Investors tapping GCC over low borrowing costs
Dubai, April 9, 2013
Corporate and infrastructure issuers in the Gulf region are benefitting from sustained positive macroeconomic fundamentals, according to a Standard & Poor's report.
The report titled "Record Low Borrowing Costs Are Boosting Gulf Issuers' Credit Quality, But Will They Last?", has found that there's strong appetite from regional and international investors for high credit quality paper, the rating agency said in a statement yesterday.
GCC hydrocarbon exporters' macroeconomic fundamentals remain strong, driven by a sustained Brent oil price above $100 per barrel, leading the agency to expect GDP growth of four per cent and above in 2013 for most of the GCC nations.
The GCC region's economic performance is more in line with faster-growing emerging Asian-Pacific and Africa than European or North American markets. All GCC sovereigns have stable outlooks.
These positive factors have allowed corporate and infrastructure entities, including Qatar Telecom, Dubai Electricity and Water Authority, and Saudi Electric, to tap the market through dollar bond and sukuk to meet their funding needs.
"The rates achieved for these entities have been significantly lower than just one or two years ago," said Standard & Poor's credit analyst Karim Nassif.
The key risks to this rosy picture are an escalation in regional political instability or an unexpected fall in oil prices.
Fortunately, these risks are negatively correlated, with any threat to supplies of hydrocarbons normally resulting in immediate price rises.
"With important spending plans ahead in the GCC infrastructure space a key challenge for the sector will also be to keep inflation under control," Nassif said.-TradeArabia News Service