Saudi stock market ‘dominant’ player in Gulf IPOs

LONDON: The Saudi stock market, known as the Tadawul, remains the “dominant” Gulf player in attracting initial public offerings (IPOs), according to a report published on Sunday by PwC.
The exchange attracted two of the region’s four IPOs during the third quarter of this year.
The Tadawul “remained the dominant exchange” in the Gulf Cooperation Council (GCC) in terms of IPO proceeds, PwC said.
The two IPOs on the market raised a total of $110 million, making up 79 percent of total Gulf IPO proceeds in the third quarter. That included an offering by Zahrat Al-Waha For Trading, which raised $61.2 million in what was the region’s largest IPO during the quarter.
Steve Drake, head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East, said: “GCC IPO market activity this quarter gained momentum representing a general improvement in market conditions and investor confidence in the region.
“We are seeing more and more companies engaging in IPO readiness activities, preparing themselves and getting ready for the right window. We expect to see companies go to market during 2018.”
The Muscat Securities Market witnessed its first IPOs since June 2015 during the third quarter of this year. Two IPOs on the exchange raised $30 million, comprising 21 percent of regional IPO proceeds over the period.
This year has so far seen a “significant increase” in the number of Gulf IPOs, with 17 offerings compared to four in 2016, PwC said.
But the actual value of GCC listings saw a slight decline on last year and the previous quarter. Proceeds raised from third-quarter IPOs amounted to $140 million, compared to $171 million in the second quarter.
The global IPO market saw an uptick in the third quarter, with total proceeds of $47.1 billion via 329 IPOs, a rise of 23 percent and 37 percent respectively compared to the same time last year.
“Low volatility coupled with high equity valuations created a favorable listing environment.
“The only significant source of risk emanated from the Korean peninsula. As political uncertainties in Europe have largely disappeared and tax reform is on the agenda in the US, the typically strong fourth quarter looks promising,” PwC said.
Snap remains the largest IPO of the year, with proceeds of nearly $4 billion.
In the bond and sukuk markets, investor appetite for GCC sovereign issuances remained “relatively high,” PwC said, with Saudi Arabia and Bahrain among the key ­issuers.
The Kingdom issued sukuk worth SR37 billion ($9.8 billion) in the third quarter of this year, PwC said. The program included three tranches: A SR16.525 billion five-year tranche, a SR14.475 billion seven-year tranche and a SR6 billion 10-year tranche.
Bahrain raised a total of $3 billion, via a $2.150 billion international bond and an $850 international sukuk.
Drake said: “GCC governments continue to tap into both domestic and international debt markets, bolstering their budgets amid prolonged low oil prices.
“We are set for a busy end of the year, with both KSA and UAE governments expected to tap the debt market with their international bond sale of $12.5 billion and $10 billion, respectively.”