Riyadh, Asharq Al-Awsat—IPO activity in the Middle East is expected to increase considerably during 2015, a report by global professional services firm Ernst Young concluded, as the region recorded its most successful year for stock market debuts since before the global financial crisis.
The report, released on Monday, said market valuations in the region were “returning to somewhere near pre-financial crisis levels” amid more balanced regulation of the region’s financial markets and rising investor confidence due to increased government spending.
A total of 27 IPOs were issued in 2014, raising a collective total of 11.5 billion US dollars, almost four times the 3 billion US dollars that was raised in 2013 from 25 IPOs. A total of 13.2 billion dollars were raised in 2008.
Last year saw the region’s largest-ever IPO, with Saudi-based National Commercial Bank raising 6 billion dollars on its stock market debut on the Kingdom’s Tadawul bourse in November. The IPO proved to be the world’s second-largestthis year after Ali Baba’s 25-billion-dollar debut on the New York Stock Exchange, the world’s largest-ever IPO.
The report also expected more numerous and larger IPOs to be issued during 2015 due to the effects of economic diversification policies undertaken by a number of oil-based economies in the region such as Saudi Arabia.
Mohamed Al-Hamadi, a member of the Riyadh Chamber of Commerce, told Asharq Al-Awsat that he expected the Kingdom’s recent push to reduce its reliance on hydrocarbon revenues to encourage more companies in non-oil sectors to seek expansion through IPOs.
Non-oil companies dominated the IPO pipeline in 2014. Manufacturing companies proved the most active during the year, with five IPOs from the sector last year in the Saudi and UAE markets, followed by real estate, food and drink, and oil and gas sectors.
However, Abdul Rahman Ba’ashan, head of the Shorouk Center for Economic Studies, told Asharq Al-Awsat further turbulence in the oil markets would lead to less companies in the region considering IPOs.
The report noted that the fall in oil prices could lead to an IPO slump in the first quarter of 2015 due to concern that the falling revenues in oil-reliant economies in the region could impact government spending on sectors like real estate, healthcare and education.
However, the report said this would likely be offset by continued economic and financial reforms in the region, as well as the easing of regulatory restrictions on IPOs, leading public issues to “increase considerably” throughout the year.
The opening of the Saudi stock market to foreign investors during the second quarter of the year would also likely raise the region’s profile globally, the report said.