The third quarter (Q3) of the year witnessed a total of three initial public offerings (IPOs) in the GCC across a wide range of sectors, said PwC, a global provider of assurance, advisory and tax services, in a new report.

Unlike the first two quarters of the year which saw IPO activity confined within Saudi Arabia, this quarter saw those new offerings from the GCC - Kuwait and Oman, in addition to a listing on Saudi’s Tadawul, added the titled “PwC GCC Capital Markets Watch Q3 2018”.

 A total of $484 million was raised this quarter on the back of these three listings, with slightly higher proceeds than the previous quarter (Q2 2018: $463 million). Among these, Boursa Kuwait, one of the region’s oldest stock exchanges, welcomed its first IPO in more than ten years, after a thorough infrastructure restructuring and reconfiguration, raising $214 million.

Equity markets activity remained subdued due to the economic slowdown and increase in interest rates driven by the US Federal interest rate hikes in the year to date. In debt markets, the oil price surge has reduced GCC governments’ borrowing needs.

However, the corporate debt issuance activity has largely maintained pace, driven by the general consensus that there will be further interest rate increases in the near future. This encouraged a number of companies to issue their debts towards the end of the quarter, and we expect this trend to continue into the fourth quarter.

Steve Drake, PwC Middle East Capital Markets Leader said: “Overall, the Capital Markets activity in the region is progressing at a cautious pace. There are signs of recovery, but it remains to be seen whether they are enough to counter the escalating pressure from increasing geopolitical uncertainties and interest rate hikes.”

He added: “Unlike last quarter, GCC equity markets were not dominated by REIT IPOs but saw instead a healthy diversification in both sectors and geographies compared with the dominance of REITs and Saudi listings in Q1 and Q2.”

Regional IPOs

Tadawul’s fresh issuance activity slowed during Q3 compared to the same period last year. Leejam Sports Company was the only IPO on Tadawul during this quarter, compared to three listings during the equivalent period of last year. Proceeds were not however negatively impacted, with $218 million generated – a seven percent increase compared to the $204 million raised from the three IPOs in the same period in 2017.

Boursa Kuwait has been in the spotlight with its infrastructure upgrade that reconfigured and restructured the stock exchange and its announced plan to privatise. The Kuwaiti exchange’s first IPO in over 10 years raised $214 million. And finally in Oman, the Muscat Securities Market (MSM) welcomed the listing of Dhofar Generating Company which raised $52 million.

Global IPOs

Typical of the third quarter, summer trading was thin – only Asia-Pacific saw increased activity, driven by jumbo IPOs on the HKEX. Global IPO activity in Q3 2018 suffered compared to last year - proceeds fell by 5 per cent and volume by 24 per cent – although year to date proceeds still exceeded the same period last year. In total, 261 IPOs raised $46.8 billion compared to $49.2 billion from 344 IPOs in Q3 2017. At $7.5 billion proceeds, China Tower was by far the largest IPO in two years globally.

GCC bond and sukuk issuances

Proceeds generated from sovereign bonds decreased to $3.9 billion in Q3 2018 compared to $22.8 billion in Q2 2018. In contrast, corporate bond and sukuk proceeds increased to $3.5 billion (Q2: $2.0 billion), predominantly attributable to DP World. The company completed its seventh debt listing on NASDAQ Dubai, raising $2.3 billion from corporate bond and $1.0 billion from sukuk issuance in the current quarter, which together with their past issuances take the aggregate value of total debt issuances to $6.7 billion.

Steve Drake noted: “Looking back at the past quarter, the higher oil price, together with the increased output, have reduced the pressure on governments’ expenditure reform programmes. Consequently, sovereign bond issuance activities have slowed down for the time being.”
 
He ended: “Affected by the macroeconomic conditions, including fluctuating oil prices, 2018 has been a slow year for IPOs, with a number of issuers putting equity transactions on hold. Despite this, the 12 IPOs in the year to date have generated total proceeds of $1.4 billion, compared to $845 million from the 20 IPOs in the first three quarters of 2017. Q3 2018 welcomed two listings of more than $200 million each, which is very encouraging.” – TradeArabia News Service