Initial public offering activity still depressed

09 July 2013

Offerings in second quarter of 2013 raised a total of only $48m

Depressed initial public offering (IPO) activity in the GCC continued into the second quarter of 2013 with three new listings raising a total of only $48m, according to PricewaterhouseCoopers (PwC).

It marked a 86 per cent decrease in total value raised compared to last quarter, when $337m was raised.

The most prominent share offering during the quarter was that of the Abu Dhabi-based Al-Noor Hospitals Group, which raised $342m after listing a third of its equity on the London Stock Exchange. The other listings were Sharqiyah Desalination Company, which raised $6m at IPO on the Muscat Securities Market, and Saudi-based insurance companies Aljazira Takaful Taawuni Company and AIG-ANB Cooperative Insurance Company, both listed on the Saudi Stock Exchange (Tadawul) with offering values of $28m and $14m, respectively.

“Concerns looming over the economic slowdown in certain global markets and the elevated political instability in Egypt and other countries in the Middle East would appear to have dampened investor appetite and contributed to the low offering values we have seen this quarter. Until volatility in global equity markets and the political situation stabilises, regional equity markets are likely to remain subdued. However, we continue to see interest in companies looking to list within the next 12 to 18 months,” says Steve Drake, Head of PwC’s Capital Markets business in the Middle East region.

According to Shehab Gargash, chief executive and managing director of Dubai-based Daman Investments, more primary market activity is needed to further boost stock markets as overregulation is preventing more companies from listing in the UAE.

The GCC bond market on the other hand, continued to be active, but was again dominated by debt raised by sovereigns and banks. Issuances included Kuwait Central Bank raising a total of $6.7bn and UAE- and Qatar-based banks raising nearly $3bn in total.

The sukuk (Islamic bond) market in the second quarter of 2013 included issuances by Saudi-based Islamic Development Bank, raising total proceeds of $1bn, and Saudi Electricity Company and Sadara Chemicals Company each raising $2bn. Abu Dhabi-based Dana Gas’ sukuk raised $850m to refinance its existing debt.

However, toward the end of the quarter market sentiment declined as the interest rate environment hardened causing some issuers to postpone their issuances, says Drake.

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