DUBAI, 17 January 2008 — Gulf Arab sales of conventional and Islamic bonds may more than double to $50 billion this year, spurred by infrastructure projects, and acquisitions, Moody’s Investor Services said yesterday.
Governments and companies in the six Gulf Arab oil producers — including the United Arab Emirates and Saudi Arabia — sold $23.7 billion of bonds last year, 62 percent more than in 2006, Moody’s said in a report on the regional bond market. That included $11.7 billion of bonds that comply with Islamic law.
Sales could have risen to as much as $35 billion had demand not fallen off after a global credit squeeze in the second half of the year linked to the subprime crisis in the United States, Moody’s said. “It is likely that new issuance and rating activity will remain robust throughout 2008.”
Sellers will have to get used to wider spreads this year after the cost of borrowing rose in 2007 by between 40 basis points and 80 basis points, compared with the year before, Moody’s said. One basis point is equivalent to 0.01 of a percentage point.State-owned Dubai Electricity & Water Authority (Dewa) was among the highest profile firms to be hit by the market downturn, when it postponed its debut bond sale in November.
Moody’s forecast Gulf sellers will offer about $10 billion of bonds in the first few months of the year, sales that would otherwise have taken place in 2007.
Total sales in the Gulf could rise to as much as $50 billion during the next 12 to 18 months “as companies seek to refinance debt and extend their maturity profiles to finance infrastructure developments and expand abroad,” the ratings company said.
The biggest growth is likely to be in Saudi Arabia, which accounted for 31 percent of regional sales last year, compared with 7 percent in 2006.
The UAE — the second-largest Arab economy — accounted for 65 percent of sales, the most among Saudi Arabia, Kuwait, Oman, Bahrain and Qatar, Moody’s said.