HSBC: An unprecedented IPO boom in the region

Al-Dugaili to Asharq Al-Awsat: Saudi Arabia is the most active

An official at HSBC Bank Middle East expected the region to see an unprecedented boom in initial public offerings, driven by governments offering some of their key assets in the public offering markets, focusing on the further development of local capital markets and reinvestment in different sectors of their economies.
Samer Al-Dugaili, Head of Capital Markets, Middle East, North Africa and Turkey at HSBC Bank Middle East, said the private sector was following the lead of the government sector as a number of issues at the end of last year introduced and in the first quarter of 2022, especially in Saudi Arabia. With more such releases expected in the second half of this year.
Saudi and UAE markets
Al-Dughaili explained that the stock markets in Saudi Arabia and Abu Dhabi worked last year to take the lead in reopening local capital markets after their activities faltered in the wake of the outbreak of the Corona pandemic, saying: “The two giant companies (ADNOC) and (Mubadala) owned by the Abu Dhabi government have listed three companies affiliated with it in the stock market (Yasat, ADNOC Drilling and Vertiglobe).
He stressed: “The list of IPO offers in the Saudi Tadawul market was at the top of, but not limited to, for example, the Arab company for Internet services and Saudi telecommunications (Sleuchoions), ACWA Power and (Tadawul Group). ), as well as the Public Investment Fund offering a portion of its shares in the Saudi Telecom Company for sale.
He continued, “The Dubai government followed suit and last year announced plans to list ten government-backed companies. So far, the Dubai government has successfully completed the first of ten potential public offerings – the initial $ 6.1 billion public offering. from Dubai Electricity and Water Authority – which is the largest IPO ever, in the UAE and the second largest IPO in the region after (Aramco), which HSBC played a role in leading these two offerings.
He added: “The momentum in the capital markets continued during 2022 at a time when global markets were largely closed, and several factors helped maintain the momentum and positivity of the region’s markets, including high oil prices, lower inflation risks and more positive and relatively strong future expectations for the economy the overall area.
He stressed that the economies of the Middle East and North Africa region, which apparently escaped the crisis of the “Covid-19” pandemic faster and better, attracted increasing interest from international investors who had their capital from the large European economies have shifted. and broader emerging markets to focus on the region, saying: “This has led to the region becoming one of the most active capital markets in Europe, the Middle East and Africa by 2022 since the beginning of the year so far. , as 7 initial public offerings were completed in 2022 in Saudi Arabia and the UAE, with a total value of more than $ 10 billion. ».

continuation of activity
The Head of Capital Markets, Middle East, North Africa and Turkey at HSBC Bank Middle East pointed out that the total value of public offerings offered in Saudi Arabia and the UAE was approximately $ 11 billion in 2021. Compared to the first four months of 2022, it has reached The value of public offerings in these two markets is about $ 10 billion, indicating the extent of strong demand and positive expectations for offers in the Middle East region for this year . He added: “Capital market activity is expected to continue strong throughout the rest of 2022 by both the public and private sectors, as Saudi Arabia and the UAE are expected to remain the most active in this regard.

Active sectors
Al-Dugaili touched on the existence of IPOs in the region and continues to cover a diverse number of sectors, saying: “Investors, including foreign investors, are largely focused on the size, quality and financial profitability of issuers in the IPOs that the IPOs come market, in addition to To the future prospects of these companies in the context of the overall economic performance and economic transformation plans of the governments of the region.
He continued, “While most international investors focusing on the region have orientations to specific markets or regions and therefore their outlook on sectors is not specific, environmental, social and institutional management standards are the main topics affecting a number of international investors. and their investment orientations. “
He added: “While this trend has led to a kind of selectivity in sectors and assets among some international investors, it has also encouraged regional issuers to improve their environmental, social and institutional governance practices and disclosures as part of the IPO.”
Impact of high valuation due to competition on offers
He stressed that the performance in the major Gulf markets compared to other emerging markets would not discourage potential investors. While it is fair to say that some companies listed on local stock exchanges trade relatively higher in terms of valuation, compared to their peers in other emerging markets, valuations are usually based on forward-looking indicators in terms of growth potential and ambitious economic transformation plans. in the region in progress. .
He said: “Saudi Arabia was, and is expected to remain, the most active market in the region, with the desire of both the private and public sectors to further support the capital markets with the reinvestment of capital in various sectors of the local economy. “
He added: “Saudi Arabia’s ambitious economic transformation program (Vision 2030) has continued to make great progress, and the investing community, at local and international level, sees great opportunities in this aspect. He stressed that HSBC will play a major role in the development of capital markets and the process of economic transformation in Saudi Arabia.

oil prices
He stressed that the measures and policies pursued by regional governments, including capital markets, go beyond the issue of current oil prices, saying: “Government policies today look beyond the next fifty years to build sustainable and diversified economies that are less oil-rich income is dependent. , and that the development of capital markets Money in the region, and the deepening and strengthening of local stock markets as an effective way to connect capital providers and issuers and reinvest in emerging sectors of the economy, is a fundamental pillar, and to this reason will continue regardless of the current prevailing oil prices. ”

Deduction plans
On the challenges facing IPOs, Al-Dughaili said the current markets are favorable for IPO activities, but the potential slowdown in global economic recovery and growth could extend to the region and affect investor sentiment.
He added: “From this point of view, the region has so far been relatively resilient from an economic point of view and an attractive and encouraging center for investors in view of the difficult and volatile conditions of world markets during the first quarter of 2022. “
He stressed that the economies of the region are witnessing major transformations supported by government initiatives, which we do not find similar in other markets, and therefore attract the interest of investors worldwide, and the regional economies are emerging faster and stronger. came. of the aftermath of the Covid-19 pandemic. Supported by high oil prices, a stable inflationary environment and a strong macroeconomic environment.
“This has supported the capital markets in the region at a time when other global markets have enjoyed relatively moderate activity with high inflation, slow growth, instability and clarity in geopolitics,” he added.

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