YanSab, the project company for the Yanbu petrochemicals complex being developed by Saudi Basic Industries Corporation (Sabic), is offering 35 per cent of its capital. The 39.4 million shares are priced at SR 50 ($13.30) and subscription is open until 29 December. With the offering some 37 per cent covered during the first day, another multiple oversubscription is inevitable.

Next in the pipeline – pushed back by the Capital Market Authority to make way for YanSab – and on a far smaller scale is the IPO of shares in Aldrees Petroleum & Transport Services Company, due in late January. Kayan Petrochemical Company, the project company for the Jubail complex planned by the local Project Management & Development Company, is also reported to be nearing readiness to approach the market. About 10-12 share offerings are expected during 2006.

‘The IPO pipeline will pick up in the year ahead, but the offerings are all too small to let enough air out of the bubble – Maaden [Saudi Arabian Mining Company] is the only big one on the cards,’ says Beshr Bakheet, managing partner of Bakheet Financial Advisors. ‘There will still be the problem of too much money chasing too few stocks.’ The TASI is up by more than 100 per cent since the start of 2005 and average trailing price/earnings (PE) ratios are running at about 40.

‘There is a kind of nationalistic reluctance to criticise the stock market, but its behaviour is completely irrational,’ says Eric Louis, equities analyst at Banque Saudi Fransi. ‘You have a situation where a company’s entire stock changes hands twice in one day, and daily turnover hits SR 17,000 million-18,000 million [$4,533 million-4,800 million]. It is farcical in some sectors. The agriculture sector [where the PE is about 54], for example, makes more money from the stock market than from milking cows.’

Bargains are few and far between, but certain sectors still offer a reasonably attractive proposition – particularly since, rationality aside, few analysts expect an imminent crash. ‘At a PE of 25.5, the telecoms sector has underperformed,’ says Louis. ‘Petrochemicals stocks and some of the banks still make sense, as well as a couple of the cement companies.’

While a crash, barring unforeseen political events, is unlikely to take place during 2006, nor is a further 100 per cent-plus year-on-year rise anticipated. ‘Already profits growth of listed companies is decreasing between quarters and will continue to do so in 2006,’ says Bakheet. ‘But the direction of share prices in 2006 will all depend on liquidity.’ There are no signs that this will dry up.