Shares in Qatar’s Mesaieed Petrochemical Holding Co soared 590 per cent on Wednesday in the country’s first stock market listing since 2010, far exceeding analysts’ estimates of fair value.
The shares opened at 50.0 riyals, up from their initial public offer price of 10.0 riyals, and after half an hour of trade had climbed further to 69.00 riyals.
Analysts’ valuations for the stock ranged between 18 and 21 riyals, Ahmed Shehada, head of trading at QNB Financial Services, said before the listing.
Mesaieed, a unit of state-owned Qatar Petroleum (QP), raised 3.2 billion riyals ($880 million) in an IPO of about 26 per cent of its shares. The offer, which authorities said was heavily oversubscribed, was open only to Qatari investors; foreigners can buy up to 15 per cent of the firm from the market.
Fund managers said Qatari retail investors who had not succeeded in buying enough of the shares during last month’s IPO were piling into the stock on Wednesday.
Most institutional investors, which were excluded from the IPO, missed the stock’s initial jump and have also been deterred by a lack of extensive analyst research on Mesaieed. So they are for now largely staying away from the stock, fund managers said.
“Being a unit of QP, it will attract investors and retail liquidity will drive the stock for the coming period,” said Reda Gomaa, portfolio manager at Mashreq in Dubai.
Mesaieed holds stakes in ventures that make polyethylene, caustic soda and other chemical products. Its partners in the ventures include U.S. company Chevron Phillips Chemical Co. These stakes generated combined revenue of 4.3 billion riyals and net profit of 1.6 billion riyals in 2012.
Retail investors’ strong appetite for Mesaieed’s shares underlined a sharp recovery of Gulf financial markets from the global credit crisis over the past year. Qatar’s main stock index is up 42 per cent since the end of 2012; last October, Dubai listed its first new stock in four years.
The success of Mesaieed’s listing is likely to pave the way for more IPOs in Qatar. The government of the tiny state, which has a population of about 2.1 million, roughly 250,000 of whom are Qatari nationals, wants to use IPOs to develop its financial markets and spread its natural gas wealth among its citizens.
Energy minister Mohammed Saleh al-Sada said in December that including Mesaieed, Qatar planned to conduct IPOs worth 50 billion riyals in its stock market over the next 10 years.
The government structured the Mesaieed offer very attractively to ensure interest among Qataris. It bought 750 of the company’s shares as a gift for each disadvantaged Qatari citizen – those receiving social insurance payments and people with special needs – and promised citizens allocations of free shares in coming years if they hold on to the bulk of their purchases in the IPO. This promise may have created a supply squeeze that pushed up the stock price on Wednesday.
Qatar’s stock market, with a capitalisation of about $170 billion, is preparing for a new influx of foreign money in May, when international equity index compiler MSCI has said it will upgrade Qatar to emerging market from frontier market status.