20170201-法国巴黎银行-EM_CREDIT_STRATEGY_11页_342kb

EM Credit Strategy Summary: GCC Sovereign Credit 2017

Core Content Overview

This report provides an analysis of international debt issuance expectations for GCC sovereigns in 2017, focusing on the economic and political factors influencing these decisions. It also includes pricing expectations for potential new Kuwait Eurobonds and highlights the key credit strengths and challenges of each country.

Key Countries and Issuance Expectations

Main Points and Analysis

Kuwait

• Issuance Expectation: The report expects Kuwait to issue USD 10bn in Eurobonds in 2017.
• Sukuk: Sukuk issuance is likely to be delayed due to the need for parliamentary approval.
• Fair Value: Kuwait Eurobonds are expected to trade flat to Abu Dhabi, reflecting its strong fiscal reserves and external position.
• Pricing: Given the large issuance size and political tensions, the spread is expected to be flat to Abu Dhabi.
• Economic Overview: Kuwait is the fourth-largest economy in the GCC with a high GDP per capita and substantial oil reserves.
• Fiscal Deficit: The 2017/18 budget targets a KWD 13.3bn revenue and a KWD 11.7bn oil revenue, resulting in a deficit of KWD 6.6bn (USD 21.6bn).
• Debt and Reserves: Government gross debt is forecast at 22.4% of GDP, which is one of the lowest in the region. The country has significant sovereign wealth funds, including the Future Generations Fund (FGF) and General Reserve Fund (GRF), estimated at USD 532bn combined.
• Political Tensions: Political tensions between the National Assembly and the government could delay reforms and affect fiscal policy.

Bahrain

• Budget Delay: No details on the 2017 budget have been released, making issuance prediction difficult.
• Deficit: The IMF predicts a USD 4bn deficit for 2017, with around half expected to be financed by international debt.
• Issuance: The report assumes USD 2bn in Eurobonds for 2017, with local currency treasury bills likely to be refinanced domestically.

Oman

• Deficit: Expected to have a USD 7.8bn deficit in 2017, assuming an oil price of USD 45/bbl.
• Issuance: The country plans to issue USD 1.5-2bn in international bonds, including sukuk. The report assumes USD 1bn in Eurobonds and USD 1bn in sukuk for 2017.

Qatar

• Deficit: Targets a USD 7.8bn deficit in 2017, assuming an average oil price of USD 45/bbl.
• Issuance: The report estimates USD 3bn in Eurobonds for 2017.
• Sukuk: Historically issued, but in smaller volumes than Eurobonds.

Saudi Arabia

• Deficit: Anticipates a USD 52.8bn deficit in 2017, assuming an oil price of USD 50.6/bbl.
• Issuance: Plans to issue USD 12.5bn in Eurobonds and USD 2.5bn in sukuk, totaling USD 15bn.
• Funding Sources: The remainder will be covered by loans, local issuance, and government reserves.

Abu Dhabi

• No Eurobond Issuance: Given current oil prices (Brent around USD 55/bbl), Abu Dhabi is unlikely to issue Eurobonds in 2017.
• Budget: No 2017 budget details are available yet, but the 2016/17 budget shows a deficit of USD 22bn.
• Fiscal Position: The UAE does not currently have a domestic bond market, and the report suggests this may change in the future.

Dubai

• Deficit: Targets a USD 0.7bn deficit in 2017, with a significant portion of spending allocated to infrastructure for the 2020 Expo.
• Issuance: The report assumes USD 1bn in Eurobonds for 2017.
• Sukuk: A USD 600mn sukuk is set to mature in May, potentially prompting new issuance.

UAE (Other Emirates)

• Sukuk Issuance: The report assumes around USD 1bn in sukuk issuance from other Emirates, such as Sharjah and Ras al-Khaimah.

Key Credit Factors

• Kuwait's Strengths:
  • Strong fiscal reserves and external position.
  • Large sovereign wealth funds (FGF and GRF) providing a substantial backstop.
  • Low gross debt compared to other GCC countries.
  • Strong central bank reserves and liquidity.
• Kuwait's Challenges:
  • Political tensions and potential delays in reforms.
  • High oil price dependence, with oil accounting for 89% of government revenues.

Conclusion

The GCC sovereign credit outlook for 2017 is influenced by oil price fluctuations, political dynamics, and the need to manage fiscal deficits. Kuwait is expected to be the largest issuer, with a USD 10bn Eurobond issuance forecast, while other countries like Oman and Saudi Arabia also plan significant international debt issuance. The report highlights the importance of oil prices and fiscal reserves in shaping the creditworthiness of these sovereigns.