Initial Public Offering (IPO) activity picked up in the Gulf region in the second quarter of 2012, witnessing the strongest quarter-wise performance in the last two years.
New listings, although limited to only a few regional exchanges, have helped to soak up some of the excess liquidity in the region and attract investor appetite, PwC's Capital Markets Watch Gulf Corporation Council (GCC) report found.
According to the report, a total of four IPOs raised $1,104 million on the GCC stock exchanges during the quarter compared to three IPOs which raised $340 million in Q2 2011, a 69% increase in value.
Average IPO offering value rose to $276 million in the quarter compared to $39 million in Q1 2012 and $113 million in Q2 2011.
The debutants this quarter included Al Tayyar Travel Group, a family business in the travel and tourism sector and Saudi Airline Catering Company, the catering unit of Saudi Airlines, raising $365 million and approximately $354 million on the Saudi stock exchange, respectively.
Despite the weak global equity market outlook and falling oil prices, the IPOs received an overwhelming response in the market signifying improving investor confidence.
Other notable issuances during the second quarter included a $227 million IPO by Najran Cement Company also on the Saudi stock exchange and the Bank Nizwa IPO, a newly established Islamic bank in Oman, raising $158 million and which may well pave the way for future IPOs of other start-up Islamic banks on the Muscat Securities Market.
The total value and number of IPOs in H1 2012 was higher by 70% and 33%, respectively, compared to the same period last year.
Tadawul, the Saudi stock market, continues to dominate the regional exchanges hosting five out of the six IPOs in the first half of 2012 and 87% of the total value raised.
Activity on the UAE stock exchanges has been muted so far compared to last year which saw three IPOs at the end of 2011. Trading activity on the GCC stock markets receded towards the end of H1 2012 driven by the downward movement in oil prices, worsening economic conditions in Europe as well as the news of slowing down of growth in China and other emerging markets.
"Whilst IPO activity in Q2 2012 could be seen to be encouraging, it is still difficult to determine if we are seeing any real recovery. With what is happening in the Eurozone and the slowing of some of the high growth markets such as China and India, it is difficult to determine the impact this will have on our regional markets," Steven Drake, Head of PwC Capital Markets in the Middle East region said.
"Our outlook for the rest of 2012 is for a continued IPO upward trend in the KSA market with perhaps limited to no activity on other regional markets".
In Europe, after some early encouraging signs in the first quarter, IPO activity slowed dramatically in Q2 2012 with a 65% decline in volume.
