Dubai: The booming market for initial public offerings across the GCC, particularly Saudi Arabia and the UAE are showing no signs of fatigue from Russia- Ukraine conflict that has adversely impacted stock markets across the world.
Analysts say rising oil prices and relatively low inflation and stable economic conditions across the six oil exporting GCC states are likely to fuel the investors’ appetite for new issues.
Saudi digital security company Elm Co. drew $57 billion in institutional orders for its IPO last week, almost 70 times the targeted proceeds.
Pharmacy retail chain Nahdi Medical Co. gathered enough demand to cover what is set to be Saudi Arabia’s biggest IPO since oil giant Aramco within hours of opening its books, Bloomberg News reported.
While abundant liquidity in the domestic markets is supporting the demand for IPOs across GCC, rising demand from foreign investors are driving up IPO demand and stock valuations. Shares in Abu Dhabi Ports Group surged 15 per cent per share on its debut on Abu Dhabi Securities Exchanges a few weeks ago.
Although the war has hit equity markets across the world resulting in a slump in new equity offerings, the Gulf markets so far have remained resilient and analysts.
Saudi dominance
Saudi Arabia topped the region in terms of IPOs in 2021, with 15 out of 20 GCC IPOs debuting on Tadawul’s main and parallel markets, according to Kamco Invest report. In terms of IPO proceeds too, the Kingdom dominated the region ranking in almost 62 per cent of the offerings at around $4.65 billion in 2021. Saudi utility provider ACWA Power marked the region’s largest IPO in 2021, after its float generated $1.21 billion.
Strong UAE pipeline
Abu Dhabi Securities Exchange came next, amounting to $2.63 billion. The GCC countries have stood out in terms of IPOs during the year 2021, totalling 20, up from 7 in the previous year. Proceeds from GCC issuers have seen a five-fold leap in 2021, reaching $7.52 billion, up from $1.64 billion in 2020. The improved performance has been supported by secondary market valuations and positive global market signals in terms of performance and liquidity.
Dubai Financial Market is expected to see a flurry of activity this year starting with the high profile IPOs of utility provider Dubai Electricity & Water Authority and Roads and Transport Authority’s road toll system Salik.
Abu Dhabi-based Gulf Capital identified 83 maiden offers in the GCC, for which, managers have been assigned for 42 and another 41 have announced their intention to tap the equity market. The total number of IPOs in the GCC during the 2007-2010 period is expected to exceed 116, including 33 in 2007 and 83 offers in the coming years.
Morgan Stanley estimates a total of 110 IPOs in Saudi Arabia alone by the end of next year. The bank’s Saudi unit has mandates to manage seven IPOs this year, including one by Saudi Basic Chemical Industries that may raise $80 million.
The National Bank of Abu Dhabi (NBAD) has already announced it expects to manage at least eight IPOs this year, with three aiming to raise at least $1 billion by the end of June. NBAD managed three IPOs last year and one so far this year.
New risks on horizon
Russia’s invasion of Ukraine has effectively shut IPO markets across the world with several issuers now looking at postponing their market entry. Although the war in Europe is not a big concern for investors and market intermediaries in the GCC, at least for now, IPOs in the region may face tougher conditions ahead, as concerns over tightening monetary policy and consequent tightening of liquidity making investors less receptive to new listings.
