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GCC IPO activity drops in Q2; volatility dampens investors – Report

GCC IPO activity drops in Q2; volatility dampens investors – Report
The only three IPOs in the region were hosted in Saudi Arabia

Mubasher: The performance of initial public offerings (IPOs) in the GCC witnessed a slowdown during the second quarter of 2017 in the number of offerings and total proceeds raised, according to a report by PricewaterhouseCoopers (PwC) on Monday.

The only three IPOs in the region were hosted in Saudi Arabia, between the main Saudi Stock Exchange (Tadawul) and the Nomu-Parallel Market.

Jadwa REIT Alharamin Fund floated 36 million shares for $96 million on Tadawul, while Thob Al-Aseel Co and Al Kathiri Holding Co made a run for the parallel market with 3 million shares at $68 million and around 800,000 shares at $6.7 million, respectively.

Although Q2-16 saw only two IPOs as opposed to three IPOs in Q2-17, the second quarter of the current year saw proceeds drop by 38% year-on-year.

When looking at semi-annual results, the first half of 2017 saw an increase in offerings with 13 in total, compares to three in H1-16; however, proceeds dropped by 23%.

“During Q2-17, the Kingdom of Saudi Arabia continued to be the main driver of IPO market activity in the GCC, while the Nomu-Parallel Market for small- and medium-sized enterprises in the Kingdom remained popular among investors,” head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East Steve Drake said.

On a global scale, volatility remained low while listing conditions were favourable given lower political uncertainty and normalising monetary conditions, PwC’s report stated.

“Further global IPO activity in Q2-17 increased by nearly 50% in terms of both proceeds and the number of IPOs compared to Q2-16. In total, 379 IPOs raised $52.6 billion compared to $35.2 billion via 253 IPOs in Q2-16 and $68 billion via 420 IPOs in Q2-15,” the report added.

Debt issuance, including sukuk and bonds, remained very popular across the GCC, as Saudi Arabia issues its first US dollar-denominated sukuk worth $9 billion. On a more in-depth note, the report revealed that sovereign bond issuance activity slowed in Q2-17, as opposed to corporate bond issuance.

While Drake ensured that debt issuance remained popular in the quarter, he also noted that “consecutive interest rate hikes by the US Federal Reserve may hamper GCC government debt appetite, while a hawkish policy would trigger a surge in borrowing cost across the global and regional debt market.”