Mubasher: The fall of oil prices over the past two years has pushed oil exporters in the Middle East and North Africa (MENA) region to pursue policies that would have otherwise been thought unachievable, according to a recent report by KAMCO Research.
There was an urgent need to raise capital to fund the expected budget deficits in the near term as the surpluses accumulated over the past decade or more could support future deficits for only a limited period of time.
On the positive side, most of the MENA oil exporters have adequate credit quality enabling them to comfortably raise debt in the international market. This is particularly the case with the GCC countries with almost all of the economies continuing to boast investment grade ratings despite several downgrades by rating agencies over the past 18 months, the report indicated.
GCC fixed income market is expected to continue to grow during 2017, although the pace of growth is not expected to be as strong as the sudden jump seen during 2016. The key drivers to the increase in fixed income issuances in the GCC during 2016, which more than doubled to $66.5 billionn, was primarily the sovereign bond issuances by Saudi Arabia, UAE and Qatar, the report added.
The research firm also said that in terms of instrument type, bonds dominated the market during 2016 while sukuk issuance took a backseat, although globally sukuk issuance was slightly higher than last year, while on the international front, high yield bond issuance declined for the fourth consecutive year primarily due to the decline in merging and acquisition transactions which is one of the key drivers for bond issuance.
KAMCO believes that the prospects for the fixed income market are brighter in 2017 owing to expectations of higher economic growth rate across key markets of US and Europe, in addition to a revival expected in the investment cycle that has was crippled for a few years now.
