Adnoc Distribution's issue of new shares and convertible bonds were the main driver behind a doubling of equity capital market issuance in the Middle East and North Africa in the first half of 2021, according to Refinitiv data.
The amount raised on the region’s capital markets increased 138 per cent to $2.1 billion, which was a three-year high, the financial data company's Mena Investment Banking Review showed. Issuance related to Abu Dhabi National Oil Company's distribution arm made up $1.64bn of this.
The amount of debt raised by Mena entities on capital markets in the first half fell 6 per cent on last year to $70.6bn, but was still the second-highest on record, the report showed.
“Sixty four per cent of the total came from investment grade corporate debt, with a total of $45.6bn, the highest total year-to-date since our records began,” the report said. “The UAE was the top nation for [debt market] proceeds, with $20.5bn” issued, it added.
Equity markets in the region have posted strong gains this year, with Abu Dhabi and Saudi Arabia's indexes outperforming global benchmarks. The Abu Dhabi Securities Exchange's index has climbed 40 per cent, taking its market capitalisation above Dh1.26 trillion ($343bn). The Tadawul index has risen 24.2 per cent, while the MSCI World Index that tracks global markets is up 14.2 per cent.
Companies are tapping into this investor enthusiasm to raise capital. Earlier this month, Mubadala's Al Yah Satellite Communications secured $730m through its initial public offering on the Abu Dhabi Securities Exchange and other companies have increased foreign ownership limits. The exchange is also incentivising further listings by cutting trading fees and developing new service lines such as derivatives as part of its ADX One strategy to double its market capitalisation.
A "slew" of new issuances is expected on the Tadawul and the ADX is expected in the second half of the year, Ullas Rao, assistant professor of finance at Heriot Watt University Dubai, said.
"Governments in Mena are evidently keen to cash in from the positive momentum" by selling stakes in state-owned firms to help improve their fiscal positions, he said.
Merger and acquisition activity in the region, however, was 9 per cent lower in the first half at $44.8bn, with Saudi Aramco’s sale of a 49 per cent stake in its pipeline network to investors including US-based EIG and Abu Dhabi’s Mubadala making up $12.4bn of this.
Deal activity is expected to continue in the energy sector – especially as international oil companies such as BP act on pledges to exit fossil fuel investments – and in the technology market, Mr Rao added.
"The favourable environment supporting the technology sector - thanks in part to the pandemic-led disruption - should encourage strategic buyouts, at least in the form of minority stakes," he said.
Overall, the fees earned by the region’s investment bankers were 4 per cent lower in the first half at $591.3 million, compared to the same period last year. JP Morgan was the top fee earner, cornering $71.6m, or 12.1 per cent of the total, according to Refinitiv. HSBC (8.5 per cent), Goldman Sachs (7.1 per cent), Citi (6.2 per cent) and First Abu Dhabi Bank (5.3 per cent) rounded off the top five.