Emerging Markets Roundup: Middle East

GULF BONDS PROVIDE SHELTER FOR INVESTORS FROM CRISIS


By Gordon Platt

 

The Gulf Cooperation Council (GCC) states are enjoying enormous demand for their debt from global investors.


Sukuk, or Islamic bonds, are particularly popular, in part because of their relative scarcity. When Qatar sold $4 billion of sukuk in a two-part offering in July, it received orders totaling more than $24 billion. The dollar-denominated issue was the country's first sukuk available to international investors since 2003.

 

The inflows from investors seeking a haven from the global financial crisis are pushing yields down to record lows. Qatar sold five-year sukuk at a yield of less than 2.1%. Despite fears that a decrease in lending by European banks would cause a liquidity squeeze, the region's nascent bond markets are taking up the slack.

 

Bahrain's first conventional bond issue in two years, a $1.5 billion issue of 10-year debt, was four times oversubscribed. The sale was greeted by the monarchy as a sign of investor confidence in the country, despite frequent anti-government protests by Shiite activists.

 

Meanwhile, the Arab Spring uprising that led to Islamist victories in Egypt and Tunisia has produced a more moderate outcome in Libya. The National Forces Alliance, led by Mahmoud Jibril, who holds a PhD in political science from the University of Pittsburgh, won 39 of 80 seats reserved for political parties in the General National Congress. The Muslim Brotherhood–affiliated Justice and Development Party won only 17 seats.

 

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