GCC share of emerging market USD debt climbs to 35% in 1Q -Fitch

Gulf countries accounted for over 35% of all non-China emerging market USD debt issued in 1Q 2025, up from 25% in 2024, according to Fitch Ratings’ latest debt capital markets (DCM) analysis. Governments and corporates in the region are increasingly turning to capital markets to fund budgets, diversify financing, and support major infrastructure projects, the rating agency said.

By the numbers: The GCC’s total debt market size surpassed USD 1 tn across all currencies by the end of March, up 10% y-o-y. Quarterly issuance stood at USD 89 bn, up 11% from 4Q 2024 but down 3% y-o-y.

Sukuk under pressure, conventional bonds rising: Islamic bonds made up 40% of total debt, though sukuk issuance slumped 51% y-o-y in 1Q to USD 18.2 bn. In contrast, conventional bond issuance rose 29%. Still, 83.5% of Fitch-rated GCC USD sukuk are investment-grade, with 57.8% rated in the A category and the majority carrying stable outlooks. Kuwait Financial Center Markaz pegged the figure at USD 17.8 bn.

Sustainability-linked issuance is gaining ground: ESG-related issuance across the GCC has now exceeded USD 50 bn, driven by initiatives such as the UAE’s Sustainable Islamic M-Bills and Qatar’s green finance framework. Fitch also highlighted growing investor and regulatory support for green and socially responsible debt.

Market maturity varies across the bloc: The UAE and Saudi Arabia continue to lead in terms of market depth and development. In contrast, foreign investor participation in local currency DCMs in Kuwait, Bahrain, Qatar, and Oman remains limited due to the lack of Euroclear or Clearstream links. In Saudi Arabia, foreign holdings of local government debt rose to 7.7% in 1Q from 4.5% in 2024.

Looking ahead: Fitch expects issuance momentum to continue, citing a “healthy pipeline,” supported by strong regional and Islamic investor liquidity. While the agency noted that “the region’s credit quality remains resilient” — with no rated sukuk or bonds defaulting in 2024 or 1Q 2025 — fiscal pressure could intensify due to global macro uncertainties. Brent crude is forecast to average USD 65 through 2026, a level that may widen deficits in Saudi Arabia and Bahrain. By contrast, Abu Dhabi, Qatar, and Kuwait are expected to remain fiscally buffered due to their sovereign wealth assets.

Background: Fitch had earlier said the UAE will be the most active among emerging markets in 2025 — particularly in sukuk. The UAE’s DCM grew 8.3% y-o-y to USD 309 bn in 1Q 2025, with issuances surging 109% y-o-y to USD 29.1 bn. The country ranked as the second-largest DCM in the GCC and fourth among emerging market USD debt issuers (ex-China), buoyed by sukuk growth, ESG momentum, and robust USD-denominated issuance.

MARKETS THIS MORNING-

Asian markets are cheering confirmation from China that it is mulling trade talks with the US, with Hong Kong’s Hang Seng opening 0.9% higher, Japan’s Nikkei up nearly 0.8%, and South Korea’s Kospi remaining flat. Over on Wall Street, futures are also rising on the news.

THE CLOSING BELL-

The DFM fell 0.6 % yesterday on turnover of AED 400.5 mn. The index is up 2.2% YTD.

In the green: International Financial Advisors (+9.4%), National Cement (+7.3%) and Watania International Holding (+3.3%).

In the red: Commercial Bank of Dubai (-8.9%), BHM Capital Financial Services (-7.1%) and Al Mazaya Holding Company (-5.5%).

Over on the ADX, the index rose 0.2% on turnover of AED 1.3 bn. Meanwhile, Nasdaq Dubai was up 0.2%.

CORPORATE ACTIONS-

Mair Group approves AED 135 mn dividend payout for 2024: Abu Dhabi investment firm Mair Group’s shareholders approved a AED 135 mn dividend, equivalent to 12% of paid-up capital or 6 fils per share, according to a press release. The payout represents 79% of the company’s 2024 net income.