A more established debt market would offer borrowers, specifically corporates, greater flexibility and a wider range of funding sources. It would also extend the maturity profile of GCC-based corporates in the long-term and help to change the structural high reliance on short-term funding, which generally acts as a constraint on corporate Issuer Default Ratings (IDRs).
“Fitch believes that some of the key obstacles facing the growth of the GCC corporate debt market include the absence of a quasi risk free benchmark yield curve, limited liquidity and market efficiency,” said Sa’ed Katkhuda in Fitch’s Dubai based office. “However, a focused sovereign bond issuance program and the existence of bond and Sukuk secondary trading platforms, such as those available in Bahrain, Dubai and Saudi Arabia, would likely help ease such obstacles.”
In addition, improved corporate governance standards, as well as the strengthening of investor protection rights, should further enhance investor’s appetite for GCC bonds, which is currently strong, albeit biased toward higher-rated entities.
