Dubai: The total amount outstanding of corporate and sovereign bonds issued by GCC entities stood at $181.9 billion (Dh667.93 billion) as of December 31, according to a new report.
"Sovereign issuances amount to $61.9 billion or 33.9 per cent of the total amount," said the report. "Of the amount outstanding as at 31 December 2011, $112.3 billion, or 61.7 per cent, will mature over the course of the next five years, by the end of 2016," said the report published by the Kuwait Financial Centre (Markaz).
The aggregate primary issuance of bonds and sukuk in the GCC jumped 34.1 per cent last year to reach Dh308 billion.
This includes both commercial sovereign and corporate bonds and sukuks and Central Bank Local Issuances (CBLI) — debt securities issued by GCC central banks to regulate the levels of domestic liquidity.
A total of $50.7 billion was raised by the central banks of Kuwait, Bahrain, Qatar, and Oman during 2011, with the Central Bank of Kuwait raising the highest amount — $25.8 billion — representing 50.9 per cent of the total CBLI amount through 63 issuances.
"Low dollar interest rates could be with us for some time to come," said Gary Dugan, chief investment officer, private banking, Emirates NBD. "In the first ever survey of US Federal Reserve governors the majority view was that the US would maintain near-zero interest rates until 2014. Dollars could be flowing around the world seeking enhanced returns for some time to come."
Comparison
The GCC bonds and sukuk market is composed of sovereign and corporate issuances. During 2011, a total of $33.4 billion was raised by Sovereign and Corporate bond and sukuk issuances, compared to $35.6 billion in 2009.
During 2011, corporate issuances made for most of the debt issuance, with $26.0 billion or 78 per cent of the total amount raised. Sovereign issuances raised $7.3 billion representing 22 per cent.
"We cannot stress strongly enough the potential upside for regional bonds and emerging market bonds. A near-zero interest rate until 2014 would encourage more and more investors to seek out other dollar or dollar-linked fixed income securities such as dirham bonds for enhanced yield," Dugan added.
The total amount raised by corporate issuances declined by 10.8 per cent and the number of issuances declined by 5.8 per cent, from 52 issuances to 49 issuances. Corporate issuances from the UAE continued to dominate the market with 33 issuances, representing 67.3 per cent of the total number of issuances, raising a total of $21.1 billion, representing 81.1 per cent of the total amount.
Sovereign issuances
The value of sovereign issuances rose by 15.2 per cent in 2011 in comparison to 2010 from $6.4 billion to $7.3 billion; however, the number of sovereign issuances decreased from 9 issuances in 2010 to 7 issuances in 2011.
Issuances by UAE entities raised the largest amount in 2011, representing 66.5 per cent of the total amount, or $22.2 billion. UAE entities were also the most active in terms of issuance frequency with 35 issuances representing 62.5 per cent of the total number of issuances.
Qatari entities raised the second highest amount during 2011 with $5.2 billion representing 15.6 per cent of the total amount. Saudi Arabian entities raised $3.6 billion, representing 10.7 per cent of the total amount. Bahraini entities raised $1.7 billion, representing 5.1 per cent of the total amount. Kuwaiti entities raised $0.7 billion, representing 2.1 per cent of the total amount. Oman raised the least amount — $2.8 million, representing 0.01 per cent of the total amount.
Conventional issuances represented the bulk of the GCC bonds and sukuk market during 2011, with $23.7 billion raised through 37 issues representing 71.1 per cent of the total amount raised and 66.1 per cent of the total number of issuances.
The amount and number of issuances in terms of conventional issuances fell by 18.1 per cent and 27.5 per cent respectively in 2011 compared to 2010.
It is notable to mention that the number of sukuk issuances almost doubled in 2011 compared to 2010, from 10 issuances to 19 issuances, raising a total of $9.7 billion.
For the first time this decade, oil and gas entities accounted for the largest amount raised during the year, with $10.5 billion representing 31.5 per cent of the total amount raised, through ten issuances representing 17.9 per cent of the total number of issuances.
Bonds with tenures of five years raised the highest amount, $15.9 billion, through the largest number of issuances — 24 — representing 47.5 per cent and 42.9 per cent of the totals respectively.
Issue sizes
GCC bonds and sukuk issuances during 2011 had issue sizes ranging from $2.8 million to $2.0 billion. Bonds and sukuk with issue sizes ranging between $500 million and less than $1.0 billion were the most active with 19 issuances, representing 33.9 per cent of the total number of issuances, amassing to $12.7 billion. Issuances with sizes ranging between $200 million and less than $500 million were the second most active during 2011, with a total of 13 issuances.
During 2011, 39 bonds and sukuks, representing 69.6 per cent of all the bonds and sukuks issued, and a total of $29.4 billion, were listed on both regional and international exchanges.
A total of 32 bonds were listed on international exchanges with a total value of $25.5 billion. Two bonds/sukuks were listed on both an international exchange and a regional exchange, representing $1.5 billion; and five bonds/sukuk were listed on regional exchanges with a total value of $2.3 billion.
