20 May, 2015

2015 saw a reversal in optimism witnessed in 2014 as the oil price slide began to impact the market

Dubai - 20 May 2015:Initial Public offering ("IPO")The first quarter ("Q1") of 2015 showed dampening optimism and lower IPO appetite for the Gulf Cooperation Council ("GCC") countries as a result of the fall in oil prices which emerged towards the end of 2014. Oil is one of the key drivers of economic growth in the GCC, and the impact of the slump in oil prices has proved significant on the region

Dubai - 20 May 2015:

Initial Public offering ("IPO")

The first quarter ("Q1") of 2015 showed dampening optimism and lower IPO appetite for the Gulf Cooperation Council ("GCC") countries as a result of the fall in oil prices which emerged towards the end of 2014. Oil is one of the key drivers of economic growth in the GCC, and the impact of the slump in oil prices has proved significant on the region's economy and the IPO market. One example of this is Massar Solutions ("Massar"), which was set to IPO on the Abu Dhabi Securities Exchange in January 2015 and was forced to postpone its offering. The initial demand anticipated for the IPO was short lived following the drop in oil prices, which caused volatility in the market leaving investors feeling at risk and holding off any plans of investment.  

Following a relatively quiet first two months of the year, March saw the only IPO during the quarter, Orascom Constructions Limited listed on Nasdaq Dubai through a dual listing with the Egyptian Exchange ("EGX"), making it the first company to be listed on both exchanges. This comes as a result of the collaboration agreement which was signed between Nasdaq Dubai and Misr for Central Clearing, Depository and Registry in Egypt ("MCDR") in November 2014 which supports companies wishing to dual list their shares on the two exchanges. Orascom raised a total of USD 185 million from its IPO, according to PwC's Capital Markets and Accounting Advisory Services team.  

Looking at IPO performance compared to the same quarter in the prior year, in terms of number of offerings, activity remained relatively low in line with typical Q1 period activity in the GCC. One company floated in Q1 2015, compared to two companies in Q1 2014.   However, total proceeds raised in Q1 2014 were higher than those raised in Q1 2015, totalling USD 953 million, compared to USD 185 million in Q1 2015. IPO activity in Q1 2015 was lower compared to Q4 2014, both in terms of the number and the value of offerings. With a total of five IPOs in Q4 2014, the total amount raised was USD 7.3 billion, mainly driven by National Commercial Bank's IPO, which raised total proceeds of USD 6 billion, making it the largest IPO in the region during 2014 and the second largest in the world, after the China based Alibaba.  

Steve Drake, Head of PwC's Capital Markets and Accounting Advisory Services team in the Middle East region said:

"The impact of lower oil prices was reflected in the subdued IPO performance in the region during the first quarter of 2015 with investors staying away from IPOs coupled with uncertainty around valuations, creating caution amongst issuers.


The outlook for IPO activity for the remainder of the year is expected to improve with set IPOs and several announcements by issuers mainly on the Saudi and the UAE stock exchanges. The Saudi Capital Market Authority recently announced that it plans to open the market for foreign investment in June which is expected to improve market sentiment. However, we should expect to continue to see caution in Saudi given uncertainty and depressed activity elsewhere in the region. The market that currently appears to be showing signs of strength is Egypt backed by government activity.

Furthermore, UAE regulators have initiated significant developments recently, with Nasdaq Dubai's collaboration agreement with EGX and the new UAE Commercial Companies Law which is expected to, amongst other benefits, reduce the minimum float requirements, support existing shareholders sell down and allow a book building approach which is expected to further encourage listings."

In contrast with the subdued IPO performance in the GCC, 2015 started with a bang in Europe, with 81 IPOs raising a combined total of USD 18.3 billion (€16.4 billion), a level not seen since the dotcom era when more than USD 30.2 billion (€27 billion) was raised in Q1 2000.  The vast majority of proceeds raised were in continental Europe with Madrid, Euronext and the Swiss exchanges raising over half of total European IPO proceeds. This resurgence in the IPO market follows a quiet second half of 2014, with only USD 17.7 billion (€15.8 billion) of IPO proceeds raised in the last six months of last year as some companies delayed the IPO to Q1 2015. Additionally, Q1 2015 activity represents a 44% increase on the prior year first quarter when only USD 12.7 billion (€11.4 billion) proceeds were raised from a stampede of retail deals capitalising on strong Christmas trading results. Q1 2015 saw a number high profile and larger deals coming to market with the privatisation of Spanish airport operator Aena which raised USD 4.4 billion (€3.9 billion); the largest transaction since Glencore in May 2011. Proceeds in continental Europe more than doubled to USD 13.1 billion (€11.7 billion) and continental stock exchanges hosted four of the top five IPOs in the quarter.

