GCC credit outlook strong

Outlook for the GCC fundamental credit quality should slowly stabilise in the near-term given the recovery in the global economy, although different regions will grow at very different speeds in 2010, said Vivek Tawadey, Global Head of Interest Rate Strategy.

He said the technical picture for credit remains strong and despite the tightening of credit spreads selective opportunities exist for credit investors. Credit spreads are likely to be less directional and performance will depend on avoiding the minefields.

He also recommended overweight strategy on bank bonds especially lower Tier 2, oil and gas and food retail sectors for this quarter. The rebound in energy prices should help growth in 2010 despite some structural weaknesses as they are being worked out gradually.

Jean-Christophe Durand, Regional Director of BNP Paribas GCC, said: "The Gulf has been and continues to be a strategic region for the group. Despite the economic slowdown, we have invested heavily here in 2009, both in terms of our human resource capacity and our business diversification. We look forward to seeing improvements in 2010, especially in the second half of the year."

BNP Paribas Global Head of Credit Research & Portfolio Strategy Cyril Beuzit believes the central banks will only start withdrawing liquidity gradually and that interest rate hikes are not on the agenda for 2010 as the global economic recovery is too fragile and there is no grave inflation threat.

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