S&P expects Qatar and the UAE to buoy Gulf Sukuk market in 2013 (By IFN)

S&P expects Qatar and the UAE to buoy Gulf Sukuk market in 2013

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GLOBAL: A newly released report by global ratings agency, Standard & Poor’s (S&P) has noted that most of the Gulf-based issuances this year will originate from the UAE and Qatar; with more impetus to come from UAE-based banks and Qatar expected to maintain its mantle as the largest Gulf-based issuer since 2012. Entitled ‘Low Interest Rates Should Keep Gulf Banks’ Debt Issuance Levels Strong In 2013’ and released on the 4th March, the report read: “Sukuk is becoming a key component of Gulf banks’ funding bases,” and highlighted that Gulf-based banks issued US$6.7 billion of Sukuk in 2012. It also said that 45% of bank’s debt in the Gulf, as at 2012, was in Sukuk form. The report also added: “Although we expect credit growth in the UAE to remain limited in 2013, as it did in 2012, we believe the level of issuances will remain strong, primarily because of banks’ efforts to reduce funding costs by paying down higher-cost debt issued in 2008 and 2009. We also expect that banks will continue to use the debt capital markets, given the opportunity to secure long-term funds at low cost. In Qatar, the level of bank issuances, albeit volatile, is rising alongside the country’s high-paced credit growth; a trend we believe is here to stay.” Growing interest from institutional investors searching for higher yields, as well as the rapid growth of Gulf-based banks and a supportive environment towards the issuance of long-term paper, are touted as the key reasons for the surge in issuances this year.