Latest news with #BasharAl-Natoor
Arab News
28-04-2025
- Business
- Arab News
Saudi debt capital market nears $500bn mark amid global uncertainty
RIYADH: Saudi Arabia's debt capital market continued its upward trajectory in the first quarter of 2025, defying global challenges and uncertainties. The market reached $465.8 billion by the end of March, marking a 16 percent year-on-year increase, with sukuk accounting for 60.4 percent of the total, according to Fitch Ratings. The Kingdom's debt market is poised to surpass $500 billion in outstanding value by the end of 2025, driven by strong economic fundamentals, diversified funding strategies, and continued progress under Vision 2030. Fitch Ratings, in its latest report, noted that the sector's further expansion this year will be supported by increased fiscal deficits, heightened project financing needs, and regulatory initiatives aimed at boosting non-oil economic growth. 'Saudi entities were the largest US dollar debt issuers among emerging markets (excluding China) in the first quarter of 2025. The country also led global dollar sukuk issuance and was the largest debt capital market issuer in the GCC,' said Bashar Al-Natoor, global head of Islamic finance at Fitch Ratings. He added: 'We expect lower oil prices and increasing deficits will drive issuance in 2025 and 2026. Banks, corporates and projects are likely to seek more diverse funding through the DCM, enhancing market development. We rate about 80 percent of the outstanding US dollar Saudi sukuk market, with almost all investment-grade and no defaults.' Issuance in the first quarter of 2025 surged by 202.4 percent compared to the previous quarter, reaching $37.3 billion. Environmental, social, and governance debt made up 9 percent of dollar-denominated DCM issuance during the period. The expansion of Saudi Arabia's asset management industry, whose assets under management have now exceeded SR1 trillion, is also playing a key role in supporting the growth of the Kingdom's debt capital market. Saudi momentum In an interview with Arab News on the sidelines of the Fitch on Saudi Arabia event held in Riyadh, Al-Natoor lauded the Kingdom debt market for weathering global economic challenges. 'I think that by itself is something that's very notable, because there is a lot of turbulence and there is a lot of uncertainties, and despite that, we've still seen the market growing,' Al-Natoor said, adding that he expected to see continued growth. He went on to say that a range of bodies — including government, corporates, financial institutions and banks — are involved with developing the debt capital market, then funding the maturities that are coming. 'All of these are drivers, and key drivers for further growth, growth of the debt capital market,' he said. Al-Natoor noted that several factors, including the need to diversify funding sources and the ambitious project underway in the Kingdom, are acting as key drivers of growth for Saudi Arabia's debt capital market from the issuer side. On investor appetite, he said: 'We're having a vibrant market in the first quarter where it shows that local investor, regional investor and international investor, of course, at varying degrees, are still interested in the market, so there is an investor appetite in that.' He cautioned, however, that the Saudi market is not insulated from global volatility. 'Of course the appetite of the investors, maybe some uncertainties, will have a toll on the market itself. However, the actual fundamentals of the market growth are still intact, and the market is still expected to grow in the future,' Al-Natoor said. According to Fitch, the Kingdom's budget deficit is forecasted to widen to 5.1 percent of gross domestic product in 2025, up from 2.8 percent in 2024, with oil prices expected to average $65 per barrel. Government debt is projected to rise to nearly 37 percent of GDP by the end of 2026, from 29.9 percent in 2024. Foreign investor participation in government local issuances increased to 7.7 percent at the end of the first quarter, compared to 4.5 percent at the end of 2024. About 94.2 percent of rated Saudi sukuk remain within the 'A' category, with almost all issuers maintaining stable outlooks. Looking ahead, Al-Natoor said: 'We don't have specific numbers, but we do expect that the growth momentum to continue in 2025 and 2026 maybe step further.' He added that changes to 'global scenery' could have an impact on appetite and liquidity in this area, which may lead to a 'toll on the growth' of debt capital markets that lasts into next year. Al-Natoor noted that government entities and banks are currently the primary drivers of debt issuance in Saudi Arabia. While major corporations such as Aramco and the Public Investment Fund have also begun tapping into the debt capital market, their participation has not significantly shifted the overall market structure. He suggested that although more corporate issuers may gradually enter the market, the dominant role of government and banks in issuance activity is expected to remain unchanged in the short to medium term. 