(MENAFN Press) During the first half of 2009 (H12009), GCC bonds and sukuk volume reached USD18.4 billion, an increase of 37% compared to the respective period of 2008 (H12008). The increase was fueled as a result of new issuances by either sovereign or corporations that are fully or largely owned by the governments, which together represented 92.1% of the total issuance during the period. Nonetheless, H12009 volumes remain lower than half, 38.3%, of the total year volume peak of 2007.
The month of April predominated in terms of issuance frequency and value with 13 issues raising a total of USD8.9 billion, representing respectively 29.5% and 48.7% of total H12009 issuances.
Conventional vs Sukuk
Continuing with the trend witnessed since 2003, conventional issuances raised the greatest amount during H12009 with USD17.3 billion representing 93.9% of the total value raised through 32 issues, compared to USD1.1 billion for sukuk through 12 issues.
It is interesting to note that all of the sukuk issuances raised during H12009 were sovereign Bahraini issuances, except for one which was issued by the Saudi Arabian based Dar Al Arkan Real Estate Development Company in May.
Source: Markaz Analysis
Sovereign vs Corporate
During H12009, sovereign issuances dominated the majority of the amount raised, raising USD12.7 billion with a 69.0% share of the total volume; continuing with the trend observed since 2003 except for the peak years of 2006-2007, in addition to 2008, where corporate issuances dominated the market.
It is significant to mention that of the USD5.7 billion raised by corporations, 74.6% was raised by corporations that are either fully or largely owned by governments. The remaining amount was raised by Dar Al-Arkan Real Estate Development Company and Aldar Properties PJSC; nonetheless, 26.3% of the latter is owned by government entities .
Breakdown by Sector
In aggregate, sovereign issues totaled USD12.7 billion. Excluding sovereign issues, only three sectors were active in the issuance of bonds and sukuk during H12009: Real Estate sector, Financial Services sector and Telecom sector.
Unlike the trend that has been witnessed since 2003, where the Financial Services sector consistently issued the greatest number and raised the largest amounts annually, the Real Estate sector in the H12009 ranked first raising the largest amount with USD2.45 billion, or 43.0% of the aggregate corporate bond market, through 3 issues. The Financial Services sector ranked second raising USD1.75 billion, representing 30.7% of the aggregate corporate bond market, followed by the Telecom sector with USD1.5 billion.
It is important to note that since 2003, there has always been an issue placed by both the Real Estate and Financial Services sector; however, the first telecom bond issuances to occur in the GCC was placed during H12009 by Qatar Telecom.
Source: Markaz Analysis
Continuing with the trend witnessed since 2006, the UAE garnered the majority share of amount issued, raising USD6.0 billion, or 38.1% of the total amount. Next was Kuwait, raising USD5.8 billion, 31.3% of the aggregate amount raised; Qatar (USD4.5 billion) and then Bahrain (USD0.92 billion). In terms of the number of issues, Kuwait garnered the majority share of the number of issues, with 22 issues representing 50.0% of the total issues; followed by Bahrain with 11 issues, representing 25.0% of the total number of issues. Saudi Arabia was the least active amongst the GCC issuers with only 1 issue raising USD0.20 billion; however, Saudi-based Saudi Electricity Company launched and sold a sukuk, but did not close the books nor issue the sukuk, during the last week of H12009. Oman did not have any issues during H12009.
It is notable to mention that H12009 witnessed the highest volume raised by both sovereign and corporate Qatari issues, USD4.5 billion. The amount raised represents 44.8% of the aggregate amount raised by the Qatari government and corporates from 2003 to 2008 which totaled USD10.0 bn.
Source: Markaz Analysis
The aggregate bond issuances during H12009 had tenors ranging from 3 months for the Kuwaiti and Bahraini treasury bills to 10-year bonds. Average tenor for the H12009 issues decreased to 2.244 years from the 2008 average tenor of 2.918 years
During H12009, issuances with 5 year maturities raised the highest amount, USD8.85 billion, representing 48.2% of the aggregate amount raised. Issues with 3 month and 6 month maturities had the largest number of issuances with 11 issues each, raising USD1.45 billion USD1.13 billion respectively. The issues with 1 year maturities had the second largest number of issues with a total of 10, raising USD3.32 billion. The 10-year maturity issuances were the least active segment during H12009 but raised the second highest amount with USD3.6 million through 4 issues.
Source: Markaz Analysis
The bond and sukuk issuances during H12009 had sizes ranging from USD13.27 million to USD2.0 billion.
Unlike the past two years, where issues with a principal amount equal or less than USD100 million were the most active, during H12009, issues with a principal amount of more than USD100 million and equal to or less than USD200 million were the most active with 12 issues, representing 27.3% of the total number of issues, totaling USD2.0 billion.
A notable change that occurred during H12009 is the category of issues with a principal value of more than USD1,000 million and equal to or less than USD3,000 million raised the highest amount, USD9.5 billion, representing 51.8% of the aggregate amount raised, through 7 issues; during 2008, the issues with a principal amount of more than USD100 million and equal to or less than USD200 million raised the highest amount, while during 2003-2007 issues with a principal amount of more than USD200 million and equal to or less than USD500 million raised the highest amount.
That led the average size of the bonds and sukuk issues to increase significantly to USD417.6 million compared to an average issue size of USD291.76 million during H12008 and USD237.6 million and USD276 million during 2008 and 2007, respectively.
The State of Qatar bond maturing in 2014 was the largest to be placed in the GCC since 2007, raising a total of USD2.0 billion.
A new trend seen in H12009 issuances compared to 2008 was the change in the currency/denomination of issuances back to USD. In 2008, local currencies dominated the currency of issuances. This was a shift from previous years which saw more USD-denominated issuances
AED-denominated issuance represented 49.5% of the total 2008 volume, while the USD-denominated issues raised a mere 4.0%. In H12009, this trend reversed to pre-2008 era were most issuances were denominated in USD raising USD12.25 billion, representing 66.7% of the total volume of all issuances in H12009. To date, no AED-denominated issuance was placed.
The KWD denominated issues raised the second highest amount in 2008, totaling USD5.75 billion, representing 31.3% of the total issuances, through 22 issues. Subsequent in the number of issues were the BHD with 10 issues then the SAR with only 1 issue. It is interesting to note that even though only one SAR denominated issue was raised during H12009 (raising USD200.2 million), that issue alone raised more than the combined amount of the 10 BHD denominated issues, in total the BHD denominated issues raised a mere USD169.8 million.
Following the methodology used to assess the rating trend during 2003-2008, we mapped the corporate GCC issues according to the Standard & Poors rating, since this agency rated the largest number of GCC issues. Of the total 7 corporate issuances placed in H12009, 6 issuances were rated, with 3 AA and 3 A- ratings.
The only issues to be listed during H12009 were the State of Qatars five-year USD2.0 billion bond maturing April 9, 2014 and the State of Qatars 10-year USD1.0 billion maturing April 9, 2019 on the Luxembourg Stock Exchange. Excluding the short-term sovereign issues, all of the other issues have submitted applications to the listing authorities of the respective stock exchange platforms yet have not been listed yet.