gcc bond chart book · gcc bond chart book a comprehensive overview of the risk and return...

GCC Bond Chart BookA comprehensive overview of the risk and return parameters of the key securities in the GCC Fixed Income space

Luciano Jannelli

Prerana Seth

Kishore Muktinutalapati

Mohammed Al Hemeiri

2018 review

GCC Bond Markets – Key Takeaways

This GCC Bond Chart Book provides a comprehensive overview of the bond market performance in 2018 (Chapter I),

the trends in GCC dollar bond issuances (Chapter II) and finally the bond valuations compared mostly with other

emerging market peers (Chapter III and Chapter IV).

Global fixed income markets, including developed and emerging market bonds suffered in 2018. However, GCC dollar

bonds have posted positive returns in 2018, in spite of the volatile oil prices in the last quarter of 2018. Our key

takeaway is – GCC markets remain relatively resilient, confirming our view that the region’s financial markets

(including equities) are relatively insulated from (the repricing of) global growth concerns (see in particular on page 6

the performance of the higher quality sovereigns).

Yet, when comparing GCC sovereign bond market prices with global sovereign bond market prices we can see that -

for each credit class - GCC bonds still appear to be cheaper.

GCC corporate credits have been relatively resilient when compared to corporate bond markets of other EM regions

(Page 8) and also amidst the decline in oil prices. A correction in oil prices in 2019 will prove supportive for the GCC

credit markets.

With majority of the GCC countries moving to an expansionary fiscal policy to boost growth, sovereign bond issuance

(both local and international) is slated to be higher in 2019. However, we expect the demand to be easily absorbed.

Inclusion of GCC bonds in JP Morgan’s Emerging Market Bond Index will attract sizeable fund inflows, leading to

tighter spreads.

All in all, ADCB’ s House View remains cautious about the outlook of global risk assets, and in particular emerging

market assets (bonds and equities) in which we have a tactical underweight. Having said so, within the broader asset

class we are relatively constructive on the GCC bond markets, and maintain a tactical overweight in the higher quality

sovereigns.

2

Index

Chapter I: GCC bond performance in 2018

Chapter II: Primary market bond issuances in

GCC

Chapter III: Credit rating valuation

Chapter IV: GCC valuation analysis

3

Chapter I: GCC bond market

performance

GCC countries: US dollar bond performance

versus EM indices

5

Source: Bloomberg, Barclays indices, ADCB

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Bahrain Kuwait Qatar SaudiArabia

UAE

% r

etu

rn

Jan-Dec 2018

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

% r

etu

rn

GCC Sovereign: 10-year dollar bond yield

performance

6

3.8

4.8

5.8

6.8

7.8

8.8

9.8

10.8

Jan-18 Mar-18 May-18 Jul-18 Aug-18 Oct-18 Dec-181

0-y

ear

bo

nd

yie

ld (

%)

Oman underperformed the most in 4Q18

Brazil Bahrain Oman Argentina

2.8

3

3.2

3.4

3.6

3.8

4

4.2

4.4

4.6

4.8

5

5.2

Jan-18 Mar-18 May-18 Jul-18 Aug-18 Oct-18 Dec-18

10

-yea

r b

on

d y

ield

(%

)

Better quality GCC sovereigns continue to be resilient

Mexico Qatar Saudi Arabia Abu Dhabi

South Korea Indonesia Dubai Kuwait

Source: Bloomberg, ADCB

GCC Sovereign: 30-year dollar bond yield

performance

7

5

6

7

8

9

10

11

30

-yea

r b

on

d y

ield

(%

)

