It has been a turbulent 12 months on the Middle East and North Africa (Mena) region’s equity markets, with 2014 seeing the highest number of initial public offerings (IPOs) since the global financial crisis. Markets rose strongly as economies accelerated, and sentiment was further boosted by classification upgrades. However, by the time the year drew to a close, the seriousness of the oil price slump was taking its toll on markets.

In all, 16 companies held IPOs in the GCC in 2014, raising a total of $10.8bn. Three of these firms were large enough to break into the MEED 100. Saudi Arabia’s National Commercial Bank was the highest new entrant, soaring into 3rd place following its $6bn offering, which was the second-largest in the world in 2014 and the largest ever in the region. The other newly listed firms to enter the table were Dubai’s Emaar Malls Group, which debuted at 26th, and Qatar’s Mesaieed Petrochemical Holding at 34th.

Market volatility

Despite this, the combined market capitalisation of the 100 largest companies, as calculated on 23 March, was $903bn, down from $912bn in last year’s MEED 100. This reflects the volatility in regional markets during the year.

Companies that have dropped out of the MEED 100
Company Exchange Sector 2014 rank
National Iranian Copper Industries Company Tehran Metals & mining 64
Arabtec Holding Dubai (DFM) Construction 70
Asiacell Iraq Telecoms 71
Saudi Industrial Investment Group Tadawul Industry 73
Gol-e-Gohar Iron Ore Company Tehran Metals & mining 78
Telecom Egypt Cairo Telecoms 78
Boubyan Bank Kuwait Financial services 82
Gulf Bank Kuwait Financial services 85
Palayesh Naft-e-Esfehan Tehran Oil & gas 86
Dubai Investment Dubai (DFM) Financial services 88
Mapna Group Tehran Industry 90
Dar al-Arkan Real Estate Development Company Tadawul Real estate 91
Commercial Bank of Kuwait Kuwait Financial services 92
Chadormalu Mining & Industrial Company Tehran Metals & mining 95
National Mobile Telecommunications Company (Ooredoo Kuwait) Kuwait Telecoms 97
Groupe ONA Casablanca Retail 99
DFM=Dubai Financial Market. Sources: Thomson Reuters; MEED

Early last year, some of the region’s most important markets were on a bull run. In March 2014, the Saudi Stock Exchange (Tadawul) was at a five-year high and the Egyptian Exchange had almost doubled in value since the previous summer. The Dubai Financial Market was also performing strongly, rising by 30 per cent in the first three months of the year.

Since then, there have been a series of dips and gains as economic and political considerations have affected investor sentiment and company performances. The upgrade of Qatar and the UAE from frontier to emerging market status by US index provider MSCI helped to boost investor interest in those bourses, but the expectations were overblown and once the upgrades actually took effect in mid-2014, the UAE markets fell sharply. Fears of another real estate bubble in Dubai also seemed to spook investors.

In Saudi Arabia, the prospect of the market opening up to international investors, following an announcement by the Council of Ministers in July, offered a fillip to the Tadawul. More recently, however, lower oil prices have dented optimism across the Gulf countries and GCC equity markets have suffered as a result.

Meanwhile, in North African markets such as Egypt and Tunisia, sentiment has waxed and waned through the year as political developments have taken their turbulent course.

New entrants in the MEED 100
Company Exchange Sector  Market capitalisation ($m) Rank
National Commercial Bank  Tadawul Financial services 35,995 3
Emaar Malls Group  Dubai (DFM) Retail 9,850 26
Mesaieed Petrochemical Holding Company Qatar Petrochemicals 9,143 34
Orascom Construction Industries  Cairo Construction & real estate 7,532 37
Makkah Construction & Development Company Tadawul Construction & real estate 4,933 56
National Shipping Company of Saudi Arabia (Bahri) Tadawul Transport & logistics 4,336 64
Esfahan Oil Refining Company Tehran Oil & gas 4,091 71
Vodafone Qatar  Qatar Telecoms 4,005 73
Vodafone Egypt Cairo Telecoms 3,899 75
Qatar Insurance Company Qatar Financial services 3,879 76
Oman Telecommunications Company (Omantel) Muscat Telecoms 3,360 87
Lafarge Ciments  Casablanca Industry 3,319 88
Housing Bank for Trade and Finance Amman Financial services 3,273 91
Bank Aljazira Tadawul Financial services 3,221 92
Qatar Navigation  Qatar Transport & logistics 3,173 93
Qatar International Islamic Bank  Qatar Financial services 3,172 94
Agility Public Warehousing Company Kuwait Transport & logistics 3,084 97
DFM=Dubai Financial Market. Sources: Thomson Reuters; MEED

Over 2014, these ups and downs have largely cancelled themselves out. The MSCI GCC index – which comprises 85 large and mid-sized firms from the six states in the bloc – posted a gain of just 1.2 per cent. The more broadly-based MSCI Arabian Markets Index, which covers 106 companies in 11 Arab markets, did slightly better, growing by 1.9 per cent. Both however, fall some way short of the MSCI Frontier Markets Index, which covers 127 listed firms in 24 countries and reported a gain of 7.2 per cent.

