The gulf countries are situated on the richest area of the world in terms of petrol and energy reserves and have 2.5 trillion dollars of fund source.  The Gulf countries have been spending 1.8 trillion dollars of these funds for overseas investments.

Owning 35% of total fund sources of the world, the Gulf countries have been working with different instruments than western-sourced investments. The Gulf countries composing of the countries such as Qatar, Oman, Bahrain, United Arab Emirates, Saudi Arabia and Kuwait have preferred interest free instruments while investing.

 

I.Gulf Funs

Country Fund Name Value (billion dolar) 

BAE- Abu Dhabi Abu Dhabi Investment Authority $773
Suudi Arabistan SAMA Foreign Holdings $757,2
Kuveyt Kuwait Investment Authority $592
Katar Qatar Investment Authority $256
BAE – Dubai Investment Corporation of Dubai $183
BAE–Abudabi Dubai Abu Dhabi Investment Council $110
BAE–Abu Dhabi International Petroleum Invest $66,3
BAE–Abu Dhabi Mubadala Development $66,3
BAE – Federal Emirates Investment Authority $15
Umman State General Reserve Fund $13
Bahreyn Mumtalakat Holding Company $10,5
Umman Oman Investment Fund $6
Suudi Arabistan Public Investment Fund $5.3
BAE- Ras Al Khaimah RAK Investment Authority $1.2
TOTAL GCC SWF Funds $2.853,6
TOTAL Word SWF Funds $7.367,6



II.Gulf Top Banks

 
Bank Name Assets Net Profit (000 USD) Country
Qatar National Bank 133.614.471 2.889.461 QATAR
National Commercial Bank 115.967.489 2.344.851 SA
National Bank of Abu Dhabi 102.395.511 1.518.886 UAE
Emirates NBD 98.835.010 1.399.137 UAE
Al Rajhi Banking Corporation 82.056.415 1.822.979 SA
National Bank of Kuwait 74.323.098 933.653 Kuwait
Kuwait Finance House 58.621.244 546.144 Kuwait
Samba Financial Group 57.973.021 1.334.687 SA
First Gulf Bank 57.764.362 1.553.236 UAE
Riyad Bank 57.223.811 1.160.642 SA
Abu Dhabi Commercial Bank 55.545.729 1.143.856 UAE
Banque Saudi Fransi 50.340.507 937.691 SA
Saudi British Bank 50.029.138 1.137.616 SA
Arab National Bank 43.911.561 767.241 SA
Dubai Islamic Bank 33.729.202 763.334 UAE
Ahli United Bank 33.444.888 531.254 Bahrain
Commercial Bank of Qatar 31.772.623 533.026 Qatar
Abu Dhabi Islamic Bank 30.466.595 476.638 UAE
Arab Banking Corporation 29.356.000 318 Bahrain
Mashreq Bank 28.815.758 676.904 UAE
Burgan Bank 26.446.308 248.055 Kuwait
Qatar Islamic Bank 26.402.875 458.393 Qatar
Saudi Hollandi Bank 25.765.125 485.576 SA
Union National Bank 25.446.023 550.102 UAE
Bank Muscat 25.268.333 423.966 Oman
Saudi Investment Bank 24.967.051 383.061 SA
Al Baraka Bank Group 23.463.589 274.767 Bahrain
Al Rayan 22.003.920 554.173 Qatar
Alinma Bank 21.563.162 337.182 SA
Gulf International Bank 21.300.200 85.6 Bahrain
Doha Bank 20.746.583 373.258 Qatar
Gulf Bank 18.187.890 120.982 Quveyt
Bank Al Jazira 17.747.714 152.658 SA
Commercial Bank of Kuwait 14.373.105 167.594 Kuwiat
Al Khaliji Commercial Bank 14.077.493 154.645 Qatar
Commercial Bank of Dubai 12.773.551 327.323 UAE
Bank Al Bilad 12.061.310 230.408 SA
Al Ali Bank Kuwait 11.937.888 128.284 Kuwait
Qatar International Islamic Bank 10.548.751 226.873 Qatar
Barwa Bank 10.059.032 176.191 Qatar
RAKBANK 9.482.754 396.026 UAE
Bank of Bahrain and Kuwait 9.311.092 133.794 Bahrain
Boubyan Bank 9.034.208 97.253 Kuwait
Bank Dhofar 8.296.425 105.073 Oman
Ithmaar Bank 7.860.904 -8.847 Bahrain
National Bank of Oman 7.730.107 130.566 Oman
National Bank of Bahrain 7.283.130 142.12 Bahrain
United Arab Bank 6.999.533 164.827 UAE
Bank of Sharjah 6.821.231 77.843 UAE
Sharjah Islamic Bank 6.650.072 80.304 UAE

 

III.Gulf Financial Products

The Gulf countries have been trying to lead their assets to safe investments. Due to the economic stability in recent years, its trust, safety, in terms of investor protection  and the business familiarity with gulf countries, US has been a candidate to be the center of the investments of Gulf Countries.

The Gulf countries, carrying out very different investments on very different fields in the world are determining the most productive fields for every country and canalizing this field.

The Gulf countries are using different instruments such as investment trusts, private equity and sukuk for investment in the countries they have tendency.

The most popular of these methods is now Sukuk.

The World Countries have been undertaking government based enterprises to attract this rich and economic source. For instance, holding 57% of all Gulf funds, Malaysia has leased council’s field using the Gulf oriented sukuk it has exported.

The fund transferred via sukuk method to the country from Gulf Countries can be used in many areas.  Lands, real estates, energy investments, vehicles, factories, workshops, industrial zones are the assets mostly used for sukuk export.

