Initial public offerings (IPOs) on Middle Eastern stock exchanges are set to pick up in the rest of the year and into 2016 as oil prices stabilize and market reforms encourage more companies to sell shares, according to Ernst & Young.
The opening of the Saudi Stock Exchange to foreign investors and new regulations in the United Arab Emirates that lower the proportion of stock companies have to offer investors to 30 percent from 55 percent, will encourage more share sales, Mayur Pau, Dubai-based Middle East and North Africa IPO leader at EY, said by phone Monday. A switch in the U.A.E. to having pricing based on demand, rather than at levels set by the regulator, will also make IPOs more attractive, Pau said.
“Economic reforms in the region are paving the way for a pick-up in IPO activity and we already see a large pipeline of companies in the U.A.E., Saudi Arabia and Egypt preparing for potential listings,” said Pau. “Egypt continues to benefit from political stability and there is a level of confidence there now that is attracting investors and issuers.”
Companies held 11 IPOs the MENA region in the first half of 2015, raising more than $2.4 billion, a report by EY published Tuesday shows. The number of deals fell by 11 percent from a year earlier and the value raised dropped by 1 percent as a slump in oil prices led to declines in regional stock markets, it said.
Oil Stabilizing
Oil’s plunge in the second half of 2014 to the lowest price in more than five and a half years sparked a sell-off across equity markets in Gulf Cooperation Council countries. As a result, the U.A.E. market regulator advised “many” companies to delay IPOs this year, Chief Executive Officer Abdullah Al Turaifi said in January.
Greater stability in oil prices has prompted companies to contemplate share sales. Buyout firm Abraaj Group is planning an IPO of its stake in credit-card processing business Network International LLC, people with knowledge of the matter said in June.
“We are seeing a lot of clients get as ready as they can for listing while watching the market to see if the timing is right,” said Pau. “We think the market opportunity is reasonably good now, particularly in Saudi Arabia and Egypt, and expect to see activity pick-up in the coming months.”
Of the 11 IPOs in the first half of the year, five were by Egyptian companies and three were in Saudi Arabia, according to the EY report.
Saudi Arabia opened its stock market to direct foreign investment for the first time in July. The move will encourage more companies in the kingdom to have their stock trade on the exchange as the pool of potential investors has increased, Pau said.
Source: Bloomberg