Bond and Sukuk Markets

The GCC debt capital markets performance during Q1 2015 showed resilience towards the impact of lower oil price, despite the slow start in January. Q1 2015 saw low bond yields on the back of the region's solid macroeconomic fundamentals. Nevertheless, the impact of sustained lower oil prices on the bond and sukuk markets in the region in the longer term is yet to be tested.   

The UAE was a key player this quarter in terms of corporate debt issuances, while Bahrain's Central Bank contributed on the sovereign front. In terms of corporate bond issuances, the quarter saw notable issuances from UAE based companies, including Emirates NBD, which issued a series of issuances amongst which included an AUD denominated bond worth AUD 450.0 million (USD 350.9 million) and a Euro denominated bond worth EUR 550.0 million (USD 595.0 million). In addition, First Gulf Bank and National Bank of Abu Dhabi both issued bonds worth USD 750.0 million this quarter. The Central Bank of Bahrain issued a series of treasury bills this quarter including 5 issuances each worth USD 118.6 million, 3 issuances each worth USD 184.5 million, a USD 78.9 million issue, a USD 92.1 million issue and a USD 527.6 million issue with maturities ranging between 3 months to a year.

In the sukuk market, one of the most predominant issuances this quarter was the Emirates Airlines USD 913.0 million sukuk issued by Khadrawy Limited guaranteed by the UK government. The offering received strong interest from investors and marked the first sukuk issuance supported by the UK government. In terms of sovereign issuance, the Central Bank of Bahrain also issued 3 sukuk each worth USD 94.8 million and three short term leasing sukuk each worth USD 52.7 million.

Steven Drake said:

"Debt activity in the first quarter of 2015 in the region proved relatively stable, compared to the impact lower oil prices had on IPOs in Q1 2015. We saw bond and sukuk issuances have strong demand from investors, with deals being oversubscribed and priced on tighter levels, reaffirming the high levels of liquidity in the region. There remains a certain level of uncertainty looking into the debt market performance for the remainder of 2015; however, with the significant infrastructure developments and projects in the region such as the 2022 World Cup in Qatar, the Expo 2020 in Dubai and the transportation projects in the UAE and Saudi Arabia, we should expect to continue to see bond and sukuk issuances to finance such projects, with a focus on Islamic financing as Dubai and the broader UAE attract Sharia'h compliant transactions. "

About Capital Markets Watch GCC
Capital Markets Watch GCC surveys conventional bond and Islamic issuance and new primary market equity IPOs on GCC's principal stock markets and market segments (including exchanges in Kingdom of Saudi Arabia, Kingdom of Bahrain, Kuwait, Sultanate of Oman, Qatar and the United Arab Emirates) on a quarterly basis. This survey was conducted between 1 January 2015 and 31 March 2015 and captures the relevant data based on their transaction date. Capital Markets Watch GCC is prepared by PwC Middle East ( All market data is sourced from publically available information and has not been independently verified by PwC.

About IPO Watch Europe
IPO Watch Europe surveys all new primary market equity IPOs on Europe's principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK) on a quarterly basis. Movements between markets on the same exchange and greenshoe offerings are excluded. IPO Watch Europe is prepared by PricewaterhouseCoopers LLP ( a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited. All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers LLP.

IPO Watch Europe Surveys and annual reviews are available at:

About the PwCs' Capital Markets and Accounting Advisory Services Team in the Middle East
The Capital Markets and Accounting Advisory Services Team in the Middle East is part of the PwC's global network of capital markets specialists who provide a broad range of advisory services to companies and investment banks in connection with capital market transactions. These include preparations for becoming a public company, selecting the right market and advisory team, assisting with reviewing accounting policies and GAAP conversion projects, advising on regulatory issues and undertaking financial and business due diligence investigations.

About PwC
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