Latest news with #GCCDCM
Arab News
30-04-2025
- Business
- Arab News
GCC share of emerging-market dollar debt jumps to 35% in Q1
RIYADH: Gulf Cooperation Council countries accounted for over 35 percent of all emerging-market US dollar debt issued in the first quarter of the year— excluding China— marking a sharp increase from around 25 percent in 2024, a new report revealed. In its latest analysis, Fitch Ratings forecast that the share is expected to continue rising through 2025 and 2026 as regional governments and corporations increasingly turn to debt capital markets for funding diversification, project finance, and budget support amid fiscal pressures and global economic uncertainty. The report stated that the total value of the GCC DCM exceeded $1 trillion across all currencies by the end of the first quarter, marking a 10 percent year-on-year increase. Issuance reached $89 billion in the first three months of the year, up 11 percent from the previous quarter but down 3 percent compared to the same period of 2024. Despite a slowdown in activity since early April, Fitch noted 'a healthy pipeline' is developing, supported by strong regional and Islamic investor liquidity. 'The GCC DCM continues to be fragmented among its six member countries in its maturity, depth, and credit profile, with Saudi Arabia and the UAE the most mature,' the report stated. 'In Kuwait, Qatar, Bahrain, and Oman, the lack of a link with international central securities depositories such as Euroclear or Clearstream partly hinders foreign-investor participation in the local-currency DCMs,' it added. According to the global investment banking firm State Street Global Advisors, other regions saw divergent trends. Brazil led the emerging market in local bond returns with a 13.7 percent gain, driven by currency appreciation and rate hikes. In contrast, Turkiye posted an 8.7 percent decline, reflecting political instability and currency depreciation. These shifts underscore varying macroeconomic dynamics across emerging markets. In the Kingdom, foreign investors increased their participation in local government debt, accounting for 7.7 percent of the investor base at the end of the first quarter of the year, up from 4.5 percent in 2024. Fitch noted that pressure from declining oil prices — forecast at $65 per barrel for 2025 and 2026 due to OPEC+ cuts and trade-related volatility — could widen fiscal deficits and lead to increased borrowing. Among the most vulnerable are Bahrain and Saudi Arabia, while Qatar, Kuwait and Abu Dhabi benefit from substantial sovereign wealth assets. Oman is seen as relatively well-positioned fiscally. Interest rate expectations are also playing a role in shaping the DCM outlook. Fitch projects the US Federal Reserve to lower rates to 4.25 percent by end of 2025, with GCC central banks expected to follow suit. Lower rates could support further issuance, as banks and corporates across the region continue to diversify their funding strategies. Sukuk remains a cornerstone of the GCC's DCM, comprising around 40 percent of the total outstanding by the first quarter of the year. The region holds over 40 percent of the global sukuk market, though issuance fell 51 percent year on year in the first quarter to $18.2 billion. Conventional bonds rose 29 percent over the same period. Fitch reported that 83.5 percent of Fitch-rated GCC US dollar sukuk are investment-grade, with 57.8 percent in the 'A' category and the majority holding stable outlooks. Environmental, social and governance financing is also gaining traction in the region, with GCC countries' ESG DCM surpassing $50 billion in all currencies by the end of the quarter. National-level regulatory reforms are also reshaping local markets. In Kuwait, the cabinet's approval of a long-delayed financing and liquidity law is expected to unlock new borrowing capacity. In the UAE, the apex bank continues to advance the Dirham Monetary Framework, with the currency's share in the domestic DCM growing to 24.9 percent from just 0.5 percent in 2020. Sustainable finance is also gaining momentum, with the UAE developing a Sustainable Islamic M-Bills program and Qatar unveiling a sustainable finance framework. Despite global uncertainty, Fitch emphasized the resilience of the region's credit quality, noting that no Fitch-rated GCC sukuk or bonds defaulted in 2024 or the first quarter of 2025.
Zawya
10-02-2025
- Business
- Zawya
GCC among leading emerging-market US Dollar debt issuers, drive global sukuk issuance
Fitch Ratings-Dubai: The Gulf Cooperation Council (GCC) countries will likely continue being among the leading emerging-market (EM) US dollar debt issuers in 2025 and 2026, Fitch Ratings says, along with being some of the largest dollar sukuk issuers and investors globally. They will be driven by government initiatives to develop the DCM, diversification goals, funding deficits and projects, and sizeable upcoming maturities. The GCC DCM crossed the milestone of USD1 trillion outstanding at end-January 2025 (all currencies), up about 10% year-on-year (yoy). GCC banks are likely to issue over USD30 billion of US dollar debt in 2025, and many large GCC corporates are also starting to issue sukuk and bonds to diversify funding. However, the landscape is still fragmented and evolving, with Saudi Arabia and UAE being the most mature markets. No Fitch-rated GCC sukuk or bond defaulted in 2024. Saudi Arabia had the largest share of the GCC DCM outstanding (44.8%), followed by the UAE (29.9%) and Qatar (12.8%), and the balance between Bahrain, Oman, and Kuwait for all currencies. Falling oil prices could lead to further DCM growth as lower government revenues could lead to increased borrowing. Fitch expects lower US Federal Reserve interest rates in 2025, with GCC central banks likely to follow suit, which should create a favourable funding environment. Four out of six GCC sovereigns are investment-grade. The GCC countries accounted for a quarter of all EM US dollar debt issued in 2024 (excluding China), with Saudi Arabia, Turkiye (non-GCC country), and the UAE being the largest EM issuers. GCC US dollar DCM issuance expanded 65.8% yoy in 2024 to USD133.4 billion. New GCC fund passporting regulations could enhance DCM investment opportunities. Sukuk are a significant funding tool, accounting for about 40% of GCC DCM outstanding at end-January 2025, with the rest in bonds. Just over 40% of global sukuk were from GCC countries. About 80% of Fitch-rated GCC sukuk are investment-grade, with about two-thirds in the 'A' rating category, with the remainder mostly split between the AA, BBB, BB and B categories. Most issuers are on Stable Outlooks (92%), and the rest are mainly on Positive. GCC sukuk issuance grew by 43% yoy in 2024 to USD87.5 billion, outpacing bonds (+1.1%). Islamic banks are a large part of the GCC banking system and are key sukuk investors and issuers. The GCC's ESG debt crossed USD50 billion outstanding at end-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. ESG debt could help issuers tap demand from ESG-sensitive international investors from the US, Europe and Asia. Saudi Arabia's and the UAE's DCMs are set for growth in 2025. In 2024, Kuwait became the GCC's third-largest dollar debt issuer in 2024, with a total of USD13.6 billion issuances, led by banks. This is despite the absence of the public debt law, which would enable sovereign borrowing. Historically, US dollar issuances from Kuwait have been sporadic and rare, with only USD11.8 billion issued in 2018–2023. Kuwait's new government plans to revise liquidity laws to facilitate capital market borrowing, but the timeline is uncertain. However, challenges persist. 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, with the exception of Saudi Arabia, whose Riyal market is more developed than peers but still has more room for growth. Sharia complexities, including AAOIFI Standard 62, pose risks for sukuk. The DCM is sensitive to oil, geopolitical, and macroeconomic volatilities. Matt Pearson Senior Associate, Corporate Communications Fitch Group, 30 North Colonnade, London, E14 5GN E:
