London continues to attract Middle East listings

Mideast listings on London Stock Exchange boom as companies seek to attract international investors, avoid local listing headaches.

Damac listed global depositary receipts – a form of quasi-ordinary shares with less rigid listing requirements – in London in December last year. Paulo Vecina / The National

A boom in Middle East listings on the London Stock Exchange is set to continue next year as companies follow the likes of Damac and Gulf Marine Services to lure more international investors, according to an LSE executive.

“Given London’s credentials in certain markets, we’ve seen an increase in the number of companies looking to raise capital in London,” said Ibukun Adebayo, the co-head of emerging markets at the LSE’s primary markets division.

“We’ve seen a lot of oil and gas companies as well as oilfield services companies, for example. We’ve got to a point where we have had to create more resources in the London Stock Exchange to look after our Middle East business. We’re growing our part of the business. We’re hiring more people.”

Mr Adebayo said English capital offers international exposure, greater pools of cash that can buy stocks and a springboard for global expansion. To date, 44 Middle Eastern companies with a combined market cap of about US$100 billion are listed in London

Listing on the LSE allows international investors to avoid the pitfalls of buying emerging market shares locally.

For investors, he said, these listings also offer the ability to avoid obstacles experienced in the Middle East in recent years such as capital controls, political upheavals and limits on how much foreigners can buy in Arabian Gulf countries. That stock valuations of many Middle East companies are at multiyear highs also makes it attractive for owners to sell shares.

Apart from Gulf entities, three Egyptian companies were seeking to sell shares for the first time in London, Mr Adebayo said.

He cited the lower costs of listing in London, the access to a greater number of investors – $3.5 trillion tracks the FTSE emerging markets index – and the quality of analysts in the city as other reasons pulling these companies to the LSE.

While there has been much talk in the UAE of IPOs in the past year-and-a-half as the economy improves, most companies that have taken the plunge have done so in London to avoid rules that force companies to sell at least a 55 per cent stake to investors. A notable exception is Emaar's recent Dubai IPO of its malls unit, for which the company received an exemption from the regulator to sell only a 15 per cent stake on Dubai's main exchange.

Abu Dhabi-based Gulf Marine Services listed its shares in London in March, while shares of the Dubai-based real estate developer Damac started trading on the same exchange in December. National Takaful was the last company that floated its shares on the Abu Dhabi bourse in November 2011.

Rashed Al Baloushi, the chief executive of Abu Dhabi Securities Exchange, said last month that his team was seeking to attract more companies to list, especially private businesses in industries such as petrochemicals, education, health care and retail because those businesses were not directly represented by the stocks on the exchange.

Still, Mr Al Baloushi will continue to face competition from not just the LSE, but also exchanges in Dubai and even as far afield as New York.

UAE IPOs will also have to vie with the bond market, where companies can tap financing on the cheap as long as interest rates remain low.

Mr Adebayo said that when it comes to costs and the support given by analysts, London will still maintain its competitive edge as a place to list shares.

“The businesses that have come previously, particularly from the UAE, haven’t come to London purely because they needed to float a smaller proportion of their company and want to retain control,” said Mr Adebayo.

“They’ve come really because there has been a significant reason underlying that, which is that London is better able to understand the equity stories of the companies that have come.”

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