Globally, the IPO offering value has increased by seven per cent despite a 25 per cent reduction in the number of IPOs, compared to the same quarter last year, according to PwC.
Investors continued to tread cautiously in the GCC equity markets in Q2 2018. Tadawul saw eight REIT listings in H1 2018, together with a $13 million listing of an insurance company in Oman generated total proceeds of $893 million across GCC in H1 2018, compared to $610 million raised from 15 IPOs in H1 2017. The increase in proceeds is mainly due to the two REIT IPOs—Sedco Capital REIT ($173 million) and Bonyan REIT ($174 million).
In terms of stock market performance, Tadawul remained the best performing stock exchange with Tadawul All Share Index (TASI) recording a 12 per cent improvement compared to the same period in 2017, followed closely by Abu Dhabi Securities Exchange (ADX), contrasting with the flat volumes and negative returns experienced by Dubai Financial Market (DFM) and Muscat Securities Market (MSM) in H1 2018. The recent approval of Tadawul’s inclusion in the MSCI Emerging Markets index which is to be completed in June 2019, is expected to attract foreign investment and provide a positive boost to the Tadwaul equity market.
The future trajectory of GCC equity markets will continue to depend on geopolitical developments, stability of oil prices and the implementation of ongoing government reform policies and related privatisation initiatives across the GCC region.
“The uncertainties in the macroeconomics of the region mean that the IPO window is narrower than it has been in the past. It is more important than ever for companies interested in capital markets funding to get ready early to capture the opportunity when it arrives,” said Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East.
Despite the challenging market conditions and the resultant reduction in deals volume by 25 per cent, global IPO proceeds were up by seven per cent. In total, 300 IPOs raised $58.1 billion in Q2 2018 (2017: 398 and $54.1 billion; 2016: 253 and $35.2 billion).
Although the global IPO pipeline for 2018 looks promising, with global headwinds increasing, market volatility levels could further increase, and the pipeline could fail to materialise.
Led by the State of Qatar and the Kingdom of Saudi Arabia, the GCC sovereign bond market witnessed proceeds of $22.9 billion during the second Quarter of 2018 from its two largest sovereign bond issuers. The $12.0 billion sovereign bond issued by Qatar represents the largest placement by an emerging market sovereign so far this year. Corporate debt activity, however, has been relatively slow.
Given the recent recovery in oil prices and easing of government fiscal deficits, sovereign debt issuances are expected to taper in the latter half of 2018.