Bahrain is trading cheap versus Turkey

Turkey Bahrain Oman Argentina Brazil

3

3.5

4

4.5

5

5.5

6

Jan-18 Feb-18 Apr-18 Jun-18 Jul-18 Sep-18 Oct-18 Dec-18

Dubai is trading cheap versus other EM peers

Mexico Qatar Saudi Arabia Abu DhabiSouth Korea Indonesia Dubai


GCC corporate bond performance

8

Source: Credit Suisse Indices, Bloomberg Barclays Indices, Bloomberg, ADCB

20

30

40

50

60

70

80

90

100

110

120

125

130

135

140

145

150

155

Jan-14 Oct-14 Aug-15 Jun-16 Apr-17 Feb-18 Dec-18

USD

/bb

l

..even amidst the drop in oil prices

GCC credit index (LHS) Brent Crude (RHS)

150

200

250

300

350

400

450

500

550

600

Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18

GCC credit relatively resilient..

EM Middle East Corp. Bond IndexEM Asia Corp. Bond IndexEM East. Europe Corp. Bond IndexEM EMEA Corp. Bond Index

GCC CDS performance versus EM

9


70

90

110

130

150

170

190

210

230

250

70

80

90

100

110

120

130

Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19

CD

S sp

read

(In

dex

ed a

t Ja

n 2

01

8=1

00

)

CD

S sp

read

(In

dex

ed a

t Ja

n 2

01

8=1

00

)

Saudi Arabia CDS widened the most in 4Q18

Dubai Saudi Arabia Kuwait Abu Dhabi

Bahrain (RHS) Oman EM average

-400 -200 0 200 400

QatarSouth Korea

KuwaitThailand

Abu DhabiHungary

DubaiCzech

Saudi ArabiaChile

RomaniaChina

PolandRussia

PeruPhilippines

BahrainIndiaBrazil

MexicoMalaysia

IndonesiaColombia

South AfricaEgyptOman

TurkeyArgentina

GCC sovereign CDS have been rangebound

2018 change in 5-year CDS

Chapter II: Primary market bond

issuances in GCC

11

JP Morgan bond index inclusion


• Sovereign and quasi-sovereign debt issuers

from Saudi Arabia, Qatar, UAE, Bahrain and

Kuwait eligible to be included in the EMBI

Global Diversified (EMBIGD), EMBI Global

(EMBIG) and EURO-EMBIG indices

• Entry will be phased over nine months

beginning from January 2019 (31st Jan 2019–

30th Sep 2019)

• Both conventional bonds and sukuk to be

included. For the sukuk to be included, a

credit rating from at least one of the three

major rating agencies is mandatory

• With the inclusion, GCC countries will

represent 11.2% of the JP Morgan's EMBI

Global Diversified and EMBI Global series

• The GCC weighting will gradually increase to

17% of the overall index

• The inclusion is likely to attract sizeable

fund inflows (USD30-40bn), leading to tighter

spreads

3.1

2.72.6

2.10.8

Potential weight in the EMBI global diversified index (%)

Saudi Arabia Qatar UAE Bahrain Kuwait

Improve liquidity

VisibilityLower cost of funding

12

GCC economies to expand fiscal budgets in 2019

-25

-15

-5

5

15

25

35

45

2008 2010 2012 2014 2016 2018

Fisc

al b

alan

ce (

% o

f G

DP

)

..will need to raise borrowing to fund their fiscal deficits

Bahrain Kuwait OmanQatar Saudi Arabia UAE

-40

-20

0

20

40

60

2008 2010 2012 2014 2016 2018

Cu

rren

t A

cco

un

t B

alan

ce (

% o

f G

DP

)

Bahrain and Oman have weak external balances..

