Saudi Arabia’s first international debt sale has generated so much interest from Asian investors that Riyadh is weighing a full pipeline of bonds starting with a $15bn initial auction as early as next month, according to bankers briefed on the sale.

The clamour for Saudi sovereign debt — which could be the largest emerging market issuance in history — comes as record-low interest rates in mature economies have prompted investors to pour money into developing markets at a record pace, overlooking the risks in some of the least stable economies.

“We are seeing massive, massive demand,” one banker said of the Saudi debt.

“Asian banks are throwing around ­billion-dollar numbers.”

Saudi Arabian leaders are expected to discuss their plans with potential investors at next week’s meeting of the Group of 20 most advanced economies in China, bankers say. Deputy Crown Prince Mohammed bin Salman, the 31-year-old responsible for the kingdom’s ambitious economic and social reforms, is visiting Japan this week and will chair the kingdom’s G20 delegation.

Saudi officials surprised the financial markets this year by hiring bankers to raise debt, underlining the extent of the economic downturn after an extended oil boom had erased the memory of previous crashes.

Spurred by the collapse in energy prices, Prince Mohammed has spearheaded a sweeping reform programme aimed at diversifying the kingdom’s economy away from oil dependence. The $15bn offering, expected to come in October, is also likely to pave the way for the biggest ever initial public offering by state oil producer Saudi Aramco.

Detailed plans for the sovereign debt sale are unlikely to be set until after the Islamic holiday of Eid al-Adha, with many government offices not reopening until Sept 18.

A roadshow to sell the landmark issuance — which will set the final size and tenor of the deal — could then begin at the start of October with the deal potentially closing around the time of the International Monetary Fund’s annual gathering on October 7-9.

Bankers say Saudi government entities, lenders and private corporations are also lining up their own debt issuance to follow the sovereign launch.

“Everyone is waiting to see how the appetite will turn out for the government, and at what price, which can then be used as a benchmark,” said a second banker. “There should be some other issuance before the end of the year.”

Saudi Arabia is seen as a safer investment than other emerging economies because it remains nearly debt free and has vast oil reserves. But it is also benefiting from a hunger for yield among investors starved by record-low interest rates in Europe, Britain and Japan.

Bankers say Asian investors not previously seen in emerging market bond transactions are helping to raise order books to new highs.

Published in Dawn, Business & Finance weekly, September 5th, 2016