Kuwait Financial Centre “Markaz”, in its recent research report titled GCC Bonds & Sukuk Market Survey, has highlighted the trends pertaining to Bonds and Sukuk primary issuances in the GCC region during 2019. The report includes analysis of the Bonds and Sukuk market in the GCC, which are issued by Sovereign and Corporate entities for financing purposes. The report also covers local issuances by Central Banks in the GCC, which are primarily utilized as tools of monetary policy.
GCC Sovereign and Corporate Bonds & Sukuk Market
The debt capital markets in the GCC comprise of Bonds and Sukuk issued by governments, corporations or financial institutions for financing purposes, and are denominated in either in local or foreign currencies. During 2019, a total of USD 114.172 billion was raised in the GCC sovereign and Corporate Bonds and Sukuk market, an increase of 24% from USD 91.872 billion raised during 2018. UAE entities were the top issuers in terms of total value issued.
The first half of 2019 recorded the highest value of GCC issuances with total value of USD 65.031 billion through 229 issuances, while a total of USD 49.141 billion was issued in the second half through 180 issuances.
GCC Central Bank Local Issuances (CLBIs)
Central Bank Local Issuances are issued by GCC Central Banks in local currencies and with short maturities for regulating levels of domestic liquidity. During 2019, a total of USD 63.814 billion was raised by the GCC Central Banks, namely by the Central Bank of Kuwait, Bahrain, Qatar, and Oman (the only publicly 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 USD 28.656 billion, followed by the Central Bank of Qatar, which raised a total of USD 12.542 billion.
Geographical Allocation: UAE-based issuers led the GCC Bonds and Sukuk market during 2019, raising a total of USD 44.818 billion through 310 primary issuances and representing 39% of the total value raised in the GCC, followed by Saudi Arabia with 35% and Qatar with 17%. Kuwait-based issuers made up 2% of the total value of GCC issuances.
Sovereign vs. Corporate: Corporate issues contributed to 54% to the overall market with a total value of USD 61.272 billion, as compared to USD 45.684 billion raised during 2018. Sovereign issues raised a total of USD 52.900 billion through primary debt issuances, an increase of 15% from USD 46.187 billion raised during 2018. The Saudi Government has issued debt of USD 23.950 billion, of which USD 10.560 billion (SAR 39.62 billion) raised through domestic issuances and USD 13.390 billion of Bonds and Sukuk in US Dollar and Euro. The Government of Qatar issued Sovereign bonds totaling USD 12.000 billion during 2019, with maturities of 5, 10 and 30 years, whereas the Emirate of Abu Dhabi issued Bonds and Sukuk amounting to USD 10.000 billion and the Emirate of Sharjah issued Bonds and Sukuk amounting to USD 1.950 billion during 2019.
Conventional vs. Sukuk: Conventional issuances increased by 25% versus last year as it raised USD 85.078 billion in 2019, representing 75% of the total amount raised during the year. Sukuk issuances in the GCC amounted to USD 29.094 billion, an increase of 22% compared to the USD 23.784 billion raised during 2018. Sukuk issuances accounted for 25% of the total primary issuances during 2019.
Sector Allocation: The Government sector within the GCC accounted for the largest amount of primary debt issuances by value, raising a total of USD 52.900 billion through 25 issuances during 2019 and representing 46% of the total value of GCC primary issuances. The Financial sector was second in its contribution to the total value of GCC primary issuances, raising a total value of USD 39.962 billion through 362 issues and representing 35% of the total value of the market.
Maturity Profile: Issuances with tenors of less than 5 years slightly dominated the GCC debt capital markets by total value, raising a total value of USD 37.612 billion through 273 issuances and contributing to 33% of total primary issuances. Issuances with tenors of 6-10 years raised a total of USD 36.452 billion through 55 issuances, where it contributed to 32% of the total.
Issue Size Profile: The size of GCC Bonds and Sukuk issuances ranged from USD 5 million to USD 6 billion. Issuances with principle amounts greater than or equal to USD 1 billion raised the largest amount totaling USD 73.179 billion, representing 64% of the total primary issuances.
Currency Profile: US Dollar-denominated issuances led the GCC Bonds and Sukuk market in 2019, raising a total of USD 91.348 billion through 253 issuances, representing an 80% of the total value raised in primary issuances in the GCC. The second largest issue currency was the Saudi Riyal (SAR), where issuances in SAR raised a total of USD 10.960 billion through 9 issuances, representing 10% of the total value of issuances.
Rating: In terms of value, a total of 81% of GCC Conventional and Sukuk bonds were rated in 2019 by either one of the following rating agencies: Standard & Poor’s, Moody’s, Fitch and/or Capital Intelligence, of which 73% are categorized as Investment Grade-rated.
Listing: During 2019, 93% of the total issuances or 260 issuances of Bonds and Sukuk in the GCC were listed on exchanges, with an aggregate value of USD 106.221 billion. London is the listing exchange with the greatest traded value of GCC primary issuances during 2019, totaling USD 45.451 billion through 89 issuances.
Bonds and Sukuk Total Amount Outstanding in the GCC: As of 31 December 2019, the total amount outstanding of Corporate and Sovereign Bonds and Sukuk issued by GCC entities was USD 596.651 billion. Government issuances made up 57% of the total amount. Financial sector led the Corporates with a total amount outstanding of USD 138.494 billion, or 23% of the total value.
Of the amount outstanding as of 31 December 2019, USD 214.854 billion, or 36%, were issued by Saudi Arabian entities. Bonds and Sukuk by Kuwaiti entities represented USD 27.857 billion, or 5% of the total amount outstanding.Final Report