Bahrain Kuwait Oman

Qatar Saudi Arabia UAE

Source: IMF, ADCB

13

Reduced dependency on oil

Source: IIF, Bloomberg, ADCB

SaudiKuwait

UAEQatar

Oman Bahrain

30%

40%

50%

60%

70%

80%

90%

40 60 80 100 120

oil

reve

nu

e (%

of

tota

l rev

enu

e)

2018 budget break-even oil price

Dependency on Oil revenue

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Oil

bre

akev

en (

USD

/bb

l)

Oil breakevens have declined

Saudi Kuwait UAE Qatar Oman Bahrain

14

More diversification needed

Source: IIF, ADCB

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bahrain Oman Saudi Arabia Kuwait UAE Qatar

Oil

reve

nu

e (%

of

tota

l rev

enu

e)

2013 2014 2015 2016 2017 2018f 2019f

Sovereign dollar bond issuance trend

15

4 3 3 3

40

50

37

0

10

20

30

40

50

60

2012 2013 2014 2015 2016 2017 2018

USD

bn

Sovereign dollar bond issuance has more than tripled

GCC sovereign dollar bond issuance (USD bn)

0 20 40 60

2016

2017

2018

USDbn

Bulk of issuance from Saudi Arabia

UAE Bahrain Kuwait Oman Qatar Saudi Arabia


Corporate dollar bond issuance trend

16

9

1922

14

24

31

42

0

5

10

15

20

25

30

35

40

45

2012 2013 2014 2015 2016 2017 2018

USD

bn

Corporate dollar bond issuance

0

5

10

15

20

25

30

35

40

2016 2017 2018

USD

bn

Financials and Agencies dominate issuance

Agency Financials Industrial

Real Estate Utility


Saudi’s first dollar bond sale of 2019 was a

success

17Note: “T” refers to similar-maturity treasuries Source: Bloomberg, ADCB

7.5

27

0

10

20

30

40

USD

bn

Strong demand at 1st bond sale of 2019

Issue size Total bids

4

3.5

Issue size (bn)

10y 30y

T+175

T+230

T+200

T+250

130

150

170

190

210

230

250

270

10y 30y

Saudi USD7.5bn bond sale

Final Pricing Initial Pricing

0%

20%

40%

60%

80%

Fundmanagers

Banks Central banks Insurance &pension funds

% o

f th

e p

rim

ary

issu

ance

Subscribers' share of total issuance

10y 30y

0%

10%

20%

30%

40%

50%

US Europe Asia Middleeast

UK% o

f th

e p

rim

ary

issu

ance

Subscribers' nationality as a share of total issuance

10y 30y

18

Strong demand for GCC sovereign bond issuers in 2018

4.4x4.7x

2.3x

2.1x 2.4x

0

10

20

30

40

50

60

70

Qatar's 3-tranchebond deal

Saudi 3-tranchebond deal

Oman's 3 tranchebond deal

Bahrain 7.5yrSukuk

Sharjah 7.5yrSukuk

USD

bn

Strong demand for bond issuances in 2018

Issue size Bids amount received


Major corporate dollar bond deals of 2018

19

Note: Deals of only amount issued greater than USD500m are shortlisted, *Priced at issue indicated as spread over Treasury (T) or as mid-swap spread (M) , Bloomberg sector classification has been used, ^Fitch rating used instead of Moody’s rating Source: Bloomberg

Corporate Issuer

Bloomberg

Ticker Sector Country

Amount

Issued Coupon Maturity Maturity Type Issue Date

Moody

Rtg

Priced at

issue

(spread,

bp)*

QNB Finance Ltd QNBK Agency QA 1500 0 5/31/2021 AT MATURITY 5/31/2018 Aa3 -

QNB Finance Ltd QNBK Agency QA 1388 0 2/12/2020 AT MATURITY 2/12/2018 Aa3 -

Saudi Electricity Global Sukuk Co 4 SECO Agency SA 1200 4.72 9/27/2028 AT MATURITY 9/27/2018 A2 M+160

DP World Ltd DPWDU Financials AE 1000 5.63 9/25/2048 AT MATURITY 9/25/2018 Baa1 T+251

Abu Dhabi National Energy Co PJSC TAQAUH Agency AE 1000 0 4/23/2030 AT MATURITY 4/23/2018 Baa1 T+205

