Gulf States Set for Debt Binge to Build Routes Avoiding Hormuz

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessGulf States Set for Debt Binge to Build Routes Avoiding HormuzTraders are preparing for a spike in borrowing from Persian Gulf nations as the region’s oil exporters seek financing to build costly bypasses around the Strait of Hormuz.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.7qdhsv4mn]p4k}sao}ge}gb]_media_dl_1.png Bloomberg(Bloomberg) — Traders are preparing for a spike in borrowing from Persian Gulf nations as the region’s oil exporters seek financing to build costly bypasses around the Strait of Hormuz.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWith the Iran war entering its sixth month, Saudi Arabia, Kuwait, the United Arab Emirates and Qatar are looking to invest billions of dollars in infrastructure less vulnerable to Iranian attacks than the Hormuz waterway. Alternatives to the strait — which channels the vast majority of regional energy exports — could include new ports on the Red Sea or the Gulf of Oman, rehabilitating ageing pipelines and upgrading desert road networks. Bond sales from the region are at a record $112 billion this year, data compiled by Bloomberg shows. Debt offices from some of these nations are holding talks with bankers and investors on issuing even more debt for the infrastructure buildout, people familiar with those discussions told Bloomberg. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“We have clearly seen interest to diversify from using the Strait of Hormuz,” said Sergei Strigo, head of emerging-markets fixed income at Amundi SA, Europe’s largest bond investor.Gulf authorities have made no secret of plans to invest in alternative export routes — the UAE’s foreign trade minister said this month new pipelines and ports would help his nation achieve “zero Hormuz dependency.” Saudi Arabia is reviving an old pipeline to the Yanbu Red Sea port, while many companies are exploring overland transport using desert roads. Port operator DP World Ltd. is developing two deepwater terminals for exports to Asia. Those projects will come with a hefty price tag, yet additional borrowing from these wealthy nations should be readily absorbed, according to Amundi’s Strigo. “There are very significant foreign-exchange reserves that underpin the financial stability of these Gulf countries,” he said. Kuwait’s $6 billion sale this week is a case in point. Investors bid for more than double the amount on offer, even though the country faces daily missile attacks and its oil exports have largely ground to a halt. Similarly, bonds sold earlier this year by Saudi, Abu Dhabi and Qatar attracted robust demand. Even Bahrain, with a lower credit rating than its neighbors, raised $1 billion just after the war started, underscoring investors’ appetite for Middle East debt. Still, some investors are bracing for the wave of issuance. Gulf sovereign spreads over Treasuries have widened this year — Abu Dhabi’s 2054 bonds now trade about 82 basis points above Treasuries, compared with 53 basis points in January. While that’s partly down to geopolitical ructions, the anticipated increase in debt supply is also to blame, investors say.Anthony Kettle, a portfolio manager at RBC BlueBay, advises using credit default swaps. These derivatives protect investors against the possibility of default, and tend to rise as a country’s finances come under pressure and budget deficits widen.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“Increased supply from a country could put modest pressure on spreads, although there’s still plenty of demand for yield,” Kettle said. “Some investors hedge using sovereign CDS as a proxy.” As issuance rises, investors may also begin differentiating between the Gulf countries, based on their location and access to alternative transit corridors. “Saudi Arabia, UAE and Oman would still benefit with these new infrastructure projects as they have geographical advantage compared to Kuwait, Bahrain, Qatar,” said Ahmed Nabi, an emerging markets credit trader at Caventor Capital. What’s more, those new routes too could become targets should the conflict broaden, Nabi said. Already this week, Iran-backed Houthi rebels attacked Saudi tankers using the alternative Red Sea export route. “I expect more sovereign issues and spreads widening, but also anticipate Bab-el-Mandeb as the next choke point if things escalate,” Nabi said, referring to the strait leading out of the Red Sea. Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.