The year 2016 has started on a negative note for the global financial market and real economy. Slowing economic growth in China, low commodity prices (especially oil) and other factors are likely to exert downward pressure on growth prospects for the year.

Financial pressures on governments and corporates accordingly will compel them to consider alternative sources of funding, and Sukuk are an obvious option.

Sukuk funds generally represent a universe of Islamic debt capital market instruments used by a wide range of investors to manage liquidity and diversification in their respective portfolios.

The Islamic funds market as a whole experienced a modest growth of 5% and the number of funds increased by 11% according to the latest Thomson Reuters Global Asset management outlook 2015

Highest rated Sukuk (particularly sovereign paper), for instance, may qualify as high quality liquid assets “HQLA” for regulatory capital calculation purposes, yet they are often in short supply in the fund universe, as indeed they are across the marketplace, as they are often held by fi nancial institutions to maturity outside of this space.

HQLA, according to the IFSB are defi ned as “assets unencumbered by liens and other restrictions on transfer which can be converted into cash easily and immediately, with little or no loss of value, including under the stress scenario.

The assets are required to meet fundamental and market-related characteristics, particularly in terms of low risk, ease and certainty of valuation, and low volatility”.

Sukuk is the flagship capital market instrument of the Islamic finance industry and has attracted a number of new issuers as well as expanded the investor base despite very challenging global economic environment. The ongoing innovation is changing the dynamics of the industry, especially, in the area of Sukuk market and the indications are that Sukuk will establish itself in the global arena as fundamentally strong instrument based on GCC Fiqh (Jurisprudence) principles.

Sukuk commercial success should not lead us to ignore the underlying principles which are the diff erentiating factor with respect to conventional bonds. Sukuk are an innovative way to raise financing in a GCC compliant manner with strong link to the real economy.

The risk sharing nature of Sukuk is a hallmark of alternative finance itself, which should not be compromised. Therefore, it is required from all stakeholders in the market, including Islamic Fiqh (Jurisprudence) academies, regulators and GCC boards to encourage the issuance of asset – backed Sukuk as well as all other related Islamic financial and banking products which are almost free from GCC issues.

Positive development is the appeal of Sukuk as an alternative source of financing from new jurisdictions ranging from Europe, Asia, CIS and Africa and emerging sign of possible direct entry from North America.

The sovereign Sukuk provides strong foundation to the Sukuk market and they are leading the upward trend since the 2008 global financial crisis.

As of end 2015, total sovereign Sukuk issuance since inception stands at USD 437 billion, which is almost 57% of all global Sukuk issuances

Total international Sukuk issuances stood at USD20.88 billion in 2015 as against 2014 level of USD 26.4 billion which was the highest ever value of issuances recorded since the inception of the Sukuk market.

Sukuk market continues to mature and globalise, with increasing participation by international issuers seeking international investors, and more substantial issue sizes, the number of issuances that benefit from a listing will continue to increase.

Twenty one per cent of one of the Indonesian government’s Sukuk was sold to investors based in the US, which is not a traditional market for Islamic products. American investors also bought more than 30% of a Sukuk issued by a prominent UAE company that listed on Nasdaq Dubai in 2015.

More than 45% of another 2015 UAE issuance went to European and Asian investors. Without doubt, it is easier to reach such investors with an instrument that is listed on an internationally recognised exchange.

In 2014, non-Islamic countries stepped-up the issuance of Sukuk, supported by the debut of sovereign issues from the United Kingdom, Hong Kong, Senegal and South Africa.

This trend continued through 2015, i.e. Hong Kong’s second Sukuk issue , respectively. The value propositions offered by Sukuk underline its attractiveness as an alternative funding solution, for the diversification of investor base and to take advantage of the increasing demand for alternative finance assets.

Underpinning the UK Government’s ambition to become a key player in Islamic finance in the Western world is a supportive architecture which has acted as an enabler to ensure this objective is realised. For example the numerous leading law firms and professional service firms, with a specialisation in all aspects of Islamic finance, in the City of London has greatly added to  the ability of advising and structuring Islamic financial products globally from the UK.

Collectively, Europe has also become an important listing destination for international Sukuk for both Asian and Middle Eastern firms seeking to widen their investor base and simultaneously promote secondary market activity in Sukuk. This feature has often been missing in traditional Sukuk markets where the securities tend to be held to maturity.

European exchanges including the LSE, the Irish Stock Exchange (ISE) and the Luxembourg Stock Exchange (LuxSE) have been able to attract Islamic issuers with their efficient and transparent listing processes and market liquidity profiles.

In the UK, Islamic finance has played an important role that is illustrated by its inclusion in the financing arrangements and solutions utilised in the development of infrastructure and infrastructure related projects around London including providing development finance for The Shard; London Gateway and the Olympic Village, the re-development of Chelsea Barracks and regeneration of Battersea Power Station. Currently, the domestic footprint of the projects deemed relevant to Islamic investment and funding is growing and, with the proactive support of the British government is ultimately likely to result in the UK Islamic capital markets providing a fi nancial platform for regeneration, development and project funding across the British Isles.

Challenges for Securities Issuance in the GCC Financial Market

Cross Border Mechanics are not widely agreed

National limitations on how property and equipment are owned in many countries.

Lack of domestic sukuk markets in most countries

Many countries have simple bond laws, but lack securitization and require general modernization

Weak bankruptcy regimes in many emerging markets.

Market issues to consider;

Basel III is restricting real estate and project finance investment;

Gulf investors are anxious about real estate;

Central banks are generally restricting real estate investment;

East Asian investors need help to love US; and,

A new financial crisis or global recession, or war in the Gulf could ruin everything.