Gulf Times
In a clear reflection of low activity, regional capital markets raised just $843.9mn through initial public offerings in 2011 compared with $2.8bn in 2010, a decline of 69.3%, according to an Ernst & Young report.
The decline was higher in the fourth quarter of 2011 with IPO funds worth only $226.1mn raised, down 83.5% on $1.4bn in Q4, 2010.
Commenting on the overall performance of the capital markets in 2011 Ernst & Young Mena head of transaction advisory services Phil Gandier said, “Companies chose other fundraising routes over IPOs in 2011, which was another year of low capital market activity. Low investor interest continued in the Mena region as companies chose Islamic funding such as sukuks, which saw a record year, as the preferred route for fundraising.
“Investors and issuers in the region remain concerned over the volatility of capital markets and this will likely continue in the next quarter. However, the number of announced IPOs continues to grow across the region. The moment economic conditions and investor sentiment improves, we could see a flood of IPOs in the regional bourses.”
United Electronic Company (Saudi Arabia) was the largest IPO in Q4, 2011 with $105.6mn, followed by SMN Power Holding (Oman, $63.9mn), Saudi Enaya Co-operative Insurance Company ($42.7mn) and Jet ALU MAROC (Morocco- $13.9mn).
The largest IPO of 2011 in Mena was UAE’s Eshraq Properties Company ($229.1Mn) followed by Saudi Arabia’s Hail Cement Company ($130.5mn) and United Electronic Company ($105.6mn).
Saudi Arabia led the country standings in 2011, raising $460.5mn in 2011, followed by the UAE ($271.3mn) and Oman ($63.9mn).
Morocco, Tunisia, Jordan and Syria were the only other Mena countries with IPO activity in 2011.
In all of 2011, five IPOs each were seen in both the industrial manufacturing and financial sectors, two in the telecommunications sector and one IPO in each of the power and utilities, real estate and retail sectors.
After a promising start in the first two quarters, global IPO activity dropped dramatically midway through the year, principally due to investors concerns about sovereign debt issues in Europe and Standard & Poor’s downgrade of US credit rating.
Year-to-date, capital raised globally is down by 45% with $155.8bn, and number of deals is also down by 20% (1,117 IPOs), compared to full year 2010. Seventy-two percent of global capital was raised in the first six months of the year.
However, 2011 fundraising activity still exceeded 2009 by more than $40bn, according to Ernst & Young’s year-end global IPO update. Ernst & Young global vice chair (strategic growth markets) Maria Pinelli said, “The uncertainty around a resolution to the eurozone debt crisis and its impact on the global economy has left investors and issuers with a lack of confidence.”
Asian exchanges completed 543 deals in the first 11 months of the year raising $77.7bn, a 56% drop in capital raised compared to full year 2010 ($177.6bn).
The largest IPO on Asian markets this year was the $5.5bn listing of Hutchison Port Holdings on the Hong Kong Stock Exchange (HKEx), followed by Italian fashion house Prada SpA, for $2.5bn on HKEx.
“The key to the IPO market recovery lies in the speedy resolution of the European debt crisis, which is likely to have a stabilising effect on the global capital market and restore investors’ confidence,” Pinelli said.
