DUBAI (Reuters) - Foreign investors flocked to buy Saudi Arabia’s first dollar bonds since Jamal Khashoggi’s death, in a clear vote of market confidence after the country’s reputation was damaged over the journalist’s murder.

FILE PHOTO: A demonstrator holds a poster with a picture of Saudi journalist Jamal Khashoggi outside the Saudi Arabia consulate in Istanbul, Turkey October 25, 2018. REUTERS/Osman Orsal/File Photo

The finance ministry in Riyadh said on Thursday the order book for the $7.5 billion sale of longer-term debt sale peaked at $27.5 billion, with final pricing only a few basis points above corresponding secondary market yields.

Almost all the paper was bought by foreign investors, with U.S.-based buyers in particular snapping up 40 percent of the bond due in 2029 and 45 percent of the note due in 2050. Middle East buyers only got 3 percent and 2 percent of the two issues, respectively.

Riyadh’s stock among investors took a hit with the killing of Khashoggi in the Saudi consulate in Istanbul in October, for which a definitive explanation has yet to emerge, and as the humanitarian consequences of its war in Yemen have become clearer.

But this week’s sale coincided with improved conditions across emerging markets, with yields compressing over the past few weeks, and Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, on Wednesday called it “opportunistic”.

A second analyst said the impact of the Khashoggi case was fading.

SHRINKING YIELD PREMIUM

Hit by slumping oil prices, Saudi Arabia has become one of the biggest emerging market issuers, having sold $52 billion in international bonds since its debut in 2016. It plans to boost borrowing this year, along with state spending.

It started marketing the bonds at around 40 basis points above its existing curve, but spreads were progressively tightened and final pricing on the $4 billion 2029 tranche was around 15-20 bps above and +25 bps on the $3.5 billion 2050 tranche.

“Timing-wise this is great, because risky assets are in vogue – 2019 went off like crazy and investors want to put their money to work,” Philipp Good, chief executive and head of portfolio management at Fisch Asset Management, said on Wednesday.

Sergey Dergachev, functional head of EM corporate debt and senior portfolio manager at Germany-based Union Investment, said he thought investors had relegated the Khashoggi case to the background, “especially since some significant government reshuffling two weeks ago.”

The sale - arranged by BNP Paribas, Citi, HSBC, JPMorgan and NCB Capital - was also the first this year by a Gulf borrower, and comes as crude prices recover.

Top oil exporter Saudi Arabia announced a slight rise in its crude oil reserves on Wednesday after they were independently audited.

“When you issue first or among (the) first in early January ...investors have cash balances to be put to work,” Dergachev added.

Saudi’s public debt amounted to 560 billion riyals ($150 billion) or 19.1 percent of GDP in 2018, and the budget forecasts a rise to 678 billion riyals or 21.7 pct of GDP this year.

The country is rated A1 by Moody’s and A+ by Fitch.