ABU DHABI/SINGAPORE, Dec 10 – Asian investors are investing in Gulf bonds and loans this year, reflecting both deepening trade and financial ties with the fast-growing region and an uncertain outlook elsewhere, including the world’s two largest economies, the United States and China.
Bond issuance in the Middle East and North Africa region rose 20% year-on-year to $126 billion in the first nine months of this year, according to LSEG data, with full-year records in sight for both the region and broader emerging market debt sales outside China.
That growth, driven largely by the six-member Gulf Cooperation Council, represents both growing financing needs linked to oil and gas-producing economies’ efforts to diversify and growing demand from Asian investors reshuffling their portfolios.
“There has clearly been a shift with Chinese investors actively diversifying away from US-based investments,” said Nour Safa, head of debt capital markets for the Middle East and North Africa at HSBC in Dubai.
Chinese investors have become more comfortable with the region and are now doubling down on their investments in both bonds and loans, which have seen particularly strong demand from Asia, Safa said.
Syndicated Middle Eastern loans in Asia and the Pacific have more than tripled to more than $16 billion so far this year, up from less than $5 billion last year, LSEG data showed.
With China’s economy slowing and Washington’s tariff-focused policies causing investors to reconsider their exposure to the vast pool of U.S. assets, the Gulf appeals for its stability and strong growth prospects.
The IMF projects that the region will grow 3.9% this year and that growth will accelerate to 4.3% in 2026. In contrast, global growth, projected at 3.2% in 2025, is expected to slow to 3.1% next year.
“Investors are being more cautious with U.S. Treasuries and are diversifying into several alternative markets,” said Oliver Holt, head of debt syndication at Nomura in Singapore, where highly rated Middle Eastern government-backed issuers often catch investors’ attention.
Deepening economic ties are also helping Gulf-Asia trade rise 15% to a record $516 billion last year, about double the value of the region’s trade with the West, according to London-based Asia House.
ASIA ACCEPTS GREATER BOND ALLOCATIONS
Ritesh Agarwal, head of debt capital markets at Emirates NBD Capital, said Asian institutions – hedge funds, asset managers and private banks – have driven an increase in the region’s debt allocations over the past 12 to 18 months.
According to Agarwal, the average Asian allocation to Gulf debt issues was now between 15% and 20%, up from 5% to 7% in early 2024. He said that while most investors were not from mainland China, Chinese capital was flowing through Asian accounts in Hong Kong, Singapore and, in the case of Islamic bonds, Malaysia.