SABIC Capital II BV SABIC Financials SA 1000 4.00 10/10/2023 AT MATURITY 10/10/2018 A3 T+115

SABIC Capital II BV SABIC Agency SA 1000 4.50 10/10/2028 AT MATURITY 10/10/2018 A3 T+155

DP World Crescent Ltd DPWDU Agency AE 1000 0.00 9/26/2028 AT MATURITY 9/26/2018 Aa3 T+181

DIB Sukuk Ltd DIBUHFinancial Institutions AE 1000 3.63 2/6/2023 AT MATURITY 2/6/2018 Baa3 M+115

QNB Finance Ltd QNBK Agency QA 1000 3.94 2/7/2020 AT MATURITY 2/7/2018 B2 -

Shelf Drilling Holdings Ltd SHLFDI Industrial AE 900 8.25 2/15/2025 CALLABLE 2/7/2018 A2 T+557

Oztel Holdings SPC Ltd OTELOM Financials OM 900 6.63 - AT MATURITY 4/24/2018 B1 T+406

Saudi Electricity Global Sukuk Co 4 SECO Agency SA 800 4.22 1/27/2024 AT MATURITY 9/27/2018 Aa3 M+115

MDC-GMTN BV MUBAUH Financials AE 800 4.50 11/7/2028 AT MATURITY 11/7/2018 Aa3 T+141

ADIB Capital Invest 2 Ltd ADIBUH Financials AE 750 7.13 - PERP/CALL 9/20/2018 Aa3 T+427

ADCB Finance Cayman Ltd ADCBUH Financials AE 750 4.00 3/29/2023 AT MATURITY 3/29/2018 Baa3 T+145

Abu Dhabi National Energy Co PJSC TAQAUH Financials AE 750 4.38 4/23/2025 AT MATURITY 4/23/2018 - T+160

QNB Finance Ltd QNBK Financials QA 720 0.00 1/23/2048 CALLABLE 1/23/2018 A1 -

Fab Sukuk Co Ltd FABUH Financials AE 650 3.63 3/5/2023 AT MATURITY 3/5/2018 - M+95

First Abu Dhabi Bank PJSC FABUH Financials AE 610 0.00 1/22/2048 CALLABLE 1/22/2018 Baa3 -

Oztel Holdings SPC Ltd OTELOM Financials OM 600 5.63 10/24/2023 AT MATURITY 4/24/2018 A2 -

Zahidi Ltd EMIRAT Financials AE 600 4.50 3/22/2028 SINKABLE 3/22/2018 Baa3 T+198

Oztel Holdings SPC Ltd OTELOM Financials OM 600 5.63 10/24/2023 AT MATURITY 4/24/2018 A3 -

ADCB Finance Cayman Ltd ADCBUH Financials AE 540 0.00 1/18/2048 CALLABLE 1/18/2018 B1 -

Nile Delta Sukuk Ltd DANAUH Financials AE 530.406 4.00 10/31/2020 CALLABLE 8/13/2018 A3 -

National Bank of Oman SAOG NBOBOM Financials OM 500 5.63 9/25/2023 AT MATURITY 9/25/2018 A1 T+282

20

Abu Dhabi Sovereign Dollar Debt Maturity Profile


0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047

USD

bn

Principal Interest

21

Dubai Sovereign Dollar Debt Maturity Profile


0

2

4

6

8

10

122

01

9

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

20

41

20

42

20

43

USD

bn

Principal Interest

22

Saudi Arabia Sovereign Dollar Debt Maturity Profile

0

1

2

3

4

5

6

7

8

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049

USD

bn

Principal Interest


23

Kuwait Sovereign Dollar Debt Maturity Profile


0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2019 2020 2021 2022 2023 2024 2025 2026 2027

