Business | Markets
IPOs to fuel Gulf market surge
Despite an erratic performance last year, the Middle East stock markets are poised for strong growth in 2007, said a report by professional services provider Ernst and Young.
- Staff Report
- Published: 23:24 June 26, 2007
Dubai: Despite an erratic performance last year, the Middle East stock markets are poised for strong growth in 2007, said a report by professional services provider Ernst and Young.
According to the study, Globalization, the fourth annual Global IPO Report released yesterday, most Middle East exchanges were down last year except for Oman, Bahrain, Kuwait and Egypt. The Saudi exchange lost more than half its value and Dubai's exchange fell by two-thirds since its peak the previous year.
"Middle East market instability has not seriously dampened investor appetite for IPOs. In 2006, Middle East IPO markets raised $10.8 billion through 87 deals. A strong outlook for the next 12-24 months includes large-scale privatisations and infrastructure projects," said Omar Bitar, managing partner of Business Advisory Solutions at Ernst and Young Middle East.
The report said that the key IPO trends of the last 18 months in the region reflect the effects of rapid globalisation, vibrant growth in the emerging markets an escalating rivalry between the world's stock exchanges.
"The availability of capital around the world and a surge in IPO-ready companies worldwide are rapidly changing the face of the world's capital markets," said Greg Ericksen, global vice-chair, Strategic Growth Markets at Ernst and Young.
Local potential
The report notes that as capital becomes more global, the vast majority of IPOs stay local. More than 90 per cent of companies around the world choose their primary place of listing in the market where they operate.
"Most companies prefer to stay local for their IPOs since their customer base is usually local, and it is local investors who best understand their business," said Ericksen.
According to the report the Gulf companies are more likely to have successful IPOs in the Gulf than they would in a foreign market. Historically, investors have made hefty gains from investing in regional IPOs. Therefore key decision makers in pre-listed companies still consider the Middle East market as a leading one for IPOs.
In 2006, the amount of capital raised globally by companies going public reached a record $246 billion, up from $167 billion the previous year. China's companies raised the most.
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