Wednesday, Apr 27, 2016

Dubai: The Middle East and North Africa region (Mena) witnessed only two initial public offerings (IPOs), raising $615 million, in the first quarter of 2016, representing another quarter with limited IPO activity, according to EY.

Capital raised through Mena firms in Q1 2016 increased by 141 per cent, while the number of IPOs were consistent (two IPOs), compared with Q1 2015.

“Q1 2016 witnessed limited IPO activity, in line with H2 2015, as volatility in the Mena capital markets continued, primarily driven by fluctuating oil prices and certain global factors. Egypt and KSA continue to lead the limited IPO activity in the Mena region, driven by investor demand and strong fundamentals. There is a strong pipeline of companies in Mena that are IPO ready and waiting for the right time to go to market,” Phil Gandier, Mena Transactions Leader, EY, said in a statement.

Oil price fluctuation continues to drive Mena stock market performance

Oil prices declined in January 2016 to the lowest level in several years (below $30 per barrel) resulting in fluctuations across the Mena capital markets. According to analysts, brent crude oil prices declined primarily due to an increase in global oil supply and reduced demand, driven by uncertainty in the performance of the global economy.

However, the price of brent crude rose slightly towards the end of the quarter, trading at around $40 per barrel, resulting in a uptick in Mena stock market performance.

“The recent Opec [Organisation of the Petroleum Exporting Countrie] meeting did not result in a consensus in terms of an output cap from oil-producing countries to stabilise oil prices. Given the continuing uncertainty in global economic performance and fluctuating oil prices, the outlook for Mena IPO activity is likely to remain subdued in 2016 unless confidence improves. The key drivers to Mena IPO activity continues to be fluctuating oil prices, regional geopolitical factors and the performance of the global economy,” Mayur Pau, Mena Strategic Growth Markets and IPO Leader, EY, said.

Staff Report

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