Saudi Arabia aims to be regional benchmark in global bond markets

Inside The Saudi Stock Exchange As Saudi Stocks GainVisitors stand and watch stock movements displayed on large video screens inside the Saudi Stock Exchange, also known as the Tadawul All Share Index in Riyadh, Saudi Arabia, on Monday, Nov.28, 2016. The Tadawul All Share Index advanced 26 percent since Saudi Arabias record-breaking bond sale last month, the most in the world during that period. Photographer: Simon Dawson/Bloomberg via Getty Images
Updated 03 May 2018

Saudi Arabia aims to be regional benchmark in global bond markets

  • “The target is to become the regional benchmark and safe haven in fixed interest markets,” says head of debt management office
  • April's $11 billion bond issue five times oversubscribed

RIYADH: Saudi Arabia wants to be the “regional benchmark and safe haven” in global bond markets, according to Fahad Al-Saif, the president of the Ministry of Finance debt management office.

The Kingdom successfully raised $11 billion on international capital markets last month with an issue that was five times oversubscribed and in which 15 percent of investors were first time buyers of Saudi debt, Al-Saif said.

The capital raising was achieved without the need for a roadshow, he pointed out, in what he took as a sign that the Kingdom was now regarded as a “reliable and credible issuer” by international markets.

“The target is to become the regional benchmark and safe haven in fixed interest markets,” he said.

The debt raising is the third successive year Saudi Arabia has gone to the markets for multi-billion dollar sums, following the record breaking $17.5 billion debut sovereign bond in 2016 and $21.5 billion last year.

Both those rounds came toward the end of the year, whereas the most recent one came comparatively early in 2018. “We did not want to be tagged a final quarter issuer,” Al-Saif said.

But two bankers at the conference — who did not want to be named because they were currently working on bond sales in the Kingdom — said that the timing meant that Saudi Arabia could go back to the markets again this year.

“Saudi Arabia has become one of the biggest issuers in the world and it has a track record of proven quality. They (Saudi policymakers) might think it makes sense to go back to the markets while their reputation is flying high and interest rates are still comparatively low,” said one.

Faisal Qadri, head of debt capital markets for HSBC in Saudi Arabia, said: “Previously, Saudi Arabia was closed in terms of transparency and disclosure. Now they have produced a prospectus and are out there.”

Al-Saif said that he took encouragement from the kind of questions he was being asked by potential creditors: “They are asking normal questions about the economic progress of the Vision 2030 strategy and the fiscal balance targets. It is more technical inquiries and less focused on the oil price and geopolitics.”

He added that Saudi Arabia had the ability to issue a “super-long” bond of up to 100 years, but such a move seems unlikely at the moment.

“Are we able to issue 50 or 100 year bonds, yes. Are we able to issue in different currencies other than dollars, yes. Are we keen to take that step at the moment, I don’t think so,” he said.

Last month 45 government-linked securities were launched on the Tadawul financial market in a move aimed at deepening the domestic credit markets.

Egypt stock market plunges as retail investors take flight

Updated 19 September 2018

Egypt stock market plunges as retail investors take flight

  • Biggest index drop in Egypt since mid-2016
  • Saudi Arabia outperforms in Gulf

LONDON: Egyptian stocks tumbled to their lowest level this year on Wednesday as retail investors took flight.
A sharp rise in Suez Canal revenues, a major foreign exchange earner for the country, was not enough to quell investors concerns about the strength of the currency.
The main Egyptian stock index lost 3.8 percent which some fund managers blamed on generally negative sentiment toward emerging markets worldwide as well as more local speculation about possible currency devaluation.
“Our channel checks suggest the sell-off in the Egyptian market is local retail and institutions driven, on currency fears and speculation over a further round of devaluation,” said Vrajesh Bhandari, portfolio manager at Al Mal in Dubai, Reuters reported.
“Selling is further intensified as margin calls are triggered and technical support levels break down. The country canceled three consecutive Treasury auctions, citing investors’ unrealistic yield demands.”
Egypt’s Suez Canal revenues rose to $502.2 million in August up 6.7 percent from a year earlier according to official data released on Wednesday.
Elsewhere regional stock markets closed mostly lower with the exceptions of Abu Dhabi which edged 0.2 percent higher and Saudi Arabia, the best regional performer, which rose by 1.1 percent.
Saudi stocks are benefiting from the strong oil price which eased slightly yesterday but still hovered just under $79.
OPEC and some other oil producers including Russia will meet in Algeria on Sept. 23 to discuss how to allocate supply increases within their quota framework to offset the loss of oil exports from Iran following the introduction of sanctions by the US.
Those measures will come into force on Nov. 4 and data suggests that buyers are already retreating from Iranian crude purchases.
A key question for the oil price as well as regional stock markets in the weeks ahead will be the extent to which other Gulf oil exporters can compenaste for the loss of Iranian supplies by pumping more.