Apr 21 2012
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Mideast bond issuance may hit $40b
JEDDAH - Bond issuance out of the Middle East could rise to $40 billion in 2012, more than 50 percent above last year's levels, fuelled by the refinancing needs of local companies and the funding requirements of large new infrastructure projects, according to an executive of Standard Chartered PLC.
According to Borsa Italiana - London Stock Exchange Group, at the same time, Middle East bonds are in strong demand among investors both inside and outside the region, Henrik Raber, Standard Chartered's Dubai-based Global Head of Debt Capital Markets, said.
"You're looking at a total of $30 to $40 billion of issuance, it's going to be a pretty robust year," Raber said.
In 2011, total issuance from the Middle East amounted to only $26 billion, Standard Chartered data said.
The Middle East capital markets have benefited from the revival of global risk appetite and the high credit standing of many Arab Gulf issuers at a time when some investors are shunning European debt, Raber said.
And issuers of Islamic bonds, or sukuk, have been able to tap in to a plentiful pool of liquidity within the Middle East region.
"There's been a net benefit to the region because investors have downsized their exposure to Europe look to new places to come to," Raber said. He expects about half of the new issues from the Middle East this year to be sukuk, in line with the proportion of Islamic bonds during the first quarter of 2012.
Several Dubai government-related entities face hefty repayments in the next few years, and some, such as the Jebel Ali Free Zone, may issue new bonds this year to refinance existing debt.
There's also a number of large infrastructure projects in the region that will require funding. For example, the Saudi Arabia General Authority Of Civil Aviation (GACA) raised a SR15 billion ($4 billion) Islamic bond at the start of this year to fund an Airport expansion project.
The increase in bond activity will be "driven by a combination of refinancings that need to be done in the region, by new projects getting financing and balanced on the other side of the equation, by strong investor demand," Raber said.
He said the majority of issues will continue to come from government related entities and financial institutions in Saudi Arabia, Qatar and the United Arab Emirates, the three wealthy oil producers which have shown the biggest appetite for issuing bonds. Emirates NBD Qatar National Bank have already tapped the markets this year, and other banks are expected to issue bonds later in 2012.
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