Which country leads MENA IPO activity?
The Middle East and North Africa (MENA) region witnessed five IPO deals in the third quarter of 2017, representing a 400% increase when compared to the single IPO recorded in Q3 2016.
Announced MENA value, or capital raised, reached US$ 236.7 million in Q3 2017, a 20% increase on Q3 2016.
MENA IPO activity was primarily driven by three IPOs on the Saudi Stock Exchange (main market) valued at a total of US$ 206.8 million.
The Musharaka REIT Fund, which raised US$ 95.1 million and was the largest IPO by capital raised in Q3 2017.
The second largest IPO of the quarter was Zahrat Al Waha for Trading, which raised US$ 62 million, followed by Al Maather REIT Fund, valued at US$ 49.7 million.
After a gap of two years, the Muscat Securities Market (MSM) in Oman witnessed two IPOs raised in Q3 2017.
The IPO of Al Ahlia Insurance Company raised US$ 19.5 million, while the IPO of Vision Insurance raised US$ 10.4 million.
“The MENA IPO market outlook is positive against the backdrop of increasing stability in oil prices, improving investor confidence in the global markets and a strong desire to raise funds through privatization, resulting in a large pipeline of companies potentially preparing to come to market,” Gregory Hughes, EY MENA IPO Leader, said.
“Based on the pipeline of IPOs, we expect to see a number of premium government or partially government owned assets being floated over the next two years, particularly in the energy-related sector.”
GCC REIT listings on the rise
In the last year, GCC markets have witnessed an increase in activity and demand in the region’s relatively new real estate investment trust (REIT) market.
Saudi Arabia opened its stock market to REIT funds in 2016 and has seen six REIT listings since. In Q3 2017, two REIT funds were listed on the Saudi Stock Exchange, collectively raising US$ 144.8 million.
However, no new listings were recorded in the Saudi NOMU market during Q3 2017. This follows nine IPOs in H1 2017 after the launch of the exchange segment in February 2017.
The NOMU index continued to decline during Q3 2017 and was down by 43% from its launch date to the end of September 2017.
Global IPO volume YTD exceeds 2016 total capital raised
The third quarter of 2017 saw 330 IPOs globally, with total proceeds of US$ 37.6 billion, driven by 10 deals valued at over one billion USD each.
This pushed stock exchanges in Brazil, Singapore, Switzerland and India onto the list of the world’s top 10 stock exchanges by capital raised, behind Shanghai and Hong Kong.
Asia-Pacific continues to dominate IPO activity both by number of deals and proceeds, accounting for 60% of IPOs and 42% of capital raised worldwide so far in 2017.
Global IPO volume in the first nine months of 2017 has already exceeded the full-year total for 2016, with 1,156 IPOs globally (up 59% on year-to-date 2016) and proceeds of US$ 126.9 billion (up 55% on year-to-date 2016).
Global IPO activity for 2017 is on course to be the busiest year since 2007, with approximately 1,600 to 1,700 IPOs expected to raise between US$ 190 billion and US$ 200 billion.
Poised for recovery
According to another report, the IPO market in the GCC is expected gain further momentum thanks to the general improvement in market conditions and investor confidence, as well as a lack of traditional funding sources across the region.
This was the consensus during accountancy and finance body ICAEW’s Corporate Finance Faculty roundtable about IPOs in the GCC.
Panellists included Fahima Al Bastaki, Executive Vice President and Head of Business Development, Dubai Financial Market; Hassan Hijazy, Senior Vice President, Investment Banking; Andrew Tarbuck, Partner, Hogan Lovells; and Umar Saleem, Group CFO, Al Jaber Group.
Panellists agreed that 2017 has been a positive year for IPOs and this can be seen in the number of IPOs raised year-to-date, which is almost four times the number of IPOs raised over the same period in 2016.
Speakers indicated that this positive sentiment is expected to continue in the near future, especially in the run-up to the milestone launch of the US$2 trillion Saudi Aramco offering which is set to be the world’s largest.
Government initiatives across the region, including large scale privatisation activity, are also expected to boost capital markets activity in the next couple of years.
Panellists advised that there is a shift in thinking for regional companies when it comes to choosing the stock exchange for IPOs.
In the past, regional companies were going to foreign jurisdictions to issue IPOs but this is not the case now.
Companies have realised that there is a lot of money in the region and that local exchanges are robust enough to attract foreign investors.