Initial public offering (IPO) activity in the Middle East recorded a fivefold increase in the first quarter of 2010, raising $420.5m from six IPOs compared to $83.6m in the same period last year.

The regional upturn was driven by five IPOs in Saudi Arabia and one in Qatar, with three of the listings in the insurance and takaful (Islamic insurance) sector, according to international accountancy firm Ernst & Young (E&Y).

Mazaya Qatar Real Estate Development Company, with an offer size of $144.21m was the largest regional IPO, followed by Saudi Arabia’s Herfy Food Services ($110.2m) and Al-Sorayai Trading Industrial Group ($64.8m).

Solidarity Saudi Takaful, Amana for Co-operative Insurance and Wataniya Co-operative Insurance were the other three with offer sizes of $59.2m, $34.1m and $8m respectively.

“While it’s too early to decree that markets have rebounded, this could potentially signal the return of normalcy to the markets, which had a very difficult 2009,” says Phil Gandier, head of transaction advisory services for E&Y Middle East.

Regional IPO activity also represented a 359 per cent increase from the five IPOs in the last quarter of 2009 which raised $91.6m. Saudi Arabia also led the market in that quarter, comprising three out of the five IPOs.

Meanwhile, the dominance of the insurance sector was also observed in the fourth quarter last year when three out of the five IPOs were for insurance firms.

“Insurance licensing procedures in Saudi Arabia, which opened up the sector to new entrants in 2005, oblige newly licensed firms to offer a percentage of their shares to the public within a set timeframe,” says Gandier. “This is why we see a disproportionate number of IPOs in the Kingdom’s insurance/takaful sector.”

The largest oversubscription in the first quarter was received by Herfy Food Services at 4.6 times offer size.

“This could be symptomatic of the caution with which new IPOs will be greeted in 2010,” says Gandier.

“We may not see the hundreds or even tenfold oversubscriptions that were witnessed during the boom years. Firms will need to invest more time and resources in preparing their institution for an IPO and ensuring they have a compelling equity story.”

The upturn mirrored the performance of the global IPO markets, which recorded 267 deals in the first quarter worth $53.2bn, compared to the 52 deals which raised $1.4bn in the same period last year – the lowest IPO activity in the last decade.