Fixed income market outlook: GCC issuances to remain subdued in 2021

Total issuances reached $140.3bln in 2020 Vs. $139.1bln in 2019 due to higher bond issuances

  
Business man holding phone. Image used for illustrative purpose.

Business man holding phone. Image used for illustrative purpose.

Getty Images

Kuwait-based Kamco Invest expects fixed income issuances in 2021 in the GCC to remain flat to marginally lower year-on-year (y-o-y) after record growth last year. 

“Government issuances are expected to decline from the exceptional growth in 2020 due to significantly smaller deficit financing expected next year. On the other hand, corporate issuances are expected to remain strong led by economic revival, better business sentiments and lower rates that would partially or fully offset the overall decline,” Kamco Invest said in a report Wednesday.

GCC fixed income issuances during 2020 rose for the second consecutive year notching another record high, but the y-o-y growth was marginal compared to last year. Growth for the year was dragged by December numbers when there were no primary market bonds or sukuk from the regional governments and no sukuk issuances from the corporates.

Total issuances reached $140.3 billion during the year as compared $139.1 billion in 2019 led by higher issuances of bonds, whereas sukuk issuances remained flat.

Bond issuances reached $95.3 billion in 2020 in the region compared to $94.1 billion during 2019, up 1.2 percent y-o-y, whereas sukuk issuances stood at $45 billion.

Total fixed income issuances for the MENA region also clocked growth for the second consecutive year rising 15.8 percent to reach $211.7 billion in 2020 compared to $182.9 billion in the previous year.

The y-o-y increase in 2020 was solely led by higher bond issuances in the region, whereas sukuk issuances remained flat coming only from the GCC region as the five MENA countries (Egypt, Jordan, Lebanon, Morocco and Tunis) continued to stay away from the sukuk market, like in 2019.

Total bonds issued by MENA countries increased 21 percent to reach $166.7 billion in 2020 compared with $137.8 billion in 2019.

Bond issuances by GCC countries stood at $95.3 billion in 2020 as compared to $94.1 billion in 2019, while non-GCC MENA countries recorded 63.4 percent growth with issuances of $71.5 billion in 2020 compared with $43.7 billion in 2019.

In terms of currency of issuance, USD-denominated bonds topped in the MENA region at $96.4 billion in 2020 compared with $84.2 billion in 2019. EGP and Moroccan Dirham (MAD) were next with issuances totaling $36.4 billion and $8.7 billion, respectively. For sukuks, dollar once again dominated with issuances totaling 21.8 billion followed by Saudi Arabian riyals and Omani riyals at $21.1 billion and $1.1 billion, respectively.

Corporate issuances also increased for the fifth consecutive year and reached a new record of $48.3 billion, but the y-o-y growth was the lowest in five years at 6.3 percent compared with double digit growth rates seen during the previous four years.

Egypt regained its top position in the MENA region as the top bond issuer in 2020 after four years at $42.2 billion, more than double the $19.1 billion in 2019. All were government issuances. 

UAE, top issuer in 2019, closely followed with issuances totaling $40.2 billion in 2020 compared with $34.4 billion in 2019. The growth was mainly led by government bonds that reached $17.3 billion in 2020 compared to $10.8 billion in 2019. Corporate issuances declined marginally to $22.9 billion in 2020 vs. $23.7 billion in 2019.

Nevertheless, the UAE continued to remain the biggest primary market for corporate bonds in the region followed by Qatar and Saudi Arabia.

In terms of sectors, financial institutions had higher issuances for the fifth consecutive year reaching $32.4 billion in 2020 followed by companies in the energy and materials sector with issuances totaling $12.3 billion and $2.6 billion, respectively.

(Reporting by Brinda Darasha; editing by Daniel Luiz)

brinda.darasha@refinitiv.com

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2021

More From GCC