Regional IPO market remain depressed

03/02/2011 00:00 AST

The issuer concern on the success of initial public offering is a major factor hindering the growth in share offers in the Gulf markets, although the last quarter of the year 2010 has seen an improvement, according to IPO watch survey results released by PricewaterhouseCoopers. The last quarter of 2010 has seen an improvement in initial public offering (IPO) levels as compared to the same period in 2009, volumes remain depressed as compared to historic levels.

The Gulf Cooperation Council exchanges have attracted only three IPOs — in Oman, Bahrain and Saudi Arabia in the last quarter of 2010.

“We have seen some issuances during the quarter with reasonably large volumes raised. This would seem to indicate that there is investor appetite for the right stock. However, we have also seen that there have been planned issuances that have not come to market which would seem to imply that there is still residual issuer and investor market concerns,” said Steve Drake, head of Capital Markets Middle East.

“In addition to this, we have also seen a continuation of public debt issuances as well as new instruments such as convertible and high-yield offerings entering the market. Collectively, these alternative sources of funding may have also had a dampening impact on equity market activity.”

The largest initial public offering of the quarter was Omani Qatari Telecommunication or ‘Nawras’ which raised $474.6 million on the Oman exchange comprising 46 per cent of the total funds raised in the quarter. In addition, Aluminium Bahrain ‘ALBA’ raised $389.8 million (or 38 per cent of the total funds raised in the period) on the Bahrain and London exchanges with Abdullah A M Al Khodari Sons Company raising $163.2 million (or 16 per cent of the total funds raised in the period) on the Saudi exchange.

Europe in third place

The total amount raised of $1 billion represents significant growth over $51.2 million raised during the same period last year and $173.32 million raised in the third quarter of 2010. This is however lower than previous periods and the GCC markets continue to under perform their European counterparts.

European exchanges attracted just over €10billion (approximately $13.4 billion) of new equity issuances as compared to €2.5billion (approximately $3.3 billion) in the previous quarter, whilst London claimed the lion’s share of initial fundraisings in the fourth quarter with €3.6billion approximately $4.8 billion) generated.

This compares to €1.7billion (approximately $2.3 billion) in the third quarter of 2010. London accounted for 49 of the 130 European listings in the last quarter.

Europe ended up in third place for the third year running raising €26 billion in 2010 (approximately $34.8 billion), behind the United States which raised $40.1 billion and Greater China which raised $131.1 billion.

Planning phase

The United State markets benefited from the General Motors IPO which raised $15.5 billion, putting their total IPO offering value just ahead of Europe. Greater China enjoyed strong activity across all the exchanges with two very notable transactions; AIA raising $17.1 billion and Agricultural Bank of China raising $20 billion.

Drake added, “As a firm, we are seeing increasing interest for 2011 issuances on both regional and international exchanges. Many businesses are in the IPO planning phase with a view to enter the public markets in 2011 and 2012.

If we see issuer and investor confidence returning at the same time, we would expect 2011 to see an increase in regional IPO activity.”

Times of Oman