New issues in the Middle East are set to remain high for the remainder of 2017, with estimates in excess of $20bn, as a result of favourable market conditions, according to Fisch Asset Management.
Qatar, it said, will “weather the storm” and continue to grow in 2018 and 2019. The current embargo makes things more difficult, but not impossible: It is likely to monetise some other assets, such as the stake in Credit Suisse and avoid unnecessary risks, Fisch said.
An encouraging landscape for new bond issuances in the GCC will likely see a dollar sovereign deal between Saudi and Bahrain, while Oman is anticipated to confirm new issues, depending on the size of deficits.
The UAE and Kuwait are very well positioned to take advantage of current conditions – resulting in new issues, provided there is a pull factor from investors.
Philipp Good, CEO, Fisch Asset Management said, “The new issues season kicked off again on August 28 with roadshows and with the September 4 US holiday. Very important to this season are some pre-funding of maturities of 2018 bonds, including: Mubadala (IPIC 2018 bond), Taqa, Aldar and Sabic. All those companies and more can benefit from great market conditions by pre-funding those maturities early. Further, there will be some government-related entities that will conduct some new issues – primarily debut issues. Those are characterised by investment grade ratings, who can benefit from cheap funding and extend their duration in the bond market.”
Saudi banks will be patient since they have larger deposits domestically. The sovereign has established the curve in the kingdom, but experience has shown that the banks don’t move fast. Further, Saudi Telecom could be a well-received corporate entity tapping the market this year, the report said.
There are many contributing factors to the success of Q4, 2017, including synchronised global growth and a low interest environment that is beneficial for emerging markets and political stability, Fisch said.
Good: Great market conditions.
