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Khaleej Times
27-04-2025
- Business
- Khaleej Times
UAE's debt capital market on track to hit $350b by 2026 despite headwinds
The UAE's debt capital market (DCM), the second-largest in the GCC, is on track to reach $350 billion by 2026, according to Fitch Ratings. Despite robust fundamentals, the market faces headwinds from global economic volatilities, including recent US tariff hikes. The UAE's DCM, valued at $309 billion by the end of the first quarter of 2025, grew 8.3 per cent year-on-year, driven by strong issuance and diversification efforts. In the first quarter of 2025, all-currency DCM issuance surged 109 per cent year-on-year to $29.1 billion, though it declined 35 per cent from the fourth quarter of 2024. Dollar-denominated debt accounted for 68.5 per cent of the outstanding total, underscoring the UAE's reliance on US currency for its debt instruments. The UAE ranked as the fourth-largest emerging market (EM) issuer of dollar-denominated debt, excluding China, contributing 7.0 per cent of EM dollar debt issuance, trailing Saudi Arabia, Brazil, and Mexico. The UAE's DCM growth is supported by several factors, including funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the development of the Islamic finance ecosystem. The Dirham Monetary Framework continues to provide critical liquidity, bolstering market stability. However, global uncertainties, particularly the US government's tariff increases announced on April 2, 2025, have introduced challenges. The primary market has been relatively subdued since the announcement, reflecting investor caution. Fitch Ratings notes that while the US tariffs are unlikely to directly impact the UAE's sovereign credit profile, indirect effects could arise from weakened global demand, potentially depressing hydrocarbon prices. Fitch recently lowered its Brent crude oil price forecast for 2025 to $65 per barrel from $70, a move that could spur increased DCM activity as the UAE seeks to offset revenue pressures. UAE banks and corporates are expected to continue diversifying funding through sukuk and bond issuances, with banks playing a dual role as both issuers and key investors. The UAE remains a global leader in sukuk, holding 6.5 per cent of outstanding global sukuk as of the first quarter of 2025. Nasdaq Dubai is a top listing center for dollar sukuk, and UAE Islamic banks facilitated nearly 20 per cent of global dollar sukuk issuances in 2023-2024, according to the UAE Central Bank. Sukuk comprised 18 per cent of DCM outstanding by the end of the first quarter, down slightly from 19 per cent a year earlier, but accounted for nearly 50 per cent of dollar-denominated issuance in the same period, up from 40 per cent in the first quarter of issuance in all currencies grew 22.6 per cent year-on-year to $4.9 billion, while bond issuance soared 145 per cent. Fitch rated $28 billion of UAE sukuk, with 92.1 per cent classified as investment grade—39.2 per cent in the 'A' category, 34.5 per cent in 'BBB,' 18.4 per cent in 'AA,' 6.3 per cent in 'BB,' and 1.6 per cent in 'B.' All sukuk issuers maintained a Stable Outlook, and no rated sukuk or bonds defaulted in 2024 or the first quarter of dirham's share of the DCM rose to 24.9 per cent by the end of the first quarter, up significantly from 0.5 per cent in 2020. The federal government has prioritized dirham Treasury sukuk over bonds, though Islamic alternatives to dirham treasury bills (M-bills) remain limited. The UAE Central Bank is addressing this gap by developing a Sustainable Islamic M-Bills program, which will allow issuances to serve as collateral for liquidity facilities. Environmental, social, and governance (ESG) debt reached $25 billion outstanding, up 30 per cent year-on-year, with sukuk comprising over 40 per cent. However, ESG debt issuance in the first quarter fell 40.7 per cent to $1.2 billion, entirely in sukuk, with no ESG bonds issued. Despite its strengths, the UAE's DCM faces risks from a concentrated investor base, primarily banks, and complexities in Sharia compliance, including issues tied to AAOIFI Standard 62. Nevertheless, the market's robust fundamentals position it for continued growth, even as global uncertainties loom.
