Posts   |   “Massive, massive demand” from Asia for Saudi bond offer

September 2, 2016
“Massive, massive demand” from Asia for Saudi bond offer

Saudi Arabia’s anticipated $15 billion bond has sparked excitement across the global investor community with the FT  quoting a banker as seeing “massive, massive demand” from Asia for the Kingdom’s landmarking debt offering. Indeed, given the demand, Saudi Arabia could raise the offering and break the emerging market record set by Argentina in April when it successfully issued $16.5 billion in paper.

A few excerpts below from Simeon Kerr and Elaine Moore’s piece in the FT:

 

The clamour for Saudi sovereign debt, which could be the largest emerging market issuance in history, comes as record-low interest rates in mature economies has prompted investors to pour money into developing markets at a record pace, overlooking the risks in some of the world’s least stable economies.

A roadshow to sell the landmark issuance — which will set the final size and tenor of the deal — could then begin at the start of October with the deal potentially closing around the time of the annual meetings of the International Monetary Fund and World Bank in Washington on October 7-9.

Bankers say Saudi government entities, lenders and private corporations are also lining up their own debt issuance to follow in the wake of the sovereign launch.

“Everyone is waiting to see how the appetite will turn out for the government, and at what price, which can then be used as a benchmark,” said a second banker. “There should be some other issuance before the end of the year.”

Saudi Arabia is seen as a safer investment than other emerging economies because it remains nearly debt free and has the world’s largest oil reserves. But it is also benefiting from the desperate hunger for yield among investors starved by record-low interest rates in Europe, the UK and Japan.

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Saudi Arabia is also robustly tapping domestic banks for financing, according to a Reuters report published in the Arab News. By the end of 2016, that total could reach nearly $30 billion, underscoring the Kingdom’s need to plug its growing deficit amid tempering oil prices.

Still, the Kingdom is seen as a safe investment given its very low debt loads.