Dubai: Oil price volatility among other factors are hurting the primary issues from companies in the GCC (Gulf Cooperation Council), souring the mood among regional and global investors, industry participants said at a conference on Tuesday.
Brent crude has fallen more than 50 per cent from its 2014 high, and has oscillated in the range of $45-$65 per barrel amid a lot of volatility in 2015, dimming appeal of the equity markets in the GCC countries, dependent on oil.
“Oil prices and geopolitical issues in the region have been contributing to slack in IPO [initial public offering] pipeline,” said Rashed Al Mansouri, chief executive officer at Qatar Stock Exchange, adding, “we should also not forget the cost of IPOs and the regulatory requirements.”
“GCC has a special case, we talk about family-owned businesses — they are cash rich, and they are not coming to raise any capital ... they come for business continuation. But when they see the cost of listing and environment they are hesitant to list.” Al Mansouri said.
A senior official from National Bank of Abu Dhabi (NBAD) agreed. “Price of oil is a matter of budgeting, government can’t re-adjust their budgeting and we are still at a level where we can’t sustain growth. Plus there are other factors which are driving primary market here, like the geopolitical issues,” said Majd Adnan Maaitah, the bank’s managing director at Securities and Fund administration services department. “I won’t be advising my clients to come out with an IPO now ... many of them are ready,” he added.
However, NBAD is working on a couple of “small” rights issues of insurance companies currently worth $50-$100 million, and is expected to hit the market between October and November this year.
Opportunity
Companies in the Middle East and North Africa (Mena) region raised $11.5 billion in 2014, it’s highest level since 2008.
“We should be encouraging companies to get ready for the opportune moment. If they time the market right they will be able to achieve maximum value in pre- and post- IPO,” said Mayur Pau, Mena financial services and IPO leader at EY Middle East. He explained that the company should have robust equity story along with robust business plan along with formalisation of policies and procedures along with proper financial reporting and IT system.
“The window of opportunity is limited so one needs to ensure that they are IPO-ready,” Pau said.
