The aggregate primary issuance of bonds and sukuk in the GCC totaled $57b in 2010, a 27.6 per cent decrease from its peak value in 2009, according to a new report.
In its recent research titled GCC Bonds and Sukuk Market Survey, Kuwait Financial Centre (Markaz) said October 2010 witnessed the highest issuance frequency and value, with 23 issuances raising a total of $9.1b, representing 16 and 11.9 per cent, respectively of total 2010 issuances.
According to the report, a total of $29.9b was raised by sovereign and corporate bond and sukuk issuances in 2010, compared to $64.9b in 2009.
Corporate issuances dominated the market during 2010, with $20.9b, representing 70.2 per cent of the total amount raised. Sovereign issuances raised $8.9b, representing 29.8 per cent of the total amount raised. The value of corporate issuances almost maintained its 2009 level with only a 0.21 per cent decline, according to the Markaz report.
However, the number of issuances increased from 37 to 42, with Emirati corporate issuances dominating the market at $6.2b through 19 issuances, the report highlighted. The number of sovereign issuances decreased in 2010 in comparison to 2009 from 22 to 12. This in effect decreased the value of total GCC Sovereigns issuances by 38.5 per cent.
Issuances by UAE entities raised the largest amount in 2010, $9.5 billion, representing 32 per cent of the total amount borrowed; followed by Qatari issuances, raising $9.3b, or 31.2 per cent of the total amount. Kuwaiti entities raised $1b, representing 3.5 per cent of the total amount while Omani entities raised the least amount in the GCC, $400m, representing 1.2 per cent of the total amount borrowed via bonds and sukuk.
As at December 31, 2010, the total amount outstanding of corporate and sovereign bonds issued by GCC entities was $157.4b. Corporate issuances make up the majority of the total amount outstanding with $99.6b, or 63.3 per cent of the total amount. Sovereign issuances amount to $57.8b or 36.7 per cent of the total amount. Of the amount outstanding $102.2b, or 65 per cent, will mature by the end of 2015.
The report states that local issuances by GCC central banks, issued to regulate the levels of domestic liquidity, raised $27.2b in 2010, with the Central Bank of Kuwait raising the highest amount: $21.8b, representing 80.3 per cent of all Central Bank Local Issuances (CBLI) through 60 issuances in 2010.
Conventional CBLI raised the greatest amount during 2010 with $26.5b, representing 97.5 per cent of the total value raised through 116 issuances, compared to $700m for sukuk through 23 issuances.
Conventional bonds issuances raised the greatest amount during 2010, $23.4b, representing 78.5 per cent of the total amount raised through 45 issuances. On the other hand, GCC sukuk issuances during 2010 slumped to its lowest level since 2006, at $6.4b through nine issuances, which represents a 39.3 per cent decrease from the amount raised by sukuk in 2009.
The financial sector accounted for the largest amount raised through the issuance of bonds and sukuk during 2010, with $10b, representing 33.3 per cent of the total amount raised through 29 issuances. Government entities raised the second highest amount with $7.9b, representing 26.4 per cent of the total amount, through 10 issuances.
Bonds with tenures of five years raised the highest amount, $14.3b, through the largest number of issuances, 22 issuances, representing 47.9 and 40.7 per cent of the total amounts, respectively. Bonds with tenures of ten years raised the second highest amount, $8.6b, representing 28.7 per cent of the total amount through eight issuances.
GCC bonds and sukuk issuances during 2010 had issue sizes ranging from $4m to $2.5b. Bonds/sukuk with issue sizes of more than $500m and equal to or less than $1b were the most active with 16 issuances, representing 29.6 per cent of the total number of issuances, amassing to $10b. Issuances with sizes of less than $100m were the second most active during 2010, with a total of 14 issuances.
Continuing with the trend witnessed in 2009, the bond and sukuk market was dominated by US dollar-denominated issuances: a total of $20.7b was raised, representing 69.3 per cent of the total amount borrowed, and a total of 28 issuances, representing 51.9 per cent of the total number of issuances placed.
The US dollar was followed by Saudi Arabian Riyal-denominated issuances, with $3.9b, representing 13 per cent of the total amount raised through five issuances (representing 9.3 per cent of the total number of issuances). It is interesting to note that, in 2010, for the first time in five years, not a single UAE dirham-denominated issuance was issued.
During 2010, a total of 47 issuances, or 84.9 per cent of the total sovereign and corporate issuances, were rated by one of the following rating agencies: Moody’s, Standard & Poor’s, Fitch, RAM, and Capital Intelligence.
During 2010, of the $57b raised in the GCC, 34 bonds and sukuk were listed on exchanges with a total value of $24.8b. A total of 30 bonds were listed on international exchanges with a total value of $37.4b versus nine bonds listed on regional exchanges with a total value of $4.9b.
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