Local IPOs a sign of better times ahead

The recent wave of initial public offering announcements in the region illustrates a renewed appetite for local companies.

The recent wave of initial public offering (IPO) announcements in the region illustrates a renewed appetite for local companies.

But bankers are warning success in subscriptions will come only from larger markets, such as the UAE and Saudi Arabia. Peripheral markets may find it a challenge, says Ali Khan, the head of equity sales at the Swiss bank UBS, based in Dubai.

After a successful IPO subscription of the Omani telecommunications operator Nawras, the country's capital market authority says it is now considering amending legislation to allow family companies to list as little as 25 per cent stake, according to Yahya al Jabri, the executive president of the regulator in Muscat.

At present, Omani companies need to list at least 40 per cent.

In the UAE, the mobile retailer Axiom Telecom is planning to go public on the NASDAQ Dubai, with the investment bank Shuaa Capital among the book-runners.

Success would mean that investors will gradually become more bullish on investment banks, since they are likely to profit from the deals, after two years of few announcements.

"Generally sentiment was better than it was six months ago for the market," Mr Khan said. "If these couple go well, there is no reason why we won't gradually begin to see more announcements."

The local indexes picked up immediately after Ramadan. Dubai's measure has added 18.7 per cent since, while Abu Dhabi's shares have gained 12.8 per cent in the same period.

Companies also appear prepared to consider entering the market within current valuations, which may be a step in the right direction. Previously there was concern over improvement in valuations before companies would go public.

"It sounds like some are more ready to test out the waters in the short term," said Mr Khan. "It's another vote of confidence for sentiment improving in our markets."