Bond issuance in GCC touched $22 billion till May 2017: Study

MUSCAT: Total gross bond issuance in the GCC has already surpassed 2016’s total value in the first five months of this year, according to Fisch Asset Management, a global leader in convertible and corporate bond strategies.

Current market conditions have created a favourable landscape for new bond issuances, with the GCC Sukuk market issuing up to US$22 billion in sovereign and corporate bonds year-to-date. In 2016, a total of $21 billion bonds were issued; this figure is up by 74.6 per cent from 2015, when issuances amounted to $12.6 billion.

The positive performance in 2017 is linked to ongoing strong investor demand for emerging market assets, due to the higher yield available, compared with developed markets and supported by upbeat global economic growth.

Philipp Good, chief executive officer at Fisch Asset Management, commented: “Many factors have contributed to this positive trend in 2017; for example lower oil prices mean higher funding requirements, there is attractive pricing after markets have rallied, there is ample liquidity in the region and there has been a strong revival in credit markets on a year-to-date basis so far.”

“The latest example of an issuer taking advantage of this positive environment is the Sultanate of Oman. It successfully completed a $2 billion issue on May 23, with the order book three times oversubscribed. I view this as a huge success and a clear indicator of confidence throughout the region,” he further added. Corporate debt in the Middle East has also been a solid performer in 2017. Spreads of investment-grade rated bonds have dropped by 20 bps (basis points), significantly outperforming Asia, where spreads have seen a decline of only 4 bps. Other regions have seen a more pronounced narrowing of spreads, but this needs to be seen against the backdrop of Middle Eastern bonds already displaying the lowest spreads among all emerging market regions at 170 bps.