed of bonds and sukuk issued by GCC. Sovereign, corporate entities and financial institutions, for financing purposes in local and foreign currencies. A total of $62.57 billion was raised in the GCC bonds market in H1 2018, a growth of 33.27 percent from $46.95 billion raised in H1 2017.

Geographical Allocation: Qatari issuers led the GCC in H1 2018, raising a total of $19.97 billion through 47 issuances and representing 31.9 percent of the total value raised in the GCC.

Saudi Arabian entities raised $17.37 billion from 10 issuances, up by 68.4 percent as compared to $10.31 billion raised in H1 2017, making up 27.76 percent of the market The UAE based issuers raised $15.39 billion during H1 2018, up by 21.9 percent as compared to $12.6 billion raised in H1 2017 and represented 24.6 percent of the total market. Total issuances by Kuwaiti entities dropped to $0.20 billion representing 0.3 percent of the total market as compared to $10.50 billion raised in H1 2017 or 22.4 percent of the total market.

Omani issuances raised a total of $8.63 billion through 7 issues representing 13.8 percent of the market and 13.2 percent above $7.62 billion raised in H1 2017. Bahraini entities represented 1.6 percent of the total issuances, raising $1 billion through a single issue.

Sovereign Vs. Corporate: Sovereign issues continued to dominate the GCC bonds and Sukuk market in H1 2018 contributing 60.2 percent to the overall market with a total value of $37.68 billion as compared to $24.0 billion in H1 2017. Total value raised by corporate entities in H1 2018 increased by 8.45 percent, to $24.89 billion in H1 2018 from $22.95 billion in H1 2017. Saudi Arabia Government raised a total of $16.87 billion out of which SAR29.99 billion ($5.87 billion) were through domestic bonds and $11 billion were through US dollar denominated bonds and sukuk. Qatar, Oman, Sharjah and Bahrain governments raised $12 billion, $6.5 billion, $1 billion and $1 billion respectively. Kuwait was the only GCC sovereign entity not tapping the international bond markets in H1 2018.

Conventional vs sukuk

Conventional issuances raised $50.17 billion, or 80.19 percent of the total amount raised in GCC bonds and sukuk market during H1 2018. Sukuk raised $2.39 billion, 30.84 percent lower as compared to $17.93 raised in H1 2017 and represented a share of 19.81 percent of the market in H1 2018.

Sector Allocation: Government sector accounted for the largest amount raised during H1 2018, with $37.68 billion representing 60.2 percent of the total amount raised as compared to $24.89 billion issued in H1 2017. The financial sector followed with $18.29 billion representing 29.26 percent of total market raised through 140 issues.

Maturity profile

Issuances with tenures of less than five years raised the highest amount, $25.7 billion, through 132 issuances, representing 41.1 percent of the total amount raised. Maturities of 11-30 years raised $18.65 billion representing 29.8 percent of the market.

Issue size profile

GCC bonds and sukuk issuances during H1 2018 had issue sizes ranging from $1 million to $6 billion. Issuances with principle amounts greater than or equal to $1.0 billion raised the largest amount of $41.83 billion, representing 66.85 percent of the total value.

Currency profile

US dollar denominated issuances lead the GCC Bonds and Sukuk market, raising $52.58 billion (84.19 percent of the total amount raised) by 113 issuances. Followed by Saudi riyal raising $5.87 billion (9.38 percent of the total amount raised) through 6 issuances.

Rating: During H1 2018, a total value of 85.2 percent of Sovereign and Corporate issuances, were rated by either one or more of the following rating agencies:

Moody’s, Standard & Poor’s, Fitch, and Capital Intelligence out of which 94.6 percent issuances had investable grade ratings.

Listing: During H1 2018, 42 percent of the total issuances or 99 GCC Bonds and Sukuk issuances, with an aggregate value of $54.14 billion were listed on exchanges. Listing on international exchanges accounted for 96 percent with Dublin accounting for the listing of 35 of such issuances.

Bonds and sukuk total amount outstanding in GCC

As of 30 June 2018, the total amount outstanding of corporate and sovereign bonds and sukuk issued by GCC entities was $463.29 billion. Government issuances made up the majority of the total amount outstanding with $236.02 billion, or 50.9 percent of the total amount. Financial sector led the corporate sector with a total amount outstanding of $104.37 billion, or 22.5 percent of the total amount.

Of the amount outstanding as of 30 June 2018, $179.03 billion, or 38.60 percent were issued by Saudi Arabian entities. Bonds and Sukuk by Kuwaiti entities represented $19.66 billion, or 4.24 percent of the total amount outstanding.