Mena IPO market dips 79 per cent in Q3
Dubai, December 7, 2010
Capital markets in the Middle East and North Africa region raised $177 million in the third quarter of 2010, down 79.7 per cent from $871.8 million raised in Q3 last year, according to a new report.
Ernst & Young’s quarterly IPO Update also revealed that the Q3 IPO raising declined 70 per cent from the $590.6 million raised in Q2 2010.
This takes the total of all IPO funds raised from the beginning of 2010 till date to $1.2 billion.
“IPO markets continue to demonstrate a flat trend. This is not expected to significantly improve in the remainder of this year, but companies that have plans for an IPO continue to prepare themselves. Conventional bank financing, bonds and sukuks are likely to be the preferred mode of raising funds for regional corporations until the profitability of issuers and investor sentiment improve. The IPO markets normally recover after the secondary markets and we have been seeing a gradual recovery in the stock markets around the region,” stated Phil Gandier, managing partner, Transaction Advisory Services, Ernst & Young Mena.
Saudi Arabia’s Al Jouf Cement and Syria’s Becco Exchange were the only two IPOs in Q3 2010 and raised $173.3 million and $3.7 million respectively.
“Companies in Saudi Arabia and Syria have consistently shown the willingness to go in for initial offerings as they have been relatively sheltered from the impact of the negative investor sentiment seen elsewhere in the region. In addition to mandatory listing regulations, companies have been taking advantage of the low cost of capital secured through the market route,” Gandier added.
Global IPO fundraising picked up in Q3, despite market volatility and fewer deals launched. In third quarter global IPOs raised a total of $52.7 billion in 286 IPOs, (compared to $46.8 billion raised in 311 listings in the previous quarter).
Global IPO activity in the first three quarters of 2010 showed $152.7 billion raised in 888 deals has already exceeded total yearly 2009 levels, ($112.6 billion in 577 listings).
The emerging markets accounted for half of the top 20 IPOs in Q3. All of these deals were from Asia: China (8), Indonesia (1), and India (1). In Q3, out of the top 20 IPOs, ten IPOs were from developed markets, the report said.
Global IPO outlook
“We have seen a gradual improvement in IPO markets in the past nine months. The global IPO pipeline continues to build up with numerous businesses world-wide seeking to fund their rapid growth. Assuming the macroeconomic environment continues to stabilise, we anticipate that global IPO markets will improve,” stated Gregory K Ericksen, global vice chair for Strategic Growth Markets for Ernst & Young.-TradeArabia News Service