•Total of six IPOs in the region - two in UAE and one each in Saudi Arabia, Jordan, Tunisia and Morocco
•First UAE real estate sector listing of Eshraq Properties since Deyaar Development IPO in May 2007
•Although Asia still leads in global IPOs, the US and Europe are closing the gap
Dubai - According to Ernst & Young's Q2 2011 MENA IPO Update, regional capital markets raised US$374.77 million in the second quarter of 2011, down 51.67% from the US$775.40 million raised during the same period in 2010. However, this is still an improvement from the lows of US$24.14 million raised in the previous quarter, Q1 2011.
A total of US$398.91 million has been raised in the regional capital markets in the first six months this year compared to US$1,203 million in the first half of 2010, a decline of 66.84%.
Saudi Integrated Telecom Company (US$93.33 million) on the Tadawul, Northern Cement Company (US$7.05 million) on Amman SE, TelNet Holding (US$8.7 million) in Tunisia and Societé de Travaux de Réalisation d'Ouvrages et de Construction Industrielle (US$13.02 million) in Morocco were the single listings per country. The UAE saw two listings on the Abu Dhabi Stock Exchange; these were Eshraq Properties Company (US$229.09 million) and National Takaful Company 'Watania' (US$23.58 million). Eshraq Properties is the first property company to list in the UAE since the May 2007 listing of Deyaar Development on the Dubai Financial Market.
Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young says: "The lack of any trend in the regional IPO market is underlined by the lack of confidence to list in these conditions. Fluctuation in funds raised every quarter is only a function of the strength and stability of the listed companies. It's likely that the next quarter may also see firms listing in the low single digits."
The Middle East has seen 225 companies delay their offers or postpone going to market over the last three years. These companies would proceed with listing as the market sentiment improves and fund raising via the capital markets picks up.
Global IPO climb steadily
Global IPO fundraising activity rose by 39% in the second quarter compared to the first quarter of 2011, and has increased by 38% compared to the second quarter of 2010.
In Q2 2011, 378 IPOs globally raised a total of US$64.6b, according to Ernst & Young's Q2 2011 Global IPO update. Asian exchanges still dominated listings this quarter, with 163 IPOs raising US$27b, (42% of global capital raised) followed by European (27%), and North American exchanges(24%). However, Asia's current lead now falls far short of its dominance in Q3 2010 when Asian exchanges made up 81% of global capital raised. The top three sectors globally were the materials, industrials and energy accounting for 45% of IPOs total value.
US driven by high profile internet IPOs
With US investors drawn by high growth expectations, internet IPOs have been driving the 2011 US IPO market, while non-technology offerings have often seen lacklustre demand. Of the 46 IPOs completed in the U.S. worth US$13.8b, 14 deals raising US$4.9b have been by technology companies, or roughly 36 % of the total US IPO volume. The largest high technology IPO in Q2 was the NASDAQ listing of Russia's most popular search engine Yandex, which raised US$1.43b. "The social networking revolution will drive the price of social media IPOs, while its valuation model will continue to be refined" says Maria Pinelli, Global Vice Chair for Strategic Growth Markets for Ernst & Young.
Europe sees a 534% rise in IPO capital raised
In Q2, European exchanges saw a huge 534% rise in capital raised (US$17.7b raised in 95 IPOs) compared to the first quarter (US$2.8b raised in 54 deals) thanks to Glencore's listing in London. Among European exchanges, the London Stock Exchange raised the most capital (US$12.6b) with 21% of capital raised coming from Russian issuers. The largest global as well as European IPO so far this year was the US$10b IPO of Swiss commodities trader, Glencore International, which listed on the London and Hong Kong stock exchanges.
The European IPO pipeline continues to fill up even in the face of the Eurozone debt crisis, poor aftermarket trading by numerous withdrawals and postponements," says Pinelli.
Asia sustains lead but is losing momentum
Asian exchanges still leads the world in IPOs, but lost some of its previous dominance in Q2. Asian exchanges completed 163 deals which raised US$27b, an 11% raise in capital raised compared to Q2'10. The largest IPO on Asian exchanges in Q2 was the US$2b listing of Italy's luxury fashion retailer Prada on the Hong Kong Stock Exchange.
The Hong Kong Stock Exchange in Q2 raised US$11.3b in 19 deals, while the Shanghai and Shenzhen Stock Exchanges (SME and ChiNext) raised US$10.3b in 77 deals altogether. "Chinese IPO activity has slowed down, with investors restrained by Chinese inflationary concerns over commodity prices and housing prices." says Pinelli. "Even so, the Chinese IPO pipeline is still very strong, containing large state-owned enterprises, and mid-cap companies."
Future outlook
"Despite the continued uncertainty of a global economic recovery, the IPO remains at the heart of many companies' growth strategy," concludes Pinelli. As the global IPO pipeline continues to build up, we expect a strong second half for new offerings from high profile issuers, notably from the US and Europe. "
-Ends-
About Ernst & Young Middle East
The MENA practice of Ernst & Young has been operating in the region since 1923. For over 87 years, we have evolved to meet the legal and commercial developments of the region. Across the Middle East, we have over 4,200 people united across 20 offices and 15 Arab countries, sharing the same values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
For more information, please visit www.ey.com/mena
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
For more information, please visit www.ey.com
Contact name: Lamice Murshid
Company: Ernst & Young
Tel: +971 4 332 4000
Email: lamice.murshid@ae.ey.com
Contact name: Sandeep Sharma
Company: Weber Shandwick MENA
Tel: +971 4 321 0077
Email: sandeep.sharma@ws-mena.com
© Press Release 2011
