Gulf companies with stalled IPO plans could return to the market by the first half of next year oil prices and bank lending improve.
Brighter outlook for new Gulf share listings
Gulf companies with stalled IPO plans could return to the market by the first half of next year as higher oil prices and the return of bank lending encourages new share sales. Top international accountancy firms Pricewaterhouse Coopers and Ernst & Young expect to see investor appetite return for regional companies in 2010, despite continuing volatility across Gulf markets. "Many companies that shelved IPO plans when the markets turned last year will now be thinking about when they should be reinvigorating their IPO plans for a 2010 listing," said Steven Drake, who heads Middle East capital markets at PriceWaterhouseCoopers, the accountancy and advisory firm. "As it takes several months to prepare for a listing I expect to see IPO volumes pick up around Q1 or Q2 2010."
The global IPO market has contracted sharply since last year as investors have become wary of equity markets amid a global recession. Five new initial public offerings in the second quarter raised an overall $1.02 billion. That compares favorably with $80 million raised in the first quarter. But it is still substantially lower than the $4.32 billion raised in ten new listings in the second quarter of 2008.
The bulk of listings so far this year have been in the telecoms and insurance sectors. Four IPOs were of Saudi Arabian insurance companies, required to list for regulatory reasons. Jeff Singer, chief executive of Nasdaq Dubai, one of Dubai's two stock exchanges, said: "We are going to have a lean 2009, but I am bullish on next year. If you talk to the most extreme optimist he will say things will pick up in the first quarter 2010, while the pessimist will say that 2011 is more likely."
The successful IPO of Vodafone in Qatar, the recent IPO of Saudi Steel Pipes Company and the imminent listing of Petrochem, also from Saudi Arabia, are pointing in the right direction, Mr Drake said. "The Vodafone IPO has helped demonstrate that the for the right company with a good story, investor appetite is still alive in the GCC and that investors are willing to re-enter the capital markets." Vodafone raised $952 million or 93 per cent of the total amount of second-quarter listings in the GCC.
But the pace of recovery across global financial services markets is likely to lag the expected rebound in the Gulf according to new research from Ernst & Young. It found a third of the 125 global financial services respondents expected some expansion this year, while 34 per cent of those polled expect the return to growth to begin in the first six months of 2010, with 32 per cent believing it would be further out.
"The financial services industry had borne the brunt of the correction phase during the downturn which then cascaded to other key sectors. Now there are strong indications, especially in the Middle East, that the sector is poised to see a return to steady growth," said Noor Abid, managing partner at Ernst & Young Middle East. "We see every possibility of the recovery phase being a relatively protracted one, but nevertheless, market fundamentals point toward a steady climb."