Qatar on track to become major GCC bond market’

18/05/2011 00:00 AST

Qatar will emerge as a major bond market in the GCC in the coming years as it provides opportunities for long-term investments and the massive infrastructure development in the region creates demand for such debt instruments, according to Doha Bank.

“The total size of bonds issued in the first quarter of 2011 for GCC bonds was about $20bn with Qatar government being the leading issuer, amounting to $13.7bn,” Doha Bank Group CEO R Seetharaman told a Thomson Reuters seminar on fixed income.

The other major bond issues in 2011 were from International Petroleum Investment Company ($4.3bn), Mubadala Development Company ($1.5bn) and Emaar Properties ($0.5bn), according to him.

The refinancing requirements of regional corporations in the coming years is expected to increase, with more than $60bn debt scheduled to mature in the next two years, he said in a session ‘GCC economy and emerging trends in GCC bond market’.

The soaring high yields in the first quarter of 2011 due to the crisis also provided opportunities, he said, adding that massive projects and huge infrastructure development in the GCC (Gulf Co-operation Council) region will create demand for bonds.

Qatar came up with four sovereign bond issues in the last two years with the recent being in January this year for $13.7bn. Earlier government bond issues were mainly denominated in dollars but of late, those have been denominated in Qatari riyals.

“More bond issues in Qatar riyal will help the development of Qatari riyal yield curve. Corporates in Qatar also have tapped the opportunities in the bond market,” Seetharaman said.

The fixation of benchmarks for bonds is also essential. To address hedging requirements, the development of interest rate derivatives market also becomes vital, he said.

Hoping that the Qatar exchange would allow bonds/sukuk trading in the second quarter (April-June), Seetharaman said the secondary market for the GCC bonds needs to be vibrant.

Recommending improved transparency for bond investors and deeper institutional investor base in the GCC, he said a favourable regulatory environment should prevail to encourage various classes of investors. Moreover a vibrant bond market will also support pension fund industry, Seetharaman said.

Gulf Times