RIYADH, (Reuters) – Saudi Fransi Capital, the brokerage arm of Banque Saudi Fransi 1050.SE, has six initial public offerings in the pipeline, including three that might launch in the first half of the year, its chief executive said.
Yasir al-Romayan said the firm, whose parent, Saudi Arabia’s fourth-largest lender, is partly owned by France’s Credit Agricole, was gearing up one of them by the end of March.
The IPOs, which include firms in the fast-growing construction and cement sectors, range in size from 500 million riyals ($133 million) to over 1 billion riyals, he said.
“We think we will see a lot of IPO activity this year; our pipeline is really full,” he told Reuters at the bank’s headquarters in Riyadh. Romayan added the brokerage also had mandates for two rights issues in 2012.
Saudi Arabia’s multi-billion-dollar infrastructure spending has been a boon to the construction sector, with builders, developers and cement firms picking up lucrative contracts.
In 2011, the bourse saw five IPOs, but values were tiny in comparison to telecom operator Zain Saudi’s 7030.SE 2008 debut, which raised 17.8 billion riyals.
The Saudi Stock Exchange is largest market in the Middle East, with around 150 listed companies valued at $337 billion, dwarfing the Dubai bourse’s $28.5 billion and Qatar’s $97 billion, according to Thomson Reuters data.
Romayan said he expected the bourse to open to foreign direct investment soon, which could attract considerable interest, as it offers foreigners a chance to invest directly in blue chips like Saudi Basic Industries 2010.SE, the world’s most valuable chemical company.
“Bringing in foreign financial institutions would help in giving direction to the market … and (eventually) bring balance and stabilisation,” he said.
Retail traders currently account for about 90 percent of daily trading, according to official data.
SUKUK APPETITE
Romayan said the appetite for Islamic bonds or sukuk, especially for project finance, was very high and would be greater if the Saudi central bank provided facilities that allowed banks to invest their abundant cash in the sukuk market.
The need for huge spending on railways, building schools and real estate made those sectors good candidates to tap the sukuk market, Romayan said, noting strong demand for riyal-denominated issues as abundant liquidity limits the need to access international credit markets.
Saudi Arabia’s General Authority for Civil Aviation (GACA) plans to issue a second Islamic bond this year, after its 15 billion riyal, 10-year sukuk in January.
Meanwhile, the Saudi Arabian Monetary Agency is talking with local and international banks with operations in the kingdom about issuing a riyal-denominated sukuk as early as in the first quarter of 2012, banking sources told Reuters in December.
“It makes sense; GACA has started that thing, and I think it will be like a domino effect, but only positive. I think the other government agencies will start adopting the same approach … Sukuk, especially project sukuk, will have an excellent opportunity in the Saudi market.”