Abu Dhabi – Mubasher: UAE corporates have a more diversified funding base than their peers, Fitch Ratings said in a new report.
In the first half (H1) of 2022, debt capital market (DCM) and equity capital market (ECM) issuances accounted for 32% of corporates’ funding structure, compared with 2% for Saudi corporates in 2021.
In the meantime, DCM issuances for corporates dropped to $2.3 billion in H1-22, following a 43% annual increase in 2021, raising $15 billion.
“We expect DCM issuances to remain low for the rest of 2022 but to grow in the medium term, supported by improved economic activity,” Fitch said.
DCM issuance was 85% bond rather than Sukuk in H1-22. Small to mid-size corporate issuers were the most affected by the Sharia standards, pushing companies to either opt for conventional notes or postpone Sukuk transactions.
“We expect the momentum of DCM issuances through international bond and Sukuk notes to pick up after 2022. All UAE fixed-income issuances were raised on the international market and none locally. Conversely, Saudi corporates have access to a more developed local Sukuk market,” the report read.
In H1-22, the UAE had a spree of initial public offerings (IPOs) mainly boosted by government-related entities, raising about $9 billion in H1-22, representing 79% of total fixed income and equity proceeds.
Bank funding remains the main source of funding for corporates’ capital structures, representing 64% of capital structure in 2021, compared to 68% in H1-22.
