The GCC’s total gross bond issuance value has already surpassed 2016’s total value in the first five months of this year. The region’s sovereign and corporate bond issuance amounted to around $22bn during the five months, ended May 2017.
Current market conditions have created a favourable landscape for new bond issuances, Fisch Asset Management, a global leader in convertible and corporate bond strategies said yesterday.
In 2016, a total of $21bn worth of bonds were issued; this figure is up by 74.6 percent on 2015 when issuances amounted to $12.6bn. Positive performance in 2017 is linked to ongoing strong investor demand for emerging market assets, due to the higher yield available compared to developed markets and supported by upbeat global economic growth.
Philipp Good (pictured), CEO at Fisch Asset Management, commented: “Many factors have contributed to this positive trend in 2017, for example lower oil prices mean higher funding requirements, there is attractive pricing after markets have rallied, there is ample liquidity in the region and there has been a strong revival in credit markets on a year-to-date basis so far. The latest example of an issuer taking advantage of this positive environment is the Sultanate of Oman. It successfully completed a $2bn issue on 23 May, with the order book three times oversubscribed. I view this as a huge success and a clear indicator of confidence throughout the region.”
Corporate debt in the Middle East has also been a solid performer in 2017. Spreads of investment-grade rated bonds have dropped by 20 bps, significantly outperforming Asia, where spreads have seen a decline of only 4 bps. Other regions have seen a more pronounced narrowing of spreads, but this needs to be seen against the backdrop of Middle Eastern bonds already displaying the lowest spreads of all emerging markets regions at 170 bps. By comparison, Asian spreads stand at 195 bps, while Latin American ones are the highest at around 250 bps. This development is a result of the inflows into emerging markets and reflects the comfort global investors have with the GCC region, according to Fisch.
