MORE ARABIAN GULF IPOS IN Q2 BUT PROCEEDS DECLINE SHARPLY

▶ Saudi Arabia is the main driver of the IPO activity in the GCC and has interest among invetsors

Proceeds generated from initial public offerings in the second quarter of the year decreased 38 per cent on a year earlier, even though the number of listings in the three months ending in June increased. Markets held three IPOs in the second quarter of 2017 compared with two a year earlier.

“During the second quarter, Saudi Arabia continued to be the main driver of IPO market activity in the GCC, while the Nomu parallel market for small and medium-sized enterprises in the kingdom remained popular among investors,” said Steve Drake, head of PwC’s capital markets and accounting advisory services in the Middle East.

The only primary exchange offering in the quarter was Jadwa Reit Al Haramain Fund, listed on the Saudi stock exchange, Tadawul. The fund, managed by Riyadh-based Jadwa Investment, is a Sharia-compliant real estate investment traded fund that aims to provide investors with income-generating real estate assets in the kingdom, primarily in Mecca and Medina. It floated 36 million shares, raising US$96 million.

On the smaller Saudi Nomu market, two listings raised $74.7m. Clothing company Thob Al Aseel raised $68m, while Al Kathiri Holding, a construction material manufacturer, reaped $6.7m.

Saudi Aramco, deemed to be the world’s largest listing, aims to raise as much as $100 billion from a 5 per cent listing.

The UAE’s Adnoc plans to sell a stake to the public in its Adnoc Distribution unit, which includes more than 300 service stations throughout the UAE, potentially making it the largest transaction on local equity markets since the DP World came to the market in 2007.

Globally, IPO activity increased by about 50 per cent in terms of proceeds and number of listings for the quarter, PwC said. A total of 379 IPOs raised $52.6bn, compared with $35.2bn from 253 listings a year earlier.

For the first six months of the year, 23 per cent less was raised from listings compared with the first half of 2016 despite the number of offerings increasing to 13 in 2017 from three a year earlier.

With the oil slump and low interest rates, sovereigns and corporates are looking to fixed income to raise funding. Saudi Arabia raised $9bn from US-denominated Islamic bonds, or sukuk.

The global consultancy said that although debt issuance in the GCC was oversubscribed domestically and internationally in the second quarter, interest rate hikes by the US Federal Reserve “may hamper GCC government debt appetite, while a hawkish policy would trigger a surge in borrowing cost across the global and regional debt market”.