Saturday, Apr 21, 2012
(This item was originally published on Thursday)
--New issues spurred by refinancing needs, infrastructure projects
--Saudi Arabia, Qatar, UAE to continue to dominate Mideast bond issuance
--Strong regional demand seen for sukuk issues
By Nicolas Parasie
OF ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Bond issuance out of the Middle East could rise to $40 billion in 2012, more than 50% 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.
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 in an interview on Thursday.
"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, according to figures from Standard Chartered.
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 (from the euro zone crisis) because investors have downsized their exposure to Europe, (and) 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, or GACA, raised a 15 billion Saudi riyal ($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 (EMIRATES.DFM) Qatar National Bank (QNB.QA) have already tapped the markets this year, and other banks are expected to issue bonds later in 2012.
Though some European banks, especially French ones, have been retreating from the Middle East lending market due to troubles at home, their place is being filled by Japanese and other Asian banks, Raber said. "As one set of actors have disappeared from the stage, a new set have come on board, and that has been the banks from the East and some of the beneficiaries of the economic turmoil," he said.
Standard Chartered, a lender with an emerging markets focus, believes the Middle East and Africa offer especially strong growth prospects.
"Of all the continents, the area that is getting global and most focus is Africa and that is not only from Western investors but also from Eastern investors," Raber said. He expects some African governments to come out with benchmark issuances followed by local corporates. He singled out Nigeria and Ghana as being attractive to investors because of the growth in terms of economy, population and commodities.
-By Nicolas Parasie, Dow Jones Newswires, +9714 446 1681, nicolas.parasie@dowjones.com
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
21-04-12 0651GMT
