Resuming its robust growth trend, Initial Public Offering (IPO) activity in the Middle East and North Africa region rose significantly in the first quarter of 2010 with the volume of funds raised almost doubling compared to the corresponding period last year, according to Cayman Islands-headquartered alternate asset management major, Al Masah Capital. Regional IPOs in the first quarter of the fiscal raised $6.8 billion through 62 issues compared to $3.7 billion in Q1 2009 through 29 issues, signaling a strong recovery in the IPO market, Al Masah Capital said in its Q1 2010 IPO update on Monday. The MENA IPO market had withered in 2009, as the economic slowdown cast a shadow on markets across the globe from 2008-end, and managed to raise a mere $12.8 billion from 191 IPOs, a decline of 82 percent year-on-year in absolute figures. “As the global economic recovery strengthens, MENA region is likely to witness larger issues driving the future IPO market activity in the region,” said Shailesh Dash, founder of Al Masah Capital. “Companies in the region will be eager to enter the IPO market as investor appetite grows stronger. Moreover, some regional indices that plummeted at the start of 2009 have rebounded since September 2009 and renewed investor interest in the stock markets is expected to increase momentum in regional IPO markets this fiscal.” The main driver of growth in the MENA IPO market, however, would be government initiatives aimed at diversification to reduce dependence on the oil sector. The United Arab Emirates leads in value terms with $25.3 billion worth of IPOs planned in 2010 followed by Bahrain with $3.8 billion and Saudi Arabia with $1.03 billion. Egypt unveiled plans to come up with two IPOs in the financial services and transportation sectors, for a total of $1 billion. “These four countries will account for the majority of MENA IPO activity in 2010.” Saudi Arabia has the highest number of announced IPOs from the 2010 pipeline accounting for 47 out of the total 106 announced issues in the region. Planned IPOs span various sectors such as telecommunications, construction and real estate. The UAE follows with 25 IPOs, mostly from the real estate sector, whereas Bahrain and Kuwait announced six and five IPOs, respectively. Libya was also expected to see a surge in IPO activity in 2010 as the Libyan government mulls material changes in its regulatory capital market authority to adapt to international norms and attract regional as well as international investors to its stock market. Of the top 10 IPOs planned in the MENA region in 2010, the UAE-based Nakheel has the largest in the list with the state-owned entity planning to raise $15 billion followed by Bahrain-based Istikhlaf Bank's $3.5 billion IPO for 35 percent of its equity. UAE-based transportation company, Emirates Post was planning to raise $272.3 million whereas Kuwait-based transportation company, Sahaab Leasing has a planned $206.1 million offering in the pipeline. Saudi food and beverage company, Aujan Group has also planned to dilute 30 per cent of its equity and raise $159.9-$213.2 million through a secondary offering. A staggering $16.6 billion worth of IPOs might emanate from the real estate sector alone and $9.9 billion from the transportation sector in 2010, as reflected from the MENA IPO pipelines, both announced and rumored. While the real estate sector is expected to come up with 27 IPOs during the year, 19 IPOs are expected from the transportation sector. “Apart from these, the financial services sector is also expected to come up with 23 IPOs worth $3.8 billion in 2010.” “Plummeting oil prices slowed down overall economic activity in the MENA region in 2009, impeding the diversification strategies of many oil-dependent economies in the Middle East. Slower growth in public spending dented business activity, forcing many investors to pull money out of stock markets. Consequently, stock markets in the MENA region plunged, reducing investor interest in IPOs and forcing many companies to either postpone or cancel their IPOs.” “All this has been put behind as the IPO market braces up for a strong comeback in 2010,” Dash added.
