News Column

GCC outstanding debt securities hit $257bn in 2013

January 26, 2014

Dubai

The GCC's stock of outstanding bonds and sukuks surged to $257 billion at the end of 2013, up 16.4 per cent from a year ago, driven by low rates and rapid economic growth, said a report. Growth in the GCC's stock of outstanding debt securities remained solid in 2013 very much in line with performance over the past few years, according to the report by National Bank of Kuwait (NBK). Issuance growth by the private sector was particularly strong, led by non-financial corporates in Saudi Arabia. Banks too continued to be a large source of new debt issues spurred on by regulatory changes, said the Kuwiti lender in its debt securities review. The new rules allowing covered bonds in the UAE and sukuk debt in Oman could see further strength in debt securities growth in 2014, it added. NBK pointed out that the net gains in the fourth quarter of 2013 reached $12.8 billion , offsetting a weak third quarter. The UAE dominated the region with the largest portfolio of outstanding debt securities followed by Qatar . The latter could lose its second place position in 2014 with $19.4 billion worth of public sector debt due to mature this year, it added. The issuance of new bonds and sukuk was flat in 2013 at $56.4 billion , said the report. "Bearish market sentiment in the wake of mid-year speculation that the Federal Reserve might begin to taper its bond buying program may have dampened issuance somewhat. Despite this, 2013 saw strong activity from the private sector, with the non-financial sector (NFS) in Saudi Arabia accounting for most of the growth," it stated. Meanwhile, the Kuwaiti bank pointed out that the issuance by public sectors and banks remained lower. "Despite lower issuance by the region's banks in 2013, the sector continued to see rapid growth in outstanding debt. Issuance topped $15 billion , with the stock of outstanding debt reaching $65 billion by the end of the year," the statement said. According to NBK, the sector has been increasingly looking at debt markets for funding in response to increased regulations requiring liabilities with longer maturities. Also, some banks started to issue bonds that meet new capital adequacy rules. The average maturity of outstanding GCC bonds remained steady at 5.8 years. The issuance of three perpetual bonds during the year reflected the attractiveness of current low rates and helped extend average maturities of NFS debt, which rose to 8.9 years. Regional interest rates moved higher in 2013, but are down from levels seen around the middle of the year, sated the report. Sovereign bonds that mature in 6-7 years for Dubai , Qatar , and Abu Dhabi have seen their yields rise by 50 to 60 basis points from a year ago, to settle at 4.46 per cent, 2.72 per cent, and 2.42 per cent, respectively. Rates had moved higher in the summer months, first as global markets generally anticipated the US to begin reducing its bond buying activity, and later as regional markets braced for a possible US strike on Syria , it added.- TradeArabia News Service ?


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Source: TradeArabia


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