The convertible and exchangeable bonds have immense potential to make inroads in the Gulf Cooperation Council (GCC) in view of the increasing appetite, especially for infrastructure and real estate sectors, according to Fisch Asset Management.
“We expect issuance of conventional corporate and sovereign bonds in the fourth quarter (Q4) 2017 to remain high, in part owing to the strong level of interest from global investors,” Fisch chief executive Philipp Good said in a report.
Although there has been no GCC equity-linked issuance since 2015, the report said while the landscape for conventional bond issuance across the GCC remains encouraging, “we believe that convertible and exchangeable bonds are an untapped opportunity for GCC issuers.”
There are several opportunities presented by convertible bonds in the region, it said, adding the GCC is home to numerous accessible and liquid underlying stocks.
“Issuers can maximise investor demand by tailoring the structure, size and terms of their equity-linked issues to the current sweet spots within the equity-linked market,” it said, adding “there is currently strong investor appetite for GCC convertible and exchangeable bonds, in particular when issued using standard structures rather than sukuks” (Islamic bonds).
Middle East convertibles have undergone a decade of evolution since the $3.5bn pre-IPO (initial public offering) sukuk into DP World launched the GCC convertible bond market in January 2006, according to Martin Haycock, Senior Partner – Convertible Bonds, at Fisch.
Since this time, 20 issues with notional value of $23bn have been issued in the region, with financial services and real estate companies comprising the majority of issuance, he highlighted. “We believe the time is right for this market to expand further,” he added.

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