saudi ipo summit opens tomorrow - government to support initial public offerings to stabilise saudi stocks as tasi loses over 8,000 points this year

Published November 18th, 2006 - 04:03 GMT

Over 400 industry professionals have registered for The Saudi IPO Summit 2006, which opens tomorrow (Monday 20th November) at the Al Faisaliah Hotel in Riyadh. Co-organised by the Riyadh Chamber of Commerce & Industry, the two-day conference intends to stabilise the market and help restore investor confidence after a volatile year, which recently saw the Tadawul All-Shares Index (TASI) drop to a 21 month low of 8,019 points.

Deep Marwaha, Conference Manager for Saudi IPO Summit said, “Debate and discussion will take place amongst investment experts, regulators and market leaders. To restore investor confidence and stabilise the markets, they will focus on regulatory and industry standards, corporate governance and transparency, reporting standards and internal audit.”

Less than a year ago however, it had been a different story. The bullish performance of the Saudi stock market in 2005 saw the TASI finish the year up over 60 per cent at 16,712 points and market capitalisation registered robust growth of 110 per cent, to stand at over US$ 645 billion. 

But concerns that six dominant stocks accounted for over half of total market capitalisation and overpriced small-cap speculative stocks were realised earlier this year. By May 11, traders were faced with a sea of red when 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 on November 11, stocks slumped still further to 8,019, wiping over US$ 300 billion off share values.

Despite less than 90 companies being listed on the TASI, ironic given the phenomenal amount of funds seeking investment opportunities, private companies are stalling on planned IPOs due to the erratic behaviour of the Saudi bourse and low investor confidence. The paradox is that strong underlying economic indicators such as, 6.5 per cent economic growth, excess liquidity, a current account surplus of US$ 87 billion and positive corporate results should support a ‘bull run’ instead of the bearish attitude apparent. Proof if it were needed that the TASI’s performance is largely built on sentiment as opposed to proven pricing techniques and evaluating market trends.

The summit 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 event will also address the costs associated with IPOs and the long-term obligations of public companies as well as the critical factors underpinning oversubscriptions, over-pricing and macro-economic issues affecting IPOs.

“The Saudi bourse has great potential, but to achieve that potential private investors, heads of family-owned companies, investment bankers and government regulators, must gain a common understanding of the true nature of IPOs,” added Marwaha.

An impressive line-up of industry experts have been recruited including amongst others, HE Dr. Fawaz Al Alamy, Deputy Minister of Commerce & Industry, KSA, Dr. Abdulrahman Al Zamil, Chairman, Zamil Group, Yassir Rumayyan, Head of Listing, Capital Market Authority, KSA, Ioannis Karapatakis, Managing Director - Global Investment Banking Advisory, HSBC, Omar M. El Quqa, Executive Vice President – Corporate Finance & Treasury, Global Investment House, Brad Bourland, Chief Economist, SAMBA and Graham Dallas, Head of Business Development, London Stock Exchange.

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