Rally in GCC company bonds fades as stocks’ appeal grows

Gulf corporate bonds fell in January, sending yields up the most in 14 months, after a four- year rally eroded returns and Dubai’s economic recovery boosted the appeal of equities.
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The average yield on Gulf Cooperation Council company bonds tracked by HSBC/Nasdaq Dubai’s GCC Corporate US Dollar Sukuk Index rose to 3.55% on January 31, up 36 basis points, or 0.36 percentage point, for the month. That outpaced a five basis-point advance in global sukuk yields while global company bond yields climbed 16 basis points.
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The rally in GCC corporate debt outpaced equities between 2009 and 2012, with bonds gaining 76% in the period versus a 17% advance in the Bloomberg GCC 200 index of stocks. Shares in Dubai, the world’s fourth-best performers last month, are leading a rebound in the Gulf this year after the emirate’s economy grew at the fastest pace since 2007.
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GCC shares offer dividend yields that are almost 50% higher than emerging-market peers, data compiled by Bloomberg show.
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“We are seeing investors shifting from fixed-income and sukuk to equities markets” as they take on greater risk, Tariq Qaqish, deputy head of asset management at Dubai-based Al Mal Capital, said by phone on Sunday. “Investors in general were very conservative in the last five years, especially in the UAE. The recovery that affected the real estate market and Dubai economic growth has built investors’ confidence.”
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Read more: http://www.gulfbase.com/news/rally-in-gcc-company-bonds-fades-as-stocks-appeal-grows/228473