'The actual strategy of diversifying funding is to take it down the chain from the government to banks to corporates to projects to infrastructure and so the actual long-term ambition is to involve more of these,' he said. Al-Natoor continued: 'However, over the short to medium term, we do expect that the government and the banks will play a big role.' He added that it will take time until 'the momentum goes down the chain.' Economic resilience In a separate interview with Arab News, Paul Gamble, head of Middle East and Africa Sovereigns at Fitch Ratings, highlighted that Saudi Arabia's non-oil economy showed resilience despite global uncertainty. 'If you look at the experience of 2024, we saw pretty good non-oil growth at a time of really heightened geopolitical tensions in the region,' Gamble said. Regarding Saudi Arabia's Vision 2030 economic transformation, Gamble stressed the importance of separating reform-driven non-oil GDP expansion from government spending-driven growth. 'You have to balance the domestic reform angle — labor market reforms, social reforms, business environment reforms — against the element of non-oil growth that's driven by government spending and GRE (government-related entities) spending,' he said. Gamble cautioned that if oil prices remain low and government capital spending is cut significantly, it could impact private sector confidence. He noted: 'For the moment, we're still looking for pretty healthy non-oil growth. Our forecast is 4.2 percent for non-oil growth this year for Saudi Arabia.' Discussing fiscal pressures, Gamble said: 'We've revised down our oil price forecast to $65 a barrel, which widened our budget deficit forecast for Saudi Arabia to 5.1 percent of GDP. That will continue to put debt on an upward trend.' He added: 'Oil prices were broadly unaffected, and metrics like tourism inflows and private sector confidence remained strong.' In the wider Gulf region, Gamble said: 'From a rating perspective, four GCC sovereigns have stable outlooks. Bahrain and Oman are exceptions.' He explained that Bahrain faces significant fiscal challenges at current oil prices, while Oman benefits from past deleveraging efforts and non-oil economic development, supporting its positive outlook.
Arab News
16-04-2025
- Business
- Arab News
Saudi asset management industry hits $266bn, poised for further growth: Fitch Ratings
RIYADH: Saudi Arabia's asset management industry grew by 20 percent year on year in 2024, pushing the sector's total assets to SR1 trillion ($266 billion) for the first time, according to a new analysis by Fitch Ratings. In its latest report, the ratings agency said the industry is expected to continue attracting steady inflows through 2025 and 2026, with assets under management projected to exceed SR1.3 trillion. Fitch attributed the sector's momentum to several key factors, including a growing investor base, favorable demographics, ongoing economic reforms, strong capital markets, and digital transformation initiatives. Bashar Al-Natoor, global head of Islamic Finance at Fitch, said: 'Saudi Arabia's asset management industry is the largest in the GCC (Gulf Cooperation Council) with AUM having crossed SAR1 trillion, and further growth expected.' He added: 'Almost all mutual funds listed on the Saudi Exchange are Shariah-compliant, indicating strong demand for Islamic products.' An earlier report by Fitch in October noted that growth in 2025 would be further supported by a rising number of high-net-worth individuals seeking asset management services within the Kingdom. The Saudi government aims for the industry's AUM to reach 40 percent of the Kingdom's gross domestic product by the end of the decade. The report also noted that bank-affiliated asset managers in Saudi Arabia accounted for nearly two-thirds of the industry's revenues by the end of 2024. However, Fitch pointed out that international competition is likely to intensify as global players such as BlackRock, Goldman Sachs, and Morgan Stanley, as well as Citigroup and Mizuho Bank, have received regulatory approval to establish regional headquarters in the Kingdom. The analysis highlighted that around half of Saudi Arabia's AUM is held in private funds, followed by discretionary portfolio management and public funds. Private fund assets are primarily concentrated in real estate and equities, while half of the AUM under discretionary portfolio management is invested in local shares. Public fund assets are distributed across money market funds, equities, real estate investment trusts, and debt instruments. Fitch also noted that the combined market capitalization of listed equity markets in the GCC surpassed $4 trillion at the end of 2024, led by the Saudi Exchange. Despite the strong outlook, the report warned of potential challenges, including trade tensions and fluctuations in oil prices. 'The market is not immune from global volatilities, such as those caused by the US government's tariff rises on April 2. Oil price changes are among the key factors that could affect the industry,' Fitch added.
