{Kantakji Group}. Add '10330' GCC Financial Market Quarterly

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 continue to be characterized by a paradox: at a time when economic growth in the region is accelerating, recovery in most market segments is uneven at best, partly because of country-specific factors, partly due to the backdrop of mounting global uncertainty. The sukuk market now offers some of the most encouraging signs with a clear pick-up in issuance and growing indications that a many investors view sukuk as something of a safe haven. By contrast, conventional bond issuance virtually stalled and most other asset classes are fairly subdued. Direct government funding remains critical in many areas.

·         Growing optimism but uneven progress. Bank lending in the region has remained sharply dichotomous with activity in Qatar, Oman, and Saudi Arabia increasingly consistently marked by positive progress and led by private sector credit. In spite of generally improving fundamentals, lending in the rest of the region is close to static. Kuwaiti credit has been held back by a slower than expected implementation of the government's investment plans.

·         Equity markets hit by uncertainty. Facing global uncertainty, depressed volumes, and falling valuations, Q3 saw only two small IPOs, both in Saudi Arabia. The total amount of funds raised was USD218.9mn, which represented a 66% drop on the USD648mn seen in 3Q10 and a 39% drop on the USD335.5mn total in 2Q11.

·         The tables are turned for bonds and sukuk. GCC conventional bond issuance has slowed down to a trickle with only two banks issuing a total of USD157.3mnin Q3. By contrast, sukuk has been the first market segment to rebound beyond its pre-crisis levels globally. Overall GCC sukuk issuance during the quarter reached USD3,190.1mn, which compared to USD2,398mn the previous quarter and only USD361.7mn in 3Q10. The launch of the region's first true project finance sukuk marked a potentially significant new departure for the asset class.

Governments to the fore. Most alternative capital sources remain subdued. By contrast direct government investment is growing with a number of high-profile projects funded directly from the budget or by government funds. This reflects the continued importance of government spending as a growth driver.

 

Best regards,

 

NCB Economics Department 

PO Box 3555, Jeddah 21481

Telephone: +9662646-3232    FAX: +9662644-9783