Saudi Arabia Takes the Lead in GCC Bond Market in 2024
In a bold move, Saudi Arabia emerged as the dominant player in the Gulf Cooperation Council bond market during the first half of 2024, securing a whopping $37 billion through 44 issuances, as per recent data.
Surging Ahead
The Markaz GCC Bonds and Sukuk Market Report revealed that this impressive figure signifies a 12.5 percent increase from the same period last year, representing a staggering 49 percent of the total new supply of GCC bonds and sukuk.
The overall value of GCC primary issuances skyrocketed to $75.5 billion during this period, showing a remarkable 38 percent surge from $54.8 billion in the first half of 2023, with the number of issuances rising to 173 from 130.
Vision 2030 and Funding Needs
Saudi Arabia’s Vision 2030 includes ambitious megaprojects that demand substantial funding. While the Kingdom’s banks have traditionally relied on deposit growth, the scale of these projects surpasses their liquidity capabilities.
To bridge this gap, banks are expected to seek additional deposits and tap into the international debt market for financing. The central government and related entities are also providing crucial support to these projects.
Financial Landscape
The Public Investment Fund has unveiled plans to deploy a staggering $70 billion annually post-2025, contemplating its fundraising initiatives. Samer Jumean, partner and head of infrastructure at KPMG in Saudi Arabia, emphasized the immense scale of financing required and the importance of accessing capital markets despite the availability of liquidity.
While Saudi banks’ balance sheets remain healthy, most key lenders have been assigned investment-grade ratings and stable outlooks by S&P Global Ratings. However, they may not be able to bear the entire financial burden of Vision 2030 independently.
Geographical Debt Issuances
The UAE closely followed Saudi Arabia in terms of value, raising $20.6 billion through 65 issuances in the first half of 2024, compared to $15.4 billion from 58 issuances in the same period last year. This accounted for 27 percent of the total value of primary GCC bond and sukuk issuances.
Qatari entities emerged as the third-largest issuers in the GCC, raising $10.5 billion, reflecting a remarkable 416 percent increase from the same period last year. Bahraini and Omani institutions raised $3 billion and $1.7 billion, respectively, capturing 4 percent and 2 percent of the market.
Dynamic Shift in Market Trends
The Markaz report highlighted a notable shift towards sovereign debt issuance in the GCC for 2024, with total primary sovereign issuances surging by 77 percent to $41.5 billion in the first half of the year. Corporate debt issuance saw growth as well, rising by 8 percent to $34 billion during the same period.
The sector allocation data revealed that the government segment led primary debt offerings by value, raising a significant $41.5 billion, while the financial sector followed closely with $28.8 billion. The utilities sector secured $2.9 billion through five issuances.
Investment Preferences
In the first six months of 2024, Saudi Arabia took the lead in the regional sukuk market with a $5 billion issuance, contributing significantly to the overall rise in sukuk across the GCC. Conventional bond issuances surged to $48.8 billion, showcasing a 56 percent increase from the first half of 2023.
S&P Global Ratings projected a stable global sukuk issuance forecast for the year, reflecting strong early performance in 2024. Foreign currency sukuk also saw a notable rise, driven primarily by issuers from Saudi Arabia, the UAE, Oman, Malaysia, and Kuwait.