Markets Outlook
Markets Outlook Middle East & Africa markets bulletin: September 2016
About Invest AD
Inside: GCC bond issuance records continue to be broken
Invest AD is an investment company that offers institutional investors access to high-growth opportunities in the MENA region. Owned by the Abu Dhabi government, the company benefits from an extensive international network, established over three decades and spanning governments, business leaders, and regulators. With a history as a long-term investor, the company is highly respected, allowing us to offer exceptional investment opportunities to our global partners. We implement international best practice in governance throughout all our operations, while offering flexibility in investment – whether through funds, tailor-made products, or long-term partnerships.
Contact For investor inquiries contact 800-Invest AD or 800-4683 7823 For international callers: +971 2 692 6101 For other enquiries call: +971 2 665 8100 Email: [email protected] This material has been prepared by the Abu Dhabi Investment Company, which operates under the trading name of Invest AD, located at PO Box 46309, Abu Dhabi UAE and by Invest AD Asset Management PJSC, a UAE-based investment company licensed and regulated by the Central Bank of the United Arab Emirates, and the UAE Securities and Commodities Authority , located at PO Box 46309, Abu Dhabi UAE. This material is provided for information purposes only to Professional and Institutional Investors. The provision of this material and/or references to securities, sectors or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or sell any security, or an offer of investment services. The analysis and opinions expressed in this material represent the subjective views of the author as of the date indicated, may no longer be current, and may change as a result of market developments. There can be no assurances that developments will transpire as forecasted in this material. Invest AD and its subsidiaries or affiliates may (1) engage in securities transactions in a manner inconsistent with this material and (2) with respect to securities referenced in this material, sell to or buy from customers on a principal basis. Investors should consider carefully the investment objectives, risks and expenses of any investment before investing. This material may not be distributed, published or reproduced, in whole or part, without the prior consent of Invest AD and Invest AD Asset Management PJSC
Focus Mohammed Al Hashemi, Executive Director at Invest AD Asset Management PJSC, discusses Middle East sovereign debt markets. More information: Page 2 Equities Valuations become attractive but sentiment is fragile. More information: Page 3
Fixed income Middle East Markets are well supported, as hunt for yield contines. More information: Page 4
1
Focus Strong pipeline of Middle East sovereign issuance 1. What is the outlook for Middle East sovereign debt markets? The outlook for the Middle East sovereign debt remains positive as the year has been characterized with heavy sovereign issuances from the GCC names. In addition to that, there has been steady issuances from financial and corporate names across the rating curve and maturities and this has made the year so far a very active one. Going forward, the market is expecting close to US$ 20-25 billion of new issuance over the next four months, with the much anticipated Eurobond issuance from Saudi Arabia along with anticipated issuances from sovereigns of Kuwait and Dubai as well. This, in conjunction with issuances from financial institutions and corporates through the end of the year, is expected to keep the market very active in the coming months. 2. How has the oil price affected Middle East debt markets? And how does this compare to international debt markets? Risk re-pricing and spread widening in the Middle East debt markets happened mainly in the second half of 2015 and early 2016. From February 2016, the market has remained positive and in the last few months, oil prices have also been relatively stable and this has brought back international investors looking to invest in high quality names. 3. GCC sovereigns have broken records with bond sales in recent months. Can we expect records to continue to be broken? The US$ 9 billion dollar issue from Qatar this year was one of the largest emerging market sovereign issuances ever. This is likely to be surpassed by Saudi Arabia, which is expected to come to the Eurobond market later this year with an anticipated size in the range of US$ 10-15 billion. 4. Governments are tapping international investors to fill budget holes left by declining oil and gas revenues. How does global demand compare to regional interest? The GCC still remains a very highly rated sovereign universe, and this has maintained international investor interest in the regional investment grade names. After the risk re-rating in the second half of 2016, international investors have been more receptive to the new spread levels in the region, especially in the context of very low
or even negative interest rates in the sovereign space in many developed economies. International investors have been particularly active in new issuances so far this year, as they seek to capture higher absolute and relative yield levels. 5. Are GCC sovereigns looking to issue long-term or short-term notes? GCC sovereigns have been slowly looking to extend their maturity profiles from the traditional 5-10 year segment. This attempt has been aided by increased demand from both local and international investors, seeking yield and higher duration in their portfolios. Issuers have therefore been able to extend their maturities to as much as 30 years.
have been steadily diverging, with markets pricing in a more benign path. Investors are looking for yield to generate returns on their books and in this context a very slow pace of well-communicated hikes is not expected to have a huge impact on Middle East fixed income markets and the new issuance cycle.