USD

bn

Principal Interest

24

Bahrain Sovereign Dollar Debt Maturity Profile

0

0.5

1

1.5

2

2.5

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047

USD

bn

Principal Interest


25

Oman Sovereign Dollar Debt Maturity Profile


0

0.5

1

1.5

2

2.5

3

3.5

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047

USD

bn

Principal Interest

Chapter III: Credit rating

valuation

GCC sovereigns vs EM peers- 10yr segment

27

Note: The ratings refer to Fitch ratings, * DEWA credit rating used as a proxy for Dubai credit rating Source: Bloomberg, ADCB

AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B

Brazil

ColombiaMexicoChile

Peru

Turkey

Russia

South Africa

QatarSaudi Arabia

Hungary

Abu DhabiPoland

Bahrain

Romania

KuwaitSouth Korea

China

Indonesia

Philippines

Oman

Argentina

Egypt

Dubai*

3

4

5

6

7

8

9

10

11

10

-ye

ar y

ield

s

GCC sovereigns trading cheap versus peers

GCC vs EM peers- 30yr segment

28


BrazilColombia

Mexico

Chile Peru

Turkey

Russia

South Africa

Qatar

Saudi Arabia

HungaryAbu Dhabi

Bahrain

Romania

South Korea

Indonesia

Oman

Argentina

Egypt

Dubai

3

4

5

6

7

8

9

10

11

30

-yea

r yi

eld

s

GCC sovereigns appear cheap versus other EM

AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B

AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B

BrazilColombiaMexico

ChilePeru

Turkey

Russia

South Africa

QatarSaudi Arabia

Dubai*

HungaryAbu Dhabi Poland

Bahrain

RomaniaCzech

Kuwait

South Korea

China

Indonesia

IndiaMalaysia

PhilippinesThailandUK Spain

Italy

France Austria Belgium

Argentina

Oman

0

100

200

300

400

500

600

700

800

900

CD

S sp

read

s (b

p)

GCC CDS versus ratings

29


AA-

A+

A

A-

BBB+

BBB

BBB-

BB+

BB

BB-

B+

B

FAB

HSB

C M

EN

BK

AD

CB

AD

IBEm

irat

es Is

lam

ic B

ank

Emir

ates

NB

DU

NB

CB

KG

ulf

Ban

kA

l Ah

li B

ank

of

Ku

wai

tA

l Ah

li U

nit

ed b

ank

Bu

rgan

Ban

kK

uw

ait

Inte

rnat

ion

al B

ank

Ku

wai

t Fi

nan

ce H

ou

seB

ou

bya

n B

ank

War

ba

Ban

kQ

atar

Nat

ion

al B

ank

Du

bai

Isla

mic

Ban

kM

ash

req

Ah

li B

ank

QSC

Qat

ar Is

lam

ic B

ank

DO

HA

BA

NK

Al K

hal

iji B

AN

KC

BD

No

or

Ban

k A

l-B

ilad

*R

AK

BA

Nk

NB

FSh

arja

h Is

lam

ic B

ank

Nat

ion

al C

om

mer

cial

Ban

kB

anq

ue

Sau

di F

ran

siR

iyad

Ban

kSa

mb

a Fi

nan

cial

gro

up

Al R

ajh

i Ban

kA

rab

nat

ion

al b

ank

Ah

li U

nit

ed B

ank

Gu

lf In

tl B

ank

Alin

ma

Ban

kSa

ud

i Ho

llan

di

Ban

k A

lJaz

ira

Sau

di I

nve

stm

ent

Ban

kU

nit

ed A

rab

ban

kSa

ud

i Bri

tish

Ban

kB

ank

Mu

scat

NB

OB

ank

Dh

ofa

rB

ank

Soh

ar S

OA

GN

BB

Om

an A

rab

Ban

k*B

ank

Niz

wa*

Bah

rain

Isla

mic

Ban

k

GCC Financials

GCC Financials credit rating

30

Note: The ratings refer to Fitch ratings, *S&P rating used as substitute where the corporate/bank not rated by Fitch ratings Source: Bloomberg, ADCB

