GCC Islamic bonds issuance slips first half of year
The total value of bonds and Sukuk issued in the Gulf Cooperation Council (GCC) was $37.6 billion during the first half of 2012 (H1 2012), a decrease of 18.7 per cent, compared to the respective period of 2011, reports Kuwait Financial Centre (Markaz)
The month of May witnessed the highest value of issuance during H1 2012 with $7.3 billion, representing 19.6 per cent of the total amount issued through 28 issuances, however, June predominated in terms of issuance frequency with 32 issuances.
Issuances by GCC central banks, in local currencies and maturities of less than one year (CBLI) reached a total of $13.8 billion during H1 2012.
The Central Bank of Kuwait raised the highest amount during H1 2012 with $6.5 billion through 14 issuances. Central Bank of Qatar raised a total of $4.3 billion through 13 issuances, recording a decrease by 70.8 per cent in value compared to the H1 2011, while the CBB raised a total of $3 billion through 37 issuances, recording an increase by 17.5 per cent in value compare to H1 2011.
The GCC bonds market, composed of sovereign and corporate bonds and Sukuk issuances denominated in local and foreign currencies, witnessed a notable increase in the number of issuance from 26 to 88 issuances during H1 2012, accompanied by an increase in the value of total issuance from $15.4 billion to $23.7 billion, a 54 per cent increase compared to the total value issued during H1 2011.
Quarter on Quarter (QoQ) basis, the first quarter of 2012 witnessed a decrease by 5.7 per cent to $13.5 billion and a further decrease by 24.9 per cent to $10.1 billion for Q2 2012. However, the number of issuances increased QoQ by 80 per cent to 36 issues during Q1 2012 and a further QOQ increase by 44.4 per cent to 52 issues during Q2 2012.
Conventional issuances dominated the GCC bonds and Sukuk primary market during H1 2012 representing 72 per cent of the total amount to $17.2 billion raised through 77 issues.
Continuing with the previous trend, corporate issuances dominated the majority of the amount raised in the GCC Bonds market during H1 2012, with $18.0 billion or 75.8 per cent of the total amount raised through 70 issuances.
UAE has been the most active in terms of amount issued and frequency of issuances with $7.3 billion raised through 49 issues. Saudi Arabia raised $8 billion through nine issues, Qatar raised $2 billion through four corporate issues, followed by Kuwait and Oman which respectively raised $484.3 million and $133.7 million through six and two issuances. Notably, none of the Bahraini corporate entities issued bonds or Sukuk during H1 2012.
GCC sovereign issuances reached $5.7 billion through 18 issuances during H1 2011, comprising issues by governments of UAE, Kuwait, Bahrain and Oman. Kuwaiti government was the most active in terms of amount issued and frequency of issuances with $3.9 billion raised through 14 issues ranging from one to seven year maturities. UAE raised $1.2 billion through two issues, followed by Bahrain and Oman that raised $265.2 million and $259.9 million respectively through one issue each.
Excluding the government sector, the financial services sector raised $8.6 billion through 58 issuances; followed by the transport sector with $3.9 billion through one issuance by the General Authority Civil Aviation of Saudi Arabia, followed by the industrial sector with $2.7 billion through five issuances.
Issuances by UAE entities raised the largest amount in H1 2012 with $8.5 billion representing 36.4 per cent of the total amount raised in the GCC, and were the most active with 51 issuances representing 58 per cent of the total number of issuances. Saudi Arabian entities raised the second highest amount, with $8 billion through nine issuances. Kuwaiti entities raised a total of $4.4 billion through 20 issuances.
During the H1 2012, the maturities of bonds and Sukuk issued in the GCC region, ranged from six months to as long as 30 years. Issuances with five-year maturity raised the largest amount with $8.9 billion, representing 37.6 per cent of the total amount raised through 24 issuances. The one year and less maturity were the most frequently issued with 34 issuances representing 38.6 per cent of the total number of issuances with only $4 billion amount raised. The longest maturity (30-years) raised $25 million through one issue by Emirates NBD.
The GCC bond and Sukuk issuances during H1 2012 had sizes ranging from $3.8 million to $3.9 billion. Issuances with a principal amount equal to or greater than $1 billion raised the largest amount with a total of $8.5 billion, or 36 per cent of the total amount raised, through five issues.
Saudi Arabia‟s General Authority of Civil Aviation bond was the largest issuance in H1 2012, raising a total of $3.99 billion (SAR15 billion).
The GCC bonds market in H1 2012 was dominated by the US Dollar denominated issuances with a total of $12.5 billion was raised in that currency, representing 53.3 per cent of the total amount. Saudi Riyal denominated issuances raised $5.5 billion, followed by Kuwait Dinar denominated issuances with $4.3 billion.
During H1 2012, a total of 24 out of the 88 GCC sovereign and corporate issuances were rated either by Standard & Poor’s, Moody’s, Fitch, and Capital Intelligence.
During H1 2012, a total of 32 GCC bonds and Sukuk were listed on exchanges with a total value of $12.5 billion. The number of regional bonds and Sukuk listed on international exchanges were 27 issues with a total value of $10.4 billion versus five bonds listed on regional exchanges with a total value of $2 billion.
As of 30 June 2012, the total amount outstanding of GCC bonds and Sukuk issued by GCC entities was $205.6 billion. Corporate issuances make up the majority of the total amount outstanding with $138.3 billion, or 67.2 per cent of the total amount outstanding. Sovereign issuances amount to $67.4 billion or 32.8 per cent of the total amount outstanding.
Bonds and Sukuk issued by UAE entities represent the largest share of amount outstanding at $106.4 billion or 51.8 per cent of the total amount outstanding.
The total return for HSBC/DIFX GCC Aggregate Bond and Sukuk (GCCB) Index increased by 6.2 per cent during H1 2012, from 139.668 on 31 December 2011 reaching 148.334 on 30 June 2012; while the yield of the GCCB Index decreased by 17.8 per cent, from 4.95 on 31 December 2011 to 4.073 on 30 June 2012. During the year, GCCB Index’s return reached its highest point on 30th June 2012, 148.334 and the lowest point, 140.393 on 1st January 2012.
The Dubai 5Y CDS decreased the most amongst GCC CDS, by 17.7 per cent to 358.184 basis points during H1 2012. This was followed by Bahrain 5Y CDS which decreased by 9.9 per cent to 345.000 basis points, followed by Saudi Arabia 5Y CDS that slightly dipped by 1.6 per cent to 126.420 basis points during H1 2012.
Though the Dubai 5Y CDS has been the best performing CDS during H1 2012, the risk perception on it still remains high, considering its high fluctuations ranging from 469.202 basis points in January to 330.825 basis points in March.