Mohammed Al Hashemi is the executive director of Invest AD Asset Management PJSC.
6. How is bank liquidity impacting bond markets? The slowing economy has put the brakes on corporate lending and this has shifted the attention of regional banks to the bond markets to use excess liquidity is present in the system. Also, banks continue to hold large chunks of regional bonds and with annual redemption of close to US$ 20 billion in 2016, the resulting liquidity is expected to be re-cycled into the bond markets to a large extent. 7. Can we expect further sovereign ratings downgrades and how will these affect Middle East debt markets? We do not expect further sovereign ratings downgrades. The sovereign downgrades were a result of the deteriorating credit metrics driven by the sharp fall in the oil prices from the US$ 100 levels seen earlier. The big rating downgrades have happened in Saudi Arabia, Oman and Bahrain. GCC governments have responded to the economic situation with many measures to curb expenditure and they are working on ways to manage budget deficits around the current oil price range. The fact that oil prices have stabilised in the US$ 40-50 range over the last few months makes it easier for governments to manage budgets. 8. How will a potential interest rate rise from the Fed affect Middle East fixed income markets and new issuances? The market is expecting a very slow pace of interest rate rises with the current probability placed at one more hike in 2016. Global eocnomic uncertainty still remains high and the Fed outlook and market outlook for future interest rate hikes 2
Equities GCC Recent market weakness, especially in Saudi Arabia, has led to attractive stock valuations, but sentiment remains cautious and regional markets appear to be lacking short-term triggers. Any progress in resolving geopolitical tensions in Yemen or the broader Middle East, or announcements of mergers or consolidation which are perceived to be value accretive, could provide the markets impetus. With Q3 results still some time away, investors will also be focused on international developments, especially oil prices, the direction of the US dollar and interest rate movements. Emerging market fund inflows are another key theme. FTSE’s confirmation that Qatar will be included in its emerging markets index in September’s rebalancing resulted in substantial inflows in August as foreign and regional funds prepositioned in stocks likely to receive substantial passive flows. Although, local investors sold into the rally the Qatar index reported an impressive performance in recent weeks. However, market direction and volumes elsewhere in the GCC and especially in the UAE took a turn for the worse later in the month as profit-taking set in. Saudi Arabian stocks may be supported in the medium to long term by progress in the country’s fiscal consolidation program. The government recently announced its intention to privatize a number of entities in the Kingdom under a range of ministries and covering a number of sectors, including 200 primary schools and health care centers.
Market data as of August 27, 2016 Country/Region S&P GCC S&P Frontier BMI S&P Pan Arab MSCI Emerging Markets MSCI World Total Return MSCI EFM Africa Ex S.A.
