Kuwait Financial Centre “Markaz”, in its recent research report titled GCC Bonds & Sukuk Market Survey, has highlighted the trends pertaining to bonds and sukuk issuances in the GCC region during 2017.
The report stated that the aggregate primary issuance of bonds and sukuk by GCC entities, including Central Banks Local Issuances, GCC Sovereign and Corporate Issuances, totaled USD174.17 billion in 2017, a 3.96% increase from the total amount raised in 2016.
Central Bank Local Issuances are Fixed Income securities issued by GCC central banks in local currencies and with short maturities for the purpose of regulating levels of domestic liquidity. During 2017, a total of USD69.90 billion was raised by the GCC central banks, namely by the Central Bank of Kuwait, Bahrain, Qatar, and Oman. (The only publically available information is from the Central Bank of Bahrain, the Central Bank of Kuwait, the Central Bank of Oman, and the Central Bank of Qatar). The Central Bank of Kuwait raised the highest amount with KWD 10.93 billion (USD36.179 billion), representing 51.76% of the total amount raised by CBLIs through 70 issuances, followed by the Central Bank of Bahrain, which raised a total of BHD5.39 billion (USD14.33 billion).
GCC Bonds and Sukuk Market
The GCC Bonds and Sukuk market is composed of bonds and sukuk issued by GCC Sovereign, corporate entities and financial institutions, for financing purposes in local and foreign currencies. A total of USD104.26 billion was raised in the GCC bonds market in 2017, a growth of 1.78% from USD102.44 billion raised in 2016.
On a quarterly basis, the fourth quarter of 2017 recorded the highest value of issuance with USD39.44 billion raised through 59 issuances while the third quarter was the most subdued as USD17.87 billion was raised through 45 issuances.
Geographical Allocation: Saudi Arabia was the leading issuer in 2017, raising USD41.60 billion through 20 issues and representing 39.9% of the total value raised by the GCC issuers during the year.
The UAE based issuers raised USD32.61 billion during 2017, up by 35% as compared to USD24.3 billion raised in 2016 and representing 31.3% of the total market. Kuwait entities represented 10.4% of the total issuances, raising USD10.83 billion as compared to USD4.52 billion raised in 2016. Omani issues represented 7.8% of the total value of issuances, raising USD8.12 billion through 8 issues. Amidst the regional crisis, Qatari entities raised USD6.18 billion from 62 issues, however the primary issuances dropped by 67.8% compared to USD19.22 billion raised in 2016. Bahraini entities represented 4.7% of the total issuances, raising USD4.90 billion through 6 issues.
Sovereign Vs. Corporate: Sovereign issues continued to dominate the GCC bonds and Sukuk market in 2017 contributing 62.6% to the overall market with a total value of USD65.28 billion as compared to USD65.82 billion in 2016. Total value raised by corporate entities in 2017 increased by 6.46%, to USD38.98 billion in 2017 from USD36.61 billion in 2016. Saudi Arabia Government raised a total of USD37.28 billion out of which SAR58.45 billion (USD15.78 billion) through domestic bonds and USD 21.5 billion through US Dollar denominated Bonds and Sukuk. The year was also instrumental for the Kuwaiti debt market as the Kuwait Government issued its debut Euro-dollar bonds in March raising USD3.5 billion through five-year bonds at a coupon of 2.75% and US$4.5bn through ten-year bonds at a coupon of 3.75%. Abu Dhabi, Oman and Bahrain governments raised USD10 billion, USD7 billion and USD 3 billion respectively. Qatar was the only GCC sovereign entity not tapping the international bond markets in 2017.
Conventional Vs. Sukuk: Conventional issuances raised USD81.42 billion, or 78.08% of the total amount raised in GCC bonds and sukuk market during 2017. Sukuk raised USD22.85 billion, 81% higher as compared to USD12.63 raised in 2016 and represented a share of 21.91% of the market in 2017.
Sector Allocation: Government sector accounted for the largest amount raised during the year, with USD65.28 billion representing 62.6% of the total amount raised as compared to USD65.82 billion issued in 2016. The Financial sector followed with USD22.29 billion (21.4% of total market) raised through 227 issues.Maturity Profile: Issuances with tenures of six to ten years raised the highest amount, USD42.9 billion, through 35 issuances, representing 41.2% of the total amount raised. However, maturities of 5 years or less increased to USD39.79 billion representing 38.2% of the market as compared to USD11.93 billion in 2016 representing 11.4%.
Issue Size Profile: GCC bonds and sukuk issuances during 2017 had issue sizes ranging from USD0.65 million to USD5 billion. Issuances with principle amounts greater than or equal to USD1.0 billion raised the largest amount of USD62.17 billion, representing 59.63% of the total value.
Currency Profile: US Dollar denominated issuances lead the GCC Bonds and Sukuk market, raising USD82.52 billion (79.14% of the total amount raised) by 203 issuances. Followed by Saudi Riyal raising USD18.78 billion (18.01% of the total amount raised) through 13 issuances.Rating: During 2017, a total value of 73.3% 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 out of which 87.9% issuances had investable grade ratings.
Listing: During 2017, 73.3% of the total issuances or 126 GCC Bonds and Sukuk issuances, with an aggregate value of USD76.46 billion were listed on exchanges. Listing on international exchanges accounted for 99% of the listed issues with an aggregate value of USD75.56 billion.
Bonds and Sukuk Total Amount Outstanding in the GCC
As of 31 December 2017, the total amount outstanding of corporate and sovereign bonds and sukuk issued by GCC entities was USD425.68 billion. Government issuances made up the majority of the total amount outstanding with USD203.39 billion, or 47.8% of the total amount. Financial sector led the corporate sector with a total amount outstanding of USD101.64 billion, or 23.9% of the total amount.
Of the amount outstanding as of 31 December 2017, USD164.21 billion, or 38.58% were issued by Saudi Arabian entities. Bonds and Sukuk by Kuwaiti entities represented USD19.67 billion, or 4.62% of the total amount outstanding.
About Kuwait Financial Centre “Markaz”
Established in 1974, Kuwait Financial Centre K.P.S.C “Markaz” is one of the leading asset management and investment banking institutions in the Region with total assets under management of over KD 1.03 billion as of 31 December 2017 (USD 3.40 billion). Markaz was listed on the Boursa Kuwait in 1997.