Jul 02 2012
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Four IPOs in GCC fetch $1.1b in Q2
Monday, Jul 02, 2012
Initial Public Offering (IPO) activity picked up in the Gulf Corporation Council (GCC) in Q2 2012 witnessing the strongest quarter-wise IPO performance in the last two years. New listings, although limited to only a few regional exchanges, have helped to soak up some of the excess liquidity in the region and attract investor appetite.
PwC’s Capital Markets Watch GCC report found that a total of four IPOs raised $1.104 billion on the GCC stock exchanges during the quarter compared to three IPOs which raised $340 million in Q2 2011, a 69% increase in value. Average IPO offering value rose to $276 million in the quarter compared to $39 million in Q1 2012 and $113 million in Q2 2011.
The debutants this quarter included Al Tayyar Travel Group, a family business in the travel and tourism sector and Saudi Airline Catering Company, the catering unit of Saudi Airlines, raising $365 million and approximately $354 million on the Saudi stock exchange , respectively. Despite the weak global equity market outlook and falling oil prices, the IPOs received an overwhelming response in the market signifying improving investor confidence. Other notable issuances during the second quarter included a $227 million IPO by Najran Cement Company also on the Saudi stock exchange and the Bank Nizwa IPO, a newly established Islamic bank in Oman, raising $158 million and which may well pave the way for future IPOs of other start-up Islamic banks on the Muscat Securities Market .
“Whilst IPO activity in Q2 2012 could be seen to be encouraging, it is still difficult to determine if we are seeing any real recovery. With what is happening in the Eurozone and the slowing of some of the high growth markets such as China and India, it is difficult to determine the impact this will have on our regional markets. We continue to see a strong pipeline in Saudi Arabia and would expect some more companies come to market in Q3 and Q4 of 2012, as long as share prices remain stable. Our outlook for the rest of 2012 is for a continued IPO upward trend in the KSA market with perhaps limited to no activity on other regional markets,” Steven Drake, Head of PwC Capital Markets in the Middle East region, said.
The GCC debt market remained strong during H1 2012 with conventional and Islamic issuances collectively performing better than in the same period last year. The region’s financing needs remain strong due to the heavy infrastructure development plans and refinancing needs to service existing debts. According to recent estimates, the Saudi government plans to invest $500 billion on expansion and development programs and gas-rich Qatar will lay out $100 billion as it prepares to host the 2022 football World Cup. In Q2 2012, one of the prominent conventional issuances included the $500 million corporate bond by Commercial Bank of Qatar which was listed on the London Stock Exchange. The largest corporate issuance of H1 2012 was Dolphin Energy’s $1.3 billion issued in February this year. On the sovereign front, the Central Bank of Kuwait issued treasury bills with a total value of $2.33 billion and bonds totalling $3.8 billion in Q2 2012.
Sukuk continued to outperform conventional bonds in the region this year with Saudi Arabia and UAE and being the most active. Saudi-based Islamic Development Bank and JAFZ sukuk from the UAE were the most notable in the quarter raising $800 million and $650 million, respectively. During the same period, the Government of Dubai issued two sukuk on the Dubai Financial Market totalling $1.25 billion. The Saudi Arabian General Aviation Company issued the largest sukuk during the year which raised $4 billion.
“The debt markets in the GCC seem to have remained largely impervious to global economic instability due to continued government support of these issuances. Despite fluctuating oil prices and turmoil in other markets, the GCC continues to remain of interest to both regional and international investors looking for exposure to regional fixed instrument securities,” Steven Drake, added.
By Mahmood Rafique - www.twentyfoursevennews.com
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