Hard-currency bond sales by Middle Eastern and African companies will reach a record high in 2016, but overall Eurobond issuance by emerging market governments and companies is likely to shrink from this year's levels, J. P Morgan predicts.
J. P Morgan, which runs the most widely used emerging debt indexes, said in a note dated Wednesday that bonds issued in foreign currency by companies in the Middle East-Africa region would rise by $4 billion year-on-year to $39 billion. Overall corporate issuance will fall to $238 billion from $251 billion in 2015, it added.
"The reduction in the overall total is driven by (investment grade) corporates, which are forecast to be $19 billion lower in 2016 compared to our 2015 projection," JPM analysts wrote. They said they expected a small pick-up in high-yielding and financial issues.
Many borrowers in the Gulf and Africa - both sovereign and corporate - have been hit by lower oil prices and may need to step up borrowing to fund themselves.
Emerging Europe was the only other region expected to see issuance volumes rise next year, adding just over $4 billion to reach $16.1 billion.
Around half the issuance will come from quasi-sovereigns, as it has in previous years, the bank said. China looks set to lead primary supply. Brazilian and Russian issuance should remain subdued.
In sovereign hard-currency debt, issuance is likely to shrink by $16.5 billion compared with the $81.4 billion issued so far in 2015, led by declines in Latin America, the Middle East and Africa.
"Supply is expected to be concentrated in relatively large issues, with the top 5 issuers Mexico, Indonesia, Turkey, Kazakhstan and Russia accounting for over 40 percent of the total supply," the bank wrote.
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