Qatar aspires to become a regional model for high-value financial services and a hub for investments and business. This year so far has been a turning point, with the emirate’s debt capital markets growing to around $130 billion, making Qatar the third largest capital market in the region, second only to Saudi Arabia and the UAE. The diversification of Qatari bond issuances also continues to expand.
“We continue to see strong development and sustained momentum in the local capital markets space,” concludes Adel Nastar, Head of Treasury and Markets at QInvest, a leading Qatari investment bank, “particularly as Qatari institutions continue to benefit from global demand for traditional bonds and investments.” “. The sukuks are supported by Qatar’s high credit ratings and stable financial position. This has been reflected in recent local currency issuances, issuances of listed companies, and strong issuance standards from recent US dollar issuances, both senior and first-tier, mostly sukuk.
The increase in debt issuance has set new standards, both for Qatari sovereign debt and offerings by companies based in the emirate.
In May, the country issued $2.5 billion in green bonds, the first issuance of its kind in the region, in line with the government’s focus on developing a sustainable domestic finance sector. Priced at the lowest spreads recorded by any country in the MENA region, the bonds were divided into two tranches: US$1 billion with a five-year maturity at 30 basis points on US Treasuries and US$1.5 billion with a five-year maturity. years. 10-year maturity at 40 basis points. Demand for subscriptions reached $14 billion, reflecting confidence in the green sovereign financing framework established by the Ministry of Finance.
In October, Ooredoo, a Qatari multinational telecommunications company, issued $500 million in 10-year bonds through its subsidiary Ooredoo International Finance Ltd. The bonds were issued as part of an existing $5 billion global medium-term bond program on the Irish Stock Exchange. At 4.625%, the bond spread of 88 basis points over 10-year US Treasuries was the narrowest on record for Ooredoo, as well as one of the lowest for an emerging market corporate issuer, and the lowest for a global telecom company in 10 years. . Annual bonds since 2020.
The offer attracted investors from the United States, the United Kingdom, Europe, Asia, and the Middle East and North Africa region.
In the first half, Qatar National Bank Group, the largest bank in the region, completed the issuance of Formosa bonds under the Euro Medium Term Note (EMTN) program and was listed on the Taipei Stock Exchange. This offering, which is a US$1 billion bond with a maturity of five years, forms part of QNB Group’s strategy to diversify funding sources from new markets.
Qatar has seen strong growth as a center for issuing Islamic sukuks or bonds this year as well, with the dollar value of this sector doubling in the first nine months. Investment Holding Company, a large and diversified public listed Qatari company focusing on healthcare, services, projects and contracting, has succeeded in issuing the first corporate bonds denominated in Qatari riyal sukuk, listed on the London Stock Exchange. This issuance, valued at 500 million Qatari riyals (137 million US dollars), is the opening tranche of the “Investment” sukuk program worth 3.4 billion Qatari riyals.
Istithmar CEO Mohammed bin Badr Al-Sada says: “This issuance demonstrates confidence in the strong Qatari economy, and highlights the ability of the Qatari private sector to expand locally and internationally with the support of government initiatives that create an environment in which companies can develop and thrive.”
Other recent issuers include Qatar Islamic Bank ($750 million for sukuks) and Qatar International Islamic Bank ($300 million for additional Tier 1 capital certificates). The QIIB deal, which was completed in October, was more than eight times oversubscribed, with the total order book exceeding US$2.5 billion, and follows the bank’s US$500 million sustainable sukuk issuance in January and a similar offering of US$250 million in July. QIB’s five-year unsecured sukuk was priced at 4.485%, 100 basis points above US Treasuries. The order book reached $2.2 billion, indicating the strength and diversity of investors interested in Qatari paper.
Green bonds debut
In September, Commercial Bank of Qatar issued its inaugural green bond denominated in Swiss francs as part of the Sustainable Finance Framework, to support green projects in the emirate. This offering is the largest green bond in Swiss francs ever issued in Qatar, the largest offering of its kind from Qatar since 2013, and the largest offering of its kind from Central and Eastern Europe, the Middle East and Africa since 2021. The huge demand resulted in 120 basis points, with a final value. It amounts to 225 million Swiss francs.
Bashar Al-Natour, managing director at Fitch Ratings, expects the influx of new banking offerings to continue as issuers replace upcoming maturities and banks seek to diversify their funding base. He points out that in the first half of this year, sukuk issuance doubled year-on-year, while traditional bond issuance increased by 59% to $12.4 billion. The Qatar Central Bank regularly issues treasury bills and sukuks, giving local banks a place to invest their excess liquidity. Earlier this year, Fitch raised Qatar’s bond rating to AA with a stable outlook, the highest credit rating among the GCC countries.
Nastar says the diversity of Qatar’s issuances, including sovereign green bonds for the first time and local corporate sukuks in Qatari riyals, has enhanced its appeal among global and regional investors looking for traditional bonds, sukuks and sustainable financing options. He adds that post-release performance has been strong, putting Qatar’s DCM market in good stead for next year.
Nastar says the next stage in attracting broader international participation is likely to accompany further development of the swaps and derivatives market in Qatar. The regulatory support provided by the Qatar Central Bank for sustainable finance has helped expand the investor audience, strengthening Qatar’s position as one of the leading countries in the region in the field of capital markets.
“There is already traction in the capital market in Qatar, whether in sukuks or traditional bonds,” says Al-Natour. “The regulator has taken steps to strengthen the still-developing market in recent years. However, limitations remain, such as the nascent riyal market, the concentration of the investor base in banks, and companies’ general preference for bank financing over bonds or sukuk.
At the end of the first half, when the Qatar Central Bank published its ESG and sustainability strategy for the financial sector, it announced its goal to promote sustainable financing and develop ESG sukuks and bonds: another initiative aimed at attracting a segment of the global investor audience. Qatar’s ESG debt at the time reached $3.8 billion, according to Fitch, with sukuks reaching 19.5% of the total.
