Qatar's $ 4bn sukuk leads record Gulf sales in 2012 |
Gulf Times - 17 July, 2012
Islamic bond sales in the Arabian Gulf have already surpassed the full-year record set in 2007 as the risk of defaults declines and investors pursue higher- yielding assets.
Gulf Co-operation Council (GCC) offerings reached $ 17.4bn this year compared with a previous record of $ 16.2bn in all of 2007, according to data compiled by Bloomberg.
Qatar led the new issues, raising $ 4bn last week by selling AA-rated Shariah-compliant notes due in 10.5 years at a profit rate of 3.241%. The rate was the lowest ever for Qatar and more than double the 1.486% yield on 10-year Treasuries.
Qatar received $ 25bn in bids for its two-part Islamic bonds sale, two people familiar with the matter said on July 11.
Gulf bonds have benefited from confidence that Dubai and its entities will refinance obligations as the International Monetary Fund forecasts 5.3% economic growth for the region this year, above the lender’s estimate of 2% for the US. The average cost of ensuring against default in the GCC, excluding Kuwait and Oman, fell 36 basis points this year to 207 basis points on July 13, according to data provider CMA.
“Lower risk perception of our economies is helping investors recognise the attractiveness of bonds in the region,” Talal Touqan, the Abu Dhabi-based head of research at Al Ramz Securities, said by phone on Sunday. “Credit default swaps are dropping, so the cost of acquiring debt in the region is falling.”
Emerging-market bond funds registered inflows of more than $ 1bn in the week ended July 11, according to EPFR Global, the Cambridge, Massachusetts-based data provider. The “overall hunger for yield” pushed inflows to more than $ 25bn in 2012, EPFR said. “Yield hunger continued to shape flows into EPFR Global-tracked bond funds during a week when the return on 10-year US treasuries fell to a record low,” according to the report.
Emaar Properties, the developer of the world’s tallest skyscraper in Dubai, sold $ 500mn of Shariah-compliant notes last week. Investors bid to buy $ 4.65bn of the securities.
Islamic borrowing costs have declined after a series of debt repayments from Dubai government-related companies. Jebel Ali Free Zone FZE settled a 7.5bn-dirham ($ 2bn) sukuk in June ahead of its November maturity. DIFC Investments paid a $ 1.25bn sukuk earlier that month. The emirate, which almost defaulted in 2009, and its entities have $ 15bn of debt maturing this year, according to IMF estimates.
Dubai’s 6.396% Islamic bonds due November 2014, which has the second-highest weighting on the HSBC/Nasdaq Dubai GCC index, rallied after the obligations were settled. The yield has declined 225 basis points, or 2.25 percentage points, this year to a record 3.32% yesterday.
Investors are seeking relatively safer assets in the Gulf as the debt crisis in Europe intensifies, according to Nick Stadtmiller, the head of fixed income research at Emirates NBD, the UAE’s biggest bank.
“If you look at European countries’ debt dynamics, they’re horrible and the US is very worrisome,” he said by phone on Sunday. “Many emerging market countries have lower debt loads and faster economic growth.”
Qatar, the world’s biggest exporter of liquefied natural gas, plans to spend about $ 130bn to host the 2022 soccer World Cup.
The nation’s $ 196bn economy will expand 6.1% this year, the most in the GCC, according to the median forecast of 11 economist compiled by Bloomberg.
The cost of insuring Qatar’s debt against default has declined seven basis points this year to 121 basis points July 13, according CMA. Dubai’s CDS dropped 105 basis points to 340, the lowest since April, according to CMA.
CMA, which is owned by McGraw-Hill Cos and compiles prices quoted by dealers in the privately negotiated market.
Qatar’s Islamic bonds received more bids than any other sukuk offering from the region, according to data compiled by Bloomberg. The nation benefited from the recent sukuk repayments which have left “a lot of investors with cash to deploy,” Stadtmiller said.