Banks lead

Although the Middle East’s stock markets may have been through a fairly tumultuous time, some aspects have not changed at all. For one thing, the finance sector dominates the list this year as usual. The region’s financial institutions fill 45 of the 100 places in this year’s table, with a total value of $392bn. They also account for three of the top 10 places.

In comparison, all other sectors trail some way behind. The second-most prominent group is telecoms, with 11 firms represented in the table, worth a combined $112bn.

Also relatively well represented are real estate and petrochemicals companies, with eight and nine respectively on the list. There are also six industrial businesses, most of which are steel and cement producers. Rounding out the top 100 are six transport and logistics firms, five energy companies, three food businesses, four retailers, two utilities and a conglomerate.

All this offers a fairly accurate representation of the region’s non-oil economy. Despite the oft-repeated statements of governments across the region about the necessity of diversification, relatively little has been achieved. As a result, in most countries, banks, telecoms firms and developers are among the few prominent businesses outside the energy sector.

An analysis of the MEED 100 by country highlights another important aspect of the Mena region, namely that business activity is dominated by the GCC countries, particularly Saudi Arabia, Qatar and the UAE. Saudi companies account for almost half of the entire capitalisation of the table, with their combined value of $443bn equivalent to 49.1 per cent of the total.

The other GCC countries remain far smaller. Kuwait contributes eight firms to the list worth a total of $48bn. Oman has two companies on the list, with a combined value of $6.4bn, while Bahrain has just one, Ahli United Bank, with a market capitalisation of just under $5bn.

The GCC fills out 82 of the places on the MEED 100. These firms have a combined value of $816bn, or 90.3 per cent of the total for the list as a whole. Further emphasising the bloc’s dominance, the first 30 places on the list are taken by GCC businesses.

Morocco is one of the more prominent countries outside the GCC on the list, contributing a total of four companies. Also worth noting is Iran, which has nine firms on the list. There are also three Egyptian businesses and two Jordanian firms. However, there is no company from Iraq in the table this year after mobile telecoms operator Asiacell, its sole representative in 2014, dropped out. The firm first entered the ranking in 2013, following its stock market listing, and was ranked 42nd that year. Last year, it slid to 71st position and this year it continued its fall, with its market capitalisation shrinking 36 per cent over the past 12 months.

Asiacell’s performance is partly due to the political turmoil in Iraq. The company has had to limit its services in Mosul, Anbar, Diyala and other areas, although it says it continues to operate as normal in most of the country. In the first nine months of 2014, it saw revenue fall by 10.5 per cent to ID1.5 trillion ($1.3bn), while its net profit tumbled by 39 per cent to ID287bn.

Overall, 16 companies have been relegated from the table this year. Iranian firms are the most prominent losers, with five Tehran-listed companies dropping out in what is a further sign of the pressure the Islamic Republic’s economy is under due to Western sanctions.

The company that fell the furthest was National Iranian Copper Industries Company, which last year was listed in 64th place, but now lies outside the MEED 100. Two other Iranian mining companies also dropped out: Gol-E-Gohar Iron Ore Company and Chadormalu Mining & Industrial Company.

Kuwait was the second-biggest loser, with four of its companies falling short of the threshold of about $3bn for inclusion this year.

For every exit there was, of course, an entrance, and it is little surprise the majority of the new entrants to the list this year came from the GCC, following its bumper year for listings. The highest entrants are all firms that made their stock market debut in the past year.

Of the 17 newcomers, five came from Qatar and four from Saudi Arabia. There were also two from Egypt, and one apiece from the UAE, Iran, Kuwait, Morocco, Jordan and Oman.

In line with the table as a whole, almost half the new entrants are either telecoms companies or banks. The others are drawn from a range of sectors including transport & logistics, construction & real estate, industry and oil refining.

Stronger performance

Of the other companies in the table, 33 made gains this year. The strongest riser was Qatar’s Barwa Real Estate Company, which leapt 27 places from 89th to 55th. Also making impressive gains were Commercial Bank of Dubai, which was up 27 spots to 60th, Saudi Arabia’s Al-Tayyar Travel Group, which rose 27 places to 47th position, and Saudi Airlines Catering Company, which climbed 24 places to 74th.

Heading in the other direction, 41 firms fell down the table while remaining in the MEED 100. Dubai Financial Market was the biggest faller, followed by Iran’s Mobarakeh Steel.

None of this will trouble the companies at the top of the table, however. Although Saudi Basic Industries Corporation (Sabic) has seen its market capitalisation fall substantially, it remains well ahead of its nearest rivals for the top spot: Qatar National Bank and National Commercial Bank. Despite the rough ride a lot of firms and investors have suffered this year, some at least have managed to maintain their strong position.

Although several companies have previously announced plans to go to public in 2015, it is expected the depressed oil price environment will shrink the volume of IPOs this year.