Latest news with #TimucinEngin
Arab News
01-07-2025
- Business
- Arab News
Saudi debt markets set to expand further on Vision 2030 reforms: S&P
RIYADH: Saudi Arabia's domestic corporate bond and sukuk markets are set to gain further momentum, fueled by Vision 2030 investments and ongoing regulatory reforms, according to a new analysis by S&P Global. In its latest report, the ratings agency noted that the Kingdom's domestic debt markets have grown steadily over the past five years, with corporate bonds and sukuk issuance more than doubling to $37 billion in the first quarter of 2025, up from $15.5 billion in the same period of 2020. The findings come as Saudi Arabia leads the Gulf Cooperation Council in primary debt issuance. In the first quarter of 2025, the Kingdom accounted for over 60 percent of all GCC sukuk and bond activity, raising $31.01 billion through 41 offerings, according to Kuwait Financial Center, also known as Markaz. Timucin Engin, credit analyst at S&P Global Ratings, said: 'The development of Saudi Arabia's overall financial markets continues to accelerate due to large-scale Vision 2030 investments, regulatory reforms, initiatives to attract overseas funding, and investments in capital markets infrastructure over the past decade.' He added: 'The markets' growth will help companies to diversify their funding bases and secure long-term capital.' In January, an analysis by S&P Global projected that global sukuk issuance would reach between $190 billion and $200 billion in 2025, driven by increased activity in key markets such as Saudi Arabia and Indonesia. While the Kingdom's domestic market has expanded, S&P noted that issuance remains concentrated, with Saudi financial institutions accounting for 65 percent of outstanding corporate debt as of May 25, followed by nonfinancial state-owned entities at 25 percent and private-sector non-financial corporates at 10 percent. The report highlighted the role of the Saudi stock exchange, whose data show that total domestic sovereign and non-sovereign issuance stood at 20.7 percent of gross domestic product in the first quarter of 2025. Corporate issuance alone rose to 3.4 percent of GDP, up from 1.9 percent in 2020, though still below levels seen in more mature emerging markets. S&P Global also cautioned that the potential long-term structural growth of Saudi Arabia's domestic corporate bond market could be affected if geopolitical tensions in the region escalate. 'We also note that the sharp escalation of the Israel-Iran conflict creates high uncertainty for the markets and their outlook in the Middle East,' said the report. It further noted that Saudi Arabia's equity markets have developed more rapidly than its debt markets, as the country's robust banking system has historically provided competitive financing for non-financial corporates, thereby crowding out interest in debt capital markets. Developing debt market According to the report, a developed local debt market enables issuers to access different pools of capital with varied terms and conditions suited to their financing needs. It also complements the equity market by providing financial solutions for local investment activities, thus supporting the broader economy. Additionally, a local debt market attracts both domestic and foreign investors, creating a deeper and more diversified investor base that should enhance funding availability for issuers. In April, Fitch Ratings reported that Saudi Arabia's debt capital market continued its upward trajectory in the first quarter of 2025 despite geopolitical tensions and economic headwinds. According to Fitch, the market reached $465.8 billion by the end of March, marking a 16 percent year-on-year increase, with sukuk accounting for 60.4 percent of the total. The Kingdom's debt market is expected to surpass $500 billion in outstanding value by the end of 2025, supported by strong economic fundamentals, diversified funding strategies, and sustained progress under Vision 2030. In December, Kamco Invest projected that Saudi Arabia will lead the GCC in bond maturities over the next five years, with around $168 billion in Saudi bonds expected to mature between 2025 and 2029 — highlighting the Kingdom's growing role in the region's debt landscape. S&P Global, however, pointed out that liquidity and foreign participation remain limited in Saudi Arabia's financial markets. 