Not all Gulf bonds are holding up well this week.
Debt linked to Abu Dhabi’s Etihad Airways declined the most among corporate and sovereign notes across the six-nation Gulf Cooperation Council, according to data compiled by Bloomberg. The carrier was in trouble before Saudi Arabia’s crackdown began, suffering from failed bets on Alitalia and Air Berlin and soaring losses from its own operations.
Saudi Arabia arrested a string of princes, billionaires and officials last Saturday in an anti-corruption drive, adding fresh uncertainty to an economy already grappling with low oil prices and several reform initiatives aimed at reducing oil-dependence. Hours earlier, Lebanese Prime Minister Saad Hariri resigned in a televised address from Riyadh, citing Iran and Hezbollah as one of the reasons for stepping down. That raised concern that proxy conflicts between regional superpowers will worsen. The price return on bonds in the GCC declined to the lowest since July, according to a JPMorgan Chase & Co index. Perpetual notes of Al Baraka Banking Group, whose founder Saleh Kamel is among those detained, posted the second biggest losses, followed debt issued by Bahrain, where a majority of the population is Shia and the government’s finances are strained.