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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 2013.
USD97.7 billion Issued During 2013 - A 14.5% increase compared to 2012 Total Amount
The aggregate primary issuance of bonds and sukuk in the GCC totaled USD97.7 billion in 2013, a 14.5% increase from the total amount raised in 2012.
The month of March predominated in terms of issuance frequency with 44 issuances; however, October witnessed the highest value as USD13.5 billion was issued, representing 13.8% of the total amount issued, through 29 issuances.
GCC Central Banks Local Issuances (“CBLI”) – Central Bank of Kuwait Raised USD25.4 Billion - 49% 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 USD51.5 billion was raised by the central banks of Kuwait, Bahrain, Qatar, and Oman during 2013, with the Central Bank of Kuwait raising the highest amount: USD25.4 billion, representing 49.3% of the total CBLI amount through 66 issuances. The Central Bank of Qatar raised a total of USD16.20 billion, a considerable increase of 172.55% from USD5.94 billion raised in 2012.
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 USD46.1 billion was raised by Sovereign and Corporate bond and sukuk issuances in 2013, an increase of 2.3% from the total value raised in 2012.
Geographical Allocation: Issuances by UAE entities raised the largest amount in 2013 representing 41.4% of the total amount, or USD18.8 billion, and were the most active in terms of issuance frequency with 111 issuances representing 67.8% of the total number of issuances. Saudi Arabian entities raised the second highest amount during 2013, USD17.2 billion while Qatari entities raised USD6.7 billion. From Kuwait, United Real Estate Company was the sole corporate issuer which issued a 5 year bond with fixed and floating tranches, raising a total of KWD60 million (USD210 million).
Sovereign Vs. Corporate: During 2013, corporate issuances dominated the majority of the amount raised, with USD42.9 billion or 93.0% of the total amount raised. Sovereign issuances raised USD3.3 billion representing 7.0% of the total amount through 4 issuances compared to USD6.7 billion raised in 2012 through 8 issuances. Three of the four sovereign issuances were from UAE while the fourth one was from Bahrain.
Saudi Arabian corporate entities were the leading corporate issuers in GCC during 2013 in terms of value, raising USD 17.2 billion through 22 issues. UAE was close behind, raising a total of USD17.1 billion and continuing to dominate the market in terms of number of issuances with 108 issues.
Conventional Vs. Sukuk: Conventional issuances raised USD23.7 billion, or 51.4% of the total amount raised in GCC bonds and sukuk market during 2013. This was an increase of 2.5% as compared to 2012. Conventional issuances slightly surpassed the value raised by sukuk which totaled USD22.3 billion in 2013.
Sector Allocation: The Financial Services entities accounted for the largest amount raised during the year, with USD19.8 billion representing 42.9% of the total amount raised, through 122 issuances. The Government sector accounted for the second largest amount with USD7.3 billion through five new issues.
Maturity Profile: Bonds with tenures of five-years raised the highest amount, USD13.3 billion, through 30 issuances, representing 28.8% of the total amount raised. There were three new GCC issuances with 30-year maturity, raising a total of USD2.0 billion. 2013 also witnessed the issuance of five perpetual issues which raised a total of USD3.1 billion.
Issue Size Profile: GCC bonds and sukuk issuances during 2013 had issue sizes ranging from USD2.0 million to USD4.0 billion. Bonds and sukuk with issue sizes equal to or greater than USD1 billion, raised the highest amount at USD19.8 billion with 15 issuances, representing 43.1% of the total amount of issuances. Saudi Arabia’s General Authority of Civil Aviation Sukuk was the largest issuance in 2013, raising a total of SAR15.2 billion (USD4.1 billion).
Currency Profile: The GCC bond and sukuk market in 2013 was dominated by the US Dollar denominated issuances: a total of USD31.1 billion was raised, representing 67.4% of the total amount. Saudi Riyal-denominated issuances followed with USD10.6 billion, followed by EURO denominated issues which raised USD1.2 billion.
Rating: During 2013, a total of 61 issuances, or 36.9% of the total 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 2013, 73 bonds and sukuk, representing 44.2% of all the bonds and sukuk issued and a total of USD39.9 billion, were listed on exchanges. The number of regional bonds and sukuk listed on international exchanges were 61 issues with a total value of USD28.3 billion versus 12 issuances listed on regional exchanges with a total value of USD11.6 billion.
Bonds and Sukuk Total Amount Outstanding in the GCC
As of 31 December 2013, the total amount outstanding of corporate and sovereign bonds issued by GCC entities was USD241.8 billion. Corporate issuances make up the majority of the total amount outstanding with USD177.4 billion, or 73.4% of the total amount. Sovereign issuances amount to USD64.39 billion or 26.6% of the total amount.
Of the amount outstanding as of 31 December 2013, USD116.7 billion, or 48.3%, were issued by UAE entities. Bonds and Sukuks by Kuwaiti entities represented USD4.11 billion, or 1.7% 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 11.24% return, while the year to date return as of March 13, 2014 is 0.59%.
About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, established in 1974, has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region with total assets under management of over KD 975 million as of December 31st, 201 3 (USD 3.45 million). Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.