Saudi real estate trust IPOs on the rise, GCC market cautious
RIYADH, August 9, 2018
There has been a steady increase in the number of REIT (real estate investment trusts) listings in Saudi Arabia during the first half even as the investors in the rest of the GCC markets have taken a cautiously optimistic approach, according to a new report from PwC, a global provider of assurance, advisory and tax services.
Saudi stock exchange Tadawul witnessed eight REIT listings in the first six months together with a $13 million listing of an insurance company in Oman generating total proceeds of $893 million across the GCC, compared to $610 million raised from 15 IPOs for the same period last year.
The increase in proceeds is mainly due to the two key IPOs - Sedco Capital REIT ($173 million) and Bonyan REIT ($174 million).
Investors continued to tread cautiously in the GCC equity markets in the second quarter, stated the report.
In terms of stock market performance, Tadawul remained the best performing stock exchange with Tadawul All Share Index (TASI) recording a 12 per cent improvement compared to the same period in 2017, followed closely by Abu Dhabi Securities Exchange (ADX), contrasting with the flat volumes and negative returns experienced by Dubai Financial Market (DFM) and Muscat Securities Market (MSM) in the first half, it said.
The recent nod for Tadawul’s inclusion in the MSCI Emerging Markets index, which is to be completed in June 2019, is likely to attract foreign investment and provide a positive boost to the Tadwaul equity market, it added.
According to PwC, the future trajectory of GCC equity markets will continue to depend on geopolitical developments, stability of oil prices and the implementation of ongoing government reform policies and related privatisation initiatives across the GCC region.
Steve Drake, the head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East, said: "The uncertainties in the macroeconomics of the region mean that the IPO window is narrower than it has been in the past. It is more important than ever for companies interested in capital markets funding to get ready early to capture the opportunity when it arrives."
Despite the challenging market conditions and the resultant reduction in deals volume by 25 per cent, global IPO proceeds surged by 7 per cent. In total, 300 IPOs raised $58.1 billion in the second quarter of this year, while in 2017, the figure was $54.1 billion from a total of 398 public offers and in 2016, $35.2 billion from 253 IPOs.
Although the global IPO pipeline for 2018 looks promising, with global headwinds increasing, market volatility levels could further increase and the pipeline could fail to materialise, said the PwC report.
Led by Qatar and Saudi Arabia, the GCC sovereign bond market witnessed proceeds of $22.9 billion during the second quarter from its two largest sovereign bond issuers, it stated.
The $12-billion sovereign bond issued by Qatar represents the largest placement by an emerging market sovereign so far this year. Corporate debt activity, however, has been relatively slow, said the expert advisory in its report.
Given the recent recovery in oil prices and easing of government fiscal deficits, sovereign debt issuances are expected to taper in the latter half of 2018, it added.-TradeArabia News Service