GCC debt issuance to top $50bn

DUBAI / Emirates Business

GCC sovereign issuance has had another strong first half, with the sovereign bond transactions of over $30 billion in the hard currency market, according to Fisch Asset Management. The Zurich-based asset manager believes that full-year issuance could surpass last year’s levels and reach $50 billion in 2018.
Philipp Good, CEO at Fisch Asset Management, said: “This robust performance by the GCC primary markets stands out as particularly strong when compared to broader emerging market trend, where aggregate issu- ance is lagging significantly behind 2017 levels. The emerging market segment faced considerable headwinds this year, which have included higher US interest rates, weak local currencies, and intensified threats to free trade. These factors, among many, have negatively impacted performance of external debt products. These negative returns have, in turn, impaired inflows. Nonetheless, we do expect performance and inflows across emerging markets to improve meaningfully in the second half of the year, and we expect the GCC to continue issuing at a brisk pace.”
Fisch noted potential inclusion of the GCC region in the JP Morgan EMBI Index, with official phase-in expected to commence in early 2019, to be particularly relevant. Fisch believes Kuwait is likely to contribute meaningfully to remaining issuance total in 2018. Although such issuances are not catalysed by raised regional debt ceilings alone, improved oil prices are set to play a critical role in the demand and supply dynamic for Kuwait and the wider GCC, having a direct impact on multiple budgetary factors across the region, as well as driving positive investor sentiment. In addition to Kuwait, Saudi Arabia may also consider returning to the market.