Middle Eastern debt issuance surged 40 per cent in the first half of 2013, the strongest period on record, according to new data released by Thomson Reuters. Debt raised reached $26bn, including $20.8bn of investment grade corporate debt in the first two quarters of the year, accounting for around 80 per cent of debt capital markets activity. In a further sign of a brighter outlook for the financial sector, debt capital markets underwriting earned banks $102m, more than double the income of the same period last year, and the best first-half performance ever, the report said. If strong activity continues in what has become a mainstay of regional investment banking over the past few years, the value of debt raised in the region could overtake the record year of 2009, when companies and governments raised $39bn. But bankers point to a recent lull in the debt capital markets, prompted by global concerns over the US tapering quantitative easing, "We had a stellar Q1, when the pipeline was on fire, but the tap got turned off at the end of May," says Chavan Bhogaita, head of markets strategy at the National Bank of Abu Dhabi. "There is clear evidence borrowers are waiting on sidelines but everyone is nervous, It's a matter of timing now, and – if spreads recover and sentiment calms – we could have a strong third and fourth quarter if some deals get away," he adds. HSBC, Standard Chartered and Deutsche Bank dominated the debt capital markets, with HSBC topping the rankings as financial adviser on 17 issues raising $4.12bn. Deutsche Bank, which advised on 10 deals worth $2.1bn, took the biggest cut of the debt fees pool, at 14 per cent, slightly ahead of HSBC. Along with a strong start for debt capital markets, mergers activity is on the rise again. The value of regional mergers and acquisitions also rose 30 per cent in the first half to $14.7bn, the healthiest period since 2008. Fees reached $83.6m, up 56 per cent on the first six months of 2012. M&A was dominated by one deal, the $7.5bn merger between Abu Dhabi and Dubai aluminium smelters, which completed after years of government-to-government negotiations. Morgan Stanley, sole adviser on the smelter merger, topped the fees list with $8.55m. The M&A revival has helped bolster hopes among investment bankers that equity markets activity will follow suit. Several companies are rumoured to be planning after the summer to follow a couple of Abu Dhabi healthcare providers' initial public offerings in London. But data on equities capital markets activity for the first half has not backed up expectations, with underwriting fees down 35 per cent on the same time last year at $45.5m, according to the report. Middle Eastern companies raised $3.2bn from 12 issues in the first half, 15 per cent down on last year. The market has a long way to recover to its 2008 peak when 52 issues raised $32bn. In the slowest half since 2010, IPOs raised $2bn, dominated by Asiacell Telecommunications' February listing, which raised $1.3bn. That transaction propelled its sole adviser, Rabee Securities of Iraq, into the Thomson Reuters league table's top spot. JPMorgan came second, handling two deals worth $542m. "Banks realise there is huge potential for equities but bringing these deals to fruition is much harder than debt capital markets," says Mr Bhogaita. Source: The Financial Times
