DUBAI, 16 July 2006 — Dubai-based Institute for International Research (IIR) has announced the launch of Saudi IPO Summit 2006, which is due to take place on Nov. 19-22 at the Al-Faisaliah Hotel in Riyadh.
The conference is intended to stabilize the market and help restore investor confidence after a volatile performance in the first half of this year.
The bullish performance of the Saudi stock market in 2005 had been powered in the main by 6.5 percent economic growth, excess liquidity, a current account surplus of $87 billion, positive corporate results and robust investor confidence. The Tadawul All-Share Index (TASI) finished the year up over 60 percent at 16,712 points and market capitalization registered robust growth of 110 percent, to stand at over $645 billion.
Projections for 2006 were buoyed by the added stimulus from the Saudi government’s privatization program, led by divestures in Saudi Arabian Airlines, Saudi Telecom Company (STC) and Saudi Basic Industries Corp. (SABIC) which pushed the index up a further 17 percent to an all-time high of 20,634 points in late February and market capitalization raced to $800 billion. However just six companies accounted for almost 55 percent of total market capitalization and overpriced small-cap speculative stocks were leaving the entire bourse vulnerable, some trading at over six times their book value. These concerns were realized on March 20 when shares dipped below 15,000 points and traders were faced with a another sea of red when trading closed on May 11 as the bourse plummeted to a 14 month low of 10,046 points. That was less than half of the euphoric highs recorded just three months prior and wiped $350 billion off share values.
One critical factor highlighted by traders was that there were still less than 90 stocks available a paradox considering the colossal amount of funds seeking investment opportunities. In light of recent gains, the government has now reiterated its range of initiatives aimed at stabilizing the market with IPOs integral to that plan.
More than 30 initial public offerings are already expected to be introduced within the next 12 months. Indeed, Emaar Economic City recently announced that it will float 30 percent of its $2.27 billion share capital to facilitate financing of the new $27 billion King Abdullah Economic City, one of the largest development projects in the region.
Deep Marwaha, conference manager for Saudi IPO Summit said, “It was against this backdrop, that the idea for Saudi IPO Summit 2006 was conceived. Over 90 percent of private companies in Saudi Arabia are family-owned and represent great potential for future listings”
The summit will feature leading figures in the financial and investment industry and will examine the role IPOs can play in broadening the total number of stocks available and improving investor confidence. It will also provide essential information to private companies looking to go public, many of which are family businesses.
“The Saudi bourse represents almost half of the total capitalization of all Arab stock exchanges and many experts believe it has the prospect to grow to the size of India’s stock market. To achieve this potential private investors, heads of family-owned companies, investment bankers and government regulators, must gain a common understanding of the true nature of IPOs,” commented Marwaha.
