Gulf Region Sukuk Issuance To Touch $30bn Mark Next Year

DOHA: Sukuk issuances in Gulf markets is expected to hit a whopping $30bn mark in 2015, revealed Michael Grifferty, President of the Gulf Bonds and Sukuk Association (GBSA).  

Speaking to Mubasher in Dubai, Grifferty said that the UAE market will see a growth in sukuk issuances particularly after the implementation of the new rules and regulations issued by the UAE’s Securities and Commodities Authority (SCA), which represent an actual addition towards developing an effective market for corporate bonds not only locally but also in the Gulf region. 

SCA had issued new regulations in mid-September to upgrade and develop the bonds and sukuk market using the local currency. These regulations also contribute to speeding up issuances and cutting costs for companies that seek to issue traditional and Islamic bonds, in addition to facilitating their trading for investors. 

Dubai is set to become a global centre point for sukuk trade owing to SCA’s regulations that are set to attract more foreign investors, GBSA President noted. 

The new regulations also allow trading outside the listed bonds and sukuk market provided that such trades are registered. An additional encouragement for foreign investors is the presence of an article that allows clearing and settlement operations to be carried out externally, through institutions like Euroclear.

Meanwhile, Emirates NBD’s Market Insight for the month of November noted GCC credit markets had a volatile month suffering from negative international sentiment on the back of falling oil prices.

With banks needing to hold more of higher rated securities for their reserve requirement under Basel III, the demand for better rated GCC paper is high from the asset liability management (ALM) desks. Also the relative political stability in the GCC countries, better economic growth in the region and the higher credit ratings of the GCC issuers affords it the luxury of receiving disproportionately higher share of bids from the global investors. Four of the six GCC countries have a rating in the AA category (Qatar, Saudi Arabia, Kuwait and UAE) compared with the BBB range ratings on the large components of the Emerging Market index such as Brazil, Russia and India.

Originally published on www.thepeninsulaqatar.com