GCC debt market continues to be strong

Sovereign bond issuances dominated GCC’s debt market activity in the first quarter of 2019, with notable multi-tranche issuances by the State of Qatar and the Saudi Arabia.

The PwC GCC Capital Market Watch for Q1, 2019 noted that Qatar issued $12.0bn worth of sovereign bonds in three tranches: a $6.0bn tranche with a coupon rate of 4.8 percent, maturing in 30 years; a $4.0bn tranche with a coupon rate of 4.0 percent, maturing in 10 years and a $2.0bn tranche with a coupon rate of 3.4 percent, maturing in five years. QNB Finance Limited issued a single tranche of corporate bonds with a coupon rate of 3.5 percent, maturing in five years.

The inclusion of GCC sovereign bonds to JP Morgan’s Emerging Market Bond Index (EMBI) from January 2019 is expected to further boost the demand for GCC sovereign bonds, as evidenced by the over-subscription of Qatar and recent Saudi bond issuances.

Corporate debt activity was also very active in the region with a number of issuances this quarter stemming from banking institutions, including a Tier 1 sukuk by Dubai Islamic Bank PJSC and programme drawdowns by Qatar International Islamic Bank, Mashreqbank PSC and First Abu Dhabi Bank PJSC.

The PwC report noted that the IPO activities eased in the region during the Q1. After a busy end to last year, 2019 started softly with just one IPO in the GCC during the first quarter. Global activity was also muted, with IPO proceeds more than halved compared to the same quarter in 2018. This is perhaps reflective of continuing geopolitical uncertainties including Brexit, the US-China trade war, and the longest ever shutdown of the US government.

Although the price of oil increased during the quarter, this was cautiously received by investors, given that the increase was mainly driven by Opec agreements on reducing production.

Expansionary policies, government incentives and continuing privatisation efforts in the region are helping to improve market sentiment. A number of GCC companies have announced their IPO plans for the next 12-18 months.

Looking ahead, PwC expects some rebound in the level of GCC IPO activity with a number of companies in the region having announced their plans to list in the next 12 to 18 months. On 10 April 2019, Network International, the largest payment services provider in the region, priced its London Main Market premium IPO, raising proceeds of over $1bn – becoming the largest IPO on the London Stock Exchange so far in 2019.

The region’s debt market continues to be active, with debt products proving to be of interest to investors.

Source from: The Peninsula