Kingdom to maintain lead in IPOs in 2009


24/03/2009 00:00 AST  Saudi Gazette

Saudi Arabia will continue its leading position in initial public offerings in the Middle East region though the “market in 2009 will witness less activity in terms of IPOs as compared to 2008,” Dr. Mahdi Mattar, head of research and chief economist of SHUAA Capital, said in the company’s report on “Saudi Vision 2009” released last month.

He said “we do not expect to see any further offerings from the downstream oil industry for the time being, as the harsh drop suffered by oil and other commodity prices makes such ventures less attractive.”

However, some companies in sectors that are currently deemed less desirable such as real estate and the downstream oil industry, which might need to raise capital, would probably revert to private placements, he noted. “We anticipate a significant increase in number of such deals throughout the year,” he pointed out.

The report said the Kingdom’s current financial and economic challenges “are cyclical and not structural in nature,” forecasting a flat growth for the Kingdom in 2009, with real GDP growing at around 0.33 percent. “This number is heavily skewed by the drop in hydrocarbon real GDP due to the decrease in the production levels of the hydrocarbon sector. The non-hydrocarbon sector will grow in 2009 by 3.9 percent, slightly slower than the 4.4 percent growth in 2008,” the report said.

Real GDP growth in Saudi is estimated to slow down to around 0.33 percent in 2009, after recording a growth of 4.2 percent in 2008. Nominal GDP is forecasted to post a 24 percent year-on-year decline in 2009, mainly due to precipitous decline in oil prices, as well as oil production cuts.

“These trends support our assessment of slower growth and squeezed profitability for Saudi banks. Our expectations for deposits and loan growth for 2009 stand at a conservative 11.1 percent and 9.3 percent, respectively. We see strong upside potential should oil prices recover and the Saudi Arabian Monetary Agency (SAMA) further relaxes current regulations. Despite looking low in absolute terms, these numbers, relative to GCC peers, will likely be marginally stronger as we see Saudi Arabia providing the best investment climate in the region for the medium term,” Mattar said.

The report further forecast a “sharp… not gradual” recovery in the Saudi stock market, adding a 30 percent upside in the Tadawul All Share Index (TASI) benchmark in 2009. Recovery will take place to take place during the second half of the year and to be in the form of a rally after a period of range-bound volatile trading.

“Signs of global economic relief are likely to be the main driver for the Saudi market in 2009. Any indication of a possible recovery is expected to increase demand for oil and petrochemicals and put upward pressure on commodity prices. This will clearly have a positive effect on investor sentiment and should set the stage for a recovery,” he added. Mattar said the expected slowdown in lending activity “does not deter our belief that the banking sector will be able to endure this global downturn given the healthy supervisory framework and strong government support.”

He explained that the sector will log slower growth than in previous years due to higher funding costs and tighter margins, more pronounced risk aversion on the lending front, 3difficult recovery in brokerage revenues given a volatile market and rising competition from foreign investment banks, and higher provision charges.

For more on this:

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2009032433060

Market News
2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | News Archive
Most Viewed Companies
Ticker Price Volume
SAGRINSURANCE 30.9 3,717,525
AMANAINSURANCE 15.75 2,625,883
JULPHAR 3.01
EEC 36.8 13,824,673
RIBL 17.55 1,517,399
EMAAR 6.7 17,612,394
SABIC 86.25 5,700,970
Recent News

Kuwait: Credit at 5.9% in November with 2014 expected at 7% y/y
Credit growth was up in November, but failed to make up for recent weakness. Growth ticked up to 5.9% y/y on a KD 222 million gain in lending during the month, but remained weaker than expectations.

Ooredoo Oman Q4 profit falls 17pc to $21m
Ooredoo Oman, a leading telecoms operator, reported a net profit of RO8.3 million ($21.6 million) in the fourth quarter of 2014, down from RO10 million ($25.8 million) in the year-earlier period, mar

Funds turning positive on Saudi as oil stabilises
Middle East funds are turning positive on Saudi Arabia's stock market because of signs that oil prices are starting to stabilise, the latest Reuters survey of asset managers shows.

Many fu

New plan aims to boost investment in Saudi
A new plan aims to transform Saudi Arabia’s investment landscape by further diversifying the economy, building its knowledge base, creating job opportunities and maintaining the ease of doing busines

Saudi Arabia’s Alhokair planning IPO of Egyptian malls unit
Saudi Arabia’s Fawaz Alhokair Group plans to raise as much as $400 million from the sale of shares in its Egyptian malls unit, owner of one of the country’s largest shopping centres.

The f

GulfBase GCC Index
Search By
  • Company Symbol
  • Company Name
  • Mutual Fund Name
  • News Content
Send this page to a friend

Poll

Which of the following do you think is the best long-term investment?