'Saudi financial institutions are the main investors and tend to hold the securities until maturity, which explains the limited secondary trading activity,' said the report. It added: 'Despite some growth over the past few years, foreign investors, including investors from the Gulf Cooperation Council region accounted for less than 2 percent of the outstanding listed and unlisted issuance as of first-quarter 2025.' Key initiatives S&P Global also outlined major initiatives undertaken by Saudi authorities to drive capital market development. In 2015, Saudi Arabia resumed issuing instruments denominated in Saudi riyals, marking a return to domestic debt markets. Two years later, the Ministry of Finance — through the National Debt Management Center — launched the riyal-denominated sukuk program. In 2018, NDMC partnered with five local financial institutions as primary dealers to broaden the investor base and improve liquidity in government securities. More local dealers were added in 2021, followed by five international banks in 2022. Most recently, NDMC raised SR2.355 billion ($628 million) through its June sukuk issuance. In May, the Kingdom raised SR4.08 billion via riyal-denominated offerings, a 9.09 percent increase from April and a 54.5 percent jump compared to March. In parallel, the Financial Sector Development Program was launched in 2018 to advance the Kingdom's financial markets, with a particular focus on debt capital markets. Tadawul was restructured into a holding group in 2021 to streamline operations and governance. That same year, a partnership between Edaa and Euroclear enabled international investors to access the Saudi sukuk and bond markets, improving trading, clearing, and settlement processes. S&P also noted continued efforts by Saudi authorities to enhance the regulatory environment, including the enactment of an updated investment law in 2024. The law provides greater protections for investors, including guarantees on fair treatment, property rights, intellectual property safeguards, and the free movement of capital.
Zawya
01-07-2025
- Business
- Zawya
Vision 2030 investments driving Saudi equity markets growth: S&P
With Saudi authorities continuing to invest in developing the domestic corporate bond and sukuk markets, the development of the kingdom's financial markets is likely to accelerate, stated S&P Global Ratings in its report "Local Ambitions, Global Lessons: Benchmarking Saudi Arabia's Domestic Corporate Bond And Sukuk Markets." In this report, the ratings agency also examines the development of sukuk markets in Latin America, Europe, the Middle East, and Asia. In emerging Asia, the development of deeper domestic capital markets has been a consistent economic policy, even though the depth and composition of domestic bond markets vary widely. "The development of Saudi Arabia's overall financial markets continues to accelerate due to large-scale Vision 2030 investments, regulatory reforms, initiatives to attract overseas funding, and investments in capital markets infrastructure over the past decade," said S&P Global Ratings credit analyst Timucin Engin. "The markets' growth will help companies to diversify their funding bases and secure long-term capital," he noted. The kingdom's Vision 2030 projects are aimed at developing a liquid local-currency debt capital market with diverse issuers and investors. Significant hard currency issuance by nonfinancial corporates began only a few years ago, but it's starting to speed up. "Deeper domestic capital markets all share the same characteristics of high issuer and investor diversity, stringent and timely disclosure requirements, good liquidity, and high-quality market infrastructure," said S&P Global Ratings credit analyst Xavier Jean. "Malaysia's and Thailand's in particular have been well developed for decades. Malaysia hosts the most developed Sukuk market globally, now accounting for over 60% of global issuance," he added. "The 1981 privatization of the pension system enhanced the demand for domestic fixed income products in Chile," said S&P Global Ratings credit analyst Luca Rossi. "The development of a solid local bond market was facilitated by a favorable legislative framework, promoting transparency and investor protection," he added. Similarly, the role of the central government was crucial in Brazil in supporting the ascent of local institutional investors and promoting the diversification of the corporate bond market, even through tax incentives (infrastructure debentures). KEY TAKEAWAYS *The Saudi domestic corporate bond and sukuk markets expanded at a steady pace over the past five years, while a limited number of issuers currently dominate the markets. Foreign participation and secondary trading are limited. S&P Global Ratings believes strategic investments in market infrastructure, policy support, and regulatory developments should support the markets' long-term growth. "We view the development of domestic bond and sukuk markets as supporting credit conditions in the country because companies can diversify their funding bases and access long-term capital, it added. Copyright 2024 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (
