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COMMERCIAL NEWS

GCC Bonds and Sukuk issuances slump 22pc in Q1 to $28.3bn

May 7, 2023 4:13 PM

Primary debt issuances in the GCC were off to the slowest start in three years during the first quarter of the year due to the tightening of monetary policy as well as continued macro volatilities said...

Primary debt issuances in the GCC were off to the slowest start in three years during the first quarter of the year due to the tightening of monetary policy as well as continued macro volatilities, said Kuwait Financial Centre (Markaz). 
 
Primary issuances of Bonds and Sukuk in the GCC amounted to $28.3 billion in the first three months of 2023 compared to $36.3 billion raised during the same period in 2022, a decline of 22.1% year-on-year, Markaz said in its research report titled “GCC Bonds and Sukuk Market Survey for Q1-2023”. 
 
In terms of the number of issuances, there were 62 primary debt issuances in the GCC during Q1-2023 compared to 76 issuances for the same period in 2022.
 
Geographical allocation 
Saudi-based issuers led the GCC Bonds and Sukuk market during Q1 2023, raising a total of $21.3 billion, representing 75.4% of the total value raised in the GCC, followed by the UAE entities with 19.9% of the total primary issuances or equivalent to $5.6 billion. 
 
Qatar entities raised a total of $0.9 billion representing 3.2% of the total primary debt issuances while Kuwaiti issuers raised a total of $0.4 billion in primary debt, representing 1.6% of all issuances. There has not been any debt issuance by Bahrain or Oman entities during Q1 2023.
 
Sovereign vs Corporate
Sovereign issuances by GCC entities made up 60.2% of the total value of GCC primary issuances during Q1 2023, amounting to $17.0 billion and down 21.2% year-on-year from its value in Q1 2022. 
 
Corporate primary issuances, on the other hand, amounted to $11.3 billion during Q1 2023 constituting 39.8% of the total value of GCC primary issuances and marking a decline of 23.5% year-on-year from its value in Q1 2022.
 
Conventional vs Sukuk
Conventional issuances increased by 167.7% year-on-year during Q1 2023, with a total of $23.0 billion raised, representing 81.4% of the total value of primary issuances in the GCC. 
 
On the other hand, Sukuk issuances made up 18.6% of the total value of primary issuances during Q1 2023, declining by 81.1% year-on-year to $5.2 billion, compared with $27.7 billion raised in Q1 2022.
 
Sector allocation
The Government sector accounted for the largest amount of primary debt issuances by value, raising a total of $11.5 billion, or 40.7% of the total value of issuances in the GCC in Q1 2023. 
 
The Financial sector (including quasi-government entities) was second in its contribution to the total value of primary issuances in the region, raising a total value of $10.9 billion and representing 38.6% of the total market. 
 
Maturity profile
Issuances with tenures of 10-30 years dominated the GCC debt capital markets by total value, raising a total of $13.5 billion, or 47.8% of the total value of issuances. 
 
Issuances with tenures of less than 5 years came in second with a total value raised of $7.2 billion, or 25.5% of the total value of issuances.
 
Issue size profile
The size of GCC Bonds and Sukuk primary issuances during the first quarter of the year ranged from $4 million to $3.5 billion. Issuances with principal amounts greater than or equal to $1 billion raised the largest amount totaling $22.0 billion, representing 78% of the total primary issuances.
 
Currency profile
US Dollar-denominated issuances led the GCC Bonds and Sukuk primary market in Q1 2023, raising a total of $25.6 billion or 90.4% of the total value of GCC primary issuances. 
 
This was followed by Saudi Riyal, where SR denominated issuances raised a total of $1.1 billion or 3.9% of the total value of issuances in the GCC. 
 
Rating
In Q1 2023, a total of 90% of GCC primary Bonds and Sukuk issuances (in terms of value) were rated by either one of the following rating agencies: Standard & Poor’s, Moody’s, Fitch and/or Capital Intelligence, of which 86% were rated as Investment Grade Issuances.
 

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