Upcoming initial public offerings in Saudi Arabia and the UAE are expected to make up for a disappointing first quarter in the region.
“The outlook for the remainder of the year is expected to improve with set IPOs and several announcements by issuers mainly on the Saudi and the UAE stock exchanges,” said Steve Drake, the head of the consultancy PwC’s capital markets and accounting advisory team in the Middle East.
“UAE regulators have initiated significant developments recently, with Nasdaq Dubai’s collaboration agreement with EGX [the Egyptian Exchange] and the new UAE Commercial Companies Law expected to further encourage listings.”
Last year, Nasdaq Dubai signed an agreement with Egypt’s securities clearing house to promote the dual listing of Egyptian companies.
The companies law, which was issued last month, allows companies to float a minimum of 30 per cent of their equity. Previous rules required companies to float at least 55 per cent and were widely perceived as making IPOs in the UAE less attractive than in other jurisdictions.
Some of the UAE companies likely to launch an IPO later this year include Daman Investments, an asset management firm in Dubai.
The Saudi regulator meanwhile has approved an IPO for Saudi Ground Services, a subsidiary of Saudi Arabian Airlines.
The opening of the kingdom’s stock market to foreign investors next month will also encourage flotations.
“The Saudi Capital Market Authority’s plans to open the market for foreign investment in June is expected to improve market sentiment,” said Mr Drake. “However, we should expect to continue to see caution in Saudi Arabia given uncertainty and depressed activity elsewhere in the region. The market that currently appears to be showing signs of strength is Egypt backed by government activity.”
Only one IPO took place in the Arabian Gulf in the first quarter owing to weak sentiment from lower oil prices. Brent, which fell to a low of US$45.19 in January, has since rebounded to about $65 per barrel, but is still 40 per cent down from $115 per barrel price reached in June last year.
The Abu Dhabi-based fleet manager Massar Solutions postponed its IPO in March, citing an insufficient number of applications for its Dh576 million offering.
“The impact of lower oil prices was reflected in the subdued IPO performance in the region during the first quarter of 2015 with investors staying away from IPOs coupled with uncertainty around valuations, creating caution among issuers,” said Mr Drake.
Egypt’s Orascom Construction, the contractor spun out of the Egyptian conglomerate OCI, raised $185m in an IPO in March, which was followed by a dual listing on Nasdaq Dubai and the Cairo bourse, the first company to be listed on both exchanges.
There were two IPOs in the first quarter of 2014, which together raised $953m, PwC said.
dalsaadi@thenational.ae
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