- GCC corporate bond market records solid performance in 2017
- Sukuk issuance year-to-date indicates healthy investor demand
- Investors in Middle Eastern assets undeterred by low oil prices
Total gross bond issuance in the GCC has already surpassed 2016’s total value in the first five months of this year, according to Fisch Asset Management, a global leader in convertible and corporate bond strategies. Current market conditions have created a favourable landscape for new bond issuances, with the GCC Sukuk market issuing up to USD 22 billion in sovereign and corporate bonds year-to-date.
In 2016, a total of USD 21 billion bonds were issued; this figure is up by 74.6% on 2015 when issuances amounted to USD 12.6 billion.
Positive performance in 2017 is linked to ongoing strong investor demand for emerging market assets, due to the higher yield available compared to developed markets and supported by upbeat global economic growth.
Philipp Good, CEO at Fisch Asset Management, commented:
“Many factors have contributed to this positive trend in 2017, for example lower oil prices mean higher funding requirements, there is attractive pricing after markets have rallied, there is ample liquidity in the region and there has been a strong revival in credit markets on a year-to-date basis so far. The latest example of an issuer taking advantage of this positive environment is the Sultanate of Oman. It successfully completed a USD 2 billion issue on 23 May, with the order book three times oversubscribed. I view this as a huge success and a clear indicator of confidence throughout the region.”
Corporate debt in the Middle East has also been a solid performer in 2017. Spreads of investment-grade rated bonds have dropped by 20 bps, significantly outperforming Asia, where spreads have seen a decline of only 4 bps. Other regions have seen a more pronounced narrowing of spreads, but this needs to be seen against the backdrop of Middle Eastern bonds already displaying the lowest spreads of all emerging markets regions at 170 bps. By comparison, Asian spreads stand at 195 bps, while Latin American ones are the highest at around 250 bps. This development is a result of the inflows into emerging markets and reflects the comfort global investors have with the GCC region, according to Fisch.
Dr. Hansjoerg Herzog, Head of Sales at Fisch, said:
“We have found that after this strong regional performance, GCC corporate treasurers are increasingly aware of the need to explore alternative capital market funding strategies, such as global convertible bonds. We therefore expect these kinds of instruments to become increasingly relevant as GCC markets develop.”
About Fisch Asset Management:
Independence and growth have been Fisch Asset Management’s hallmarks since its foundation by Kurt Fisch and Dr. Pius Fisch in 1994. The Company’s independence rests on the ownership of all shares in Fisch Asset Management AG lying with the Executive Committee and employees. Since foundation, Fisch Asset Management has grown to 81 colleagues, including one of the world’s largest convertible bond teams. The Company specialises in credit research and analysis, with an exceptional record in convertible, high yield and corporate bond strategies. Assets under management (AuM) total more than USD 9.8 billion, as at 31 March 2017. As a licensed securities dealer, the Company is regulated by the Swiss Financial Market Supervisory Authority (FINMA). Fisch Asset Management is a signatory of the United Nations Principles for Responsible Investment (UN PRI).
The Company’s client base comprises 82% institutional and 18% wholesale investors. Fisch Asset Management has an international outlook, which applies to both its employees and distribution channels. The Company is increasingly targeting investors from beyond its core market of German-speaking countries. Fisch Asset Management offers mandates as well as mutual fund solutions.