GCC corporates credit rating

31

Note: The ratings refer to S&P ratings, ** Fitch ratings used as substitute where the corporate/bank not rated by S&P ratings, ^ refers to Moody’s ratingsSource: Bloomberg, ADCB

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

BB+

BB

BB-

B+

B

B-

CCC+

Mu

bad

ala

IPIC

Etis

alat

Qat

ari D

iar

Qat

ari P

etro

leu

m

Do

lph

in e

ner

gy**

Nak

ilat

RA

SGA

S

Etih

ad**

Oo

red

oo SEC

O

SAB

IC

Sau

di T

elec

om

TAQ

A**

DEW

A

DP

Wo

rld

**

Jafz

**

MA

F

Ald

ar^

DIF

C

Ku

wai

t p

roje

cts

Co

Emaa

r

OM

GR

ID**

Dam

ac

Ezd

an H

old

ing

Bat

elco

Top

az w

orl

d**

Ku

wai

t en

ergy

GCC Corporates

Chapter IV: GCC valuation

analysis

GCC sovereign dollar yield curves

33

BHRAIN 5.875 1/21BHRAIN 6.125 8/23

BHRAIN 7 10/28 BHRAIN 7.5 9/47

OMAN 3.625 6/21 OMAN 3.875 3/22

OMAN 5.375 3/27

OMAN 6.5 3/47

4

5

6

7

8

3yr 5yr 10yr 30yr

ADGB 2.125 5/21ADGB 2.5 10/22

ADGB 3.125 10/27

ADGB 4.125 10/47DUGB 5.59 6/21

DUGB 3.875 01/23

DUGB 5 04/29

DUGB 5.25 1/43

KSA 2.375 10/21KSA 2.875 3/23

KSA 3.625 3/28

KSA 4.625 10/47

KUWIB 2.75 3/22

KUWIB 3.5 3/27

QATAR 2.375 6/21 QATAR 3.875 4/23

QATAR 4.5 4/28

QATAR 5.103 4/48

3

3.5

4

4.5

5

5.5

6

3yr 5yr 10yr 30yr


Abu Dhabi z-spread and yield curve (YTD

change)

34

-60

-10

40

90

140

190

0

1

2

3

4

5

Z-sp

read

(b

ps)

Yiel

d

29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)

Note: YTD change: 29th December 2017 to 31st December 2018, , Source: Bloomberg, ADCB

The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.

Dubai z-spread and yield curve (YTD

change)

35: YTD change: 29th December 2017 to 31st December 2018, , Source: Bloomberg, ADCB


0

50

100

150

200

250

300

0

1

2

3

4

5

6

Z-sp

read

(b

ps)

Yiel

d


Saudi Arabia z-spread and yield curve (YTD

change)

36: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018, , Source: Bloomberg, ADCB


0

50

100

150

200

250

300

0

1

2

3

4

5

6

Z-sp

read

(b

ps)

Yiel

d


Kuwait z-spread and yield curve (YTD

change)

37: YTD change: 29th December 2017 to 31st December 2018, , Source: Bloomberg, ADCB

35

45

55

65

75

85

95

105

115

125

135

0

0.5

1

1.5

2

2.5

3

3.5

4

KUWIB 2.75 3/22 KUWIB 3.5 3/27

Z-sp

read

(b

ps)

Yiel

d



Bahrain z-spread and yield curve (YTD

change)

38: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018, S= International SukukSource: Bloomberg, ADCB


200

250

300

350

400

450

500

550

600

0

1

2

3

4

5

6

7

8

9

Z-sp

read

(b

ps)

Yiel

d


Oman z-spread and yield curve (YTD

change)

39: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018 , Source: Bloomberg, ADCB


100

150

200

250

300

350

400

450

500

550

600

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Z-sp

read

(b

ps)

Yiel

d


GCC corporate top performers (spread

performance in 2018)

40

Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and maturing in 2019 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB

The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.

