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After a positive start to the year, IPO performance in the Gulf Cooperation Council (GCC) in the second quarter of 2017 witnessed a slowdown in both the number of offerings and total proceeds raised.
The Kingdom of Saudi Arabia hosted the only three IPOs of this quarter — they were allocated between Saudi Stock Exchange primary market (Tadawul) and the parallel market (NOMU).
On the primary exchange front, the only offering in Q2 2017 was by Jadwa REIT Alharamin Fund which floated a total of 36 million shares, raising proceeds of $96 million. The primary objective of the Fund is to provide its investors with current income by investing in income-generating real estate assets in Saudi Arabia, with a principal focus on the Holy Cities of Makkah and Madinah.
On the parallel market front, the first and largest offering in Q2 2017 was by Thob Al-Aseel Co, which floated 3 million shares, raising proceeds of $68 million. Al Aseel is engaged in import, export, wholesale and retail in textiles and readymade garments. The second offering was by Al Kathiri Holding Co, which floated 0.8 million shares, raising proceeds of $6.7 million. Al Khathiri manufactures and distributes construction materials through its subsidiaries.
In terms of IPO performance in Q2 2017 compared to the same period in the prior year, the number of offerings has slightly increased, with three IPOs in Q2 2017 compared to two IPOs in Q2 2016; however the total proceeds raised in Q2 2017 was 38% lower compared to Q2 2016.
Further, IPO activity in the first half of 2017 witnessed an increase in the number of offerings (13) compared to H1 2016 (three), which was largely due to the increased activity in Q1 2017; however proceeds raised in H2 2017 were 23% lower as compared to H1 2016.
Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East, said: “During Q2 2017, the Kingdom of Saudi Arabia continued to be the main driver of IPO market activity in the GCC, while the NOMU parallel market for small and medium-sized enterprises in the Kingdom remained popular among investors.”
Against a backdrop of lower political uncertainty and normalizing monetary conditions, equity markets displayed an upward trend, volatility remained low and listing conditions were favorable. Political uncertainties in Europe decreased with the victory of Macron in France’s presidential election, and his party in subsequent parliamentary elections. Voting in the UK led to a hung parliament, which is likely to lead to further uncertainty surrounding the path of Brexit negotiations, which officially began on June 19th. Finally, Trump’s tax and infrastructure plans remain mired in uncertainties, as the Administration is having to deal with an investigation into links with Russia and calls for the President’s impeachment.
The last few days of June marked a stark reversal for global monetary policy, with Draghi and Carney delivering nearly simultaneous hawkish statements. A few days earlier, the Federal Reserve had raised rates for the second time this year, and begun discussions on unwinding its massive balance sheet. Nevertheless, inflation is not picking up, and pressures even eased as the price of oil fell to a nine-month low in June.
Further global IPO activity in Q2 2017 increased by nearly 50% in terms of both proceeds and the number of IPOs compared to Q2 2016. Compared to Q1 2017, activity also increased in Q2 2017, though less pronouncedly. In total, 379 IPOs raised $52.6 billion compared to $35.2 billion via 253 IPOs in Q2 2016 and $68 billion via 420 IPOs in Q2 2015.
Asia-Pacific was dominant in terms of the number of IPOs again, accounting for 57% (216) of global transactions. EMEA and the Americas accounted for 22% (84) and 21% (78), respectively. Nonetheless, in terms of proceeds, the Americas was almost on a par with Asia-Pacific. Both acc
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