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Activity declines in the Middle East IPO market in Q3 of 2009: Ernst & Young
Three IPOs in Saudi Arabia and one in Syria raised a total of US$871.79 million in Q3 ’09Dubai 02 November 2009: The initial public offering (IPO) market in the Middle East has declined according to the figures in the Ernst & Young Middle East IPO Update for the third quarter (Q3) of 2009. A total of four companies listed in the Middle East in Q3 2009 raised US$871.79 million in Q3 2009 compared to five IPOs raising US$1.021 billion in the previous quarter and 14 IPOs raising US$3.74 billion during the Q3 ‘08. A total of US$1.97 billion has been raised in Middle East IPOs in the first three quarters of 2009 compared to US$12.44 billion in same period last year.
Three IPOs in Saudi Arabia and one in Syria raised a total of US$871.79 million in Q3 ’09. National Petrochemical Company of Saudi Arabia was the largest regional IPO in Q3 2009, raising US$640.85 million followed by the Saudi Steel Pipe Co. with US$106.81 million. Saudi Arabia’s Al Mouwasat Medical Services with US$87.99 million and Qatar National Bank – Syria with US$36.14 million were the other two new issues.
Phil Gandier, Managing Partner, Transaction Advisory Services, Ernst & Young Middle East, commented on the reasons for the reduced IPO activity: “Companies are still wary of the strength of the recovery in the region. Whilst the market may not change significantly during the remainder of this year, once there is evidence of a sustained recovery in the region, there is likely to be an increase of fund-raising on the regional stock markets, and the 152 announced, delayed or rumored IPOs would be anxious to list”.
Globally, a succession of billion dollar plus Chinese IPOs helped drive the total value of the market in Q3 2009 to US$37.8billion: the highest amount since Q2 2008 and an increase of 292% on Q2 2009. The number of IPOs (149) was the highest quarterly total this year but remains well below the trend in recent years.
Globally, the largest IPO in the quarter (and the year so far) was China State Construction Engineering Corp, which listed in Shanghai in July 2009 at US$7.3billion.
Whilst China and the rest of Asia boomed, Europe is still very much stuck in the doldrums. Total value across Europe was US$189.2million or 0.5% of the Q3 global figure.
Gregory K. Ericksen, Ernst & Young’s Global Vice Chair Strategic Growth Markets says, “It has been a remarkable quarter for the IPO market in Asia and in particular for China. Not only has there been a welcome return to activity with a series of significant listings, it is also noticeable that whereas in the early part of this decade Chinese or Indian companies might have considered listing in developed markets, today there is no question around Mumbai or Shanghai’s capacity to host IPOs of almost any scale.”
Ericksen adds, “Even though we saw the globalization of the capital markets with companies, investors and exchanges looking worldwide for growth opportunities five years ago, the pace of that change has really accelerated with the recession and the relative speed with which the Chinese and Indian economies have recovered from the downturn.”
Q4 IPO outlook
Globally, in Q4 ’09, Ernst & Young expects another strong quarter for the IPO market in Asia; the absence of a rapid rebound in Europe; and a cautious but substantive improvement in IPO sentiment in the US as risk appetite returns.
Ericksen concludes, “This doesn’t quite feel like a ‘dead cat bounce’, but nor is it a universal recovery in global IPO markets. Until we see properly functioning markets globally, and in particular a return to confidence on the main European bourses, questions will remain about the health of the recovery and there will remain an excessive reliance on a handful of large Chinese listings to prop up the overall numbers. So for now it remains cautious optimism.”
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About Ernst & Young Middle East
The Middle East practice of Ernst & Young has been operating in the region since 1923. For over 85 years, we have evolved to meet the legal and commercial developments of the region. Across the Middle East, we have over 4,500 people united across 20 offices and 15 Arab countries, sharing the same values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit www.ey.com
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