DUBAI - Nasdaq Dubai sees new corporate and government bond issues to drive the local capital market activity when economic conditions improve, the exchange’s chief executive said.
Jeff Singer said regional bond and debt issues will come before any revival
of initial public offerings (IPOs), both of which have been hit by the global financial crisis.
"Debt and sukuk issues are going to precede equity listings," he told reporters at a briefing held on Wednesday to announced a new
$100 million bond listing by the International Finance Corporation
(IFC), the World Bank group’s private sector finance arm.
The Gulf Arab market bond market has been lying idle for
much of 2009 after issuance was hit last year by the global
financial crisis. Issuance fell 56 percent to $14.9 billion in 2008, according
to Standard & Poor's.
The market has seen a bit of a revival in the latter part of the year and corporate and sovereign bond issuers in the Gulf have raised over $14 billion in bonds this year amid rising interest from investors for high-rated bonds and banks reluctance to lend.
Gulf IPOs, meanwhile, are at $1.6 billion so far this year, their lowest level since
2004, Thomson Reuters data shows.
Singer said he saw several potential bond issues in the region Nasdaq Dubai hopes to attract for listings a that the exchange is talking to governments to list new bonds.
"The pipeline of debt and sukuk issues that are being talked about and reviewed (by companies and governments) are a natural evolution from the recession that we are in,” he said.
Nasdaq Dubai has struggled to attract big regional equity listings and trade volumes have been low.
In a setback for the exchange, Australia’s Boulder Steel said last month it has decided to withdraw its securities from Nasdaq Dubai because of low turnover and the compliance costs of maintaining the listing.
The value of sukuk traded on the exchange is $16.6 billion, the largest for Islamic bonds for any bourse in the world.
Sukuk are structured around underlying assets, from which returns to bondholders are derived, to account for Islam's prohibition of interest.
Singer said the IFC’s global profile will help the exchange in attracting other issuers.
“This gives us a clear endorsement about our market and our market model,” he said.
The IFC is the first non-Islamic multilateral agency to issue a sukuk.
Nina Shapiro, the IFC’s vice-president for finance, said the money will be used to fund healthcare projects in Yemen and Egypt.
She said the IFC decided to raise money through an Islamic bond because it wanted to tap investors who would only participate in a Sharia-compliant method.
The IFC expects to launch a new sukuk issue every 12 to 16 months to fund projects in the region.