Closing price
MTD
YTD
3M
1Y
3Y
148.22
-1.68%
-1.65%
0.03%
-10.62%
-6.46%
88.52 141.12 901.39 4,746.88 443.20
1.47% -0.82% 12.83% 7.61% -0.05%
-1.51% -0.60% 15.74% 5.36% -4.46%
-2.03% 0.55% 13.01% 3.42% -11.32%
-7.08% -8.87% 12.97% 6.25% -5.09%
-9.67% -3.76% 7.61% 23.69% -16.34%
137.78 1,593.75 1,315.59 876.97 1,719.41 192.88
4.24% -8.01% 0.14% 13.24% 1.63% 2.25%
11.69% -10.60% -7.22% 12.62% 7.13% 2.66%
6.26% -5.99% -3.45% 16.45% -0.42% 6.11%
-1.05% -18.61% -11.79% 3.03% 0.49% -16.95%
36.18% -15.26% -23.66% 13.11% -0.83% -50.33%
215.02 370,845.63 228.02 0.43 30.21 70.07 511.12 17.92 25.51 1.75 697.92 98.88 90.67
16.46% 1.18% -4.59% 1.04% 6.08% -15.91% 9.82% -3.87% 3.75% -17.00% 2.72% 12.07% 1.99%
16.17% 9.51% -10.32% 0.37% 21.35% -23.62% -5.42% 0.86% 2.92% -34.41% 7.41% 24.04% -18.23%
14.19% -0.55% -4.78% -0.27% 5.08% -19.12% 8.11% -7.21% -2.30% -38.94% -5.86% 14.21% -9.56%
12.28% 5.31% -16.40% 3.99% 15.27% -31.91% -1.77% 7.59% -2.43% -33.00% -7.98% 4.32% -38.24%
47.93% -11.87% -8.35% 9.02% 16.13% -16.52% -45.47% 14.84% -10.46% -56.17% -8.11% 10.54% -53.21%
Total return in local currency (MSCI) MSCI UAE Saudi Arabia MSCI Kuwait MSCI Qatar MSCI Oman MSCI Bahrain Total return in USD (MSCI) MSCI Egypt MSCI Turkey MSCI Jordan MSCI Lebanon MSCI Morocco MSCI Botswana MSCI Ghana MSCI Kenya MSCI Mauritius MSCI Nigeria MSCI Tunisia MSCI South Africa S&P Zambia
-
Source: Bloomberg
3
Fixed income Middle East credit markets are likely to be driven in the coming days by anticipation of an opening of the new issuance pipeline after the summer lull. While global markets have been relatively quiet in the absence of any major news, particularly from central bankers meeting in Jackson Hole, the regional markets have been trading sideways in a tight range. The global search for yield continues with strong inflows into emerging market funds and this has helped to maintain support for regional credits. The new issuance pipeline is expected to be strong in the coming weeks, with the much anticipated debut issuance from Saudi Arabia expected to come to the market. This issuance cycle already kicked off at the end of August with a roadshow from Sharjah Islamic Bank and this is expected to be followed by issuances from a range of sovereigns, quasi-sovereigns, financials and corporate names from across the region. The redemption profile in the current year has been strong with close to US$ 10 billion of bonds due to mature in the second half of 2016. The excess liquidity from these maturities will also be helpful in supporting the bond market in the
absence of any other major lending avenues for banks faced with slowing economic growth in the region. The growing number of bonds trading in negative interest rate territory – around US$ 14 trillion of bonds globally – is also contributing to demand for high-quality assets giving relatively high returns and this has been evident in the last few months in the strong demand seen from international accounts for investment grade bonds from the region, sovereign names in particular. The long end of the credit curve is especially in demand, and this has helped to squeeze spreads gradually across the whole of the credit curve. Regional accounts have been slowly reducing risk after the huge rally in the last few week’s while also creating some space in their portfolios for the upcoming jumbo new issuances, especially from sovereign names. The selling has been met with steady buying from global emerging market funds and this has helped to maintain balance in the market amidst steady two-way flows, mainly in the investment grade space.The quantitative easing efforts from the ECB have helped to keep euro-denominated bonds extremely well bid
Sovereign CDS spreads
and the long end of the curve has been bid well by international accounts. Regional investors have been keen on financial paper, and particularly Qatar bonds from banks needing to meet new central bank regulations. The sukuk market also remains well bid with regional accounts looking to add specific names. One of the credits which has started to see some profit taking is the Oman sovereign, which has performed very well in the last few week’s. Investors are looking to reduce their positions and book profits ahead of the anticipated jumbo GCC sovereign issuances.
GCC CDS spreads Sov CDS
1000
Level
Wk (bps)
YTD (bps)
75
3
-18
Dubai Qatar Saudi
158 89 151
-4 -7 -8
-76 -4 -5
FI & Corp CDS NBAD ADCB Emirates Bank Samba
99 112 161 202
-1 -2 -1 -3
-11 -16 -38 10
124
-1
157
1
9 -27
Abu Dhabi
900 800
Abu Dhabi Saudi
700 600 500
Dubai Bahrain
400 300
Qatar Turkey
200 100 0 Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16 Abu Dhabi
Dubai
Qatar
Saudi
Bahrain
Turkey
TAQA DP World
Source: Bloomberg
Source: Bloomberg
Market data as of August 29, 2016 Financials – senior
Maturity
Cpn
Bid
Ask
Bid sprd
Ask sprd
S&P
CCY
Type
ADCB
16-Sep-19
2.75%
102.00
102.75
102
77
A
USD
C
ADCB
6-Mar-23
4.50%
104.38
105.38
USD
C
29-Oct-49
6.38%
105.60
105.95
N.A.
