JEDDAH, 8 November 2006 — Demand for Saudi IPOs remains strong and is expected to maintain its momentum. This is despite the “poor secondary (stock) market sentiment,” according to a market survey.
The average size of IPOs in 2006 has been significantly higher than in 2005 thus highlighting the liquidity that remains available for opportunities in the primary and secondary markets.
After the strong positive showings in August and September, regional stock markets were for the most part lower at the end of October. Four of the six GCC markets were lower with Kuwait and Oman being the notable exceptions.
“The sudden and dramatic meltdown in the Saudi stock market as the breach of the 11,000 barrier on the TASI index led to furious selling pressures taking the market to its lowest level in about 18 months,” the latest review for October 2006 of Dubai-based Rasmala Investments said yesterday.
The largest stock market, Saudi Arabia, was down by around 13.2 percent for the period. “The beginning of the month saw the market reacting positively to a series of reports on Saudi Basic Industries Corporation (SABIC), the largest constituent of the index,” said Jeehan Dahman Balfaqaih, head of corporate communications at Rasmala Investments.
The company announced the acquisition of a bulk chemical unit of a major European company, its long term corporate credit rating was upgraded by the credit rating agency Standard and Poor’s from A to A+, and a final settlement of a legal dispute with US major oil company Exxon was also announced.
The Saudi stock market remains very technically driven and a breach of this support level is a setback to those who had hoped for a recovery in the market.
Based on consensus estimates for 2006 earnings, the market price earnings ratio has come down from around 22 times earnings to around 18 times after this week’s huge losses and certain banks and other blue chip companies are becoming attractive.
UAE markets traded in a narrow range during most part of the month and Emmar and Etisalat in Dubai and Abu Dhabi dominated trading volumes respectively with a resurgence of interest in Du featuring toward the end of the month.
The UAE economy continues to grow with a recently published IMF report projecting a huge 11.6 percent growth in 2006, but cautioning that growth would slow down in 2007 due to flat oil production and capacity constraints.
The Egyptian stock market witnessed a mild correction during the middle of the month after a stellar performance in the last few months. The market, however, recovered in the last few days of the month on the back of expectation of strong corporate results and favorable reports by major western investment banks and finished the month on a positive note.
The Qatari stock market continued its weak performance despite generally positive corporate results. The market remains quiet and trading volumes continue to be focused on only a couple of stocks, particularly Al Rayan Bank.
The Kuwaiti stock market continued to perform very well over the month and optimism surrounding the market and corporate earnings supported a good level of trading activity.
The Omani stock market also performed very well during the month with ever increasing interest from investors amid a budding real estate boom that has caught the eyes of regional investors.
