The value of bonds and sukuk issued by Gulf oil producers plunged by nearly 32 per cent in the first half of this year but conventional bonds continued to dominate the market, according to a Kuwait financial company.
From around $35 billion in the first half of 2009, the total value of bonds and sukuk (Islamic financial instruments) slumped to nearly $24.2 billion in the first half of 2010, Markaz financial centre said in a study.
April was the dominant month in terms of issuance frequency and value, with 17 issuances and $6.1 billion, raising 25.1 per cent of H1 2010 total value.
“Continuing with the trend witnessed since 2003, conventional issuances raised the largest amount during the first half of 2010 with $20.1 billion through 68 issues representing 82.9 per cent of the total value raised, and five times the total value of sukuk issued during the same period,” the report said.
“Sukuk issuers were more diverse in the first half of 2010 than the first half of 2009, to include, in addition to the Central Bank of Bahrain and Dar Al Arkan Real Estate Development: the Central Bank of Qatar, the Saudi Electricity Company and the National Bank of Abu Dhabi.”
The study showed government and sovereign issuances dominated the majority of the amount raised in the first half of 2010, with around $17.2 billion or a 71.0 per cent of the total amount raised. It said this represents a continuation with the trend observed since 2003 except for the peak years of 2006-2007 and 2008, where corporate issuances dominated the market.
Governments involved in the issuance of bonds and sukuk during the first half of 2010 were the Central Bank of Kuwait, which raised $10.7 billion, or 62.2 per cent of the aggregate amount raised by GCC governments and other sovereign bodies, the Central Bank of Qatar, which raised $3.3 billion and the Central Bank of Bahrain, which raised around $3.2 billion.
As for the corporate issuance, about 82.3 per cent of the total value was raised by corporations that are either fully or largely owned by GCC governments.
Sector-wise, excluding sovereign/government issuances, four sectors were active during the first half of 2010, according to Markaz.
They include the Financial Services sector which, continuing with the trend that has been witnessed since 2003, issued the greatest number and raised the largest amount, with $3.3 billion through eight issuances. It was followed by the Power and Utilities sector with $2.9 billion through two issuances, the Real Estate sector with $0.6 million through three issuances, and the oil and gas sector with around 0.3 million through one issuance.
The study showed Kuwait raised the largest amount in the first half of this year, with $10.8 billion, representing 44.7 per cent of the total value of 31 issuances.
However, in terms of frequency, Bahrain was the most active, issuing 37 bonds and sukuk representing 45.1 per cent of the total number of issuances and raising $two billion. Saudi Arabia raised around $4.2 billion through five issuances, followed by Qatar with $3.3 billion through three issuances and the UAE, with a value of around $2 billion.
Oman was the least active amongst the GCC issuers with only one issuance by Al Omaniya Financial Services, raising a total of $4 million.
The study showed 2009 was a record year in terms of issuances, with a value of around $61.4 billion for bonds and $11.3 billion for sukuk. It was way above the 2008 issuances, involving around $14.6 billion bonds and $8 billion sukuk.