Jul 10 2012 |
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Positive end to first-half IPO activity in GCC states
Muscat: Initial Public Offering (IPO) activity picked up in the Gulf Corporation Council (GCC) in second quarter of 2012 witnessing the strongest quarter-wise IPO performance in the last two years, according to PwC's Capital Markets Watch GCC report.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, it added.
Four IPOs raised
The report found that a total of four IPOs raised $1,104 million on the GCC stock exchanges during the quarter compared to three IPOs which raised $340 million in second quarter of 2011, a 69 per cent increase in value. Average IPO offering value rose to $276 million in the quarter compared to $39 million in first quarter of 2012 and $113 million in second quarter of 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.
The total value and number of IPOs in first half of 2012 was higher by 70 per cent and 33 per cent, respectively, compared to the same period last year. Tadawul, the Saudi stock market, continues to dominate the regional exchanges hosting five out of the six IPOs in the first half of 2012 and 87 per cent of the total value raised.
Activity on the UAE stock exchanges has been muted so far compared to last year which saw three IPOs at the end of first half of 2011. Trading activity on the GCC stock markets receded towards the end of first half of 2012 driven by the downward movement in oil prices, worsening economic conditions in Europe as well as the news of slowing down of growth in China and other emerging markets.
Steven Drake, Head of PwC Capital Markets in the Middle East region said: "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,- he added.
The GCC debt market remained strong during first half of 2012with 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 programmes and gas-rich Qatar will lay out $100 billion as it prepares to host the 2022 football World Cup.
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