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Middle East debt issuance jumps 145% to $77.8 billion

Debt issuance in Middle East jumped to a record $77.8 billion in 2016 compared to 2015 as major economies in the region resorted to bond and sukuk market to tide over the challenges posed by the drop in oil revenue.
"Bolstered by Saudi Arabia's $17.2 billion bond sale in October, Middle Eastern debt issuance reached $77.8 billion during 2016, a 145 per cent increase compared to the value raised during 2015 and by far the highest annual total in the region since records began in 1980," said Nadim Najjar, managing director, Mena, Thomson Reuters.
Saudi Arabia was the most active nation in the Middle East accounting for 29 per cent of overall activity, followed by the UAE and Qatar, according to Thomson Reuters annual investment banking analysis
International Islamic debt issuance increased 24 per cent year-on-year to reach $37.9 billion during 2016. HSBC took the top spot in the Middle Eastern bond ranking during 2016 with 13.3 per cent share of the market, while CIMB Group took the top spot for Islamic DCM issuance with a 13.5 per cent share.
In the backdrop of a steep fall in oil revenues, the combined deficit of the six GCC states is estimated to be $153 billion in 2016, up from $119 billion in 2015. Saudi Arabia accounted for 55 per cent, or more than $84 billion.
The GCC countries, which together pump more than 18 million barrels per day of crude oil, suffered significant revenue shortfall in 2016. In 2015, total GCC total revenue, mainly from hydrocarbons, dropped to $443 billion, the lowest in five years, from a peak of $735 billion in 2013. In 2016, combined GCC revenue is estimated to have dropped further to $365 billion.
According to forecast by Kuwait's investment firm Kamco, the six-nation group is set to post an average annual shortfall of $100 billion until 2021
According to estimates from Thomson Reuters/Freeman Consulting, Middle Eastern investment banking fees reached $820.8 million during 2016, an 18 per cent increase compared to fees recorded during 2015 and the highest annual fee total in the region since 2008.
In M&A transactions with any Middle Eastern involvement, the value of announced activities reached $46.9 billion during 2016, 16 per cent less than the value recorded during 2015 and the lowest annual total in the region since 2013. Middle Eastern equity and equity-related issuance totalled $2.6 billion during 2016, a 55 per cent decline year-on-year and the lowest annual issuance total in the region since 2004, Najjar said.
In respect to investment banking fees, syndicated lending fees increased 50 per cent year-on-year to $444 million, a nine-year high, while debt capital markets fees more than doubled to $134.1 million. Fees generated from completed M&A transactions totalled $200.9 million during 2016, a 20 per cent decrease compared to 2015 and the lowest annual total for M&A fees in the region since 2012. Equity capital markets underwriting fees declined 51 per cent to $41.8 million, a 12-year low.
HSBC earned the most investment banking fees in the Middle East during 2016, a total of $43.4 million for a 5.3 per cent share of the total fee pool. Rothschild topped the completed M&A fee rankings with 16 per cent of advisory fees.
The $14.1 billion merger of National Bank of Abu Dhabi and First Gulf Bank was the largest deal to be announced in the region during 2016, it is the largest domestic Middle Eastern deal of all time. Boosted by this deal, domestic and inter-Middle Eastern M&A increased 151 per cent year-on-year to $22 billion.
Outbound M&A activity fell 24 per cent from 2015 to reach $14.7 billion. Overseas acquisitions by Qatar accounted for 33 per cent of Middle Eastern outbound M&A activity, while acquisitions by companies based in Saudi Arabia and the UAE accounted for 28 per cent and 20 per cent, respectively. Inbound M&A fell 30 per cent to $4.0 billion.
- issacjohn@khaleejtimes.com