Kuwait better-cushioned against oil price declines

This is the reason why its dollar-bond debut is a hit with investors

LONDON: The scramble among investors to buy Kuwait’s first international bond reveals a subtext: the country is better cushioned against oil-price declines than any of its peers.

International Monetary Fund figures show the current oil price, at about US$52 barrel, is more than enough for the country to balance its budget and current account, unlike its neighbours.

Which is why when the Opec member raised US$8bil from the sale of five-year and 10-year notes this week, and attracted US$29bil in bids, it paid less than what Qatar, Abu Dhabi and Saudi Arabia offered last year.

“Kuwait’s mix of breakeven oil price for both the budget and the current account shows it is more protected against a drop in oil,” said Simon Quijano-Evans, an emerging-market strategist at Legal & General Investments Management Ltd in London.

“It also reflects a more cautious stance on the fiscal side and growing expectations that Kuwait may be one of the only countries to have a budget surplus this year.”

Kuwait pledged to be a “prudent” borrower after the bond sale, saying it wants to maintain its current credit grade and ensure the success of its existing issue.

The offer has covered the bulk of its funding needs from the international market in 2017, said deputy Prime Minister Anas al-Saleh, who is also the finance minister and chairman of the country’s sovereign wealth fund.

Kuwait, the United Arab Emirates and Qatar are all rated Aa2 at Moody’s Investors Service, the third highest investment grade. –