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Gulf IPO activity drops by half in Q2

Gulf IPO activity drops by half in Q2

Economic volatility and lower oil prices led to a significant slowdown in listing activity

Initial Public Offering (IPO) activity in the Gulf remained muted in the second quarter of 2016 with lower oil prices and global economic volatility resulting in half as many deals as the previous year.

In a report, PwC said Al Yamamah Steel Industries’ $147m, 30 per cent share listing and jeweller L’Azurde’s $127m, 30 per cent listing were the only offerings in quarter that saw four times lower total proceeds than Q2 2015.

Read: Saudi’s newly listed L’azurde Jewellery eyes UAE, Qatar expansion

The total money raised, at $127m, was 42 per cent lower than the previous quarter despite twice as many listings.

First half activity was also significantly lower than the previous year, at $745m through three deals, compared to $1.3bn through five deals in H1 of 2015.

“Whilst uncertainties with oil prices remain and regional geopolitics continue to play out, we would expect to see continued volatility in regional equity markets. Valuations tend to fluctuate significantly in times of uncertainty and investors tend to stay out of equities. Any significant IPO activity we see in the short to medium term is therefore likely to be government sponsored,” said PwC Middle east capital markets and accounting advisory services team head Steve Drake.

The slower listing activity in the Gulf followed a global trend, with activity down 49 per cent to $34.5bn through 241 deals in Q2 compared to $77bn through 325 deals in Q2 0f 2015.

However there was greater activity in the Gulf bond and Sukuk market.

The second quarter saw some of the largest bond issuances in the region with $9bn from Qatar and $5bn from Abu Dhabi.

Read: Qatar completes Middle East’s largest ever bond sale

Corporate bond issuances included $533m form Gulf International Bank and $1bn from Abu Dhabi National Energy Co (TAQA) through two senior note tranches of $500m.

In terms of Islamic finance, Bank Al-Jazira issued a $533m listing with an option to redeem after five years and Bahrain’s Central Bank issued three Sukuk Al Salam each worth $114m and three short term leasing Sukuk worth $69m each.

“Bond and Sukuk activity improved compared to the previous quarter of this year, with notable issuances from regional governments such as of Qatar and Abu Dhabi and this is expected to pick up further in the next quarter as the Kingdom prepares its first ever proposed $10bn bond issuance,” said Drake.

“However, challenging market conditions and uncertainty amongst investors and issuers may impact activity for the remainder of 2016 and a surge in borrowing cost could weigh on market appetite.”

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