Decision to trade government bonds on country's bourse seen positive amid eurozone crisis
Qatar’s plan to list government bonds on the country’s bourse for the first time may motivate companies in the world’s fastest-growing economy to sell bonds locally as Europe’s debt crisis prompts its banks to lend less.
The central bank of Qatar, which will host soccer’s 2022 World Cup, said on Monday it would list treasury bills on the Qatar Exchange on Dec. 29 “as a first step toward starting a secondary market.” Listings of bonds and sukuk, or Islamic notes, would follow, the central bank said.
The urgency of developing Arabian Gulf credit markets has heightened as euro-zone countries seek to raise $1.1 trillion of debt in 2012, according to Deutsche Bank forecasts. Rather than relying on investment from Europe, borrowers may seek to lure wealthy investors in the Arabian Gulf, home to one-fifth of the world’s proven oil reserves.
“This will increase transparency and allow individual investors to get into the bond market,” Samer Mardini, vice president of fixed income and Islamic finance products at SJS Markets Ltd in Dubai, said in a telephone interview on Monday. “There is big demand from individual investors. The move will also encourage companies to sell more debt.”
Qatar raised $5bn in dollar bonds this year, making it the second-biggest issuer in the Middle East and North Africa after the International Petroleum Investment Co., which is owned by the emirate of Abu Dhabi, according to data compiled by Bloomberg. Qatar’s economy may expand 19 percent this year, the International Monetary Fund forecasts.
Gulf Cooperation Council issuers raised $27.5bn in US dollar bonds this year, bringing total sales in the last three years to about $101bn, according to data compiled by Bloomberg.
Qatari companies and banks have been inactive in the debt markets in 2011 unlike counterparts in Abu Dhabi, Dubai and Saudi Arabia, which have issued debt this year, data show. In 2010, state-owned developer Qatari Diar Real Estate Investment Co. sold $1bn in five-year bonds, and other domestic issuers have sukuk plans in the pipeline.
Doha Bank QSC, Qatar’s fourth-biggest lender by assets, plans to sell a benchmark bond in the first quarter, Deputy Chief Financial Officer Sanjay Jain said on Nov. 22. Masraf Al Rayan, Qatar’s second-biggest Islamic lender, said in March it obtained approval from its shareholders to sell sukuk.
“The move to develop a bond market is particularly important given the crisis in the euro zone, which was an important source of funding for the GCC,” Monica Malik, chief economist at investment bank EFG-Hermes Holding SAE said by telephone in Dubai. “We expect to see increased issuances by banks and corporates in 2012 to meet funding requirements.”
Malik said Qatar’s move is part of steps “toward increasing the depth of the bond market” in the region, which include an increase in sovereign issuances “to create a benchmark yield curve.”
The average yield of GCC debt fell 31 basis points, or 0.31 percentage point, this year to 4.993 percent as Qatari bonds rallied, according to the HSBC/Nasdaq Dubai GCC US Dollar Sukuk/Bond Index. This was a wider decline than the 10 basis- point decline to 5.86 percent experienced by emerging markets bonds, JPMorgan Chase & Co.’s data show.
The yield on the Qatari government’s 4 percent bond due January 2015 slumped 73 basis points this year to 2.39 percent, according to data compiled by Bloomberg. The yield on Qatari Diar’s 3.5 percent notes due July 2015 retreated 95 basis points to 2.56 percent, data show.