Dubai's $2 billion dual-tranche bond sale on Wednesday was backed mostly by funds in the Middle East, Europe and the United Kingdom, a document showed, while the emirate's lack of a rating may have contributed to Asian investors shying away.
It was Dubai's first foray into the public debt markets since 2014, as the Middle Eastern tourism and commerce hub seeks to bolster finances hurt by the COVID-19 pandemic.
The debt sale comprised a $1 billion tranche of 10-year sukuk, or Islamic bonds, at 2.763 percent and a $1 billion tranche of 30-year conventional bonds at 4 percent. Fund managers said on Wednesday the Dubai deal was priced attractively for the emirate.
The bonds were trading up following the issuance, said Doug Bitcon, head of credit strategies at Rasmala Investment Bank.
“At current levels, the longer end of the unrated Dubai curve looks attractive relative to the Baa2/BBB rated Sharjah curve. This is evident in the yield on the new 30-year Dubai
government issue which is trading just below 4 percent versus around 3.5 percent for the 30-year Sharjah government bond,” Bitcon said.
Fund managers took a majority of the sukuk, buying 52 percent, while banks and private banks (PBs) took 44 percent, according to a document from one of the banks leading the deal seen by Reuters.
Investors from the Middle East were the biggest buyers of the sukuk, which attracted $6.6 billion in orders, taking 48 percent. UK and other European investors got just over a quarter, Asian buyers bought 16 percent and offshore US investors took 10 percent.
Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital, said fund managers taking more than half the sukuk was encouraging for the overall sukuk market.
Fund managers dominated the conventional tranche too, taking 78 percent, while banks and private banks got 17 percent.
Half of the investors in the 30-year bonds, which received $3.4 billion in demand, were from the UK and Europe. Offshore US investors took 21 percent, Middle Eastern buyers bought 16 percent and Asian investors accounted for 13 percent of the bond distribution.
“The lack of a rating may have been a factor in lower Asian participation,” Hussain said.
Dubai announces ‘retirement visa’ scheme for resident expatriates, foreignersThe Dubai government has announced the launch of the “Retire in Dubai” program that will offer resident expatriates and foreigners aged 55 and above ... Gulf
Dubai set to raise $1.5 billion on return to public debt marketsThe government of Dubai is expected to raise $1.5 billion through a dual-tranche bond issuance on Wednesday, its first sale in public debt markets in ... Financial Markets
As coronavirus hits global economy, foreign investment in Dubai plunges 74 pctForeign direct investment in Dubai fell by 74 percent in the first half of the year compared with the same period of 2019, as the coronavirus pandemic ... Coronavirus