Qatar is on a remarkable journey to establish itself as a regional powerhouse in high-value financial services. This year has witnessed significant growth and innovation, with the emirate's debt capital markets reaching new heights. Let's explore the various aspects that have contributed to Qatar's ascent in the financial arena.

Unleashing Qatar's Potential in Financial Services

Qatar's Debt Capital Market Surge

Qatar is now the third largest DCM in the region, behind Saudi Arabia and the United Arab Emirates. The emirate's debt capital markets have grown to around $130 billion, setting new benchmarks. Aadil Nastar, head of treasury and markets at QInvest, highlights the strong development and sustainable traction in the local DCM space. Qatar's institutions are capitalizing on global demand for conventional bonds and sukuk, backed by the country's high credit ratings and stable fiscal position. This is reflected in recent local-currency, corporate listed issuance and strong issuance parameters from recent US dollar issuances, both senior and tier 1, predominantly sukuk.In May, the state issued green bonds amounting to $2.5 billion, the first of its kind in the region. Priced at the lowest spread recorded by any country in the Middle East North Africa region, these bonds were divided into two tranches: $1 billion with a five-year maturity priced at a 30-basis-point spread over US Treasuries and $1.5 billion with a 10-year maturity priced at a 40-basis-point spread. Subscription demand reached $14 billion, demonstrating confidence in the sovereign green financing framework established by the Ministry of Finance.In October, Ooredoo, a Qatari multinational telecommunications company, issued a 10-year, $500 million bond through its subsidiary, Ooredoo International Finance Ltd. Priced at 4.625%, the bond's spread of 88 basis points over 10-year US Treasuries was the tightest ever for Ooredoo and one of the lowest for an emerging-market corporate issuer and the lowest for a global telecommunications company on a 10-year bond since 2020. The offering attracted investors from the US, the UK, Europe, Asia, and MENA.In the first half, Qatar National Bank Group, the region's largest bank, completed a Formosa bond issuance under its Euro Medium Term Note (EMTN) program and listed on the Taipei Stock Exchange. A $1 billion bond with a five-year maturity, this offering is part of QNB Group's strategy to diversify funding from new markets.

The Growth of Sukuk Issuance

Qatar has grown strongly as a center for sukuk, or Islamic bond, issuance this year. It has more than doubled its dollar value in the sector in the first nine months. Estithmar Holding, a large, diversified Qatari public listed company focused on health care, services, ventures, and contracting, successfully issued the first sukuk-denominated corporate bond in Qatari Riyal, listed on the London Stock Exchange. The QAR500 million (US$137 million) issue is the inaugural tranche in a QAR3.4 billion Estithmar sukuk program. This issuance demonstrates confidence in Qatar's robust economy and highlights the ability of the Qatari private sector to expand both domestically and internationally with government support.Other recent issuers have included Qatar Islamic Bank ($750 million sukuk) and Qatar International Islamic Bank ($300 million Additional Tier 1 Capital Certificates). The QIIB transaction, completed in October, was more than eight times oversubscribed, with a total order book exceeding $2.5 billion. Qatar Islamic Bank's five-year unsecured sukuk was priced at 4.485%, 100 basis points over US Treasuries; the order book reached $2.2 billion, indicating the strength and diversity of investors interested in Qatari paper.

Green Bonds and Sustainable Finance

In September, The Commercial Bank of Qatar issued its inaugural green bond denominated in Swiss francs as part of its Sustainable Finance Framework, supporting green projects in the emirate. The offering is the largest-ever Swiss-franc green bond issued in Qatar, the largest such offering from Qatar since 2013, and the largest such offering out of Central and Eastern Europe, the Middle East and Africa since 2021. Significant demand resulted in a 120-basis-points spread, with a final value of CHF225 million.The QCB regularly issues Treasury bills and sukuk, giving domestic banks a venue to invest their excess liquidity. Early this year, Fitch upgraded Qatar's bond rating to AA with a stable outlook, the highest credit rating among the Gulf Cooperation Council states. Nastar emphasizes that the diversity of Qatar's issuance, including its debut sovereign green bonds and domestic Qatari riyal corporate sukuk, has solidified its appeal among global and regional investors seeking conventional bonds, sukuk, and sustainable finance options. Post-issuance performance has been strong, positioning Qatar's DCM market well for next year.The next stage in attracting wider international participation will likely accompany further development in Qatar's swaps and derivatives market. Regulatory support from the QCB for sustainable finance has helped broaden the investor audience, enhancing Qatar's position as one of the region's leaders in DCM.Al-Natoor notes that there is indeed traction in Qatar's DCM, both in sukuk and conventional bonds. The regulator has taken steps to advance the still-developing market in recent years. However, limitations remain, such as the nascent riyal-DCM market, the concentration of the investor base in banks, and corporates generally preferring bank financing over bonds or sukuk.At the end of the first half, when the QCB published its ESG and sustainability strategy for the financial sector, it announced its aim to boost sustainable finance and develop ESG sukuk and bonds. ESG debt in Qatar was then $3.8 billion, according to Fitch, with sukuk amounting to 19.5% of the total.