USD
S
8-Oct-18
3.27%
102.63
103.13
N.A.
USD
S
AUBBI
29-Dec-49
6.88%
101.25
102.25
N.A.
USD
C
Boubyan
29-Dec-49
6.75%
106.38
107.13
3-May-21
3.75%
102.25
103.00
CBDUH
17-Nov-20
4.00%
104.00
104.50
COMQAT
24-Jun-19
2.88%
100.88
101.63
DIBUH
30-Mar-21
3.60%
102.63
103.13
EIBUH
31-May-21
3.54%
103.00
103.75
14-Jan-19
3.25%
103.00
103.75
NOORBK
28-Apr-20
2.79%
99.50
100.00
NBAD
13-Aug-19
3.00%
102.38
103.13
234 245 75 510 390 192 175 124 174 156 62 171 87 157 23 127
A-
ADIB
251 261 99 540 407 210 187 152 186 173 94 185 112 182 75 139 129
ALHILA
Bank Muscat
First Gulf Bk
7-Oct-19
3.13%
100.75
QNB
14-Feb-18
2.13%
100.13
101.50 100.88
Qatar Islamic Bank
27-Oct-20
2.75%
101.00
101.50
3-Dec-18
4.35%
104.50
105.00
Natl Bk of Oman
Aldar
Source: Bloomberg
106
N.A.
USD
S
BBB-
USD
C
N.A.
USD
C
BBB+
USD
C
N.A.
USD
S
N.A.
USD
S
N.A.
USD
C
N.A.
USD
S
AA-
USD
C
N.A.
USD
C
A+
USD
S
N.A.
USD
S
BBB
USD
S
4
About Invest AD
Inside: GCC bond issuance records continue to be broken
Invest AD is an investment company that offers institutional investors access to high-growth opportunities in the MENA region. Owned by the Abu Dhabi government, the company benefits from an extensive international network, established over three decades and spanning governments, business leaders, and regulators. With a history as a long-term investor, the company is highly respected, allowing us to offer exceptional investment opportunities to our global partners. We implement international best practice in governance throughout all our operations, while offering flexibility in investment – whether through funds, tailor-made products, or long-term partnerships.
Contact For investor inquiries contact 800-Invest AD or 800-4683 7823 For international callers: +971 2 692 6101 For other enquiries call: +971 2 665 8100 Email: [email protected] This material has been prepared by the Abu Dhabi Investment Company, which operates under the trading name of Invest AD, located at PO Box 46309, Abu Dhabi UAE and by Invest AD Asset Management PJSC, a UAE-based investment company licensed and regulated by the Central Bank of the United Arab Emirates, and the UAE Securities and Commodities Authority , located at PO Box 46309, Abu Dhabi UAE. This material is provided for information purposes only to Professional and Institutional Investors. The provision of this material and/or references to securities, sectors or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or sell any security, or an offer of investment services. The analysis and opinions expressed in this material represent the subjective views of the author as of the date indicated, may no longer be current, and may change as a result of market developments. There can be no assurances that developments will transpire as forecasted in this material. Invest AD and its subsidiaries or affiliates may (1) engage in securities transactions in a manner inconsistent with this material and (2) with respect to securities referenced in this material, sell to or buy from customers on a principal basis. Investors should consider carefully the investment objectives, risks and expenses of any investment before investing. This material may not be distributed, published or reproduced, in whole or part, without the prior consent of Invest AD and Invest AD Asset Management PJSC
Focus Mohammed Al Hashemi, Executive Director at Invest AD Asset Management PJSC, discusses Middle East sovereign debt markets. More information: Page 2 Equities Valuations become attractive but sentiment is fragile. More information: Page 3
Fixed income Middle East Markets are well supported, as hunt for yield contines. More information: Page 4
1
Focus Strong pipeline of Middle East sovereign issuance 1. What is the outlook for Middle East sovereign debt markets? The outlook for the Middle East sovereign debt remains positive as the year has been characterized with heavy sovereign issuances from the GCC names. In addition to that, there has been steady issuances from financial and corporate names across the rating curve and maturities and this has made the year so far a very active one. Going forward, the market is expecting close to US$ 20-25 billion of new issuance over the next four months, with the much anticipated Eurobond issuance from Saudi Arabia along with anticipated issuances from sovereigns of Kuwait and Dubai as well. This, in conjunction with issuances from financial institutions and corporates through the end of the year, is expected to keep the market very active in the coming months. 2. How has the oil price affected Middle East debt markets? And how does this compare to international debt markets? Risk re-pricing and spread widening in the Middle East debt markets happened mainly in the second half of 2015 and early 2016. From February 2016, the market has remained positive and in the last few months, oil prices have also been relatively stable and this has brought back international investors looking to invest in high quality names. 