Sovereign issuances by GCC entities amounted to $66.3 billion during 2020 amid growing budget deficits ensuing from Covid-19 and lower oil prices, up 25% year-on-year from $52.9 billion raised during 2019, a report said.
Corporate issuances on the other hand amounted to a total value of $66.4 billion during the past year, an increase of 8% year-on-year from $61.3 billion raised during the previous year, added the report titled “GCC Bonds and Sukuk Market Survey 2020” by Kuwait Financial Centre (Markaz).
The report showed that despite the double blow of the outbreak of Covid-19 and the subsequent decline in oil prices, primary debt issuances set a new record for the total value of issuances raised in one year.
GCC bonds and sukuk market
The bonds and sukuk market within the GCC consists of bonds and sukuk issued by governments or corporations for financing purposes and are denominated in either local or foreign currencies. Primary issuances of Bonds and Sukuk amounted to $132.7 billion during 2020, marking a growth of 16% year-on-year from $114.2 billion raised in 2019.
The implications of Covid-19 have resulted in added strain on regional economies in terms of growing budget deficits and tightening liquidity. Moreover, the total number of primary issuances during last year totalled 360, compared to 409 issuances during the same period in the previous year.
UAE-based issuers led the GCC Bonds and Sukuk market during 2020, raising a total of $48.5 billion, or representing 37% of the total value raised in the GCC, through 195 primary issuances. Saudi Arabia followed with 32% and Qatar with 18% of the total value raised. Moreover, Kuwaiti entities raised a total of $4.6 billion, representing 3% of the total value raised during the year.
Conventional vs. Sukuk
Conventional issuances increased during 2020 by 10% year-on-year, where a total of $93.4 billion was raised in 2020, representing 70% of the total value of primary issuances in the GCC. On the other hand, Sukuk issuances increased by 35% year-on-year to reach $39.3 billion during 2020 and representing 30% of the total value of issuances, compared with $29.1 billion raised during 2019.
The Government sector accounted for the largest amount of primary debt issuances by value, raising a total of $66.3 billion, or 50% of the total value of issuances in the GCC during 2020. The Financial sector was second in its contribution to the total value of primary issuances in the region, raising a total value of $47.4 billion and representing 36% of the total market.
Issuances with tenors of 5-10 years dominated the GCC debt capital markets by total value, raising a total of $42.8 billion, or 32% of the total value of issuances, through 130 issuances. Issuances with tenors of 10-30 came in second with a total value raised of $36.2 billion through 66 issuances.
Issue Size Profile
The size of GCC Bonds and Sukuk issuances ranged from $5 million to $5 billion. Issuances with principle amounts greater than or equal to $1 billion raised the largest amount totalling $89.9 billion, representing 68% of the total primary issuances.
US dollar-denominated issuances led the GCC Bonds and Sukuk market in 2020, raising a total of $102.6 billion or 77% of the total value of issuances, through 203issuances. The second largest issue currency was the Saudi Riyal (SAR), where issuances in SAR raised a total of $17.7 billion or13% of the total value of issuances in the GCC, through 13 issuances.
In terms of value, a total of 70% of GCC Conventional and Sukuk bonds were rated as Investment Grade during 2020by either one of the following rating agencies: Standard & Poor’s, Moody’s, Fitch and/or Capital Intelligence.
During 2020, 234 issuances of a total of 390 issuances of Bonds and Sukuk were listed, equivalent to $123.7 billion. London Stock Exchange is the listing exchange with the greatest traded value of GCC primary issuances during 2020totaling $58.1 billion through 100issuances.
Bonds and Sukuk
Total Amount Outstanding in the GCC: As of 31 December 2020, the total amount outstanding of Corporate and Sovereign Bonds and Sukuk issued by GCC entities was $648.5 billion. Government issuances made up 57% of the total amount. The Financial sector led the Corporates with 23% of the total amount.
Of the amount outstanding as of 31 December 2020, $248.1billion, or 38%, were issued by Saudi Arabian entities. Bonds and Sukuk by Kuwaiti entities accounted for only $25.1 billion, or 4% of the total amount of outstanding debt in the GCC.
GCC Central Banks Local Issuances
GCC Central Banks Local Issuances are comprised of short-term issuances by GCC Central Banks primarily to regulate levels of domestic liquidity and issued in local currency. During 2020, the Central Banks of Kuwait, Bahrain, Qatar and Oman raised a combined total of $48.1 billion (other Central Banks in the GCC do not provide regular and publicly available information on such issuances).
The Central Bank of Kuwait was the largest issuer, raising a total value of $28.4 billion during 2020, followed by the Central Bank of Bahrain with a total value of $13.7 billion.
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