Bahrain plans bond launch in 2018

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MANAMA: KAMCO Research expects fixed income market issuances to be led by Saudi Arabia followed by Qatar, Oman and Bahrain in 2018 as these countries look at ways to finance their respective investment plans and plug budget deficits.

GREs are increasingly tapping the international bond markets and this new trend is expected to see noticeable growth in 2018.

Fixed income issuances in the GCC in 2017 saw one of the biggest jumps since the financial crisis with growth recorded in both bonds and sukuk markets. It was a record year for the GCC countries as sustained low oil prices coupled with rising budget pressure at home as well as infrastructure spending requirements triggered some of the biggest issuances in the region. Ongoing trends also indicate a healthy pipeline of issuances in the near term. In addition, central banks in the region are also under pressure to raise interest rates due to rising interest rates in the US and the pressure to keep currency pegs within a manageable limit. This has also forced some issuers in the region to lock in favorable rates before the interest rates are raised.

In terms of individual country share, Saudi Arabia continued to account for the lion’s share of total fixed income market issuances that reached a record level of USD 40.6 Bn as against around USD 20 Bn during 2016. The increase was primarily in terms of Sukuk issuances that reached USD 28.1 Bn during the year as against merely USD 1.7 Bn during 2016.

On the economic front, the GCC continues to boast one of the biggest project markets in the region with almost USD 3.1 trillion worth of projects in pipeline, according to MEED. This is more than USD 300b or 11.6% more as compared to the projects pipeline at the end of 2016, requiring additional funding requirements and thereby increasing the possibility of higher issuances in the fixed income market in the near term. Furthermore, with banks becoming more stringent in their lending process amid liquidity constraints, corporates are increasingly looking at the fixed income market and are actively tapping in record deals.

In terms of quality of issuers, most of the MENA oil exporters have adequate credit quality enabling them to comfortably raise debt in the international market. This is particularly the case with the GCC countries with most of the larger economies continuing to boast investment grade ratings despite several downgrades by rating agencies since the start of the oil price decline.

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