The GCC will continue to attract initial public offerings this year, despite the challenges facing the global economy, with the listing momentum in Dubai, in particular, set to continue.
Between announced and rumoured IPO plans, between 27 to 39 companies could float their shares in the region this year, Kamco Invest said in a report on Monday.
“While we expect the trajectory of interest rate hikes, geopolitics, secondary stock market volatility and oil price volatility to continue to remain risks in 2023, it is worth noting that the prevalence of these factors did not stop strong IPO activity in 2022,” the report said.
Looking specifically at Dubai, the pipeline of government and public sector companies looking to go public continues to rise amid strong economic growth in the emirate.
It is the right time for family offices and small and medium-sized enterprises to list and raise funds for growth and develop financial resilience amid a weakening global economic outlook, panellists told the inaugural Mena IPO Summit in Dubai.
“When you look at the role the government has played in shaping up the economy, it serves as a compass [for investors],” Shaikha Almarri, head of government corporates at HSBC Dubai told delegates on Monday.
“The momentum from 2022 is expected to continue in 2023”, with the continuation of the government’s privatisation programme, she added.
The UAE, the Arab world’s second-largest economy, and the wider GCC region has seen a flurry of IPOs amid strong investor demand as economies rebound at a quicker pace from the coronavirus-induced slowdown and liquidity has been shored up by high oil prices.
The total number of IPOs issued in the region jumped to 48 in 2022 from 20 in 2021, Kamco Invest said.
Proceeds for 2022 from GCC issuers went up by 3.1 times to $23.38 billion, from $7.52 billion in 2021, data from Bloomberg and stock exchanges showed.
Saudi Arabia, the Arab world's largest economy, maintained its leadership position for IPO issuances from the region in 2022, as 34 out of the 48 GCC IPOs debuted on either the Tadawul or the Nomu.
Overall, 12 companies in the UAE listed last year, raising $11 billion, in addition to the joint Abu Dhabi-Riyadh listing of Mena food franchisee Americana, which raised $1.8 billion in late 2022, according to EFG Hermes Research.
“The GCC is expected to continue to generate interest for its strong businesses and family office listings from international investors,” Kamco said.
Dubai, a commercial and tourism hub, has been the centre of capital markets activity last year after a lull in IPOs for a few years.
In November 2021, Dubai announced plans to bolster the size of its capital markets, with intentions to list 10 state-owned companies and boost the size of the emirate's financial market to about Dh3 trillion ($816 billion).
The emirate also announced a Dh2 billion market maker fund to encourage the listing of more private companies from sectors such as energy, logistics and retail.
Four of the announced 10 state-owned enterprises listed on the Dubai Financial Market last year.
The March listing of the Dubai Electricity and Water (Dewa) was the largest GCC IPO in 2022, raising $6.1 billion. The offering size was more than doubled to 8.5 billion shares amid strong investor demand. The utility is now the largest listed company by market capitalisation on the DFM.
From the private sector, schools operator Taaleem also listed its shares in Dubai, after raising $205 million from its public offering in November.
“When the government announced it wanted to bring 10 [state-owned] assets to the market, it was a clear message,” Ms Almarri said.
With that announcement, the government made its intention clear to further develop the emirate’s equity market and accelerate its economic development, she said.
Approximately 50 per cent of DFM's investors come from within the region, Hamed Ali, chief executive of the DFM and Nasdaq Dubai, told reporters on the sidelines of the event.
In terms of the market capitalisation, about 20 per cent is held by foreign investors, he said.
“It is very important for us to be able to add value to the Dubai’s capital market … an efficient, functioning non-exclusive capital market that helps different segments of the economy.”
He said the Dubai market has the capacity to surpass its IPO performance of last year.
“The pipeline is looking phenomenally well. It is looking fantastic,” he said.
“The fact [is] that a lot of the regional businesses that in the past would end up looking at an international listing on international markets are now shifting their attention to look more at the region.”
Dubai’s economy, which grew 6.2 per cent in 2021, continued growth momentum in 2022. Gross domestic product expanded 4.6 per cent on annual basis in the first nine months of 2022, according to the Dubai Statistics Centre data.
Helal Almarri, director general of Dubai’s Department of Economy and Tourism (DET), on Monday said Dubai's GDP grew in mid single digits in 2022 and it is expected to continue growing at the same pace this year.
“We did very, very well,” he told the summit. “We are lucky to be where we are, and we have a very good base for 2023.”
Foreign direct investment and the rapid growth of the Dubai tourism and financial services sectors drove the economic growth last year and they will continue to support economic momentum this year.
With continuing jitters in the global equity market, “the time is right for UAE SMEs to go public” and draw on the strength of the emirate’s capital market, Mr Almarri said.
There is already interest not only from local businesses but also from companies from the across the region and beyond to list their shares in Dubai.
“There is a mindset shift in companies” that realise the need to develop resilience amid global economic headwinds and growing competition, he added.