Markaz Examines Trends in The GCC Bonds & Sukuk Primary Market:


Conventional issuances represent 79% of totalmarket; Finanical Services sector top issuer

In its recent research report titled GCC Bonds and Sukuk Market Survey, has highlighted the trends pertaining to aggregate issuances in the GCC region during 2010.

USD 57.0 Billion Issued During 2010 - A 28% Decline from the 2009 Total Amount

The aggregate primary issuance of bonds and sukuk in the GCC totaled USD57.0 billion in 2010, a 27.6% decrease from its peak value in 2009.

The month of October witnessed the highest issuance frequency and value with 23 issuances raising a total of USD9.1 billion, representing 16.0% and 11.9% respectively of total 2010 issuances.

GCC Central Banks Local Issuances (“CBLI”) – Central Bank of Kuwait Raised USD21.8 Billion - 80% of the Total CBLI Issuance

Central Bank Local Issuances are debt securities issued by GCC central banks to regulate the levels of domestic liquidity. A total of USD27.2 billion was raised by the central banks of Kuwait, Bahrain and Oman during 2010, with the Central Bank of Kuwait raising the highest amount: USD21.8 billion, representing 80.3% of the total CBLI amount through 60 issuances.

Conventional CBLI raised the greatest amount during 2010 with USD26.5 billion representing 97.5% of the total value raised through 116 issuances, compared to USD0.7 billion for sukuk through 23 issuances.

GCC Bonds and Sukuk Market

The GCC bonds and sukuk market is composed of Sovereign and Corporate issuances. During 2010, a total of USD29.9 billion was raised by Sovereign and Corporate bond and sukuk issuances, compared to USD64.9 billion in 2009.

Sovereign Vs. Corporate: Corporate issuances dominated the market during 2010 with USD20.9 billion representing 70.2% of the total amount raised. Sovereign issuances raised USD8.9 billion representing 29.8% of the total amount raised. The value of Corporate issuances almost maintained its 2009 level with only a 0.21% decrease. However the number of issuances increased from 37 issuances to 42 issuances, with Emirati corporate issuances dominating the market at USD6.2 billion through 19 issuances.

The number of Sovereign issuances decreased in 2010 in comparison to 2009 from 22 to 12 issuances. This in effect decreased the value of total GCC Sovereigns issuances by 38.5%.

Geographical Allocation: Issuances by UAE entities raised the largest amount in 2010, USD9.5 billion, representing 32.0% of the total amount borrowed; followed by Qatari issuances, raising a total of USD9.3 billion, or 31.2% of the total amount. Kuwaiti entities raised a total of USD1.0 billion, representing 3.5% of the total amount; Omani entities raised the least amount in the GCC, a total of USD0.4 billion, representing 1.2% of the total amount borrowed via bonds and sukuk.

Conventional Vs. Sukuk: Conventional bonds issuances raised the greatest amount during 2010, USD23.4 billion, representing 78.5% of the total amount raised through 45 issuances, compared to USD6.4 billion for sukuk issuances through nine issuances.

GCC sukuk issuances during 2010 slumped to its lowest lowest level since 2006, at USD6.4 billion, which represents a 39.3% decrease from the total amount raised by sukuk in 2009.

Sector Allocation: The financial sector accounted for the largest amount raised through the issuance of bonds and sukuk during 2010, with USD10.0 billion representing 33.3% of the total amount raised through 29 issuances. Government entities raised the second highest amount with USD7.9 billion, representing 26.4% of the total amount, through 10 issuances.

Maturity profile: Bonds with tenures of five-years raised the highest amount, USD14.3 billion, through the largest number of issuances, 22 issuances, representing 47.9% and 40.7% of the total amounts respectively. Bonds with tenures of ten-years raised the second highest amount, USD8.6 billion, representing 28.7% of the total amount through eight issuances.

Issue Size Profile: GCC bonds and sukuk issuances during 2010 had issue sizes ranging from USD4.0 million to USD2.5 billion. Bonds/sukuk with issue sizes of “more than USD500 million and equal to or less than USD1.0 billion” were the most active with 16 issuances, representing 29.6% of the total number of issuances, amassing to USD10.0 billion. Issuances with sizes of “less than USD100 million” were the second most active during 2010, with a total of 14 issuances.

Currency Profile: Continuing with the trend witnessed in 2009, the bond and sukuk market was dominated by U.S. Dollar denominated issuances: a total of USD20.7 billion was raised, representing 69.3% of the total amount borrowed, and a total of 28 issuances, representing 51.9% of the total number of issuances placed. Saudi Arabian Riyal denominated issuances followed with USD3.9 billion, representing 13.0% of the total amount raised through five issuances (representing 9.3% of the total number of issuances). It is interesting to note that, in 2010, for the first time in five years, not a single UAE Dirham denominated issuance was issued.

Rating: During 2010, a total of 47 issuances, or 84.9% of the total Sovereign and Corporate issuances, were rated by one of the following rating agencies: Moody’s, Standard & Poor’s, Fitch, RAM, and Capital Intelligence.

Listing: During 2010, of the USD57.0 billion raised in the GCC, 34 bonds and sukuk were listed on exchanges with a total value of USD24.8 billion. A total of 30 bonds were listed on international exchanges with a total value of USD37.4 billion versus nine bonds listed on regional exchanges with a total value of USD4.9 billion.

Bonds and Sukuk Total Amount Outstanding in the GCC

As at 31 December 2010, the total amount outstanding of corporate and sovereign bonds issued by GCC entities was USD157.4 billion. Corporate issuances make up the majority of the total amount outstanding with USD99.6 billion, or 63.3% of the total amount. Sovereign issuances amount to USD57.8 billion or 36.7% of the total amount. Of the amount outstanding USD102.2 billion, or 65.0%, will mature by the end of 2015.

About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre 'Markaz', with total assets under management of over KD 960 million as of March 31st, 2011, 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