The initial public offering bonanza that bucked the global trend and allowed GCC companies to raise tens of billions of dollars by listing their shares will continue next year amid booming economies, analysts say.
Market fundamentals are strong and liquidity remains abundant, especially in the six-member economic bloc of GCC. The drive to bring the government sector entities to the market, primarily in the UAE, the Arab world’s second-largest economy, will further accelerate the IPO momentum going into the next year.
“The main drivers are the government bringing prized jewels to the exchange to increase the depth of the market, corporates taking advantage of liquidity in the system and good performance of the secondary market as compared to international peers,” Faisal Hasan, chief investment officer and head of asset management at Dubai-based Al Mal Capital, said.
“I think this trend is going to continue next year, as we currently see a strong pipeline of IPOs coming from UAE and Saudi Arabia.”
Unlike global markets that are largely short of liquidity amid subdued investor sentiment, soaring inflation and rising fears of recession on the back of interest rate increases, the Mena region has been buzzing with IPO activity this year with about $21 billion raised from offerings — the highest share after 2019 when Saudi Aramco went public in a $29 billion offering.
The regional IPO market has carried the momentum from last year, when several big-ticket share sales hit the market in the UAE and Saudi Arabia.
The pipeline developed last year has continued to mature this year as the number of new Mena-based companies listed on the region's bourses more than tripled.
The Mena IPO market, which saw nine companies raising $9 billion in proceeds from their share sales, continued its strong run in the third quarter, with seven IPOs raising approximately $1.5 billion in proceeds.
The surge of IPOs in the GCC, in particular, is attributable to multiple factors, including “solid economic fundamentals, market evaluation, compelling value proposition and change in perspective from international investors”, said Vijay Valecha, chief investment officer at Century Financial.
Global investors are also increasingly finding the region attractive after the Middle Eastern economies made a swift recovery from the Covid-driven slowdown, supported by higher oil prices.
"The region is now part of international indices like MSCI and FTSE and it is attracting both regional and foreign participation from active and passive funds," Mr Hasan said.
“They are looking at good equity growth, dividend plays and the IPOs are providing them with good investment avenues.”
Most GCC currencies are pegged to the dollar and that is also an advantage for the region and its stocks as other emerging market currencies have taken a hit, he added.
“We see capital increasingly being deployed to the GCC countries,” Mr Valecha said.
The drive of local companies to expand through IPO proceeds is met by an “equally keen international community, seeking growth and healthy underlying fundamentals”, he said.
Globally, there have been a total of 992 IPOs until the end of October this year, down 44 per cent from the same period in 2021, according to EY data.
Together, these companies raised $146 billion, a 57 per cent annual decrease as companies and investors continue to face mounting macroeconomic challenges, market uncertainty, increasing volatility and falling global equity prices, according to EY.
The UAE and Saudi Arabia were the most active IPO markets in the region this year both in terms of the value and the number of deals.
Dubai Water and Electricity Authority, the Dubai utility, raised $6 billion from its public offering, making it the biggest equity capital markets deal so far this year.
Dewa’s listing is part of Dubai’s plans to list 10 state-owned entities to increase the size of the emirate's bourse to Dh3 trillion, as well as set up a Dh2 billion market maker fund to encourage the listing of more private companies from sectors such as energy, logistics and retail.
Americana, the largest quick-service restaurant operator in the Mena region, is among the companies that floated shares this year. The company raised $1.8 billion from its IPO in November to dual list on Abu Dhabi and Saudi bourses.
Saudi Aramco Base Oil Company, better known as Luberef, is the latest Saudi company to pursue listing on Tadawul. It raised more than $1.32 billion from its IPO.
Bayanat, a geospatial data products and services provider owned by Abu Dhabi-based artificial intelligence and cloud computing company G42, raised more than Dh628.5 million from its ADX IPO.
In October, Abu Dhabi healthcare provider Burjeel Holdings listed its shares on the Abu Dhabi bourse after raising more than Dh1.1 billion from the sale of an 11 per cent stake.
Schools operator Taleem, Salik and Tecom, Abu Dhabi Ports Group and Borouge are among other listings this year.
The vibrant IPO activity in the UAE is a reflection of investors' desire to get exposure to the growing variety of economic sectors as markets continue to broaden and deepen with each new listing.
“The IPOs provide an opportunity to gain exposure to key sectors of the economy, including oil, petrochemicals or overall non-oil sector growth,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, said.
“The reform programme is also boosting confidence in the economic outlook. This is at a time where a number of other regions are facing structural and cyclical headwinds.”
The pipeline of listing deals heading into the next year remains strong.
Abu Dhabi, which launched a Dh5 billion IPO fund last year, has shortlisted six private sector companies to potentially receive investment and advisory services for listing their shares on the ADX.
