Markaz Fixed Income Research Examines Changing Trends of the Kuwaiti Bond and Sukuk Market

25/10/2010

Kuwait Financial Centre “Markaz” in its recent research on the GCC Fixed Income Market has highlighted the trends in the Kuwaiti bonds and sukuk market during the period from 2003-2009.

During the period covered in the survey, Kuwait’s total new issuances of bonds and sukuk amounted to USD99.7 billion, representing 40% of the entire GCC issuances during the same period. Government issuances, issued entirely by the Central Bank of Kuwait, represented 92.9% of the aggregate Kuwaiti market with USD92.6 billion. This in effect, dictated the dominant form of issuances, as well as the dominant currency for the aggregate market: Conventional bonds constituted 97.9% of the aggregate market while Kuwaiti Dinar denominated issuances raised 94.3% of the aggregate market.

CBK Issuances

CBK issued 1) Treasury Bills, which are debt obligations with maturities of less than one-year and no periodic interest payments, 2) Central Bank Bonds, which are debt obligations with maturities of less than one-year carrying a fixed coupon rate,  and 3) Treasury Bonds which are debt obligations with maturities greater than one-year with a fixed coupon rate.

In 2009, the CBK issuances witnessed the highest frequency with 51 issuances and raised the second largest amount with KWD4.1 billion (USD14.7 billion). The CBK’s peak issuance amount was raised in 2003 with KWD4.4 billion (USD15.5 billion).

Corporate Issuances

During the period, Kuwaiti corporates raised a combined total of USD7.1 billion through 65 issuances. The Kuwaiti corporate bonds and sukuk market peaked during 2006 as USD2.1 billion was raised through 11 issuances, representing 2.02% of Kuwait’s GDP during that year.

Throughout the period, Conventional issuances raised 70.3% of corporate issuances total value, USD Dollar denominated issues raised 63.8% while 74.0% of the total number of corporate issuance was rated.

Tenors ranged from two to 15 years, with the five-year tenor constituting 80.0% of the total number issued with 52 issuances raising USD5.6 billion, followed by three years tenor raising USD0.55 billion, constituting 12.3% of the total number issued.

During the period, various sectors tapped into the Fixed Income Market including the Financial Services sector, Conglomerates, the Real Estate sector, the Transport sector, the Construction sector, and the Oil and Gas sector. The Financial Services sector recorded the highest number of issuances with 39 issues and raised the largest amount with USD4.2 billion, representing 59.1% of the total amount raised throughout the period.

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About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD928 million (USD 3.19 billion) as of June 30, 2010, 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.