IPO value in MENA rises to $349mln in Q3

Regulatory updates and inclusions in global indices have been positive for the GCC IPO market

  
A Saudi trader observes the stock market on monitors at Falcom stock exchange agency in Riyadh, Saudi Arabia February 7, 2018.

A Saudi trader observes the stock market on monitors at Falcom stock exchange agency in Riyadh, Saudi Arabia February 7, 2018.

REUTERS/Faisal Al Nasser

The value of initial public offerings (IPO) in the Middle East and North Africa region surged by 21.9 per cent in the third quarter to $349.9 million year on year, while activity declined by 33.3 per cent, according to the latest EY Mena IPO Eye report.

"In light of fluctuating oil prices and headwinds in the economy, IPO activity in the region has been slow from the first quarter to the third quarter of 2018," said Phil Gandier, Mena transactions leader at EY.

However, it is positive to see that IPO value increased year on year in the third quarter, especially when there had been several entities across the region delaying their plans for IPOs in 2018 due to various factors, including regulatory and global trade concerns and uncertain market conditions in a rising interest rate environment, said Gandier.

Globally, IPO activity saw a significant slowdown in the third quarter, with 302 IPOs raising $47.1 billion, marking a decrease of 15 per cent and two per cent respectively, compared to the second quarter.

"Globally, the third quarter has been a relatively quieter period for IPO activity driven by geo-political tensions, trade issues between the US and China and the looming exit of the UK from the European Union, all of which have dampened investor confidence in the short term," said Gandier.

In Mena, Saudi Arabia led the IPO activity in the quarter with the IPO of Leejam Sports Company on the Saudi Stock Exchange, which raised $220.6 million, making it the biggest IPO in the third quarter. In the previous quarter, four companies went public, three of which were Reit listings on the Tadawul. Additionally, in the GCC region, Oman's Muscat Securities Market (MSM) had a single IPO listing for Dhofar Generating Company in the power and utilities sector raising $52 million.

Gregory Hughes, Mena IPO Leader, EY, said while IPO performance has been slow this year, regulatory updates and inclusions in global indices have been positive for the GCC IPO market.

"FTSE Russell has issued a statement that it plans to include Tadawul as a secondary emerging market index in 2019. This follows the September 2018 announcement where MSCI signed an agreement with Tadawul to jointly launch a tradable index in Q4 2018, which is intended to function as a platform for investment instruments, covering exchange-traded funds," said Hughes.

"Looking to Oman, increased clarity in regulatory processes in the power and water sectors has created transparent competition in the sectors, encouraging developers and investors. With as many as six power generation and water desalination companies planning IPOs within three years, Oman's IPO pipeline looks very healthy," said Hughes.

The Abu Dhabi Securities Exchange has announced plans to roll out futures trading in 2019 to boost investments. The stock exchange is connecting with seven companies that have IPOs on their agenda.

There have also been talks of MSCI reclassifying the Kuwait Stock Exchange as an emerging market in 2019. The stock exchange is currently a frontier market.

In the wider Mena region, Egypt and Tunisia recorded one deal each. The IPO of Cairo for Investment & Real Estate Development Company raised $69.7 million.

 

 

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