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 2015.
USD48.13 billion Issued during H1 2015 - A 15.19% decrease compared to H1 2014 Total Amount
The aggregate primary issuance of bonds and sukuk by GCC entities, including Central Banks, totaled USD48.13 billion in H1 2015, a 15.19% decrease from the total amount raised in H1 2014.
GCC Central Banks Local Issuances (“CBLI”) – Central Bank of Kuwait Raised USD12.85 Billion – 48.8% of the Total CBLI Issuance
Central Bank Local Issuances are Fixed Income securities issued by GCC central banks for the purpose of regulating levels of domestic liquidity. During H1 2015, a total of USD28.29 billion was raised by the GCC central banks, namely by the Central Bank of Kuwait, Bahrain, Qatar, and Oman. The Central Bank of Kuwait raised the highest amount with USD12.85 billion, representing 48.8% of the total amount raised by CBLIs through 36 issuances, followed by the Central Bank of Bahrain, which raised a total of USD6.69 billion, 47.13% higher from USD4.55 billion raised in H1 2014.
GCC Bonds and Sukuk Market
The GCC bonds and Sukuk market is composed of bonds and sukuk issued by GCC Sovereign and Corporate entities (including Government related entities GREs and Financial Institutions FIs) for financing purposes and denominated in local and foreign currencies. A total of USD19.83 billion was raised in the GCC bonds market in H1 2015, a decline of 19.29% from USD24.57 billion raised in H1 2014.
Geographical Allocation: Issuances by UAE entities raised the largest amount in GCC Bonds & Sukuk market in H1 2015, representing 75.6% of the total amount, or USD14.99 billion, and were the most active in terms of issuance frequency with 99 issuances. Saudi Arabian issuers raised USD1.57 billion through 3 issues. Omani corporates raised USD1.38 billion while Bahraini issuers raised USD800 million. Qatari entities raised USD380 million by 10 issuances. There was a single Kuwaiti corporate issue, a tier 1 perpetual USD700 million bond by National Bank of Kuwait bearing an initial coupon of 5.75%.
Sovereign Vs. Corporate: During H1 2015, corporate issuances (which includes GREs and FIs) dominated the majority of the amount raised in the GCC bonds market, with USD18.83 billion or 95% of the total amount raised. The sole sovereign issue was a 10 year USD1.0 billion bond issued by the emirate of Ras al Khaimah bearing a coupon of 3.094%.
Conventional Vs. Sukuk: Conventional issuances raised USD15.01 billion, or 75.71% of the total amount raised in GCC bonds and sukuk market during H1 2015. This was a decline of 16.69% as compared to H1 2014. Sukuk issuances shrunk by 26.45% from USD6.55 billion raised in H1 2014 to USD 4.82 billion raised in H1 2015.
Sector Allocation: The Financial Services issuers accounted for the largest amount raised during H1 2015, with USD16.82 billion representing 84.8% of the total amount raised, through 113 issuances. The other sectors, i.e. Communications, Government, Industrial Utilities and Transport, were represented by a single issue each.
Maturity Profile: Bonds with tenures of five-years raised the highest amount, USD7.25 billion, through 26 issuances, representing 36.56% of the total amount raised. Issuances with tenor of one year or less were the most frequently issued with 39 issues raising USD1.28 billion. A total of USD3.15 billion was raised by 5 perpetual issues.
Issue Size Profile: GCC bonds and sukuk issuances during H1 2015 had issue sizes ranging from USD5.0 million to USD1.12 billion. Issuances with principle amounts greater than or equal to USD500 million but less than USD1.0 billion raised the largest amount of USD7.07 billion, representing 35.63% of the total value. The two largest issues were the Euro-denominated bonds by Aabar Investments each raising EUR1.0 billion (USD1.12 billion) and having tenors of 5 and 7 years.
Currency Profile: US Dollar denominated issuances dominated the GCC Bonds and Sukuk Market in H1 2015, raising a total of USD13.13 billion thereby representing 66.2% of the total amount. Euro-denominated issuances raised USD3.23 billion, followed by SAR denominated issues which raised USD1.57 billion. GCC currencies were used to raise a total of USD1.66 billion (8.37% of the total amount) in H1 2015.
Rating: During H1 2015, a total of 44 issuances, representing 37.3% 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 2015, 52 bonds and sukuk, representing total of USD15.56 billion, were listed on exchanges. The number of regional bonds and sukuk listed on international exchanges were 47 issues with a total value of USD13.00 billion versus 5 issuances listed on regional exchanges with a total value of USD2.55 billion.
Bonds and Sukuk Total Amount Outstanding in the GCC
As of 30 June 2015, the total amount outstanding of corporate and sovereign bonds issued by GCC entities was USD242.04 billion. Corporate issuances constituted the majority of total amount outstanding with USD205.41 billion, or 84.87% of the total amount. Sukuk issuances represented 34.33% of the total amount.
Of the amount outstanding as of 30 June 2015, USD115.85 billion, or 47.87% were issued by UAE entities. Bonds and Sukuks by Kuwaiti entities represented USD6.10 billion, or 2.52% of the total amount outstanding.
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 11.74% return, while the year to date return as of June 2015 is 0.56%.
About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, with total assets under management of over KD 1.12 billion as of March 31, 2015, 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.
For further information, please contact:Osama Al Musallam
Media & Communications Department
Kuwait Financial Centre K.P.S.C "Markaz"
Tel: +965 2224 8000 ext 1819
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Fax: +965 2241 4499
Email: [email protected]