Presite AI Holding plc rose by nearly 145 percent in its first trading session after its listing on the Abu Dhabi Stock Exchange during trading last Monday, after an initial public offering of $496 million, weeks after an initial public offering of $2.5 billion. A dollar for “ADNOC” in the largest listing ever in the Abu Dhabi market.
These new IPOs, in addition to the IPOs that took place in the markets of the Middle East last year, as well as the upcoming IPOs this year, are very significant signs confirming the fact that (the Middle East is on the radar of global investors, as it enjoys a boom in public offering), which was highlighted by an analysis published by the newspaper. British “Financial Times” finally.
This prosperity contradicts the trend of the European markets, which suffer under the weight of the state of “uncertainty” that dominates them in light of the consequences of geopolitical developments and the turmoil and economic challenges resulting from them. This is reflected in the statistics issued by the consulting firm Ernst & Young, which indicate that:
- The number of IPOs in the Middle East and North Africa region reached 51
- Those IPOs raised $22 billion last year, up 179 percent from last year’s rates
Good turnout despite external turmoil
Consultant and economist Kamal Amin Al-Wasal says, in exclusive statements to the “Sky News Arabia Economy” website, that although the state of political and economic instability at the international level and geopolitical tensions cast a shadow over the Middle East region, the demand for IPOs in the region appears to be Well, for several reasons; The most important of them:
- Part of the IPOs takes place in companies in which governments own significant stakes, which gives investors (subscribers) more security, which they need in an uncertain environment.
- A broad sector of these companies operates in strategic and vital activities (oil and basic industries), which means that the productive and financial performance of these companies will be more able to deal with international and regional economic fluctuations, which keeps their future profitability within reasonable limits.
- There are also some IPOs in companies that enjoy sound fundamentals and high-value assets, but suffer from liquidity problems or mismanagement, as is the case in the Egyptian case.
- Added to the attractiveness of these IPOs is that they take place in promising markets, either as a result of population density (as is the case in Egypt) or as a result of high levels of income (as is the case in the Gulf countries).
Al-Wesal points out that “although European markets have been considered attractive markets for long periods due to the strength of their fundamentals, the strength of their economies, and their relative stability compared to the markets of the region, the war in Ukraine, which has entered its second year, has become difficult to predict its future outcomes, the state of uncertainty, and the open scenarios for its end.” make the region’s markets attractive.
He concludes by saying: “The violent financial tremors that toppled some huge financial institutions in the United States and Europe recently pushed investors to IPOs in the countries of the region.”
The Financial Times report quoted a number of analysts as confirming the attractiveness of the region’s markets, including Citigroup’s head of investment banking for the Middle East and Africa, Miguel Azevedo, who noted that the region “has appeared on the radar screen (…) a lot of people (investors) They moved here after covid, and there were a lot of IPOs here, so it forced the world to look at the region that was getting attention when there was nothing going on in the rest of the world.”
Bankers said financial regulatory reform and political stability, with oil and gas prices having risen dramatically from their pandemic lows, are driving an increase in initial public offerings and private deals.
Key factors that enhance the attractiveness of Arab markets
In addition, the head of Prime Holding Company, Muhammad Maher, explains in statements to “Sky News Arabia Economy”, a group of factors that enhance the attractiveness of the markets of the Arab region, as follows:
- Good returns for investment, which are higher than the average global returns, for developing markets, taking into account the differences between one country and another according to risk assessment.
- The factor of stability in international relations, especially with the openness of the countries of the region to coordination and communication with the surrounding economies and the various political and economic blocs.
- The high population in many countries of the region, in contrast to the high level of income in the Gulf countries, and thus the relatively high ability to spend, higher than the global averages.
In the same context, Maher refers to geopolitical factors and their repercussions on the countries of the region and the world, explaining that the impact of the countries of the region is less severe than many other markets and countries, in addition to the fact that some sectors benefit to some extent from these developments, including the energy sector after the war in Ukraine and the rise in Oil and gas prices after most of the Russian supplies to Europe were disrupted, in addition to the benefit of the export sectors in some countries, such as Egypt, despite what they are facing from inflationary pressures.
He refers to the expansion of IPOs in the region, pointing to the Egyptian market for example, as the government has announced a long list of companies (in what is known as the government offering program) with the government’s tendency to reduce its contribution to the economy and increase private sector ownership in state-owned companies, from In order to contribute to increasing and improving the capabilities of economic activity.
This comes at a time when Egypt plans to increase the private sector’s contribution by 65 percent of the total investments executed during the next three years.
The report of the British journalist referred to points to several models in the region, where Saudi Arabia is working to renew its economy, and the United Arab Emirates has attracted financial groups to its commercial center in Dubai, and launched an astonishing number of listings in the oil-rich capital of Abu Dhabi. Qatar also doubled its gas exports.
For example, in Saudi Arabia, the combination of regulatory reform and high oil prices was most noticeable in the stock market, where the landmark deal was the $29 billion listing of oil giant Saudi Aramco in 2019. This encouraged an increase in the number of IPOs, as The year 2022 marked a record year, and in the UAE, the Abu Dhabi National Oil Company offered a series of assets for public offering, which led to a similar increase in listings.
How can the momentum of IPOs be sustained in the Middle East?
In this context, Waddah Al-Taha, a member of the Advisory Board of the British Institute for Securities and Investment in Dubai, points out in statements to “Sky News Arabia Economy” that IPOs are a very important factor for the maturation of markets in the region, citing what the Kingdom of Saudi Arabia and the Dubai and Abu Dhabi markets witnessed. Explaining that the latter’s performance was very remarkable in this context.
