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.
|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|
|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|
|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|
|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|
|Saudi Investment Bank||24.967.051||383.061||SA|
|Al Baraka Bank Group||23.463.589||274.767||Bahrain|
|Gulf International Bank||21.300.200||85.6||Bahrain|
|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|
|Bank of Bahrain and Kuwait||9.311.092||133.794||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.