Mena IPO market set to rebound on back of new state initiatives – News

The IPO market in the Middle East Africa is expected to bounce back over the coming months while economic conditions in the region continue to improve, according to EY analysts. Looking at the remainder of 2021 and beyond, there are many reasons to be optimistic about the upcoming quarters despite a slow start in the first quarter, according to EY Mena IPO report.

“A strong IPO pipeline in key Mena markets across sectors, coupled with various government initiatives to deepen the capital markets, particularly in Saudi Arabia and the UAE, should help bring more IPOs to markets in the region,” said Gregory Hughes, EY Mena IPO and Transaction Diligence leader. He said the underlying economic factors within the region remain strong. “We anticipate that future IPO activity in the Mena region will reflect the overall positive signs that we are beginning to see.”

The Central Bank of the UAE expects economic activity to continue to pick up, supporting positive growth of 2.5 per cent during 2021. The CBUAE expects a full recovery in 2022, with overall real GDP increasing 3.5 per cent while the non-oil real GDP is forecasted to rise by 3.9 per cent.

However, in the first quarter of 2021, the IPO market in Mena had a slow start despite expectations for an increase in activity after an uptick in issuances in the last quarter of 2020.

The first quarter of 2021 saw three IPOs raising total proceeds of $294.8 million, a 64 per cent drop in proceeds raised when compared with the same period in 2020. The three issuances were in the transport, power and utilities and real estate sectors. In the preceding quarter, four IPOs raised $925 million in proceeds, said the report.

“Continued uncertainty around the impact of the ongoing pandemic has affected the Mena markets even as oil prices have continued their recovery and vaccination rollouts have been gaining speed across the region,” said the report.

The report said globally, Q1 2021 has been the best-performing first quarter by deal number and proceeds in the last 20 years, despite the trend of Q1 being a slower period. The first quarter of 2021 saw 430 IPOs — compared to 233 in Q1 2020 — as well as $105.6 billion in proceeds, up 271 per cent when compared to the same quarter last year. The surge in momentum can be attributed to the ample liquidity in the financial systems; the accelerated growth of technology and new economy companies propelled by the pandemic; speculative and opportunistic transactions; and platforms that have made retail investing more accessible to the general public and young generations.

Matthew Benson, EY Mena Strategy and Transactions leader, the three IPOs during the first quarter, which raised a total of $295 million in proceeds, demonstrated strong investor demand in the market, particularly in Saudi Arabia. “Hence we expect IPO activity to bounce back over the coming months while economic conditions in the region continue to improve, aided by the accelerated vaccine rollouts and the possibility of reaching herd immunity against Covid-19.”

The EY report noted that during Q1 2021, UAE financial institutions announced a few key initiatives as the country continues to recover from the impact of the Covid-19 pandemic. “The Abu Dhabi Securities Exchange (ADX) announced a new ‘ADX One’ strategy, which aims to double market capitalization over the next three years, increase market liquidity and further improve market efficiency. The new strategy will include initiatives to launch derivatives trading, an investor relations guide, as well as a program to support research coverage of stocks.”

The Saudi Stock Exchange (Tadawul) continued to be the Mena region’s top listing venue in Q1, with two listings totaling $281.6 million, which represented 96 per cent of the total amount raised by Mena IPO candidates during the quarter. The previous year, it had four listings totaling $1.45 billion, representing 78 per cent of the total amount raised by Mena IPO candidates in 2020. — issacjohn@khaleejtimes.com

Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE’s mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.