Dubai: Companies in the Arabian Gulf aren't benefiting from record demand for share sales in emerging markets as debt concerns hurt investor confidence.

Omani mobile-phone operator Nawras and Aluminium Bahrain (Alba), the operator of an 850,000-metric-tonnes-a-year smelter, sold shares this month at the bottom of the range used to canvas investor interest in the stocks.

The six-member Gulf Cooperation Council region generated $1.91 billion (Dh7.02 billion) of initial public offerings (IPOs) this year, compared with $2.27 billion in the same period a year earlier.

The region's benchmark GCC 200 Index has gained 9.1 per cent this year, compared with a 9.9 per cent increase for the MSCI Emerging Markets Index. The average number of shares traded daily in Dubai has dropped 65 per cent from the year-earlier period. By contrast, the pace of IPOs in Asia has climbed to a record since the crisis.

Stimulation needed

"It's a chicken and egg situation," said Mohammad Ali Yasin, chief investment officer at Abu Dhabi-based financial services company CAPM Investment. "With equity markets still struggling, it's difficult to attract investors for IPOs, but then you need new offerings to stimulate the markets."

Axiom, a Dubai-based mobile-phone retailer, on November 21 set a price range of 80 cents to $1.15 for the sale of as much as 35 per cent of its shares to institutional investors in the UAE's first IPO in almost two years. "Looking at the overall market sentiment where retail investors are still nervous, we felt that there would be enough demand just from institutional investors," Axiom Chief Executive Officer Faisal Al Bannai said.

The 200 companies listed on the Gulf's benchmark index are trading at 16.3 times earnings. That compares with 15 times for Dubai's index and 14 times for the MSCI EM Index.

Still, "appetite is improving albeit slowly," said Shehzad Janab, head of asset management at Dubai-based Daman Investments. "The region is definitely on the radar screen for debt investors. It's only a matter of time before the same holds true for institutional equity investors."

Planned issues

Kuwait Energy Company, an oil and gas company that operates in the Middle East and eastern Europe, plans to go public in the next nine months, the company said on October 10. Emirates District Cooling, a provider of central air conditioning, may offer shares by the end of 2011, Managing Director Adib Moubadder said in October.

Their success may hinge on how shares of Nawras and Aluminium Bahrain perform after their IPOs. Mazaya Qatar Real Estate Development, which raised $137.4 million in a stock sale in January, dropped 8.9 per cent since the stock started trading in Doha on October 17.

"Investors are really sensitive about valuations and won't pay any price no matter how good the company is," Fadi Al Saeed, head of equities at ING Investment Management [Dubai], said. Aluminium Bahrain and Nawras will "set the tone for the upcoming pipeline of share sales," he said.Easier in Asia

Aluminium Bahrain, owned by sovereign wealth fund Bahrain Mumtalakat, raised $339 million after going public at the bottom of the 0.90 dinar to 1.25 dinar range used to sell the stock to money managers. Nawras, which is controlled by Qatar Telecom, sold shares for 702 baisas each, also the bottom of the range.