3. GCC sovereigns have broken records with bond sales in recent months. Can we expect records to continue to be broken? The US$ 9 billion dollar issue from Qatar this year was one of the largest emerging market sovereign issuances ever. This is likely to be surpassed by Saudi Arabia, which is expected to come to the Eurobond market later this year with an anticipated size in the range of US$ 10-15 billion. 4. Governments are tapping international investors to fill budget holes left by declining oil and gas revenues. How does global demand compare to regional interest? The GCC still remains a very highly rated sovereign universe, and this has maintained international investor interest in the regional investment grade names. After the risk re-rating in the second half of 2016, international investors have been more receptive to the new spread levels in the region, especially in the context of very low
or even negative interest rates in the sovereign space in many developed economies. International investors have been particularly active in new issuances so far this year, as they seek to capture higher absolute and relative yield levels. 5. Are GCC sovereigns looking to issue long-term or short-term notes? GCC sovereigns have been slowly looking to extend their maturity profiles from the traditional 5-10 year segment. This attempt has been aided by increased demand from both local and international investors, seeking yield and higher duration in their portfolios. Issuers have therefore been able to extend their maturities to as much as 30 years.
have been steadily diverging, with markets pricing in a more benign path. Investors are looking for yield to generate returns on their books and in this context a very slow pace of well-communicated hikes is not expected to have a huge impact on Middle East fixed income markets and the new issuance cycle.
Mohammed Al Hashemi is the executive director of Invest AD Asset Management PJSC.
6. How is bank liquidity impacting bond markets? The slowing economy has put the brakes on corporate lending and this has shifted the attention of regional banks to the bond markets to use excess liquidity is present in the system. Also, banks continue to hold large chunks of regional bonds and with annual redemption of close to US$ 20 billion in 2016, the resulting liquidity is expected to be re-cycled into the bond markets to a large extent. 7. Can we expect further sovereign ratings downgrades and how will these affect Middle East debt markets? We do not expect further sovereign ratings downgrades. The sovereign downgrades were a result of the deteriorating credit metrics driven by the sharp fall in the oil prices from the US$ 100 levels seen earlier. The big rating downgrades have happened in Saudi Arabia, Oman and Bahrain. GCC governments have responded to the economic situation with many measures to curb expenditure and they are working on ways to manage budget deficits around the current oil price range. The fact that oil prices have stabilised in the US$ 40-50 range over the last few months makes it easier for governments to manage budgets. 8. How will a potential interest rate rise from the Fed affect Middle East fixed income markets and new issuances? The market is expecting a very slow pace of interest rate rises with the current probability placed at one more hike in 2016. Global eocnomic uncertainty still remains high and the Fed outlook and market outlook for future interest rate hikes 2
Equities GCC Recent market weakness, especially in Saudi Arabia, has led to attractive stock valuations, but sentiment remains cautious and regional markets appear to be lacking short-term triggers. Any progress in resolving geopolitical tensions in Yemen or the broader Middle East, or announcements of mergers or consolidation which are perceived to be value accretive, could provide the markets impetus. With Q3 results still some time away, investors will also be focused on international developments, especially oil prices, the direction of the US dollar and interest rate movements. Emerging market fund inflows are another key theme. FTSE’s confirmation that Qatar will be included in its emerging markets index in September’s rebalancing resulted in substantial inflows in August as foreign and regional funds prepositioned in stocks likely to receive substantial passive flows. Although, local investors sold into the rally the Qatar index reported an impressive performance in recent weeks. However, market direction and volumes elsewhere in the GCC and especially in the UAE took a turn for the worse later in the month as profit-taking set in. Saudi Arabian stocks may be supported in the medium to long term by progress in the country’s fiscal consolidation program. The government recently announced its intention to privatize a number of entities in the Kingdom under a range of ministries and covering a number of sectors, including 200 primary schools and health care centers.
