Saudi Arabia’s sukuk, bond issuances reach $202 bn in Q4 2023

Kingdom attracts Saudi investors, advances capital market, and maintains fiscal stability
Saudi Arabia’s sukuk, bond issuances reach $202 bn in Q4 2023
Saudi investors held a staggering 99 percent of the listed holdings

Saudi Arabia’s sukuk and bond issuances experienced a robust 2.8 percent year-on-year growth, reaching approximately SAR758.8 billion ($202.34 billion) in value by the end of the fourth quarter of 2023, according to the Saudi Exchange. The surge is due to the increase in Saudi Arabia’s government-listed sukuk and bonds. This underscores the kingdom’s commitment to fostering its capital market and attracting both domestic and foreign investors.

Government dominance

A recent Tadawul report revealed that Saudi Arabia’s government sukuk and bonds issuances constituted a significant 70 percent of the total at SAR529.8 billion. This reflects a clear preference for government-backed financial instruments. Saudi investors held a staggering 99 percent of the listed holdings. Hence, this demonstrates a strong domestic investor base with a traded value of SAR5.44 billion in the fourth quarter of 2023.

Gulf Cooperation Council (GCC) investors contributed 0.2 percent with a traded value of SAR3.96 billion. Meanwhile, the remaining 0.8 percent was distributed among foreign investors. Saudi Arabia’s focus on advancing its capital market involves encouraging private sector involvement and attracting foreign institutional investors to support key projects, aligning with the kingdom’s vision for economic diversification.

Market dynamics

The ratio of bonds and sukuk issuances to gross domestic product (GDP) in Saudi Arabia slightly decreased from 20.71 percent to 19.05 percent in the fourth quarter. However, this indicates a stable market despite the economic challenges. Moreover, government-listed sukuk and bonds grew by 5.14 percent. Meanwhile, corporate issuances experienced a decline of 6.35 percent, reaching SAR20 billion.

Sukuk, being Shariah-compliant financial certificates, provide investors with partial ownership of an issuer’s assets until maturity. Bonds, on the other hand, signify a lending arrangement where investors lend money to the issuer with an obligation for repayment at maturity. The report highlights that 86 percent of listed issuances primarily consist of fixed interest rates. Notably, unlisted holdings, primarily held by Saudi investors, amounted to SAR238 million during this period, showcasing the strength of the local market.

Read: Egypt explores issuing bonds in Emirati dirhams and Indian rupees, minister says

Strategic debt management

The National Debt Management Center of Saudi Arabia, in its Annual Borrowing Plan Report for 2024, emphasized the kingdom’s commitment to maintaining a conservative debt-to-GDP ratio. The report highlighted Saudi Arabia’s strategic debt management initiatives, careful risk management approach, and investor relations strategy. These underscore its robust credit position and commitment to meeting loan payments without default.

Meanwhile, Saudi Arabia’s sukuk and bond market’s remarkable growth underscores its attractiveness to both domestic and foreign investors. Its strategic initiatives in debt management and commitment to fiscal stability position it as a regional leader in the capital market. Therefore, the impressive figures in the final quarter of 2023 set a positive tone for the kingdom’s financial outlook in the coming year.

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