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Japan firm's shares soar after Saudi listing

Riyadh, June 25, 2012

Shares in an affiliate of Japanese insurance giant Tokio Marine & Nichido Fire Insurance Company soared as they listed on the Saudi Arabian stock market yesterday, showing strong demand for fresh equity among Saudi investors despite the global market slump.

Alinma Tokio Marine traded as high as SR100 ($26.67), a 10-fold increase from its initial public offer (IPO) price of SR10. It was at SR76 after an hour of trading, with 5.5 million shares having changed hands in hectic trade.

Many Saudi stocks more than double on listing, because IPO shares are traditionally sold at cheap valuations by international standards.

The government encourages IPOs as a way of distributing corporate wealth to its citizens. Alinma's jump was large even by Saudi standards.

Though the Saudi stock market has been hit by the global slump - the local index is down 15 per cent from this year's peak - many investors remain cash-rich because of the booming economy and are eager for new investment opportunities, analysts said.

'We will see the price supported for the first few days, and then there will be some selling pressure' as short-term investors take profits, said Tarek Al Mady, an independent financial analyst in Riyadh.

Alinma was seen as attractive because as an insurance stock, it is focused on the Saudi economy rather than the global economy.

The firm plans to develop Islamic insurance or takaful products for retail and corporate customers; they will be sold through the national branch network of Alinma Bank, a co-founder of the firm.

Islamic insurance has been expanding rapidly in the Gulf although growth has slowed in recent years.

The growth of takaful contributions in Saudi, which accounts for about half of the global total, slowed to 12 per cent in 2010 from a compound growth rate of 38 per cent during 2005-2009, a report by consultants Ernst & Young said in April.

Alinma's IPO of 6 million shares, or 30 per cent of the company, raised SR60 million and was more than 16 times subscribed, according to Alinma Bank, the lead underwriter.

The firm is owned 29 per cent by the Japanese parent and 29 per cent by Alinma.

Foreign investors can theoretically obtain access to Saudi IPO shares through swap agreements with Saudi institutions.-Reuters




Tags: IPO | Saudi | Insurance | stocks | Japan | Shares | listing | Tokio Marine & Nichido Fire Insurance |

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