Initial public offering, or IPO, activities and the debt market in the Gulf region remained positive and strong in the first half of the year compared to the same period in 2011, and it is predicted that the upward trend will continue in the next six months.
IPOs picked up in the region in the second quarter of 2012, witnessing the strongest quarter-wise IPO performance in the last two years. New listings, although limited to only a few regional exchanges, have helped to soak up some of the excess liquidity in the region and attract investor appetite.
The “Capital Markets Watch GCC” report of PricewaterhouseCoopers, or PwC, found that a total of four IPOs raised $1,104 million on GCC stock exchanges during the quarter compared to the same period last year, where three IPOs raised $340 million.
“Our outlook for the rest of 2012 is for a continued IPO upward trend in the KSA [Kingdom of Saudi Arabia] market with perhaps limited to no activity on other regional markets,” Steven Drake, head of PwC Capital Markets in the Middle East region, said.
Despite encouraging IPO activity in the second quarter, it is still difficult to determine if there is any real recovery, Drake said, adding: “With what is happening in the eurozone and the slowing of some of the high growth markets such as China and India, it is difficult to determine the impact this will have on our regional markets.”
“We continue to see a strong pipeline in Saudi Arabia and would expect some more companies come to market in Q3 and Q4 of 2012, as long as share prices remain stable, he added.
The Tadawul, Saudi Arabia’s stock market, continues to dominate the regional exchanges, hosting five out of the six IPOs in the first half of 2012.
Activity on the UAE stock exchanges has been muted so far compared to last year, which saw three IPOs at the end of first six months of 2011.
Trading activity on the GCC stock markets receded towards the end of first half of 2012, driven by the downward movement in oil prices, worsening economic conditions in Europe as well as the news of slowing down of growth in China and other emerging markets.
The GCC debt market remained strong during the first half of 2012, with conventional and Islamic issuances collectively performing better than in the same period last year. The region’s financing needs remain strong due to the heavy infrastructure development plans and refinancing needs to service existing debts.
In the second quarter, one of the prominent conventional issuances included the $500 million corporate bond by the Commercial Bank of Qatar, which was listed on the London Stock Exchange.
The largest corporate issuance was Dolphin Energy’s $1.3 billion issued in February this year. On the sovereign front, the Central Bank of Kuwait issued treasury bills with a total value of $2.33 billion and bonds totalling $3.8 billion in second quarter of 2012.
Sukuks continued to outperform conventional bonds in the region this year with Saudi Arabia and UAE and being the most active. Saudi-based Islamic Development Bank and Jebel Ali Free Zone sukuk from the UAE were the most notable in the quarter, raising $800 million and $650 million, respectively.
During the same period, the Government of Dubai issued two sukuk on the Dubai Financial Market totalling $1.25 billion. The Saudi Arabian General Aviation Company issued the largest sukuk during the year, which raised $4 billion.