Muscat: The aggregate primary issuance of bonds and sukuk by Gulf Cooperation Council (GCC) entities, including central bank local issuances and GCC sovereign and corporate issuances, in the first half of 2018 increased by 9.64 per cent to US$95.25 billion compared with the same period in 2017, a new report revealed.
Qatar led the GCC in terms of total value raised from issuances, according to the Kuwait Financial Centre (Markaz) in its recent research report, “GCC Bonds and Sukuk Market Survey.”
The report highlighted the trends followed by bonds and sukuk issuances in the GCC region during the first half of 2018.
Central bank local issuances (CBLIs) 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.
In the first half of 2018, a total of $32.77 billion was raised by GCC central banks, namely the Central Banks of Kuwait, Bahrain, Qatar, and Oman, which are the only central banks in the region that make information available to the public.
The Central Bank of Kuwait raised the highest amount, with KD4.77 billion ($15.88 billion) through 22 issuances, representing 48.59 per cent of the total amount raised by CBLIs. This was followed by the Central Bank of Bahrain, which raised a total of BD2.99 billion ($7.95 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, in local and foreign currencies for financing purposes. A total of $62.57 billion was raised in the GCC bonds market in the first half of 2018, a growth of 33.27 per cent from the $46.95 billion raised in the first half of 2017.
Qatari issuers led the GCC in the first half of 2018, raising a total of $19.97 billion through 47 issuances, representing 31.9 per cent of the total value raised in the region.
Saudi Arabian entities raised $17.37 billion from 10 issuances, up by 68.4 per cent compared to the $10.31 billion raised in the first half of 2017, making up 27.76 per cent of the market.
UAE-based issuers raked in $15.39 billion during the first half of 2018, up 21.9 per cent compared to the $12.6 billion raised in the same period in 2017 and representing 24.6 per cent of the total market.
Total issuances by Kuwaiti entities dropped to $0.20 billion, representing 0.3 per cent of the total market, a huge drop compared to the $10.50 billion raised in first half of 2017, which was 22.4 per cent of the total market.
Meanwhile, Omani entities raised a total of $8.63 billion through seven issuances, representing 13.8 per cent of the market. This marks a 13.2 per cent increase over the $7.62 billion raised in the first half of 2017. Bahraini entities were responsible for 1.6 per cent of the total issuances, raising $1 billion through a single issue.
Sovereign vs. corporate
Sovereign issues continued to dominate the GCC bonds and sukuk market in the first half of 2018, contributing 60.2 per cent to the overall market with a total value of $37.68 billion as compared to $24.0 billion in the first half of 2017. Total value raised by corporate entities increased by 8.45 per cent to $24.89 billion in the first half of 2018, from $22.95 billion during the same period in 2017.
Saudi Arabia's government raked in a total of $16.87 billion, of which SR29.99 billion ($5.87 billion) was raised through domestic bonds and $11 billion through US dollar denominated bonds and sukuk. The Qatar, Oman, Sharjah, and Bahrain governments raised $12 billion, $6.5 billion, $1 billion, and $1 billion respectively, while Kuwait was the only GCC sovereign entity that did not tap the international bond markets in the first half of 2018.
Conventional vs. sukuk
Conventional issuances raised $50.17 billion or 80.19 per cent of the total amount raised in the GCC bonds and sukuk market in the first half of 2018. A total of $12.39 billion was raised through sukuk, which is 30.84 per cent lower compared to the $17.93 billion raised in the first half of 2017 and represented a share of 19.81 per cent of the market in the first half of 2018.
The government sector accounted for the largest amount raised during the first half of 2018, with $37.68 billion or 60.2 per cent of the total amount raised, as compared to $24.89 billion issued in the first half of 2017. The financial sector followed with $18.29 billion, representing 29.26 per cent of the total market raised through 140 issuances.
Issue size profile
The size of GCC bonds and sukuk issuances in the first half 2018 ranged from $1 million to $6 billion. Issuances with a principle greater than or equal to $1 billion raised the largest amount with $41.83 billion, representing 66.85 per cent of the total value.
Total amount outstanding
As of June 30, 2018, the total amount outstanding of corporate and sovereign bonds and sukuk issued by GCC entities stood at $463.29 billion. Government issuances made up the majority of the total amount outstanding with $236.02 billion, or 50.9 per cent of the total amount. The financial sector led the corporate sector with a total amount outstanding of $104.37 billion, or 22.5 per cent of the total amount.
Of the amount outstanding as of June 30, 2018, $179.03 billion or 38.60 per cent was issued by Saudi Arabian entities, while bonds and sukuk by Kuwaiti entities represented $19.66 billion, or 4.24 per cent.