Saudi Arabia and the UAE come tops as regional hubs of public listing activity for investors 

Phil Gandier, Head of Transaction Advisory Services, Ernst & Young MENA.

Phil Gandier, Head of Transaction Advisory Services, Ernst & Young MENA.

REGIONAL CAPITAL markets raised approximately $2 billion in 2012 up from $843.9 million in 2011; an increase of 134%, according to the latest Ernst & Young’s Middle East and North Africa (Mena) fourth quarter and year-end 2012 ‘IPO Update’ report.

The year closed with regional companies raising a total of $339.8 million through three initial public offerings (IPOs) in the fourth quarter of 2012. This is significantly higher than the $226.1 million raised in the fourth quarter of 2011 and the $252.3 million raised in the third quarter of 2012.

Phil Gandier, Mena’ Head of Transaction Advisory Services, Ernst & Young says: “It’s been an eventful year [2012] for the region, with mixed implications for the capital markets. Drawing comparisons over the last two years we have noticed a steady climb in the amount of funds being raised by IPOs possibly hinting that markets are inching towards better results. The outlook for 2013 will be to a great extent influenced by investor sentiments, against the backdrop of regional developments. We are confident that Saudi Arabia and the UAE will continue to be the regional hubs of IPO activity for investors in 2013.”

Three IPOs in Q4 2012

Dallah Healthcare Holding Company led regional IPO deal sizes with its $143 million listing on the Saudi Stock Exchange (Tadawul) in November followed by Al Izz Islamic Bank at $106 million on the Muscat Securities Market in September. The third IPO in Q4 was Amira Nature foods listing on the New York Stock Exchange (NYSE) at $90m in October.

Saudi Arabia led the country standings in 2012, raising $1.4 billion through seven IPOs in all of 2012, followed by the UAE with $277 million and Oman with $264.4 million. Morocco and Tunisia were the only other Mena countries with IPO activity in 2012.

Phil Gandier says: “When we look back at the sector split of the IPOs that have taken place in 2012 we can see a broad spread of coverage where five were in the Materials sector, followed by three each in the Financial and Consumer Products sectors, two in the Healthcare sector and one IPO in the Packaged Foods Sector.”

Global IPO activity

In Q4 2012, the US markets raised $7.3 billion (29 IPOs), narrowing the lead on the Asian markets, which raised $8.8 billion (59 IPOs). European exchanges also saw something of a return to form, with deal value reaching $7.0 billion (20 IPOs).

Globally, year-on-year, the picture for Q4 remained somewhat depressed. The number of deals fell 46% from 255 deals in Q4 2011 to 136 deals in Q4 2012, whereas by capital raised, it only fell 6% from $29.1 billion in the same period last year to $27.3 billion this quarter.

Maria Pinelli, Ernst & Young’s Global Vice Chair Strategic Growth Markets says: “The weakening economy, unstable equity market conditions and poor performances on some IPO transactions undoubtedly impacted investors’ confidence. As expected, there has been lower IPO activity in Asia as the number of state owned enterprises (SOEs) coming to market has diminished. The fourth quarter figures show that the US IPO market is back by deal number and rewarding companies that perform strongly. Europe has significantly increased activity in the fourth quarter, compared to the rest of the year.”

US stock exchanges ahead of Asia

The NYSE and NASDAQ exchanges raised $44.9 billion in 128 deals, and NYSE raised 19% of global proceeds in 2012; leading the Shenzhen, Hong Kong and Shanghai stock exchanges ($11.1 billion via 129 deals, $9.8 billion via 44 deals, $5.3 billion via 25 deals respectively) for a second consecutive year.

The Asian exchanges only completed 373 deals which raised $47b, down 46% by capital raised compared to 2011 (610 IPOs, raising $88 billion). Other active stock exchanges included, Bursa Malaysia, raising $7.6 billion with three of the year’s top 20 deals, the HKEx ($9.8 billion in 44 deals), and the Shanghai and Shenzhen Stock Exchanges (SME and ChiNext), raised $16.4 billion in 154 deals in total.

“Looking ahead to 2013, we expect a better outlook, with a strengthening US economy leading the recovery, followed in the latter half of the year by Europe and Asia. Reduced stock market volatility, assertive action from central banks and brighter economic prospects suggest 2013 could be the right time for companies currently in the pipeline to list,” says Pinelli.

“The US, Toronto, London, Frankfurt, and Moscow stock exchanges lifted significantly in the fourth quarter, thus suggesting that signs of stability in equity markets and supportive central bank policy are starting to take effect. We believe the market is likely to see smaller offerings initially while market and investor confidence builds,” the executive adds.