(The following statement was released by the rating agency)
Oct 08 -
-- We expect both bond and sukuk issuance to continue rising in the GCCcorporate and infrastructure segment, supported by the GCC financial system'ssound liquidity, local investors' strong appetite for debt, and accommodativemonetary policies around the world.
-- Rising oil prices lifted our GDP growth forecast for the GCC to 5% andcreated fertile ground for credit growth.
-- We've taken only positive rating actions across our GCC corporate andinfrastructure portfolio over the past six months, reflecting among otherthings, successful debt refinancing.
-- Uncertain global economic conditions, diverging property marketsacross the GCC, and continued political tension remain key challenges.
Corporate and infrastructure issuers in the Gulf region may increasingly rely on sukuk, theIslamic equivalent of bonds, as a source of funding in coming quarters says a report titled"Sukuk Are Surpassing Conventional Bond Issuance In The Gulf Countries As YieldsTighten," published Oct. 5, 2012, by Standard & Poor's Ratings Services.
Sukuk issuance in Gulf Cooperation Council countries (GCC)--comprisingBahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates--hasreached a record high this year, propelled by positive developments in theregion's economy and capital markets.
Yields have fallen dramatically on both conventional and sukuk capital marketissuance in the past year. This trend was supported by the GCC financialsystem's sound liquidity, local investors' strong appetite for debt, andaccommodative monetary policies around the world.
"As access to capital markets widened, several corporate issuers in the regionwere able to successfully refinance large amounts of debt falling due, notablyby tapping the sukuk market," said Standard & Poor's credit analyst TommyTrask. "We also expect the project finance sector, including real estate andtransport projects, to increasingly rely on sukuk issuance to fundtransactions," said Standard & Poor's credit analyst Karim Nassif.
Overall, rising oil prices have led Standard & Poor's Ratings Services'economists to revise their GDP growth forecast for the GCC for 2012 to 5%,from 4% previously, and created a fertile environment for credit growth,particularly in the Gulf's oil-exporting economies. However, tough globaleconomic conditions and continued political tension in the region followingthe Arab Spring should remain key challenges over the coming months.