For the second time since the global financial crisis, the Middle East has surpassed Europe in terms of Initial Public Offerings (IPOs), as regional investors seek liquidity from increased oil prices.
According to Bloomberg data, the proceeds of IPOs from Riyadh to Abu Dhabi have totaled $4.8 billion since the beginning of 2022, compared to $3.9 billion in Europe.
During the same period, the Gulf region has accounted for more than half of the largest listings in Europe, the Middle East, and Africa in terms of value.
High oil prices give Gulf an edge
The market turbulence that has occurred since the beginning of the year because of concerns about inflation, strong central bank policies and Russia’s invasion of Ukraine has impacted IPOs around the world.
But high energy prices have ensured that the demand for shares in the oil-rich Gulf will continue to rise.
Also, the Ukraine conflict has compounded the existing supply issue for fossil fuels, driving up prices. As a result, stock indices in Saudi Arabia and the United Arab Emirates have climbed by 5 percent or more since the beginning of the year, while the European “Stoxx 600” index has declined by more than 6 percent.
Surging IPOsÂ
The Saudi Riyadh Bank topped the list of IPOs issued by Bloomberg for Europe, the Middle East, and Africa during the current quarter. The list is usually dominated by American and European institutions.
The Abu Dhabi National Oil Company (ADNOC) and Borealis are preparing to offer shares in their plastics joint venture, Borouge, in an IPO.
Dubai’s exclusive water and electricity provider, Dubai Electricity and Water Authority (DEWA), is looking to raise as much as $2.19 billion in its offering, the biggest in the emirate since the 2007 listing of DP World.
The listing, which will make DEWA the biggest company on the emirate’s bourse, marks the first step in Dubai’s ambitious plan to reinvigorate its flagging capital markets.Â
The demand exceeded the number of shares on offer within hours of launching the deal, according to terms seen by Bloomberg.
Experts believe that this step reflects the country’s aim to catch up with other Gulf corporations that have profited greatly from IPOs.
DEWA’s offering is part of Dubai’s aim to list 10 state-owned enterprises on the Dubai Financial Market.
The Dubai government, which missed the Middle East and North Africa IPO boom last year, pushed private and family businesses to offer and list their shares on the financial market to keep up with the pace of IPOs in Abu Dhabi and Riyadh.
A key indicator of the momentum could be witnessed in the shares of Al-Nahdi Medical Company, Saudi Arabia’s largest pharmacy chain, which soared 15 percent on the first trading day in Riyadh this week following a $1.4 billion IPO, the largest in Europe, the Middle East, and Africa since the beginning of 2022.
Good performance sparks interest
IPO bets in the Middle East will pay off in 2022, with returns averaging 29 percent, compared to 17 percent in Europe so far this year, according to Bloomberg.
A Goldman Sachs analysis published in January of this year said Saudi Arabia has the busiest stock market in the Middle East in terms of IPO activity, even as the UAE encourages more companies to go public.
Major IPOs in the Gulf region performed well, sparking the interest of international investors in Gulf stocks. According to Goldman Sachs, Abu Dhabi corporations will become more active than their Saudi competitors.
The bank stated in a report in November 2021 that the Dubai government’s intentions will now lead the trade volumes in the UAE because it aims to launch large enterprises, such as Salik (to collect road tolls), Tecom, and Emirates Airlines.
These proposals can transform the general index of the Dubai Financial Market, which has previously been dominated by banks and real estate and telecommunications firms.