Oil prices, interest rates to lift fixed income assets
MANAMA, March 16, 2016
Demand for high-quality fixed income assets will remain insatiable this year, as long as oil prices and interest rates stay low, according to a recent review.
This was the outlook of Bahrain-based Securities and Investment Company (Sico), following its latest review of the global and regional fixed income markets.
Global deflationary pressures and a slowdown in China, along with negative interest rates in Europe and Japan, are likely to limit rates from widening much this year.
The divergence and volatility in international markets during the first two months of 2016 has led to significant mispricing and opportunities within the GCC bonds and Sukuks.
According to Sico, bottom-up analysis has the potential to add significant value on the back of the weak macro environment.
GCC fixed income now offers one of the highest sources of income among global fixed income and dividend-paying assets.
GCC governments have significant room and the necessary versatility to improve their credit through various fiscal measures, along with subsidy cuts and the hike in petrol prices implemented in recent months.
Sico expects further efforts in reducing the fiscal breakeven oil price to be beneficial for GCC fixed income.
The best combination would be for oil prices to rise again while public expenditure is kept in check.
In contrast to the negative performance of GCC equities in 2015, the region’s fixed income market posted a positive performance, closing the year up nearly two per cent.
Najla M Al Shirawi, chief executive officer, said: “Our prudent investment style has enabled us to deliver another strong performance for our clients in 2015, despite highly-volatile market conditions.
“Sico’s success stems from its disciplined investment strategy, conservative approach, and the quality of its in-house comprehensive research capability.
“These differentiating factors have supported the development of Sico into a leading and highly-respected institutionally-focused GCC and Mena public markets asset manager, providing investors with stable long-term returns that have consistently outperformed benchmarks and peers.” - TradeArabia News Service