Khaleej Times
13-03-2025
- Business
- Khaleej Times
Value of debt securities listed on Nasdaq Dubai crosses $136 billion
With the latest $1 billion listing by the Government of Ras Al Khaimah, the total value of sukuk listed on Nasdaq Dubai now exceeds $92.7 billion, further enhancing its position as a global hub for Islamic finance. The listing, a 10-year $1 billion senior unsecured sukuk at a profit rate of 5.038 per cent issued on March 5, was through the Investment and Development Office of Ras Al Khaimah. Overall, now the value of debt securities currently listed on Nasdaq Dubai has reached $136.2 billion across 157 issuances. Fitch Ratings anticipates a vibrant UAE debt capital market (DCM) in 2025, and predicts it to grow to $400 billion over the next few years. This growth will be propelled by funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the Dirham Monetary Framework (DMF) implantation, the ratings agency said. Due in 2035, the new sukuk has been issued under the $2 billion trust certificate issuance programme of RAK Capital, a special-purpose vehicle affiliated with the Government of Ras Al Khaimah, and will support the emirate's economic growth and infrastructure development plans. The issuance attracted strong investor demand, with an orderbook exceeding $4.4 billion, indicating market confidence in Ras Al Khaimah's economic stability and growth prospects. Mohammed Sultan Al Qadi, managing director at the IDO, rang the market-opening bell at Nasdaq Dubai on behalf of the Government of Ras Al Khaimah to celebrate the listing, in the presence Hamed Ali, CEO of Nasdaq Dubai and Dubai Financial Market (DFM). 'This Sukuk issuance is a reflection of Ras Al Khaimah's prudent financial management and our commitment to long-term economic growth. The overwhelming investor response highlights the strength of our economic fundamentals, and listing on Nasdaq Dubai provides us with a transparent and well-regulated platform to engage with global investors,' said Al Qadi. Ali said the strong investor demand reflects the deep and sustained appetite for high-quality sovereign debt. 'With government issuances making up 62 per cent of Nasdaq Dubai's listings, this reinforces our position as the leading exchange for public fundraising, providing issuers with a trusted and well-regulated platform to access global capital markets.' This listing follows RAK Capital's previous Sukuk issuances on the exchange, including the $500 million Sukuk that matured in October 2018 and the currently listed $1 billion Sukuk issued in 2015, which will mature by the end of March 2025. According to Fitch, A favourable funding environment, with projected lower US Federal Reserve interest rates in 2025, and declining oil prices could further stimulate the diverse DCM. 'Nasdaq Dubai continues to be a key global listing venue for Sukuk. After surpassing $300 billion and up just over 10 per cent from last year, the UAE DCM is on track to reach $400 billion, driven by strategic diversification and reforms,' says Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. 'The UAE continues to be a key part of the global sukuk landscape, with 92 per cent of its sukuk being investment-grade, nearly all of its sukuk issuers on stable outlooks. No defaults in 2024 highlight the market stability, supported by the evolving Dirham Monetary Framework and favourable funding conditions,' Al Natoor said. The UAE was the third-largest dollar debt issuer in emerging markets (excluding China) and the second-largest DCM among GCC countries in 2024.
Zawya
07-02-2025
- Business
- Zawya
UAE's debt capital market on track to reach $400bln amid favourable policies: Fitch
The UAE's debt capital market (DCM) is on track to grow to $400 billion in the coming years, Fitch Ratings said. The growth will be fueled by funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the Dirham Monetary Framework. 'After surpassing $300 billion and up just over 10% from last year, the emirate's DCM is on track to reach $400 billion,' said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. The UAE is a key player in the global sukuk landscape, with 92% of its sukuk being investment-grade and nearly all of its sukuk issuers on stable outlooks. 'No defaults in 2024 highlight the market stability, supported by the evolving Dirham Monetary Framework and favourable funding conditions,' he added. Sukuk made up 20.8% of dollar issuances in 2024, followed by ESG issuance at 17.2%. The dirham's share of the DCM surged to 23% by 2024-end compared to 0.5% in 2020. 'The UAE's consolidated debt is stable. We expect UAE banks to continue being key debt issuers and investors,' Al Natoor added. However, challenges persist as the DCM investor base is mainly concentrated in banks. 'Dirham issuance by corporates and banks is rare. Many large corporates are starting to issue debt, but the funding culture remains bank-focused.' Sharia complexities, including AAOIFI Standard 62, pose risks for sukuk, Al Natoor said.
Zawya
06-02-2025
- Business
- Zawya
UAE DCM to thrive in 2025 on funding diversification; Major emerging markets issuer
Dubai / Jakarta / Toronto: Fitch Ratings anticipates a vibrant UAE debt capital market (DCM) in 2025, and for it to grow to USD400 billion over the next few years. This growth will be propelled by funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the Dirham Monetary Framework (DMF) implantation. A favourable funding environment, with projected lower US Federal Reserve interest rates in 2025, and declining oil prices could further stimulate the diverse DCM. Nasdaq Dubai continues to be a key global listing venue for sukuk. "After surpassing USD300 billion and up just over 10% from last year, the UAE DCM is on track to reach USD400 billion, driven by strategic diversification and reforms," said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. "The UAE continues to be a key part of the global sukuk landscape, with 92% of its sukuk being investment-grade, nearly all of its sukuk issuers on Stable Outlooks. No defaults in 2024 highlight the market stability, supported by the evolving Dirham Monetary Framework and favourable funding conditions." The UAE was the third-largest dollar debt issuer in emerging markets (excluding China) and second-largest DCM among GCC countries in 2024. It is among the most developed DCMs within the Organisation of Islamic Cooperation (OIC) countries, and is a significant global sukuk issuer and investor. Sukuk made up 20.8% of dollar issuances in 2024, followed by ESG issuance (17.2%). The dirham's share of the DCM rose to 23% by end-2024 (2020: 0.5%). The UAE's consolidated debt is stable. We expect UAE banks to continue being key debt issuers and investors. However, challenges persist. The DCM investor base is concentrated in banks. Dirham issuance by corporates and banks are rare. Many large corporates are starting to issue debt, but the funding culture remains bank-focused. Sharia complexities, including AAOIFI Standard 62, pose risks for sukuk. Matt Pearson Senior Associate, Corporate Communications Fitch Group, 30 North Colonnade, London, E14 5GN E:
