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Sukuk

Gulf region's bond and Sukuk markets set to grow after slow start, S&P

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The rating agency expects issuance volumes to increase strongly in the remainder of the year, led by Saudi Aramco and Saudi Telecom.

Wednesday 10, April 2019 BY KUDAKWASHE MUZORIWA

S&P Global said that bond and Sukuk issuance by corporate entities in the GCC is likely to increase in the remainder of 2019 after a slow start in the first quarter of 2019, due to volatility in the global capital market.

In a report, S&P stated that despite strong interest in credit ratings from previously unrated GCC-based corporates in new industries such as consumer goods, health care and education, uncertainty and volatility in the global capital market have kept issuance volumes low so far in 2019.

The rating agency said that the total bond and Sukuk issuance in Q1 2019 is around $1.1 billion, Saudi-based Almarai Company came to the market with its debut $500 million five-year six per cent Sukuk and Bahrain’ Mumtalakat issued $600 million during the same period.

“With average yields on GCC bonds and Sukuk having fallen in recent weeks to levels not seen since 2017, issuers see an opportunity to lock in lower rates on long-term borrowings,” S&P said.

Saudi Aramco’s debut international bond has received $100 billion in orders, a record-breaking vote of market confidence for the state-owned oil giant.

According to Moody’s in 2018, corporate issuance in the region increased by 86 per cent to $15.6 billion, up from $8.4 billion the previous year. Around $1.8 billion of this was from debut issuances by a mix of government-related entities and private sector firms such as Senaat, NMC Healthcare and Aldar Investment Properties.

S&P said that despite tough market conditions for issuers in sectors such as real estate and telecoms, the fact that yields on GCC bonds and Sukuk have fallen in recent weeks to levels not seen since 2017 means investors have an opportunity to lock in low rates on long term borrowings.

TAGS : S&P Global Ratings, Bond issuance , Sukuk, Mumtalakat, Almarai Company , Saudi Aramco, Aldar Investment Properties, Senaat, NMC Healthcare

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