-4.5-4.5-4.6-4.8-4.9-5.2-6.7-7.8-7.8-7.8-8.6-9.0-9.0-10-13-18-25-29

-39-68

-281-396

-425-614

-637

-700-600-500-400-300-200-1000

MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 09/19/22 MASQUH Float 09/07/22

NOORBK 6 ¼ PERP MASQUH Float 06/08/22

BATELC 4 ¼ 05/01/20 MASQUH Float 11/09/20

MUBAUH 6 ⅞ 11/01/41MUBAUH 6 ⅞ 11/01/41

MASQUH Float 01/18/20QTELQD 7 ⅞ 06/10/19QTELQD 7 ⅞ 06/10/19

MASQUH Float 05/25/20 MASQUH Float 10/21/19 MASQUH Float 08/29/19

BUBYAN 6 ¾ PERP EBIUH Float 03/31/24 EBIUH Float 10/12/20

BGBKKK 7 ¼ PERP KUWAIE 9 ½ 08/04/19 EBIUH Float 11/27/23 EBIUH Float 05/16/19

ALHILA Float 01/09/19 EBIUH Float 02/27/19

Performance from 29 Dec 2017 to 31 Dec 2018

GCC corporate bottom performers (spread

performance in 2018)

41

Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and with maturing in 2019 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB


2,361510

412379372

273229229225225205202185185173172150145145142121120111105100

05001000150020002500

EAPART 6 ⅞ 09/28/20ERESQD 4 ⅜ 05/18/21

KWIPKK 4.8 02/05/19 DAMACR 6 ¼ 04/20/22

ERESQD 4 ⅞ 04/05/22 DPWDU 1 ¾ 06/19/24 OMGRID 3.958 05/07/25 OMGRID 3.958 05/07/25 OMGRID 5.196 05/16/27 OMGRID 5.196 05/16/27 MAFUAE 5 ½ PERP EBIUH Float 03/11/23 MAZOON 5.2 11/08/27 MAZOON 5.2 11/08/27 FABUH 3 ¼ 01/14/19

NBOBOM 3 ⅛ 10/07/19 BKMBOM 3 ¾ 05/03/21 KWIPKK 4 ½ 02/23/27 DAMACR 4.97 04/09/19

KWIPKK 9 ⅜ 07/15/20 ALHILA 5 ½ PERP EBIUH 5.35 07/11/22 KWIPKK 5 03/15/23 EBIUH 2.65 04/12/19 EMAAR 3.635 09/15/26


GCC Investment Grade corporates (BBB- rated

and above only) spread performance in 2018

42



444221

-3-5-5-8-8-8-9-9-18-29-39

-396-425

-614

-750-550-350-15050

MASQUH Float 02/28/21 QTELQD 4 ½ 01/31/43 QTELQD 4 ½ 01/31/43 RASGAS 6 ¾ 09/30/19 RASGAS 6 ¾ 09/30/19 EBIUH Float 01/26/20

UNBUH Float 02/28/22 MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 11/09/20

MUBAUH 6 ⅞ 11/01/41MUBAUH 6 ⅞ 11/01/41

QTELQD 7 ⅞ 06/10/19QTELQD 7 ⅞ 06/10/19

MASQUH Float 08/29/19 EBIUH Float 03/31/24 EBIUH Float 10/12/20 EBIUH Float 11/27/23 EBIUH Float 05/16/19

ALHILA Float 01/09/19

Top performers..

