For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
English
  • English
en
  • en
Filter by theme
Filter by date
Filter by boutique
Filter by theme
Filter by date
Filter by boutique
No posts matching your criteria
Clear theme
Clear all
No posts matching your criteria
Clear date
Clear all
No posts matching your criteria
Clear boutique
Clear all
For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
English
  • English
en
  • en
© 2019. BNY Mellon Investment Management International Limited. All rights reserved.
IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
3 January 2019

Gulf state sovereigns: Index changes could signal a banner year ahead

The coming year promises to be a banner one for bond issuers from the Gulf (GCC*) states. This is because, recognising the region’s increased standing, index provider JPMorgan has announced the inclusion of five GCC countries (Oman is currently included) to its suite of emerging market hard currency sovereign indices. With more than US$360bn benchmarked against these indices and a likely 11% weighting for the GCC region expected when the indices fully rebalance, these bond markets are expected to receive strong inflows.

 

Such a move makes sense in our view. A notable trend in recent years has been the considerable increase in sovereign bond issuance from GCC states. Since 2016, they have issued US$124bn in hard currency debt – almost four times the total issuance of the preceding six years. As a percentage of the EM hard currency sovereign debt asset class, GCC today accounts for 14%, up from just 5% in 2014.

 

Given that GCC issuers are among the highest rated sovereigns within the EM sovereign complex and offer a spread pick-up relative to similarly rated developed market credits, there is no shortage of demand for this debt. Saudi Arabia, Qatar, Kuwait and Emirati issuers are all rated single-A and above, and investors are attracted to the bonds’ defensive qualities and relatively low beta to the rest of EM. Bahrain is the outlier, rated B+, but compensates with close to 400 basis points of spread pick-up.

 

Rodica Glavan, emerging market debt portfolio manager. Insight Investment – a BNY Mellon company

Please note the content on this website is for Investment Professionals only and should be shared responsibly. No other persons should rely on the information contained within this website.

 

Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.

 

On January 31, 2018, The Boston Company Asset Management, LLC (TBCAM) and Standish Mellon Asset Management Company LLC (Standish) merged into Mellon Capital Management Corporation (Mellon Capital), which immediately changed its name to BNY Mellon Asset Management North America Corporation.

Subscribe to updates