Zawya
11-02-2025
- Business
- Zawya
GCC set to top US dollar debt issuers among emerging markets
The Gulf Cooperation Council (GCC) is expected to remain among the top emerging-market (EM) US dollar debt issuers in 2025 and 2026, Fitch Ratings has said. The growth will be driven by government initiatives to develop the debt capital market (DCM), diversification goals, funding deficits and projects, and sizeable upcoming maturities. The DCM in the GCC crossed $1 trillion outstanding (all currencies) at the end of January 2025, an increase of 10% year-on-year (YoY). In January, the rating agency said GCC banks are likely to issue over $30 billion in US dollar debt this year. However, the market is still fragmented but evolving, with Saudi Arabia and the UAE among the most mature markets. Saudi Arabia accounted for the largest share of the regional DCM outstanding at 44.8%, followed by the UAE at 29.9% and Qatar at 12.8%. The remainder is split between Bahrain, Oman, and Kuwait. Support from falling oil prices Falling oil prices could lead to further DCM growth as lower government revenues could increase borrowing, said Bashar Al-Natoor, Global Head of Islamic Finance at Fitch Ratings. In 2024, the GCC contributed a quarter of all EM US dollar debt issuance (excluding China), with Saudi Arabia and Turkey (non-GCC) being key players. The UAE was the largest EM issuer, as GCC US dollar DCM issuance surged 65.8% YoY to $133.4 billion. New GCC fund passporting regulations could enhance DCM investment opportunities, he said. GCC sukuk issuance grew by 43% YoY in 2024 to $87.5 billion, outpacing bonds (+1.1%). Islamic banks are a large part of the GCC banking system and are key sukuk investors and issuers. The region's ESG debt crossed $50 billion outstanding in January 2025, with 44.1% sukuk and the majority in Saudi Arabia and the UAE. ESG-debt issuance was a sizeable part of dollar debt issuance in the UAE (17%) and Saudi Arabia (7.3%) in 2024. Challenges Despite growth, challenges persist as the DCM investor base is concentrated in banks and the funding culture remains bank-focused. Local-currency debt issuances by corporates and banks are still rare in most GCC countries, except Saudi Arabia, whose riyal market is more developed than peers but still has more room for growth, said Al-Natoor. He said that Sharia complexities, including AAOIFI Standard 62, pose risks for sukuk, adding that the DCM is sensitive to oil, geopolitical, and macroeconomic volatilities. (Editing by Seban Scaria
Arab News
04-02-2025
- Business
- Arab News
Saudi Arabia's Debt Capital Market set to reach $500bn by end of 2025: Fitch Ratings
RIYADH: Saudi Arabia's Debt Capital Market is expected to hit $500 billion by the end of 2025, fueled by the Kingdom's economic diversification efforts under Vision 2030, according to Fitch Ratings. In its latest report, Fitch highlighted several factors contributing to this growth, including the government's need for deficit funding, maturing obligations, and continued reforms. The DCM, which involves the trading of securities like bonds and promissory notes, serves as a key mechanism for raising long-term capital for both businesses and governments. Fitch also noted that the DCM in the Gulf Cooperation Council region had surpassed the $1 trillion mark by November 2024, bolstered by strong oil revenues. The agency predicts continued growth, with the GCC region expected to remain one of the largest emerging-market issuers of dollar-denominated debt through 2025. 'Saudi Arabia's sukuk market maintains a strong credit profile, with 97.4 percent of Fitch-rated Saudi sukuk rated investment-grade and 98 percent of issuers holding a stable outlook. Notably, no Fitch-rated Saudi sukuk or bonds defaulted in 2024,' said Bashar Al-Natoor, global head of Islamic finance at Fitch Ratings. He added: '2025 has started strong, with a growing pipeline of issuances. We expect the market to surpass $500 billion by year end, driven by Vision 2030 initiatives, robust government support, and favorable funding conditions.' Fitch's analysis further said that Saudi Arabia became the largest dollar-denominated debt issuer in emerging markets (outside of China) and the world's largest sukuk issuer in 2024. The Kingdom's DCM grew by 20 percent year on year in 2024, reaching $432.5 billion in outstanding debt. The report also emphasized the increasing importance of environmental, social, and governance debt in the region, with $18.6 billion in outstanding ESG-related bonds in 2024. Saudi banks have significantly expanded their international DCM activities since 2020, aligning with their growth strategies and foreign-currency requirements. Additionally, corporates are diversifying their funding sources, moving beyond traditional bank loans, according to Fitch. In another report, Fitch projected that global ESG sukuk issuances will exceed $50 billion in outstanding debt by 2025, driven by major Islamic finance markets like Saudi Arabia and Indonesia. The agency noted a 23 percent year-on-year growth in global ESG sukuk, which reached $45.2 billion in 2024, outpacing the 16 percent growth in global ESG bonds.
