BUSINESS

GCC to see more IPOs in coming months

Muscat: The initial public offering (IPO) market has been booming in the region compared to other parts of the world where a significant slowdown took place, according to an industry expert.

“The trend in the GCC and Oman was fuelled by the introduction of big state-owned companies in a bid to draw private companies to the stock market and to create a surge in liquidity and interest among investors,” Abdelhadi Laabi Chief Marketing Officer, Emporium Capital, said.

“The new listings have so far been successful and were able to attract large inflows of capital and have been largely oversubscribed,” he added.

Speaking about the new IPOs planned in the Gulf Cooperation Council (GCC), he said that several share sales are planned or expected in the region like Empower in the Dubai Financial Market (DFM) which will start its subscription period by the next month.
The listing of other state-owned companies in the UAE could soon be announced as well and we can mention Bayanat in Abu Dhabi while Tadawul (Saudi stock market) is expecting 18 IPOs in the next three months, Laabi said.

So far the GCC region as a whole witnessed strong IPOs this year with the likes of DEWA, Borouge, or Salik, drawing interest from local and international investors. The success of these listings has created an impetus for private companies to follow suit and for governments to take steps to incentivise such operations, creating a spillover effect in the surrounding countries as well like in Egypt, he further pointed out, he added.

Elaborating further regarding the GCC IPOs, Laabi said that many share sales are expected in the coming months in the region. In Saudi Arabia, 18 listings should see the light of day while a total of 70 applications are being explored. In the UAE, the Dubai authorities have previously announced 10 potential IPOs, of which less than half were introduced on the DFM. “In this regard, we could see more listings in the coming months,” he added.

The current uncertainty in economic conditions has put investors on edge, Laabi said, adding that as a result, they are closely monitoring economic developments and changes in financial markets. From economic publications to governmental decisions, all types of data are used to build expectations. “However, the slowing economic output worldwide, the tightening monetary policies and sliding energy prices have effectively eroded confidence and fuelled a cautious atmosphere,” he added.

Like in other stock markets, equities in the GCC and Oman are exposed to a number of factors like inflation, slowing economic growth, tighter monetary policy and more cautious investors, Laabi said. “The first three factors could have a direct effect on local companies’ performance and results while the latter could lead to diminished liquidity overall and a migration of capital towards safer assets. Additionally, stock markets in the region are exposed to volatility in energy markets. The Gulf is a large exporter of oil and natural gas and could see negative effects from the currently declining prices,” he added.

This year’s IPOs were topped by the introduction of Dubai Electricity and Water Authority (DEWA) which raised $6 billion in the DFM followed by the listing of Borouge in the Abu Dhabi stock market with $2 billion. Other notable listings include Salik which raised $1 billion, Tecom with $1.7 billion and Adnoc drilling with $1.1 billion.

At a time when uncertainty is rife and economic conditions are deteriorating, Laabi said that investors could find opportunities in strong companies that harbour solid business models and competitive products.

“In this regard, companies with strong brands and superior pricing power could be more resilient against inflation as they can raise their selling prices when input costs increase, saving their margins in the process. Defensive stocks like utilities could also be resistant to the slowing economy thanks to the nature of the services,” he added.

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