IPO Watch - Enthusiasm remains

But wait, what about fears of a recession in the US and a global slowdown, uncontrollable swings on global stock markets and tightening credit conditions across the world. Would this perhaps create a sense of pessimism about the year ahead for the Middle East IPO market? The nervousness of investors showed in reported requests to postpone the trading debut of PetroRabigh , the Saudi petrochemicals joint venture between Saudi Aramco and Japan's Sumitomo Chemical Co. A $1.2 billion IPO for 25% of the company was covered 3.48 times by demand in early January, especially from retail investors who subscribed at an issue price of $5.60 per share.

As petrochemical stocks suffered in the Saudi Stock Exchange market scare on January 20 to 22, Saudi media wrote of requests by retail investors who asked to delay the start of trading because they feared losses if the stock came in on negative sentiment -- but when PetroRabigh shares started trading as originally scheduled on January 27, they opened at $11.50 and closed the first day at $13.90.

Given that the outlook for the largest stock markets remains jittery and whole choruses of US economic experts are singing opposing chants on the are-we-in-recession question, it would be unfair to ask for a consensus on the IPO expectations in Arab countries during 2008. There are reassuring signs such as the PetroRabigh story but there also are justifiable reasons to see the IPO mill grinding slower than some might think. In a massive hint at the length of time which some of the highly touted IPOs of state-owned corporate gems could take, the chairman of UAE carrier Emirates Airlines, Sheikh Ahmed bin Saeed al-

Maktoum, said in an interview that a flotation should be expected up to two years after government approval of partial privatization through IPO. Last autumn, media reports quoted top managers at the airline that a huge Emirates IPO would happen in the first quarter of 2008.

Some regional research houses and market experts continue to support an optimistic outlook and claim that 2008 is set to be another record year citing a flurry of new IPO announcements in January which flooded the halls of the region's stock markets -- generating excitement not just for local investors but also for foreign ones.

Saudi Arabia, which boasts the region's largest stock market, through the Saudi Capital Market Authority (CMA), announced two new IPOs with a combined value of $4.5 billion. Inma Bank, the country's Islamic development bank, will be offering a whopping 1.05 billion shares or 70% of its capital in an IPO between April 7 and 16. With Samba Financial Group as the lead manager, the share price will be set at $2.67 for a total value of $2.80 billion.

CMA also announced that Zain Saudi Arabia, a subsidiary of Kuwait's biggest mobile operator, Zain Group, will float 700 million shares or 50% of the company's capital to the public from February 9 to 18. Share price will be set at $2.67 for a total value of $1.86 billion.

Meanwhile, the UAE had promised more IPO action for 2008. But in January, only two announcements were made. The first being Damas, the UAE's largest jewelry chain, said it has confirmed plans to launch an $272 million IPO in the first half of 2008. Although the venue of the listing has not been confirmed, sources say the company will list on the Dubai Financial Market and possibly a dual listing on a foreign exchange as well. The second firm is DEPA United Group, which said it will launch a $500 million IPO in the second quarter of 2008. The joint lead managers for the interiors contracting company are Morgan Stanley and UBS. The company is expected to list on the DIFX.

Moving to the North Africa, the number of scheduled IPOs in Morocco for 2008 is expected to be around 10 on the Casablanca Stock Exchange, according to BMCE Capital Bourse. One of the largest rumored so far is the Chaabi Lil Iskane Chaabi Lil Iskane real estate firm which is expected in the second quarter of 2008. Another potential for second half of 2008 is Delta Holding while Credit Agricole Morroco, will float its shares at the end of 2008.

Whether the region's stock markets can ride out the storm of a global slowdown and a US recession is a question on the minds of many investors. The answer isn't clear, but given the unprecedented high oil prices and economic liberalization across the region, substantial growth in all major sectors and unheard of interest in the region by foreign investors, observers who spoke to Executive said that local stock markets in general and the IPO market in particular, will continue to flourish in 2008. They claim that the turbulence in the US markets has not dampened the enthusiasm or the development drive in the region. The say that even if oil prices drop by $20 in 2008 the MENA region will continue to experience significant economic growth for many years to come.