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Dubai: Bond issues from the region, both conventional and sukuk, which slowed down in the second half of last year following the US subprime turmoil, are expected to gather pace this year, according to global credit rating agency Standard & Poor's.
"There has been a significant slowdown in sukuk issues in the second half of last year. The total cumulative sukuk issue is expected to exceed $100 billion in late 2008 or early 2009 from $60 billion at the close of last year," said Emmanuel Volland, director of financial services.
S&P, which rates 19 financial institutions and more than 100 regional corporate entities, said the corporate and sovereign bond issues are set for big growth during the next two years.
According to S&P estim-ates, net borrowing by Middle Eastern and African rated sovereigns is forecast to climb sharply to $23 billion in 2008, from $7 billion in 2007, due to a reduction in debt repayments and a rise in sover-eign borrowing requirements.
Despite the increase in borrowing, total new debt accounts for just 1.1 per cent of the combined GDP of the rated sovereigns.
S&P expects rated MEA sovereigns' commercial medium- and long-term borrowing to be $77.6 billion in 2008, up from $57 billion in 2007.
Refinancing
Of this, the vast majority ($54.2 billion) is required to refinance existing maturing debt, with the remaining $23.4 billion reflecting new debt.
"The Gulf states of Saudi Arabia, Oman, Kuwait, Qatar, Bahrain, and the emirate of Abu Dhabi are all expected to record significant fiscal surpluses in 2008," said Standard & Poor's credit analyst Farouk Soussa.
"By and large, these countries continue to budget prudently, using oil price assumptions below consensus forecasts, resulting in considerable excess revenues. This has been the case over the past five years and, encouragingly, these unforeseen oil revenues are not being matched by excessive spending, but have been mainly set aside in stabilisation funds or sovereign wealth funds," he said.
Expansion: Agency opens DIFC office
Standard & Poor's yesterday announced the official launch of its first office in the Middle East in the Dubai International Financial Centre (DIFC).
The office, which will be managed by Jan Willem Plantagie, Standard & Poor's regional manager for the Middle East, will offer Standard & Poor's full range of independent research, credit and fund management ratings, investment management and investment banking tools and index products.
"Gulf companies are increasingly accessing the global capital markets to address their financing requirements and recognise the benefits that Standard & Poor's globally-recognised credit ratings can provide," said Deven Sharma, president of Standard & Poor's.
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