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Markaz Examines Trends in The GCC Bonds & Sukuk Primary Market 24 - Sep - 2013

Kuwait Financial Centre “Markaz”, in its recent research report titled GCC Bonds & Sukuk Market Survey, has highlighted the trends pertaining to aggregate issuances in the GCC region during H1 2013.
USD 45.5 Billion Issued During H1 2013 - A 4.6% Increase from the H1 2012 Total Amount

The aggregate primary issuance of bonds and sukuk in the GCC totaled USD45.5 billion in H1 2013, a 4.6% increase from the total amount raised compared to H1 2012.

The months of March and April witnessed the highest issuance activity with USD10.7 billion raised in March and USD10.6 billion raised in April through 42 issuances and 32 issuances respectively

GCC Central Banks Local Issuances (“CBLIs”) – Central Bank of Kuwait Raised the highest amongst GCC central banks at USD12.3 Billion

During H1 2013, a total of USD21.4 billion was raised through Central Bank Local Issuances (CBLIs), which represents a reduction of 3.4% from its levels during same period of 2012. GCC CLBIs were issued by the Central Bank of Bahrain, the Central Bank of Kuwait, the Central Bank of Oman, and the Central Bank of Qatar.
Central Bank of Kuwait raised the highest amount amongst GCC central banks during H1 2013, at USD12.3 billion through 34 issuances, despite a 12.7% decline from the amount it raised during the same period of 2012.  
In continuation to the trend which prevailed in previous years, Central Bank of Kuwait remained the leading issuer of conventional CBLIs, raising 61.6% of total value raised through conventional bonds issued by GCC central banks in H1 2013.  By the same token, Central Bank of Bahrain and Central Bank of Qatar remained the only issuers of Sukuk, raising USD0.8 million and USD0.5 million respectively.

GCC Bonds and Sukuk Market
The GCC Bonds and Sukuk market includes GCC Sovereign Issuances and GCC Corporate Issuances and does not include GCC Central Banks Local Issuances. The total value of new issuances in the GCC Bonds and Sukuk market, during H1 2013 was 24.1 million, a 13.0% increase in comparison to the respective period of 2012.  This was accompanied by an increase of 25.6% in the number of issuances to 103 new issues.  

Geographical Allocation: UAE entities remained the most active issuers raising 50.6% of the total amount raised in H1 2013, through 72 issuances. Saudi Arabian entities raised USD7.3 billion through eleven issuances, followed by Qatari entities which raised USD3.1 billion through eleven issuances. The Kuwaiti bond market witnessed two new issuances raising KWD60 million (USD210 million).

Sovereign Vs. Corporate: In continuation to the previous trend, 94.8% of total value (USD22.8 billion) raised by new issuances in H1 2013 was raised by corporate entities (including FIs & GREs), through 101 new issuances. UAE corporate entities raised 48% of corporate issuances through 70 new issues, followed by Saudi Arabia corporate entities which raised USD7.2 billion. In Kuwait, two corporate bonds, totaling KWD60 million (USD210 million), were issued by United Real Estate Company.

Conventional Vs. Sukuk: The total value raised by conventional new issuances (bonds) in the GCC market increased by 46% during H1 2013 in comparison to the same period last year, reaching USD12.5 billion and slightly surpassing the value raised by the Sharia compliant Sukuk, which totaled USD11.6 billion.

Sector Allocation: During H1 2013, the financial services sector was the most active sector raising a total of USD11.6 billion through 80 new issuances, followed by the Power and Utilities sector which raised USD3.7 billion through four new issuances.

Maturity Profile: During H1 2013, maturities of new issuances ranged from 4 months to 30 years. Issuances with five-year maturity raised the largest amount with 26.3% of the total amount raised. Issuances with one year and less maturity were the most frequently issued with 46.6% of the total number of new issuances.

Issue Size Profile: The size of new issuances ranged from USD2.0 million to USD2.0 billion. Issuances with principal amounts equal to or greater than USD1.0 billion raised the largest amount of USD9.9 billion, or 41.5% of the total amount raised, through nine new issues.
Saudi Arabia’s Sadara Basic Service Company sukuk (SADARA Float 12/15/28 Corp) was the largest issuance in H1 2013, raising a total of SAR7.5 billion (USD2.0 billion).

Currency Profile: The GCC Bonds and Sukuk market, during H1 2013, was dominated by the US Dollar denominated issuances with USD17.6 billion raised in the currency, representing 73.3% of the total amount raised, followed by Saudi Riyal denominated issuances raised USD3.7 billion, and Swiss Francs denominated issuances which raised USD1.1 billion.

Rating: During H1 2013, a total of 32 GCC new issuances were rated by either one or more of the following Rating Agencies: Standard & Poor’s, Moody’s, Fitch, and/or Capital Intelligence.

Listing: During H1 2013, a total of 35 GCC Bonds and Sukuk were listed on Exchanges. A total of 24 issuances were listed on international exchanges versus 11 bonds listed on regional exchanges.

Bonds and Sukuk Total Amount Outstanding in the GCC
As of 30 June 2013, the total amount outstanding in the GCC Bonds and Sukuk market was USD224.7 billion; out of which:

  • Bonds and Sukuk issued by UAE entities represented the largest share with 50.4% of the total amount outstanding.
  • Corporate issuances, including financial institutions, made up 72.2% of the total amount outstanding.
  • US Dollar denominated issuances comprised 73.3% of total amount outstanding, followed by Saudi Riyal denominated issuances with 11.4%.
  • Conventional Bonds represented 69.4% of the total amount outstanding.

About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, with total assets under management of over KD 982.6 million (USD 3.45 billion) as of June 30, 2   013, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.