Record num­ber of IPOs in first quar­ter

The 10 share is­sues were most in any quar­ter since 2012

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The GCC had a record num­ber of IPOs is­sued in the first quar­ter of the year, ac­cord­ing to a re­port by PwC yes­ter­day. The 10 IPOs is­sued was the most in any quar­ter since 2012, PwC said. The surge was in large part driven by the Saudi Tadawul’s launch this year of the first par­al­lel mar­ket (Nomu) in the GCC. Nomu is an al­ter­na­tive eq­uity mar­ket to the Tadawul, aimed at smaller cap com­pa­nies, al­though it pro­vides the pos­si­bil­ity for com­pa­nies to tran­si­tion to the main mar­ket af­ter a pe­riod of time. The launch of Nomu was marked by the suc­cess­ful list­ing of seven IPOs.

Mean­while, on the pri­mary ex­change front, there were three of­fer­ings in the first quar­ter, in­clud­ing by Al Jazira Mawten Reit fund on Tadawul of­fer­ing 11.8 mil­lion shares and rais­ing US$31 mil­lion.

The fund in­vests in de­vel­op­ing real es­tate to gen­er­ate rental in­come. Another list­ing was by ENBD Reit fund on Nas­daq Dubai of­fer­ing 94.6 mil­lion shares and rais­ing pro­ceeds of $105m. The fund in­vests in a di­ver­si­fied port­fo­lio of Sharia-com­pli­ant real es­tate as­sets in the UAE. The IPO is the first to list on a Dubai ex­change since March 2015. The third was by In­vest­ment Hold­ing Group on the Qatar Stock Ex­change.

IPO is­suance in the first quar­ter of the year com­pared with just one in the same pe­riod last year, PwC said. How­ever, the to­tal pro­ceeds raised in the first quar­ter of this year was 15 per cent lower. This mainly re­lates to the na­ture and char­ac­ter­is­tics of the Nomu mar­ket, one of which is a lower mar­ket cap­i­tal­i­sa­tion re­quire­ment com­pared to Tadawul, open­ing the doors for the list­ing of small to medium-size en­ter­prises, the re­port said. Fur­ther­more, the num­ber and to­tal pro­ceeds raised from IPOs in Q1 2017 sharply in­creased com­pared with Q4 2016, which had one IPO rais­ing $37m. Saudi Ara­bia has been the most ac­tive mar­ket in terms of the num­ber of of­fer­ings and pro­ceeds raised dur­ing the first quar­ter, with a to­tal of eight IPOs on Tadawul, out of which seven were listed on the Nomu Par­al­lel Mar­ket with a to­tal of $15m raised.

“An in­ter­est­ing start to the year, with the launch of Tadawul’s al­ter­na­tive eq­uity mar­ket re­sult­ing in an in­flux of list­ings dur­ing the first three months of the year,” said Steve Drake, a PwC part­ner and the head of PwC’s cap­i­tal mar­kets and ac­count­ing ad­vi­sory ser­vices team in the Mid­dle East.

“As the re­gion con­tin­ues to ad­just to a dif­fer­ent oil price en­vi­ron­ment, we are start­ing to see signs of mar­ket re­cov­ery and ac­tiv­ity, which are pos­i­tive in­di­ca­tors to what we hope to be an im­proved year for IPOs in the re­gion. Fur­ther­more, gov­ern­ment ini­tia­tives across the re­gion, in­clud­ing large-scale pri­vati­sa­tion ac­tiv­ity, is ex­pected to boost cap­i­tal mar­kets ac­tiv­ity in the next cou­ple of years,” Mr Drake said.

Glob­ally, the first quar­ter this year was the scene for low volatil­ity cou­pled with new record heights in cer­tain eq­uity mar­kets, the PwC re­port said. While the US Fed­eral Re­serve lifted rates for a third time since the fi­nan­cial cri­sis, the Euro­pean Cen­tral Bank left its mone­tary eas­ing mea­sures un­changed. In the po­lit­i­cal spec­trum, a vote in the Nether­lands did not trans­late into pop­ulism’s next mile­stone. None­the­less, the French pres­i­den­tial elec­tion and the of­fi­cial start of Brexit pro­ce­dures are weigh­ing on Euro­pean eq­uity mar­kets, while up­com­ing elec­tions in Ger­many and po­ten­tially Italy could re­form the EU. Fi­nally, con­cerns are mount­ing that Trump will not be able to come through on the poli­cies he promised which have driven eq­uity mar­kets higher since Novem­ber 2016.

On the IPO front, ac­tiv­ity in the first quar­ter was con­sid­er­ably higher than in the same pe­riod last year. IPO pro­ceeds in­creased by 155 per cent com­pared with the same quar­ter last year. In to­tal, 321 IPOs raised $37 bil­lion com­pared with $14.5bn via 146 IPOs in the first quar­ter last year and $42.5bn via 253 IPOs in the same pe­riod a year ear­lier. The GCC bonds and sukuk mar­ket re­mained strong in Q1 2017, sov­er­eign is­suances con­tin­ued to be pop­u­lar among gov­ern­ments, which are ben­e­fit­ing from strong credit qual­ity, with most of them hold­ing in­vest­ment grade ratings, said the re­port.

The first quar­ter this year was marked by the gov­ern­ment of Kuwait bond is­suance of $8bn, the third-largest in the GCC, fol­low­ing Saudi Ara­bia’s record $17.5bn. Oman also is­sued a $5bn bond this quar­ter.

In cor­po­rate bonds is­suances, Na­tional Bank of Abu Dhabi is­sued its sec­ond For­mosa bond (US dol­lar bond listed in Tai­wan), struc­tur­ing it as a multi-callable zero coupon bond for an amount of $885m with a ma­tu­rity of 30 years. Nas­daq Dubai con­tin­ued to prove pop­u­lar among cor­po­rate sukuk is­suers with no­table is­suances such as Dubai Is­lamic Bank is­su­ing $1bn sukuk and Is­lamic De­vel­op­ment Bank $1.25bn sukuk dur­ing Q1 2017.

On the sov­er­eign front, the cen­tral bank of Bahrain was an ac­tive con­trib­u­tor in the re­gion is­su­ing three sukuk al salam, each worth $114m, and three short-term leas­ing type sukuk each worth $69m.

“Bond and Sukuk mar­kets con­tin­ued to be ac­tive in the first quar­ter of 2017, while most of the GCC coun­tries man­aged to main­tain a rel­a­tively com­pet­i­tive bor­row­ing cost, ben­e­fit­ing largely from car­ry­ing in­vest­ment grade credit ratings,” Mr Drake said

“The longer-term im­pact of the in­ter­est rate hike by the US Fed­eral Re­serve re­mains to be seen.”

Simon Daw­son / Bloomberg

King Ab­dul­lah Fi­nan­cial District in Riyadh. The IPOs were led by Tadawul’s launch of an al­ter­na­tive eq­uity mar­ket.

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