Despite the global economic and political turmoil, capital markets remained open in 2014, and we saw debt issuers coming to the market with confidence.
Tadawul continued to be the most liquid exchange in the region, and we also witnessed activity flourishing in the UAE, specifically on DFM during 2014.
In 2014, Saudi Arabia and the UAE played major roles in terms of IPO (initial public offering) activity with Saudi Arabia accounting for 38 percent of the total number of IPOs and 63 percent of total proceeds raised, and the UAE accounting for 31 percent of the total number of IPOs and 27 percent of total proceeds raised.
The fourth quarter of 2014 witnessed a total of five IPOs in the GCC raising $7.3 billion, which led to a considerable increase as compared to the same quarter last year that saw a total of three IPOs raising $179 million.
IPO performance during Q4, 2014 was also stronger than the previous quarter, which saw a total of two IPOs raise $1.6 billion.
The floats during Q4 included National Commercial Bank (NCB), which is listed on the Saudi stock exchange (Tadawul) and raised $6 billion, making it the largest IPO during 2014 in the GCC; Dubai Parks and Resort, which is listed on the Dubai Financial Market and raised $695 million; Amanat Holdings, another DFM listing, raised $382 million; Electrical Industries Company listed on Tadawul raised $194 million; and Al-Maha Ceramics listed on the Muscat Stock Exchange and raised $21 million.
I think the bumper harvest of 2014 will be difficult to match, not least because of the increased uncertainty in the region, most notably manifested in the oil price volatility.
I expect continuity in the sense that the cost of capital is likely to remain low and the regional nonoil growth dynamics positive.
New regulatory restrictions on bank credit may encourage companies to look for alternative sources of funding, including the equity markets.
However, the oil price volatility may have implications on the timing of IPOs as the largest regional bourses have proven quite sensitive to such variations. It will also be interesting to see how the opening of the Saudi market to foreign investors impacts the market for IPOs and new issuances.
Interestingly, the debt capital market in the GCC continued to be active in 2014 with issuers gaining confidence together with strong demand from investors. This, in my opinion, portends well for the region and is a silver lining in the dark clouds that enveloped some of the crisis-laden world economies.
— This is a regular column called Ripple Effect by Khalil Hanware ([email protected])