Market data as of August 27, 2016 Country/Region S&P GCC S&P Frontier BMI S&P Pan Arab MSCI Emerging Markets MSCI World Total Return MSCI EFM Africa Ex S.A.
Closing price
MTD
YTD
3M
1Y
3Y
148.22
-1.68%
-1.65%
0.03%
-10.62%
-6.46%
88.52 141.12 901.39 4,746.88 443.20
1.47% -0.82% 12.83% 7.61% -0.05%
-1.51% -0.60% 15.74% 5.36% -4.46%
-2.03% 0.55% 13.01% 3.42% -11.32%
-7.08% -8.87% 12.97% 6.25% -5.09%
-9.67% -3.76% 7.61% 23.69% -16.34%
137.78 1,593.75 1,315.59 876.97 1,719.41 192.88
4.24% -8.01% 0.14% 13.24% 1.63% 2.25%
11.69% -10.60% -7.22% 12.62% 7.13% 2.66%
6.26% -5.99% -3.45% 16.45% -0.42% 6.11%
-1.05% -18.61% -11.79% 3.03% 0.49% -16.95%
36.18% -15.26% -23.66% 13.11% -0.83% -50.33%
215.02 370,845.63 228.02 0.43 30.21 70.07 511.12 17.92 25.51 1.75 697.92 98.88 90.67
16.46% 1.18% -4.59% 1.04% 6.08% -15.91% 9.82% -3.87% 3.75% -17.00% 2.72% 12.07% 1.99%
16.17% 9.51% -10.32% 0.37% 21.35% -23.62% -5.42% 0.86% 2.92% -34.41% 7.41% 24.04% -18.23%
14.19% -0.55% -4.78% -0.27% 5.08% -19.12% 8.11% -7.21% -2.30% -38.94% -5.86% 14.21% -9.56%
12.28% 5.31% -16.40% 3.99% 15.27% -31.91% -1.77% 7.59% -2.43% -33.00% -7.98% 4.32% -38.24%
47.93% -11.87% -8.35% 9.02% 16.13% -16.52% -45.47% 14.84% -10.46% -56.17% -8.11% 10.54% -53.21%
Total return in local currency (MSCI) MSCI UAE Saudi Arabia MSCI Kuwait MSCI Qatar MSCI Oman MSCI Bahrain Total return in USD (MSCI) MSCI Egypt MSCI Turkey MSCI Jordan MSCI Lebanon MSCI Morocco MSCI Botswana MSCI Ghana MSCI Kenya MSCI Mauritius MSCI Nigeria MSCI Tunisia MSCI South Africa S&P Zambia
-
Source: Bloomberg
3
Fixed income Middle East credit markets are likely to be driven in the coming days by anticipation of an opening of the new issuance pipeline after the summer lull. While global markets have been relatively quiet in the absence of any major news, particularly from central bankers meeting in Jackson Hole, the regional markets have been trading sideways in a tight range. The global search for yield continues with strong inflows into emerging market funds and this has helped to maintain support for regional credits. The new issuance pipeline is expected to be strong in the coming weeks, with the much anticipated debut issuance from Saudi Arabia expected to come to the market. This issuance cycle already kicked off at the end of August with a roadshow from Sharjah Islamic Bank and this is expected to be followed by issuances from a range of sovereigns, quasi-sovereigns, financials and corporate names from across the region. The redemption profile in the current year has been strong with close to US$ 10 billion of bonds due to mature in the second half of 2016. The excess liquidity from these maturities will also be helpful in supporting the bond market in the
