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 2018.
The aggregate primary issuance of bonds and sukuk by GCC entities, including Central Banks Local Issuances, GCC Sovereign and Corporate Issuances, totaled USD153.74 billion in 2018, a 11.7% decrease from the total amount raised in 2017. Saudi entities were the top issuers in terms of total value issued.
GCC Central Banks Local Issuances decreased by 11.5% to USD61.87 Billion
Central Bank Local Issuances are issued by GCC central banks in local currencies and with short maturities for the purpose of regulating levels of domestic liquidity. During 2018, a total of USD61.87 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 USD30.43 billion (KWD 9.14 billion), representing 49.18% of the total amount raised by CBLIs through 42 issuances, followed by the Central Bank of Bahrain, which raised a total of USD15.42 billion (BHD5.79 billion).
GCC Sovereign and Corporate Bonds & Sukuk Market
A total of USD91.87 billion was raised in the GCC sovereign and Corporate bonds and sukuk market in 2018, a decline of 11.89% from USD104.26 billion raised in 2017.
Second quarter of 2018 recorded the highest value of GCC issuances with total value of USD 36.08 billion through 90 issuances, while fourth quarter was the least active with total value of issuances of USD13.13 billion through 61 issuances.
Geographical Allocation: Saudi Arabia based issuers led the GCC in 2018, raising a total of USD28.51 billion through 22 issuances and representing 31% of the total value raised in the GCC, followed by UAE with 30% and Qatar with 24%. Kuwaiti issuances represented 1.4% of the total issuances, raising USD1.3 billion through 8 issuances compared to USD10.83 in the previous year. Total value of Omani issuances was USD10.8 billion through 10 issuances representing 12% of total GCC issuances. Qatari issuances totaled USD22.23 billion representing an increase of 259.22% compared to its level in 2017. Bahraini issuances represented 2.2% of total GCC issuances with US$2.02 billion through 4 issuances.
Sovereign Vs. Corporate: Sovereign issues contributed 50.3% to the overall market with a total value of USD46.19 billion as compared to USD65.28 billion in 2017. Total value raised by corporate entities in 2018 increased by 17.19%, to USD45.68 billion in 2018 from USD38.98 billion in 2017. Saudi Arabia Government raised USD23.88 billion out of which USD10.88 billion (SAR48.78 billion) was through domestic bonds and USD13 billion through US Dollar denominated Bonds and Sukuk. Qatar, Oman, Sharjah and Bahrain governments raised USD12 billion, USD8 billion, USD 1 billion and USD 1 billion respectively. Kuwait was the only GCC sovereign entity not tapping the international bond markets in 2018.
Conventional Vs. Sukuk: Conventional issuances were lower by 16.4% last year as it raised USD68.09 billion, representing 74.11% of the total amount raised. During 2018, Sukuk issuances raised USD23.78 billion, 4.10% higher as compared to USD22.85 raised in 2017 and represented a share of 25.89% of the market in 2018.
Sector Allocation: Government sector accounted for the largest amount raised during 2018, with USD46.19 billion representing 50.3% of the total amount raised as compared to USD65.28 billion issued in 2017. The Financial sector followed with USD27.20 billion (29.6% of total market) raised through 250 issues.
Maturity Profile: Issuances with tenures of less than five years raised the highest amount, USD38.76 billion, through 237 issuances, representing 42.2% of the total amount raised. Issuances with maturities more than 5 years to 10 years represented 31% with USD 29.13 billion.
Issue Size Profile: The sizes of GCC bonds and sukuk issuances during 2018 ranged from USD0.77 million to USD6 billion. Issuances with principle amounts greater than or equal to USD1.0 billion raised the largest amount - USD52.42 billion, representing 57.05% of the total value.
Currency Profile: US Dollar denominated issuances lead the GCC Bonds and Sukuk market, raising USD72.88 billion (79.32% of the total amount raised) through 204 issuances. Followed by issuances in Saudi Riyal raising USD10.88 billion (SAR 48.78 billion) through 12 issuances and represented 11.84% of the total amount raised.
Rating: During 2018, a total value of 80.5% of the 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 91.2% issuances had investable grade ratings.
Listing: During 2018, 88.9% of the total issuances or 189 GCC Bonds and Sukuk issuances, with an aggregate value of USD81.71 billion were listed on exchanges. Listing on international exchanges accounted for 91.1% with Dublin accounting for the listing of 61 of such issuances.
Bonds and Sukuk Total Amount Outstanding in the GCCAs of 31st December 2018, the total amount outstanding of corporate and sovereign bonds and sukuk issued by GCC entities was USD484.02 billion. Government issuances made up 50.3% of the total amount. Financial sector led the corporates with a total amount outstanding of USD109.86 billion, or 22.7% of the total amount.
Of the amount outstanding as of 31st December 2018, USD188.44 billion, or 38.93% were issued by Saudi Arabian entities. Bonds and Sukuk by Kuwaiti entities represented USD20.75 billion, or 4.28% of the total amount outstanding.
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