He points out that “what is remarkable about most of the recent listings – including ADNOC Gas, for example – is that it was distinguished and characterized by sobriety and governance, in addition to adding a culture of interim distributions that did not exist previously, which is a remarkable and important progress.
Al-Taha indicates that the sustainability of the momentum of these IPOs in the region is highly required, while specifying a set of factors that support this momentum in its proper context, including:
- The principle of selection and priorities: It is assumed that there will be a level of selection in the markets of the region, so that priority is given to companies with a successful and clear history, and they have an appropriate rate of profitability, appropriate governance and professional management.
- Addition: that these subscriptions constitute an addition and depth to the market in terms of the sector to which the companies belong. Al-Taha infers here the latest listing in the Abu Dhabi market in the field of artificial intelligence, saying: “It was very remarkable.. This is considered a new field.. There was a remarkable demand for subscription, and herein lies the real addition.”
- Pricing: The most important point in Taha’s assessment is related to the pricing process, so that there must be great care in the pricing process, given that the listing of a stock and then its decline if there is an exaggeration in its pricing is a matter that frustrates investors’ morale and may affect the upcoming IPOs.
And while he set the conditions for sustaining the momentum of IPOs, a member of the Advisory Board of the British Institute for Securities and Investment in Dubai highlights, at the end of his conversation with “Economy Sky News Arabia”, part of the reasons for the boom in IPOs in the Arab region in recent periods in particular, which is related to geopolitical developments and risks around the world.
He adds, “The Arab region is considered a safe region and is governed by a set of good laws.. In terms of emerging markets in general, there is an opportunity for a number of markets, the most important of which is the Gulf markets, to grow at higher rates than their counterparts in the world.. Perhaps this is another factor that adds to the attractiveness of those markets for the investor in addition to other factors.” other mentioned”.
According to the Global Private Capital Association, private equity fund managers pumped $19.8 billion into 191 deals in the Middle East last year, a region that is “the only place in the world that recorded an annual increase in investment value in 2022.”
Gulf markets.. Luminous models
The local financial markets in the UAE witnessed a strong year in terms of listings in 2022, with a series of listings amounting to about 15 listings, considered “the strongest in the history of the UAE financial markets since its inception”, in terms of the number, magnitude and diversity of listings, which encouraged more strong offerings in the following year.
- 3 initial public offerings in the UAE have attracted record subscription requests amounting to 557 billion dirhams since the start of the current year 2023.
- The public offering of “ADNOC Gas” raised total proceeds of about 9.1 billion dirhams.
- The IPO of Presite raised total proceeds of approximately 1.822 billion dirhams.
- The Al Ansari Financial Services Group raised, through its initial public offering, AED 773 million.
In the context, the Emirati economic analyst, Nile Al-Jawabra, indicates, in statements to the “Sky News Arabia Economy” website, the status of the companies that were listed in the year 2022 and the financial solvency they enjoy, especially the oil companies operating in the local markets, as “we are considered one of the largest exporters.” For oil and its derivatives.. our markets are attracting attention from major investors and global indices, especially after the inclusion of many companies in these indices (MSCI and FTSE).
He stresses that this is among the main factors supporting a “positive and optimistic outlook”, especially for the Dubai Financial Market. He also indicates the factors related to the “distributions” that investors expect from these companies, citing in the same context, for example, the distributions of DEWA companies.
With regard to the consequences of geopolitical developments around the world and their impact on investor orientations, the economist explains in his interview with “Sky News Arabia Economy” that attention has been directed to our markets, and the listings that take place in them, due to their greater attractiveness, especially with the appropriate financial solvency and government support for various sectors in a way Large, which appeared strongly during the Corona crisis.
And he adds: “We are expecting this year 2023 – and despite the conditions in the banking sector in the United States and Europe (with reference to the banking crisis) – the inclusion of several new companies, in a way that makes investors’ eyes turn to the region’s markets in light of the external financial, economic and geopolitical conditions, which may be considered a factor positively for our markets in terms of increasing investment.”
With regard to the Gulf, the aforementioned “Financial Times” report quoted an American investment banker as saying: “International investors come – senior asset managers from the United States and Europe – and invest with their people to prepare for more investments in this world.”
The report quoted Citigroup’s head of investment banking for the Middle East and Africa, Miguel Azevedo, as saying that the region is moving into “phase two” of the listing, with “the initial public offering of non-governmental entities in the United Arab Emirates, in both Dubai and Abu Dhabi.”
“This year will see a few more family-owned businesses emerge,” he added. He predicted that a third wave of “young fintechs and technology-enabled companies that have been raising money in the private capital market” will follow.
The impact of peace and pacification efforts
Dr. Zaid Al-Barzanji, a researcher in the global economy in the United States, professor of economics at the International Peace University in South Africa, identifies in statements to “Sky News Arabia” a set of basic factors that drive an increase in the attractiveness of IPOs in the region, and the flow of foreign investments accordingly, among them :
- Many countries in the region have benefited from the consequences of the war in Ukraine and its effects on the rise in oil and gas prices, and with the disruption of Russian energy supplies to Europe due to the impact of the war.
- The rise in energy prices in this way contributed to the countries in the region achieving large returns, which enhances the increase in government spending on investment in various fields.
- These IPOs in the region and investments in it are considered largely safe, due to the strength of the economies and the government behind them.
He points out that there are political factors that have in turn helped support investor confidence in this region (the Middle East), foremost of which is the solution of a number of existing problems between some countries (…) and the trend towards peace and calm, which are factors that contributed to spreading peace, including It supports prosperity, economic growth, investor confidence, and their interest in various IPOs.