Fixed income maturities in the GCC are expected to remain elevated over the coming five years backed by issuances made during the pandemic years aimed at supporting economic growth as seen globally, a report showed.
According to Kamco Invest’s GCC Fixed Income Market Update for July, in the primary market, GCC bonds and sukuk issuances topped expectations with record issuances from the region during the first half of the year. Issuances during the first six months of 2024 exceeded full year 2023 levels to reach $113.7 billion and were almost double when compared to year-on-year issuances during H1-2023. Total issuances witnessed y-o-y growth across the board when compared to H1-2023. Saudi Arabia accounted for almost 50 per cent of the y-o-y growth in issuances during H1-2024 followed by UAE and Qatar accounting for the rest.
According to data from Bloomberg, GCC sovereign maturities stand at $174.3 billion over the next five years (2024-2028), whereas corporate maturities stand slightly lower at $165.5 billion. Bonds and sukuk maturities in the region are expected to remain elevated until 2029 followed by a steep decline starting from 2030. A majority of these maturities are denominated in US dollars at 61.1 per cent followed by local currency issuances in Saudi riyals and Qatari riyals at 11.7 per cent and 7.3 per cent, respectively.
In addition, due to the credit rating profile of the GCC governments, a majority of these maturities are in the high investment grade or A rated instruments. “Around 40.9 per cent of the overall maturities in the coming five years are for investment grade instruments. In terms of type of instruments, conventional bonds dominate with $224.5 billion in maturities over the next five years, whereas sukuk maturities are expected to be at $115.3 billion,” the report, prepared by Junaid Ansari, Kamco’s head of investment strategy and research, said.
In terms of country split, the UAE is expected to see the biggest fixed income maturities between 2024 and 2028 at $116.3 billion followed by Saudi Arabia, which is forecasted to see maturities of $105.3 billion until 2028. Maturities in Qatar and Oman were next at $61.3 billion and $22.4 billion, respectively.
In terms of sector maturities, the banks and other financial services sector have $128.6 billion in maturities in the next five years, accounting for around 77.7 per cent of the total corporate maturities and 37.8 per cent of the total maturities in the GCC until 2028, respectively. The energy sector was a distant second with maturities of $13.7 billion or 8.3 per cent of GCC corporate maturities until 2028 followed by Utilities and Communications at $7.9 billion and $5.0 billion, respectively.
Banks in the region were once again leading in terms of issuances and consequently maturities in the coming years. Banks in the UAE reported the biggest maturities over the next five years at $53.4 billion followed by Qatari banks with maturities of $20.4 billion. Banks in the two countries accounted for 21.7 per cent of total bond/sukuk maturities over the next five years in the GCC. Real Estate maturities are concentrated mainly in the UAE and Saudi Arabia at $5.9 billion and $2.4 billion, respectively, until 2028.
In terms of issuances, Kamco expects a record year for the GCC as issuances during H1-2024 have already exceeded last year’s level. “We expect aggregate issuances to breach the $150 billion mark by the end of the year as corporate issuances are expected to tap the market towards the end of the year as rate cuts are implemented,” the report said. Sovereign issuances, meanwhile, are expected to retreat as compared to H1-2024 levels. The remainder of the year would see maturities of $24.8 billion that is almost equally split between governments and corporates.
Green bonds remain one of the areas of interest for GCC issuers with this year’s issuance by Qatar government. HSBC was one of the arrangers of the green bond and said that other countries in the GCC could follow either this year or next. Oman’s ministry of finance has already prepared a sustainable finance framework under which it intends to borrow.