Saudi Arabia may tap bond markets again in H2: Fisch

Saudi Arabia is likely to re-tap the sovereign debt markets in the second half of this year, Fisch Asset Management said in a new report.

"While Kuwait is likely to contribute meaningfully to the remaining issuance total in 2018, Saudi Arabia may also consider returning to the market," it added.

The total debt issuance of the Kingdom, which issued a jumbo-sized transaction in April, touched $11 billion year-to-date (YTD) 2018, with the issuance for the last six months estimated at $5 billion, the consultancy noted.

Meanwhile, total GCC debt issuance this year is expected to cross $50 billion, while total sovereign debt issuance already surpassing $30 billion YTD this year, thanks to the potential inclusion of the GCC region in the JP Morgan EMBI Index.

“This robust performance by the GCC primary markets stands out as particularly strong when compared to the broader emerging market trend, where aggregate issuance is lagging significantly behind 2017 levels," said Philipp Good, CEO, Fisch Asset Management.

"The emerging market segment has faced considerable headwinds this year, which have included higher US interest rates, weaker local currencies, and intensified threats to free trade. Nonetheless, we do expect performance and inflows across emerging markets to improve meaningfully in the second half of the year, and we expect the GCC to continue issuing at a brisk pace.”

While the GCC region has, in the past, traded at a tighter credit spread relative to other emerging market peers, the sharp correction in oil prices in 2015 has reversed that relationship, with the GCC region trading with a higher risk premium versus the broader peer group, the report  added.

Fisch noted that the current trading levels are "attractive, particularly so given the recovery in energy prices."

"We expect each region in the emerging market space to offer a unique set of risks and opportunities. In many ways, it can be argued that the risk-reward dynamic is particularly compelling for the GCC region,” Good said.