More sun, less trade: Summer slump for IPO activity in GCC countries
The month of July and August marked the start of the summer and Ramadan period with the expected slowdown in Initial Public Offering (IPO) activity in the Gulf Corporation Council (GCC) with lower available trading days and activity on the regional exchanges. The only listing witnessed in the third quarter of 2012 was that of City Cement Company from Saudi Arabia which raised $252 million in mid-September.
This represented a marginal increase of $33 million or 13 per cent in amounts raised compared to the same period last year where two IPOs in Saudi Arabia raised $219 million. Despite the relatively quiet third quarter performance, the 2012 year to date (YTD) results were significantly ahead by $857 million or 148 per cent compared to 2011.
Steven Drake, head of PwC Capital Markets in the Middle East region said: "Given the macro-dynamics of the GCC region, the summer and Ramadan months are generally slow in terms of IPO activity.
We are seeing growing issuer interest in equity markets particularly in Saudi Arabia stimulated by improving oil prices, strong corporate earnings and continued infrastructure needs. We don't expect to see significant activity in the fourth quarter of 2012 although prospects for financial year 2013 now look better than they had been."
As anticipated in Europe, low activity in the first two months of this quarter reflected the traditional summer lull and London being quieter due to the Olympics. If recently announced transactions do successfully complete and perform well in the aftermarket, this will go some way to boosting investor confidence in European IPOs.
Europe scene London saw a strong end to the quarter, with the Main Market IPO of Sberbank, the largest commercial bank in Russia, raising $5.2 billion through its offering of ordinary shares and global depository shares. The European IPO activity in 2012 YTD was rather disappointing, with a total of 48 IPOs raising $6.6 billion.
Unlike equities, the GCC bond market remained undeterred through the summer periods with a strong third quarter performance on both sovereign and corporate fronts. National Bank of Abu Dhabi issued a $750 million bond during the month of August which underpinned the strength of the debt market in the region. One of the significant sovereign issuances during the quarter was from the Kuwait Central Bank which issued a series of bonds amounting to a total of $5.4 billion.
The sukuk market continued to trend upwards during the quarter augmented by growing investor appetite for Islamic debt financing as the region continues to spend heavily on infrastructure development. Amongst the prominent issuances in the quarter was the sovereign SoQ Sukuk A QSC issuance which raised $4 billion in two tranches. On the corporate side, both Emaar Sukuk and EIB Sukuk Company issued $500 million each.
- Qatar expansion driving down credit growth - Barclays
- 7% of Emaratis had to deal with a false positive with their bank - survey
- Trade between 18 Arab countries hikes to $2.1 trillion - IMF
- Allocating more funds to SWF would improve Saudi wealth returns
- Sovereign wealth funds in GCC focus more on local investments