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Mena IPO value plunges 51.6pc in Q2

Dubai, August 28, 2011

The value of initial public offerings (IPOs) in the Middle East plunged 51.67 per cent to  $374.77 million in the second quarter this year from $775.40 million during the same period in 2010, according to a report by Ernst & Young.

However, this is still an improvement from the lows of $24.14 million raised in the previous quarter, said the company in its 'Q2 2011 Mena IPO Update.'

A total of $398.91 million has been raised in the regional capital markets in the first six months of this year compared to $1.2 billion in the same period last year, posting a decline of 66.84 per cent.

Saudi Integrated Telecom Company ($93.33 million) on the Tadawul, Northern Cement Company ($7.05 million) on Amman SE, TelNet Holding ($8.7 million) in Tunisia and Societé de Travaux de Réalisation d'Ouvrages et de Construction Industrielle ($13.02 million) in Morocco were the single listings per country, the report said.

The UAE saw two listings on the Abu Dhabi Stock Exchange -  Eshraq Properties Company ($229.09 million) and National Takaful Company 'Watania' ($23.58 million).

Eshraq Properties is the first property company to list in the UAE since the May 2007 listing of Deyaar Development on the Dubai Financial Market.

Phil Gandier, Mena Head of Transaction Advisory Services, Ernst & Young pointed out that the lack of any trend in the regional IPO market was underlined by the lack of confidence to list in these conditions.

'Fluctuation in funds raised every quarter is only a function of the strength and stability of the listed companies. It’s likely that the next quarter may also see firms listing in the low single digits,' he noted.

The Middle East has seen 225 companies delay their offers or postpone going to market over the last three years. These companies would proceed with listing as the market sentiment improves and fund raising via the capital markets picks up.

Global IPO fundraising activity rose by 39 per cent in the second quarter compared to the first quarter of 2011, and has increased by 38 per cent compared to the second quarter of 2010.

In Q2 2011, 378 IPOs globally raised a total of $64.6 billion, according to Ernst & Young’s Q2 2011 Global IPO update.

Asian exchanges still dominated listings this quarter, with 163 IPOs raising $27b, (42 per cent of global capital raised) followed by European (27 per cent), and North American exchanges(24 per cent).

However, Asia’s current lead now falls far short of its dominance in Q3 2010 when Asian exchanges made up 81 per cent of global capital raised. The top three sectors globally were the materials, industrials and energy accounting for 45 per cent of IPOs total value.

With US investors drawn by high growth expectations, internet IPOs have been driving the 2011 US IPO market, while non-technology offerings have often seen lacklustre demand, the E&Y report stated.

Of the 46 IPOs completed in the US worth $13.8 billion, 14 deals raising $4.9 billion have been by technology companies, or roughly 36 per cent of the total US IPO volume.

The largest high technology IPO in Q2 was the NASDAQ listing of Russia’s most popular search engine Yandex, which raised $1.43 billion.

“The social networking revolution will drive the price of social media IPOs, while its valuation model will continue to be refined” remarked Maria Pinelli, Global Vice Chair for Strategic Growth Markets for Ernst & Young.

Europe sees IPO rise

In Q2, European exchanges saw a huge 534 per cent rise in capital raised ($17.7 billion raised in 95 IPOs) compared to the first quarter ($2.8 billion raised in 54 deals) thanks to Glencore’s listing in London.

Among European exchanges, the London Stock Exchange raised the most capital ($12.6 billion) with 21 per cent of capital raised coming from Russian issuers.

The largest global as well as European IPO so far this year was the $10 billion IPO of Swiss commodities trader, Glencore International, which listed on the London and Hong Kong stock exchanges.

The European IPO pipeline continues to fill up even in the face of the Eurozone debt crisis, poor aftermarket trading by numerous withdrawals and postponements,” stated Pinelli.

Asia sustains lead

Asian exchanges still led the world in IPOs, but lost some of its previous dominance in Q2, said the report.

Asian exchanges completed 163 deals which raised $27 billion, an 11per cent raise in capital raised compared to Q2’10. The largest IPO on Asian exchanges in Q2 was the $2 billion listing of Italy’s luxury fashion retailer Prada on the Hong Kong Stock Exchange.

On the future outlook, Pinelli said despite the continued uncertainty of a global economic recovery, the IPO remains at the heart of many companies’ growth strategy.

'As the global IPO pipeline continues to build up, we expect a strong second half for new offerings from high profile issuers, notably from the US and Europe,' the official added.-TradeArabia News Service




Tags: UAE | Mena | Ernst & Young | capital market | plunge | Saudi Integrated Telecom Company | IPO volume |

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