HSBC is expecting an upbeat demand and supply side for the debt capital markets this year following a very busy 2024, during which the investment bank recorded $137.5 billion – a 47% growth YoY – from a combined 72 deals, including bond and sukuk issuances in the MENA region.

“I think we will see more MENA bond issuances in 2025. The year started with a strong pipeline, and we expect sovereign issuances to come early to the market” Khaled Darwish, Managing Director - Head of CEEMEA Debt Capital Markets at HSBC, told Zawya.

“There will be an element of front loading and accelerating issuance timelines, to come ahead of the start of Ramadan. Overall, there will be busy activity in Q1 if the markets stay in a constructive phase like the present one,” he said.

While a renewed issuer interest to diversify the mix of funding led the supply side last year, Asian investors dominated the demand side.

About 40% of the papers issued last year by HSBC MENA fell under 10-15 years, reflecting a demand for expanded duration, especially since the cycle of reducing rates have kicked in.

“We saw robust demand last year due to ample regional liquidity, Asian investors’ interest in the GCC, cross over investment-grade money from the US and the regional Islamic banks priming the sukuk market,” Darwish told Zawya.

Big numbers in DCM

According to LSEG data, MENA bond issuance totalled $119.6 billion during 2024, 66% more than the value recorded in 2023 and an annual total only exceeded once before, in 2020 at $139 billion.

Saudi Arabia was the most active issuing nation during 2024, accounting for 45% of total bond proceeds, followed by the UAE (33%), and Qatar (10%).

Financial issuers accounted for 63% of proceeds raised during 2024, while Government & Agencies accounted for 23%.

The highest year on record for the region in terms of volume was 2020 and that was $139 billion.

Islamic bonds in the region raised $46.2 billion during 2024, a 44% increase from year ago levels and an all-time annual record. Sukuk account for 39% of total bond proceeds raised in the region, compared to 45% last year at this time.

LSEG Investment Banking fees are imputed for all deals without publicly disclosed fee information. 

“We have substantial issuances on local currency, especially in the Saudi market. If you include issuances in local currency, HSBC MENA tops league tables acting on over $15bn of credited Bond and Sukuk offerings in 2024,” Darwish clarified. 

Market leaders

He highlighted a few factors that encourage Asian investors, who are risk averse in nature, to invest more in the GCC. 

“We have seen more inflows from the Asian markets into the GCC. The GCC has been quite resilient. We have lived through various geopolitical situations since last year but which did not impact in the market. Business has been as usual in the Middle East. Spreads are tight and no deals have been cancelled or delayed because of geopolitical issues.”

The well-known state-owned names visited the market in 2024. The smallest of three Abu Dhabi sovereign wealth funds, ADQ, listed a dual tranche $2.5 billion bond. Saudi wealth fund, PIF, visited the market three times, Aramco twice and Mubadala visited the market three times with dollar and dirham denominated bonds and sukuk and Formosa bonds.

“The issuances were nicely distributed for HSBC, with the corporate segment including wealth funds, contributing 37%, followed by 28% from the financial sector,” Darwish said. 

Overall, HSBC expects the GCC to continue to do well. “In 2025, we will see a similar deal size like in 2024 if there are no geopolitical surprises. I am not bullish enough to say we will go above $137 billion,” Darwish said. 

(Reporting by Seban Scaria seban.scaria@lseg.com; editing by Daniel Luiz)