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Mideast IPO activity drops in Q3

JEDDAH - The initial public offering (IPO) market in the Middle East has declined in the third quarter (Q3) of 2009, Ernst & Young Middle East said in its latest IPO Update.

A total of four companies listed in the Middle East in Q3 2009 raised $871.79 million in Q3 2009 compared to five IPOs raising $1.021 billion in the previous quarter and 14 IPOs raising $3.74 billion during the Q3 ’08. A total of $1.97 billion has been raised in Middle East IPOs in the first three quarters of 2009 compared to $12.44 billion in same period last year.

Three IPOs in Saudi Arabia and one in Syria raised a total of $871.79 million in Q3 ’09. National Petrochemical Company of Saudi Arabia was the largest regional IPO in Q3 2009, raising $640.85 million followed by the Saudi Steel Pipe Co. with $106.81 million. Saudi Arabia’s Al-Mouwasat Medical Services with $87.99 million and Qatar National Bank - Syria with $36.14 million were the other two new issues.

Phil Gandier, managing partner, Transaction Advisory Services, Ernst & Young Middle East, said the drop in IPO activity was a result of corporate concerns. “Companies are still wary of the strength of the recovery in the region. While 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 $37.8 billion – the highest amount since Q2 2008 and an increase of 292 percent on Q2 2009.

The number of IPOs at 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 $7.3 billion.

Nearly 63 percent of the total global IPO value in Q3 was for the 62 Chinese companies which listed in the period. US firms were second with total value of $3.2 billion or 8.4 percent of global capital raised and four of the top 20 deals by size. Indian firms were third with a total value of $2.6 billion or 7.2 percent of global capital raised, and three of the top 20 deals.

While China and the rest of Asia boomed, Europe is still very much stuck in the doldrums. Total value across Europe was $189.2 million or 0.5 percent of the Q3 global figure.

Gregory K. Ericksen, Ernst & Young’s Global Vice Chair Strategic Growth Markets, said “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.”

Globally, in Q4 ’09, Ernst & Young forecast 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.

© The Saudi Gazette 2009