absence of any other major lending avenues for banks faced with slowing economic growth in the region. The growing number of bonds trading in negative interest rate territory – around US$ 14 trillion of bonds globally – is also contributing to demand for high-quality assets giving relatively high returns and this has been evident in the last few months in the strong demand seen from international accounts for investment grade bonds from the region, sovereign names in particular. The long end of the credit curve is especially in demand, and this has helped to squeeze spreads gradually across the whole of the credit curve. Regional accounts have been slowly reducing risk after the huge rally in the last few week’s while also creating some space in their portfolios for the upcoming jumbo new issuances, especially from sovereign names. The selling has been met with steady buying from global emerging market funds and this has helped to maintain balance in the market amidst steady two-way flows, mainly in the investment grade space.The quantitative easing efforts from the ECB have helped to keep euro-denominated bonds extremely well bid
Sovereign CDS spreads
and the long end of the curve has been bid well by international accounts. Regional investors have been keen on financial paper, and particularly Qatar bonds from banks needing to meet new central bank regulations. The sukuk market also remains well bid with regional accounts looking to add specific names. One of the credits which has started to see some profit taking is the Oman sovereign, which has performed very well in the last few week’s. Investors are looking to reduce their positions and book profits ahead of the anticipated jumbo GCC sovereign issuances.
GCC CDS spreads Sov CDS
1000
Level
Wk (bps)
YTD (bps)
75
3
-18
Dubai Qatar Saudi
158 89 151
-4 -7 -8
-76 -4 -5
FI & Corp CDS NBAD ADCB Emirates Bank Samba
99 112 161 202
-1 -2 -1 -3
-11 -16 -38 10
124
-1
157
1
9 -27
Abu Dhabi
900 800
Abu Dhabi Saudi
700 600 500
Dubai Bahrain
400 300
Qatar Turkey
200 100 0 Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16 Abu Dhabi
Dubai
Qatar
Saudi
Bahrain
Turkey
TAQA DP World
Source: Bloomberg
Source: Bloomberg
Market data as of August 29, 2016 Financials – senior
Maturity
Cpn
Bid
Ask
Bid sprd
Ask sprd
S&P
CCY
Type
ADCB
16-Sep-19
2.75%
102.00
102.75
102
77
A
USD
C
ADCB
6-Mar-23
4.50%
104.38
105.38
USD
C
29-Oct-49
6.38%
105.60
105.95
N.A.
USD
S
8-Oct-18
3.27%
102.63
103.13
N.A.
USD
S
AUBBI
29-Dec-49
6.88%
101.25
102.25
N.A.
USD
C
Boubyan
29-Dec-49
6.75%
106.38
107.13
3-May-21
3.75%
102.25
103.00
CBDUH
17-Nov-20
4.00%
104.00
104.50
COMQAT
24-Jun-19
2.88%
100.88
101.63
DIBUH
30-Mar-21
3.60%
102.63
103.13
EIBUH
31-May-21
3.54%
103.00
103.75
14-Jan-19
3.25%
103.00
103.75
NOORBK
28-Apr-20
2.79%
99.50
100.00
NBAD
13-Aug-19
3.00%
102.38
103.13
234 245 75 510 390 192 175 124 174 156 62 171 87 157 23 127
A-
ADIB
251 261 99 540 407 210 187 152 186 173 94 185 112 182 75 139 129
ALHILA
Bank Muscat
First Gulf Bk
7-Oct-19
3.13%
100.75
QNB
14-Feb-18
2.13%
100.13
101.50 100.88
Qatar Islamic Bank
27-Oct-20
2.75%
101.00
101.50
3-Dec-18
4.35%
104.50
105.00
Natl Bk of Oman
Aldar
Source: Bloomberg
106
N.A.
USD
S
BBB-
USD
C
N.A.
USD
C
BBB+
USD
C
N.A.
USD
S
N.A.
USD
S
N.A.
USD
C
N.A.
USD
S
AA-
USD
C
N.A.
USD
C
A+
USD
S
N.A.
USD
S
BBB
USD
S
4
