Press Release

February 07, 2010

GCC IPO market to soar over the next two years

A leading banker is predicting that the GCC IPOs future is still bright, and that the IPO market will deepen and widen as it raises at least an additional $13.5 billion over the next two years.

Outlining the factors behind the sustained growth in IPO market, Gulf Capital’s CEO, Dr Karim El Solh said: “Economic growth in the UAE, which is projected to average 6.2% over the next 3 years, will continue supporting the equity markets and increasing liquidity, and it is necessary that more stocks are listed in the regional markets. For example, Qatar, Bahrain, KSA, and UAE have much less listed stocks than comparable economies of Jordan, Egypt, and Turkey. Turkey’s economy is comparable to Saudi Arabia’s, but Turkey has three times the number of stocks. In addition, stellar stock market performance is ideal for more IPOs.“ Dr. El Solh was delivering the keynote speech at the 1st IPO Summit, which is currently taking place at the Al Murooj Rotana, Dubai.

“There are 116 IPOs in the pipeline, and of those, 60 have already assigned a manager and will be going to the market soon. Another 18 IPOs have assigned a manager without deciding on the details of the offering, while the remaining 38 have announced their intention to conduct an IPO,” said Dr El Solh.

The figures indicate a massive upsurge in Initial Public Offerings on the GCC capital markets with total amounts to be raised exceeding $13.5 billion, more than twice the $6.2 billion raised in 2005. The number of IPOs in 2005 has doubled compared to 2004 from 12 to 25. That number will quadruple to 116 in 2006 and 2007 and offerings are expanding to new sectors such as travel and tourism, transportation, services, mining, media, education and consumer goods.

This is a healthy development that will bring more balance between the supply and demand for IPOs. The net effect will be a dramatic drop in over subscription rates and more realistic post IPO returns.

Outlining the performance of the IPO market, Dr. El Solh stated that IPOs launched in 2005 saw record over subscription – by an average of 71 times – especially in the active markets like UAE, KSA, and Qatar. The recent Aabar IPO set a world record of x808 times.

The average IPO return in 2005 was close to 300%. Considerably above the 92% average returns for the GCC stock markets.

“IPOs performed extremely well, and far exceeded the performance of the stock market. The stock market general performance and high liquidity has helped to raise record amounts for each IPO. The average demand for each IPO launched in 2005 was around $14.4 billion, enough to finance all 116 upcoming IPOs.”

“However, not all IPOs have fared so well, especially in the weaker Omani and Bahraini markets,” added Dr El Solh. “GCC investors are becoming more discerning, and demanding a robust offering with a good IPO story, growth momentum, and sensible pricing. This is a healthy development that will ensure that only the highest quality IPOs come to market.”

“The future outlook remains bright,” reiterated Dr. El Solh. “Continued economic growth and high oil prices will fuel the liquidity necessary to support future offerings, and investors will be seeking investments in new sectors and in attractive, well priced IPOs,” concluded Dr. El Solh.