Z-spread (bp)

636565666670

777981818387

9494

105120

150173

202273

0100200300

EBIUH 2.7 03/30/19 EBIUH 4.27 09/28/37 EBIUH 4 ½ 03/16/27 FABUH 4.365 08/09/32 FABUH 4.1 09/24/32

EBIUH 4 ⅛ 07/06/32 EBIUH Float 04/10/19 MAFUAE 4 ¾ 05/07/24 GULINT 3 ½ 03/25/22 RAKBNK Float 07/24/21 EBIUH Float 04/26/19

ETISLT 2 ⅜ 06/18/19 DOLNRG 5.888 06/15/19 DOLNRG 5.888 06/15/19 EBIUH 2.65 04/12/19 EBIUH 5.35 07/11/22 BKMBOM 3 ¾ 05/03/21 FABUH 3 ¼ 01/14/19 EBIUH Float 03/11/23 DPWDU 1 ¾ 06/19/24

..bottom performers

Z-spread (bp)

GCC High Yield corporates (rated BB+ and

below only) spread performance in 2018

43



379

229

229

205

150

145

2

-281

-400-300-200-1000100200300400500

DAMACR 6 ¼ 04/20/22

OMGRID 3.958 05/07/25

OMGRID 3.958 05/07/25

MAFUAE 5 ½ PERP

BKMBOM 3 ¾ 05/03/21

DAMACR 4.97 04/09/19

FABUH 5 ¼ PERP

KUWAIE 9 ½ 08/04/19


UAE financials (spread performance in 2018)

44



121

39

34

34

4

-2

-5

-5

-5

-5

-5

-5

-8

-9

-10

-13

-18

-40-20020406080100120140

ALHILA 5 ½ PERP

CBDUH 4 11/17/20

EIBUH 3.542 05/31/21

DIFCAE 4.325 11/12/24

MASQUH Float 02/28/21






NOORBK 6 ¼ PERP








45

Disclaimer

ADCB Asset Management Limited (“AAML”), is a member of ADCB Group, licensed by Financial Services Regulatory Authority in Abu Dhabi

Global Markets under financial services permission number 170036.

This publication is intended for general information purposes only. It should not be construed as an offer, recommendation or solicitation to purchase or

dispose of any securities or to enter in any transaction or adopt any hedging, trading or investment strategy. Neither this publication nor anything

contained herein shall form the basis of any contract or commitment whatsoever. Distribution of this publication does not oblige ADCB Group to enter into

any transaction. The content of this publication should not be considered as legal, regulatory, credit, tax or accounting advice. Anyone proposing to rely

on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the

information and should obtain independent and specific advice from appropriate professionals or experts regarding information contained in this

publication. Investment products are not available to US persons.

Information and opinions contained herein is are based on various sources, including but not limited to public information, annual reports and statistical

data that AAML considers accurate and reliable. However, AAML makes no representation or warranty as to the accuracy or completeness of any

statement made in or in connection with this publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission

taken as a result of the information contained in this publication. This publication is intended for customers who are either retail or professional investors.

Charts, graphs and related data or information provided in this publication are intended to serve for illustrative purposes only. The information contained

in this publication is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors

relevant to their determination. All statements as to future matters are not guaranteed to be accurate. AAML expressly disclaims any obligation to update

or revise any forward looking statement to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of

unanticipated events.

ADCB Group does and may at any time solicit or provide commercial banking, investment banking, credit, advisory or other services to the companies

covered in its publications. As a result, recipients of this publication should be aware that any or all of foregoing services may at time give rise to a

conflict of interest that could affect the objectivity of this publication. Opinions expressed herein may differ from opinions expressed by other businesses

or affiliates of ADCB Group.

Past performance does not guarantee future results. Investment products are not bank deposits and are not guaranteed by ADCB Group. They are

subject to investment risk, including possible of loss of principal amount invested. This publication may not be reproduced or circulated without ADCB

Group written authority. The manner of circulation and distribution may be restricted by law or regulation in certain jurisdictions. Persons who come into

possession of this document are required to inform themselves of, and to observe such restrictions. Any unauthorized use, duplication, or disclosure of

this document is prohibited by law and may result in prosecution.

gcc bond chart book · gcc bond chart book a comprehensive overview of the risk and return...

Documents