MENA fixed income outperform as global risks loom

1Q 2025 saw Mena fixed income markets off to a strong start, according to Mashreq Capital’s latest quarterly outlook (pdf), even as risk sentiment takes a hit globally. The Bloomberg MENA USD Aggregate Bond Index climbed 2.6% in 1Q 2025, reversing a 2.6% drop in the previous quarter and outperforming broader emerging market (EM) debt.

The main draw: Gains were driven by a 40 bps drop in US 10-year treasury yields and steady appetite for the long-duration, high-grade regional bonds. With an average duration of 6.1 years and an A credit rating, MENA bonds continue to offer value, with yields close to 6%, about 100 bps above their five-year average, even as spreads remain tight by historical standards.

Gulf heavyweights did most of the lifting: Saudi Arabia, the UAE, and Qatar drove fixed income gains in 1Q, together contributing 211 bps to overall performance. Sovereigns and government-related entities delivered most of the returns across MENA, accounting for 220 bps in total.

New debt looks to be pouring into the region: Issuance across MENA is picking up speed, with 40% of the total USD 120 bn expected this year already completed by the end of 1Q. Saudi Arabia and the UAE — both at a federal level and from Abu Dhabi — are expected to contribute the lion’s share of supply, whilst Kuwait is set to return to international markets after passing its long-delayed debt law.

Equities underperformed, but the flows didn’t stop: Mena stocks lagged EM peers by 57 bps last quarter, weighed down by soft oil prices. Still, foreign capital continued to flow in: Kuwait surged nearly 10%, Dubai rose 1.7% on the back of strong performance from real estate and bank stocks, and Saudi’s Tadawul gained 0.6%. Abu Dhabi was only up marginally as Adnoc stocks came under pressure.

Mashreq Capital has a more cautious stance for 2Q: The firm remains neutral on Mena fixed income but has trimmed risk, cutting high-beta names and adding modest duration through investment-grade bonds. The shift comes amid rising global volatility, with US trade tariffs and weakened Brent oil prices flagged as key downside risks.

The big picture: The UAE, Qatar, and Oman are expected to outperform thanks to low fiscal breakeven oil prices and solid external positions, according to the report. Oman and Morocco are on upgrade watch, while Bahrain and Sharjah remain underweight amid debt concerns and weaker fundamentals.

It is also backing sectors tied to domestic demand, including infrastructure, real estate, and tech, in markets like the UAE, Saudi Arabia, and increasingly Oman. The firm says structural reforms and policy follow-through are anchoring long-term investor interest in these economies.

MARKETS THIS MORNING-

Asian markets are still riding the Wall Street rally, with Japan’s Nikkei, Hong Kong’s Hang Seng, and South Korea’s Kospi all up around 1%. China’s CSI 300 was up 0.3%. Over on Wall Street, futures suggest another strong open as tech earnings continue to boost the indices.

THE CLOSING BELL-

The ADX rose 1.1% yesterday on turnover of AED 2 bn. The index is up 0.1% YTD.

In the green: Gulf Pharma Industries (+14.4%), Burjeel Holdings (+9.7%) and Abu Dhabi National Co. for Building Materials (+7.5%).

In the red: Emirates Ins. Co. (-9.9%), Aram Group (-6.2%) and Hayah Ins. (-5.6%).

Over on the DFM, the index fell 0.2% on turnover of AED 626.2 mn. Meanwhile, Nasdaq Dubai was up 0.9%.

CORPORATE ACTIONS-

Al Wathba National Ins. approved a FY 2024 dividend of AED 41.4 mn, or AED 0.20 per share, representing 20% of its share capital, according to an ADX disclosure (pdf).

Abu Dhabi National Takaful has greenlit the distribution of AED 21 mn in dividends for FY 2024, representing 20% of paid-up capital, according to an ADX disclosure (pdf).

Dubai National Ins. approved a 15% dividend for FY 2024, totalling AED 17.3 mn, up from AED 11.5 mn last year, according to a press release.

Takaful Emarat appointed BHM Capital as the liquidity provider for its shares, according to a DFM disclosure (pdf).

Lulu Retail Holdings approved a dividend of AED 309.9 mn for 2H 2024, equivalent to 3 fils per share, according to an ADX disclosure (pdf).