Equity markets in Arab states suffer from a lack of liquidity as shareholders tend to keep hold of their stocks rather than trading them, which leads to lower trading volumes, the director-general of the Muscat Securities Market has told Zawya.
“There is a concentration of ownership. The high wealth individuals and institutional funds are buying and not selling,” Ahmed Saleh Al-Marhoon told Zawya on Monday on the sidelines of the Abu Dhabi-hosted annual conference of the Federation of Euro-Asian Stock Exchanges on Monday.
Al Marhoon said that he was speaking about the Muscat market as well as other markets in the Gulf Cooperation Council and the wider Arab region.
“Furthermore, we have not witnessed in the recent years big IPOs. We need big IPOs,” he said.
Saudi Arabia, the Arab world’s biggest economy, has postponed plans for a flotation of a minority stake in state-owned oil firm Saudi Aramco – a deal which could possibly create the most valuable listed company in the world. A dual listing of its shares was initially due to take place on the Saudi stockmarket this year, and on an international exchange next year, but Reuters reported in August that the advisory teams working on the deal had been disbanded.
The kingdom’s oil minister, Khalid Al-Falih, replied in a statement that the kingdom remained committed to an IPO, but did not give a date.
There have also not been any IPOs on primary markets in the United Arab Emirates – the region’s second-biggest economy – this year.
“Those big IPOs will make these funds and (wealthy) individuals sell portions of what they have in order to buy from the new company, which will make the market more liquid,” Marhoon said.
“This problem almost prevails in all Arab countries,” he added.
He also urged governments to issue more bonds and sukuk. Although debt and sukuk issuance in the region has boomed in recent years, ever since Saudi Arabia first tapped debt capital markets in 2015, data from Refinitiv shows that during the first nine months of 2018 the amount of debt and sukuk issued in MENA dropped by 11.8 percent year-on-year to $73.1 billion. More than half (53 percent) of this was issued by soverign governments.
(Reporting by Yasmine Saleh; Editing by Michael Fahy)
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