IslamicFinance.de

According to Fisch Asset Management CEO Philipp Good, the GCC bond and Sukuk market is generally sound. The GCC debt market has seen considerable development, in terms of issuance volume and spread, for both the conventional and Islamic space. The bond and Sukuk pipeline in the GCC for the last two to three years has been dominated by the senior unsecured USD format. At the same time, some project bond issuance has occurred in the GCC, which has utilised highly innovative structures. Recent hybrid issuances from corporates, and Additional Tier 1 bonds and Sukuk from banks such as First Abu Dhabi Bank, Dubai Islamic Bank and Noor Bank, all prove that there is plenty of scope for more sophisticated instruments to be offered. The investor base for GCC debt is now more diverse than ever before, and 2018 looks to be another strong year. It will probably be weighted towards corporates, with sovereigns having dominated the market in 2017.

The market for Gulf Arab bonds and Sukuk achieved an all-time high issuance of 70 billion U.S. dollars in 2017, with sustained investor appetite expected in 2018. A recent study titled "The GCC (Gulf Co-operation Council) Fixed Income Market: Then and Now," said that 70% of all debt and Sukuk issuances were from sovereigns, while 30% were from corporations. The study was conducted by Emirates NBD and Swiss portfolio management firm Fisch Asset Management. Regarding the outlook for 2018, increased debt issuance could continue in the region despite elevated geopolitical instability. According to Usman Ahmed, Head of Investments at Emirates NBD, growth of the GCC's debt investor base is expected to continue in 2018, with demand coming from the record inflows to emerging markets and supply provided by the diversification needs of the region.

Fisch Asset Management says Middle East credit ratings are likely to come under further pressure due to low oil prices and an increase in primary issuance will support market liquidity. According to Philipp Good, head of portfolio management at Fisch, the region has the highest average ratings globally, but budget deficits need to be addressed through a combination of investment and reform.