Morgan Stanley favors UAE corporate bonds as MEast picks

Morgan Stanley favors UAE corporate bonds as ME picks

Bank favors Dewa, IPIC, TAQA bonds - analyst; Strong cash position, strategic importance key

June 8, 2011 9:33 by Reuters

Morgan Stanley is betting on UAE corporates which are of strategic importance to the Gulf state among its top bond picks in the Middle East, an analyst at the US bank said.

The bank’s fixed income analyst Lenka Polackova prefers utility Dubai Electricity and Water Authority’s 2015 bond , energy investment firms Abu Dhabi Energy Co’s (TAQA) 2012 maturity , and International Petroleum Investment Co’s (IPIC) 2016 bonds , she said in an interview with Reuters.

Investment firm Kuwait Projects Co (KIPCO) bond maturing 2020 and Bahrain’s sovereign wealth fund Mumtalakat’s 2015 issue also feature on the list of five names Morgan Stanley selected as its top corporate bonds for value.

All the companies have strong government links.

“Corporates with good cash flows and/or strategic importance will be a key investment theme for the region,” Polackova said.

Spreads on Gulf bonds in both the sovereign and corporate space have tightened in recent weeks, as the region proves resilient to any contagion effects from the political upheaval in the broader Middle East.
Last week, Dubai-based airline Emirates priced a $1 billion five year bond at the tighter end of guidance, which attracted orders over $5 billion.

The issue could prompt more corporate borrowers from tapping global debt markets amid strong investor appetite and improved pricing levels.

Tightening spreads has led to some investors looking harder for yields in solid Gulf credits.
“We continue to be constructive on sovereign credit but valuations are less compelling than in early 2011. Opportunities however remain for selective longs and relative value plays,” Polackova said. (Reporting by Rachna Uppal; Editing by Dinesh Nair)