Regional bond market key to end crisis

MANAMA // Bahrain-based investment bank Sico sees establishing a regional bond market as key to creating a sustainable capital market in the Gulf Arab region and end the current liquidity freeze, according to its chief executive. Bond markets in the Gulf Arab region lack a secondary market as most bonds are held until maturity by institutional investors. "If you really want to have a diversified source of funding, for governments primarily, but also for the corporate sector, you have to have a bond market," Anthony Mallis said. "International capital markets remain shut for both governments and corporate borrowers in the region."

Mr Mallis added that most bonds issued in the region were placed with international investors instead of using them to create a more sustainable regional market that is less exposed to volatility in international capital markets. "(Instead) we have capital surplus countries that were recycling their funds through foreign institutions." Mr Mallis said that regional bond markets also need to branch out into the retail market.

"You will have to have the man in the street - exceptionally rich or the average middle class person - buying Kingdom of Saudi Arabia bonds," he said. He also urged governments to report more frequently on sovereign debt levels and financing need to give investors a better orientation of where regional debt markets are heading. * Reuters