GCC governments issue bonds worth $88b in first half of 2016

GCC sovereigns have been the biggest issuers of bonds so far in the year. About $88 billion (Dh322.96 billion) of the issuances has come from sovereigns or government-related enterprises to plug the budget deficits left by falling oil prices, which contributes 60 to 85 per cent of government revenues. The second biggest issuers have been banks with $59 billion in the first half followed by power and telecom firms, among others, according to Emirates NBD.

Companies like Abu Dhabi National Energy Company issued $1 billion bonds to repay a maturing bond. Noor Bank, among other banks, recently listed a $500 million sukuk. On the sovereign side, Abu Dhabi issued $5 billion in early May, while Qatar issued a $9 billion euro bond in late May.

The one area not seeing a surge in bonds is the oil and gas sector. It contributed only $6 billion in the first half and contributed to only 3 per cent of the total bond issuances in the GCC.

Despite GCC being petro-economies, “the number of energy related issuers in the bond market is limited,” Anita Yadav said in a report.

Analysts expect oil companies in the GCC to come and issue bonds in the later part of the year even as they depend heavily on banks for their funding requirements.

“Regional energy companies are typically government owned or controlled. These entities have historically had access to cheap sources of liquidity outside the bond market. The structure of the US energy market is significantly different as many energy companies are privately owned and therefore access the bond market regularly. We expect regional energy companies to be more active in accessing the bond markets as alternative sources of liquidity become more expensive and difficult to access,” said Chandru Bhatia, fund manager fixed income at Rasmala.

In the US, oil and gas related activity represents less than 4 per cent of GDP but over 17 per cent of corporate debt. In contrast, while oil and gas represent on average 25 to 60 per cent of GDP, the issuers from this segment constituted less than 7 per cent of the bond market.

Buyers

International investors in search for yields have also been actively looking at opportunities. “In terms of demand for these bonds, we see some appetite from dedicated debt asset managers. Probably some cross over money is also interested,” Sergei Strigo Portfolio Manager and Head of Emerging Market Debt and Currency, Amundi Asset Management told Gulf News from London.

Amundi Asset Management themselves have been active in this space.

“We would definitely look at Saudi Arabian bond when it comes . ... We have been actively investing in the GCC bond market in the past six months,” Strigo said.

Managing Director and head of research at Arqaam Capital