Dubai: The aggregate prim-ary bond issues from the Middle East and North Africa (Mena) region is expected to be lower this year as high market volatility has kept a number of regional issuers from tapping the market, Andrew Dell, HSBC's head of debt capital markets for Mena told reporters yesterday.
He expects the total bond issues from the region to be around two-thirds of the volumes reported last year. In 2010, aggregate bond issuance from the Mena region exceeded $40 billion (Dh146.88 billion) and the Gulf Cooperation Council (GCC) accounted for $32 billion.
"There are a few issuance windows available before the end of the year. But the volatility is too high and we do not expect the aggregate issuance for the fully year to reach last year's level," said Dell.
Although the overall number of issues has declined for the Mena region, HSBC said there has been significant number of issues from well diversified group of issuers from the region.
"Unlike the previous years it has not been just sovereign issuers and government related entities that tapped the market this year. Going forward we will see more diversification of issuers with increasing number of corporates tapping the market," he said.
Although the European debt crisis was partly responsible for dampening regional debt issues, the HSBC official said, besides Europe all things that triggered volatility and uncertainty kept regional issuers away from the market. HSBC said at the global level the number of issues kept up with the numbers last year, largely driven by bonds from emerging markets such as China, India, Emerging Europe and Africa.
The huge demand for public infrastructure around the Mena region and emerging markets are expected to drive the demand for long term debt financing. The ever growing demand for infrastructure funding across Mena, Africa, and global emerging markets is expected drive up long term funding through bonds.
"The infrastructure funding requirements are very long term in nature and many of these can't be arranged through bank financing route and there is a need for new class of long term instruments to fund these projects," said Dell.
Despite the European crisis, HSBC said there is still big global investor appetite for high yield emerging market debt. The growing signs of stability around credit spreads of regional issuers will keep them in demand.
Although an average 20 to 30 per cent of the Mena debt issues are placed with Asian investors, Dell said there is no evidence to suggest that there is a big shift in demand for Mena debt issues from West to East.
