gif Market Review SUKUK
A RISING SECTOR for $88 Billion Construction in Qatar
Source:
GlobalIslamicFinanceMagazine.com
ended March 21 to 114.4, according to CMA, which is owned by CME Group Inc. and com- piles prices quoted by dealers in the privately negotiated market. The yield on the country’s 4.5 percent security maturing in January 2022 fell 29 basis points to 3.99 percent in the two months to April 2012. That outpaced the 20 basis-point drop through March 21 in the average yield for the HSBC/NASDAQ Dubai Middle East Conventional Sovereign US Dollar Bond Index.
Qatar, which borders Saudi Arabia and has about the same area as the US state of Con- necticut, was awarded the 2022 World Cup in December 2010, beating out the US, Aus- tralia, South Korea and Japan. The country, whose population of 1.8 million people is concentrated in Doha, pledged to build nine new stadiums, refurbish three others and construct training facilities.
Qatar’s lenders need international banks to help finance as much as $88bn of con- struction for the 2022 soccer World Cup as deposits in the energy-rich Persian Gulf emirate fail to keep pace with loan de- mand. Local banks’ capacity to lend may be declin- ing as a pickup in borrowing, particularly by state-owned enterprises, squeezes liquidity. The ratio of Qatari credit facilities to deposits soared to 112 percent in January from 91.8 percent six months earlier in July, according to Bloomberg calculations based on central bank data. The country with the third-largest natural gas reserves will need to fund stadi- ums planned for the world’s most watched sporting event, as well as hotels, roads, a bridge to Bahrain and a new city to house 200,000 people. Qatar Rail Co said it will
34 Global Islamic Finance May 2012
tender as much as $14bn in tunnelling and station contracts next month, part of a planned $38bn rail system. “In terms of overall size and substance compared to the projects which are coming out, we have a limited scale,” Raghavan Seetharama, Doha Bank’s chief executive officer, said in an in- terview in Doha, the Qatari capital. “There could be the blend of international institu- tions as well as local banks when it comes to project finance.”
Qatar’s bonds have been rising as percep- tions of the nation’s credit quality improve. The cost to insure Qatari debt is the second lowest in the Middle East after Abu Dhabi, according to credit-default swap prices com- piled by data provider CMA. The contracts dropped 33 basis points in the two months
A total of $9bn will be spent on sporting fa- cilities alone for the event, the government’s planning board said in the October report. Qatar also pledged to complete projects that were already planned, including the 40km bridge to the neighboring island nation of Bahrain and the rail and metro system. Most of the work will be completed in seven years, Prime Minister Sheikh Hamad Bin Jasim Bin Jaber Al Thani said in December 2010.
Local banks have anticipated the construc- tion boom by raising capital to ensure they can grab their share of loans. Doha Bank sold $500m in bonds after meeting investors in March, while government-owned Qatar Na- tional Bank raised $1bn in a debt offering last month. Barwa Bank, an Islamic lender that is the country’s newest bank, complet- ed a QR1.7bn rights issue earlier this year.
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