Markaz Examines Trends in The GCC Bonds & Sukuk Primary Market

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Markaz Examines Trends in The GCC Bonds & Sukuk Primary Market 14 - Sep - 2014

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 2014.
 
The aggregate primary issuance of bonds and sukuk in the GCC totaled USD56.71 billion in H1 2014, a 24.71% increase from the total amount raised in H1 2013.
 
June was the most active month in terms of both the amount raised and the number of issuances. A total of USD15.55 billion was raised during the month through 44 issues. 
 
GCC Central Banks Local Issuances (“CBLI”) – Central Bank of Kuwait Raised USD13.29 Billion – 41.36% of the Total CBLI Issuance
 
Central Bank Local Issuances are debt securities issued by GCC central banks in local currencies and maturities of less than 1 year, to regulate the levels of domestic liquidity. A total of USD32.14 billion was raised by the central banks of Kuwait, Bahrain, Qatar, and Oman during H1 2014. During H1 2014 CBQ surpassed CBK as the top issuer, in contrast to the previous years, by issuing the largest amount amongst GCC central banks. CBQ raised USD14.29 billion through 25 issues, representing 44.48% of the total CBLI amount. The CBK raised USD13.29 billion through 37 issues, an increase of 7.87% from USD12.32 billion raised through 34 issuances in H1 2013.
 
GCC Bonds and Sukuk Market
The GCC bonds market is composed of sovereign and corporate bonds and sukuk issuances denominated in local and foreign currencies. A total of USD24.57 billion was raised by Sovereign and Corporate bond and sukuk issuances in H1 2014, an increase of 2.09% from the total value raised in H1 2013.



Geographical Allocation: Issuances by UAE entities raised the largest amount in H1 2014 representing 59.88% of the total amount, or USD14.71 billion, and were the most active in terms of issuance frequency with 54 issuances. Saudi Arabian entities raised the second highest amount, USD7.35 billion while Qatari entities raised USD1.18 billion. Kuwait Projects Company (KIPCO) was the sole corporate issuer from Kuwait, raising USD500 million through a conventional bond.
 
Sovereign Vs. Corporate: During H1 2014, corporate issuances dominated the majority of the amount raised, with USD23.82 billion or 96.95% of the total amount raised. Sovereign issuances raised USD750 million represented by a single issuance from Government of Dubai.
 
UAE corporate entities were the leading corporate issuers in GCC during H1 2014 in terms of value, raising USD 13.96 billion through 53 issues followed by Saudi Arabian corporate entities which raised USD7.35 billion through nine new issues.
 
Conventional Vs. Sukuk: Conventional issuances raised USD18.02 billion, or 73.34% of the total amount raised in GCC bonds and sukuk market during H1 2014. This was a substantial increase of 44.31% as compared to H1 2013. Sukuk issuance totaled USD6.55 billion in H1 2014.
 
Sector Allocation: The Financial Services entities accounted for the largest amount raised during the year, with USD9.15 billion representing 37.22% of the total amount raised, through 54 issuances. The Communications sector accounted for the second largest amount raised with USD4.81 billion, predominated by the debut issuances by Etisalat.  




Maturity Profile: Bonds with tenures of ten-years raised the highest amount, USD8.52 billion, through 13 issuances, representing 34.68% of the total amount raised. A total of USD5.08 billion was raised through issues with maturity longer than 10 years, including one perpetual issue by Al Hilal bank which raised USD 500 million and a 40 year issue by Saudi Electricity Company.
 
Issue Size Profile: GCC bonds and sukuk issuances during H1 2014 had issue sizes ranging from USD2.5 million to USD1.63 billion. Bonds and sukuk with issue sizes greater than or equal to USD500 million but less than USD1.0 billion raised the largest amount of USD10.98 billion, representing 44.71% of the total value.
 
Currency Profile: The GCC bond and sukuk market in H1 2014 was dominated by the US Dollar denominated issuances: a total of USD14.06 billion was raised, representing 57.2% of the total amount. Saudi Riyal-denominated issuances followed with USD4.99 billion, followed by Euro denominated issues which raised USD3.89 billion.  
 
Rating: During H1 2014, a total of 25 issuances, or 33.8% of the total number 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.
 
Listing: During H1 2014, 41 bonds and sukuk, representing 79.85% of all the bonds and sukuk issued and a total of USD19.62 billion, were listed on exchanges. The number of regional bonds and sukuk listed on international exchanges were 34 issues with a total value of USD15.83 billion versus 7 issuances listed on regional exchanges with a total value of USD3.79 billion.
 
Bonds and Sukuk Total Amount Outstanding in the GCC
As of 30 June 2014, the total amount outstanding of corporate and sovereign bonds issued by GCC entities was USD245.47 billion. Corporate issuances make up the majority of the total amount outstanding with USD195.46 billion, or 79.6% of the total amount. Sukuk represented 34.6% of the total amount outstanding.
 
Of the amount outstanding as of 30 June 2014, USD115.80 billion, or 47.2%, were issued by UAE entities. Bonds and Sukuks by Kuwaiti entities represented USD4.65 billion, or 1.9% of the total amount outstanding. 


 
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About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, established in 1974, is one of the leading asset management and investment banking institutions in the Arabian Gulf Region with total assets under management (AUM) of over KD 1 billion as of June 30th, 2014 (USD 3.82 billion). Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.
 
Markaz Fixed Income Fund
Markaz Fixed Income Fund (“MFIF” or the “Fund”) was established on 31st December 2010. The Fund objective is to provide investors steady returns with reduced risks by investing in high grade, high quality Bonds and Sukuk issued or guaranteed by sovereign, quasi-sovereign institutions and highly rated corporations, in Gulf Cooperation Council (GCC) countries in particular and Middle East and North Africa (MENA) countries to a lesser degree. Since its inception the fund achieved 11.47% return, while the year to date return as of August 31, 2014 is 0.79%.
 
For further information, please contact:
                                                                                        
Osama Al Musallam

Senior Communications Officer
Media & Communications Department
Kuwait Financial Centre S.A.K. "Markaz"
                                                                          
Tel: +965 2224 8000 ext 1819

Dir: +965 2224 8075
Fax: +965 2241 4499
Email: omusallam@markaz.com
www.markaz.com