It is also in discussion with 30 other companies to list on the capital’s stock market, Mohamed Al Shorafa, chairman of the Abu Dhabi Department of Economic Development, said last month.
There are several companies from outside the region that are also seeking the fund's support to list their shares on the ADX, Mr Al Shorafa told The National at the time.
In November, Abu Dhabi National Oil Company's board also gave approval to set up a new gas subsidiary and list its shares on the ADX next year. The new gas processing and marketing company, Adnoc Gas, will begin operations on January 1, according to Adnoc.
Supermarkets operator Lulu and Pure Health, a unit of Abu Dhabi-listed International Holding Company, have also announced plans for listings next year.
“Tadawul, the ADX and the DFM will dominate the GCC markets in terms of IPO activity next year,” Mr Valecha said. “We are likely to see multiple big-ticket IPOs.”
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Brief scoreline:
Liverpool 2
Mane 51', Salah 53'
Chelsea 0
Man of the Match: Mohamed Salah (Liverpool)
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Power: 218hp (Cooper and Aceman), 313hp (Countryman)
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Marwan Lutfi says the core fundamentals that drive better payment behaviour and can improve your credit score are:
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2. Limit the number of products you borrow on: the more loans and credit cards you have, the more it will affect your credit score;
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Tributes from the UAE's personal finance community
• Sebastien Aguilar, who heads SimplyFI.org, a non-profit community where people learn to invest Bogleheads’ style
“It is thanks to Jack Bogle’s work that this community exists and thanks to his work that many investors now get the full benefits of long term, buy and hold stock market investing.
Compared to the industry, investing using the common sense approach of a Boglehead saves a lot in costs and guarantees higher returns than the average actively managed fund over the long term.
From a personal perspective, learning how to invest using Bogle’s approach was a turning point in my life. I quickly realised there was no point chasing returns and paying expensive advisers or platforms. Once money is taken care off, you can work on what truly matters, such as family, relationships or other projects. I owe Jack Bogle for that.”
• Sam Instone, director of financial advisory firm AES International
"Thought to have saved investors over a trillion dollars, Jack Bogle’s ideas truly changed the way the world invests. Shaped by his own personal experiences, his philosophy and basic rules for investors challenged the status quo of a self-interested global industry and eventually prevailed. Loathed by many big companies and commission-driven salespeople, he has transformed the way well-informed investors and professional advisers make decisions."
• Demos Kyprianou, a board member of SimplyFI.org
"Jack Bogle for me was a rebel, a revolutionary who changed the industry and gave the little guy like me, a chance. He was also a mentor who inspired me to take the leap and take control of my own finances."
• Steve Cronin, founder of DeadSimpleSaving.com
"Obsessed with reducing fees, Jack Bogle structured Vanguard to be owned by its clients – that way the priority would be fee minimisation for clients rather than profit maximisation for the company.
His real gift to us has been the ability to invest in the stock market (buy and hold for the long term) rather than be forced to speculate (try to make profits in the shorter term) or even worse have others speculate on our behalf.
Bogle has given countless investors the ability to get on with their life while growing their wealth in the background as fast as possible. The Financial Independence movement would barely exist without this."
• Zach Holz, who blogs about financial independence at The Happiest Teacher
"Jack Bogle was one of the greatest forces for wealth democratisation the world has ever seen. He allowed people a way to be free from the parasitical "financial advisers" whose only real concern are the fat fees they get from selling you over-complicated "products" that have caused millions of people all around the world real harm.”
• Tuan Phan, a board member of SimplyFI.org
"In an industry that’s synonymous with greed, Jack Bogle was a lone wolf, swimming against the tide. When others were incentivised to enrich themselves, he stood by the ‘fiduciary’ standard – something that is badly needed in the financial industry of the UAE."
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strategies
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Multitasking pays off for money goals
Tackling money goals one at a time cost financial literacy expert Barbara O'Neill at least $1 million.
That's how much Ms O'Neill, a distinguished professor at Rutgers University in the US, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.
"I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could've had $2 million," Ms O'Neill says.
Too often, financial experts say, people want to attack their money goals one at a time: "As soon as I pay off my credit card debt, then I'll start saving for a home," or, "As soon as I pay off my student loan debt, then I'll start saving for retirement"."
People do not realise how costly the words "as soon as" can be. Paying off debt is a worthy goal, but it should not come at the expense of other goals, particularly saving for retirement. The sooner money is contributed, the longer it can benefit from compounded returns. Compounded returns are when your investment gains earn their own gains, which can dramatically increase your balances over time.
"By putting off saving for the future, you are really inhibiting yourself from benefiting from that wonderful magic," says Kimberly Zimmerman Rand , an accredited financial counsellor and principal at Dragonfly Financial Solutions in Boston. "If you can start saving today ... you are going to have a lot more five years from now than if you decide to pay off debt for three years and start saving in year four."
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