Dubai – “ASWAQ”
Middle East debt issuance jumped to a record high of US$77.8 billion in 2016, a 145 per cent increase compared to 2015 and by far the highest annual total in the region since 1980, as major economies in the region turned to bond and Sukuk market to pull through the challenges posed by the drop in oil revenue, said Nadim Najjar, managing director, Mena, Thomson Reuters.
Thomson Reuters’ investment banking analysis reported that Saudi Arabia’s US$17.2 billion bond sale in October has made it the most active nation in the Middle East accounting for 29 per cent of overall activity, followed by the UAE and Qatar.
On the international side, Islamic debt issuance increased 24 per cent year-on-year to US$37.9 billion in 2016. HSBC took the top spot in the Middle Eastern bond ranking in 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.
Amidst the sharp decline in oil revenues, the combined deficit of the six GCC states is estimated at US$153 billion in 2016 up from US$119 billion in 2015, with Saudi Arabia accounting for 55 per cent or equivalent to more than US$84 billion.
In 2015, GCC’s total revenue, mainly from the oil sector, dropped to US$443 billion, the lowest in 5 years, from a peak of US$735 billion in 2013. The GCC states, which together pump more than 18 million barrels per day of crude oil, suffered significant drop in revenue in 2016, estimated to have dropped further to US$365 billion. The six-nation group is set to post an average annual shortfall of US$100 billion until 2021, according to forecast by Kuwait’s investment firm Kamco.
With regard to investment banking fees, syndicated lending fees increased 50 per cent year-on-year to US$444 million, a 9-year high, while debt capital markets fees more than doubled to US$134.1 million. Fees generated from completed M&A transactions totalled US$200.9 million in 2016, a 20 per cent decrease compared to 2015 and the lowest annual total for M&A fees in the region since 2012. Meanwhile, equity capital markets underwriting fees also declined 51 per cent to US$41.8 million, a 12-year low.
In 2016, HSBC earned the most investment banking fees in the Middle East at US$43.4 million, accounting for a 5.3 per cent share of the total fee pool. Rothschild topped the completed M&A fees ranking with 16 per cent of advisory fees.
During the same period, Middle Eastern investment banking fees reached US$820.8 million, an 18 per cent increase compared to fees recorded in 2015, the highest total annual fee recorded in the region since 2008, according to Thomson Reuters/Freeman Consulting.
M&A transactions involving the Middle Eastern activities were said to have reached US$46.9 billion in 2016, 16 per cent less than the value recorded in 2015 and the lowest annual total in the region since 2013. Middle Eastern equity and equity-related issuance totalled US$2.6 billion in 2016, a 55 per cent drop year-on-year and the lowest annual issuance total in the region since 2004.
The US$14.1 billion merger of National Bank of Abu Dhabi and First Gulf Bank in 2016 was 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 US$22 billion.
Meanwhile, outbound M&A activity dropped 24 per cent from 2015 to US$14.7 billion. Qatar’s overseas acquisitions 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 also recorded a drop by 30 per cent to US$4.0 billion.