{Islamic_Finance_Banking} GCC FMQ 2Q11

FYI

 Nawaf Y. Husein

 Faculty Member
 Msc, CRP , CLBB
 Saudi Training Society Member

 Institute of Banking
 Saudi Arabian Monetary Agency ( SAMA)
  P.O.Box : 10820   Riyadh 11443 Saudi Arabia
 Tel : + 966 1 463 3000   Ext. 3825
  Fax: + 966 1 466 2368
  Mobile : + 966 55 48 44 828

  SKYPE : abuhejleh2     

Dear Readers,

The GCC financial markets have made a clear recovery from their turbulent spring season when political unrest depressed issuance activity and secondary markets alike. Nonetheless, the current situation bears many similarities to last year when the structural market drivers were generating growing interest in capital market issuance but economic uncertainty made this a sporadic, uneven activity. Due to an exceptional cluster of external risks, the positive market momentum in many areas has stalled somewhat in Q2.

·         A persistent dichotomy in bank credit. Even as credit conditions are generally beginning to improve across the region, the process is slow and uneven. A clear positive momentum is now underway in Oman, Saudi Arabia, and Qatar, although Saudi Arabia is the only regional economy with a positive trend in private credit. Credit in Bahrain is still declining while Kuwait is stagnant and the UAE barely in the positive territory.

·         Equity issuance still subdued. Although IPO activity rebounded from Q1, there were only three issues and the total volume of USD346mn fell clearly short of the typical quarterly activity seen last year. Also the secondary equity markets have lost momentum with volumes dropping off again in June in the face of renewed global economic uncertainty. The pipeline looks more promising for the second half of the year, although market nervousness may delay issuances.

·         Bonds down, sukuk up. Even though bond and sukuk markets have thawed and the secondary market conditions have become much more benign, the new issuance of USD3.40bn in bonds fell short of the Q1 total. The most important conventional issuers were Mubalada, the Government of Dubai, and the Emirates airline. The sukuk markets rebounded to USD2.18bn with importance offerings by the Islamic Development Bank, HSBC, and Sharjah Islamic Bank.

·         Alternatives treading water. Syndicated loan activity fell to less than half of the levels seen in Q1, from USD20.9bn to USD8.9bn, although the figures for the first three months of the year had been skewed by restructuring deals. Activity in Q2 was led by syndications for Zain KSA, the Government of Dubai, and Saudi Electricity Company. Private equity deals were minimal with only one purchase recorded in the region.

 

Best regards,

NCB Economics Department