Middle East Bucks Global Stock Market Slump, With Slew Of New Listings

The Middle East is bucking a global slump in stock market listings, with an almost 300% rise in the number of companies making their debuts on bourses across the region so far this year.

According to data from consultancy firm EY, there have been 31 initial public offerings (IPOs) in the region in the first nine months of 2022, up 288% on the same period in 2021. Between them, these deals have raised some $14.7 billion, up 550% year-on-year.

The pace of new listings has been slowing down as the year has progressed, but the oil windfall that the region’s energy producers are enjoying means the level of activity is expected to remain relatively high for some time.

There were 15 IPOs in the first three months of the year, raising a combined $4 billion. In the second quarter the number of listings dropped to nine, although the amount raised grew to $9 billion.

In the most recent quarter, from July-September, there were seven listings which between them raised $1.5 billion in proceeds. The largest of these was the Dubai road toll operator Salik, which raised more than $1 billion. However, most of the deals were in Saudi Arabia, accounting for five of the seven. The only other one was in Morocco, where Disty Technologies raised $17m on the Casablanca Stock Exchange.

Despite the relative slowdown over the course of the year, the Middle East and North Africa (MENA) is outperforming most other parts of the world when it comes to stock market activity.

In the first three quarters of this year, there have been a total of 992 IPOs worldwide, according to EY, some 44% less than in the opening nine months of 2021. Between them they have raised $146 billion, a 57% drop year-on-year. The consultancy says the U.S. is set to record its lowest proceeds from stock market listings in almost 20 years.

“Despite IPO volumes and values declining significantly in the majority of other global markets, the MENA region continues to forge its own path with a steady stream of new listings in Q3, adding to the large number of IPOs already announced across exchanges in the year-to-date,” said Brad Watson, MENA strategy and transactions leader at EY.

Many parts of the world are facing constraints on economic activity, with high oil prices feeding into rising inflation and dampening investor sentiment. However, in the Middle East many countries are enjoying a surge in oil and gas revenues, which is leading to improved investor sentiment. As a result, most local stock markets have been rising this year, led by the Abu Dhabi Stock Exchange which is up 15% so far this year.

IPO pipeline

There continues to be a strong pipeline of new deals, with EY describing the outlook for IPOs in the MENA region in the final quarter of 2022 and into 2023 as “promising”.

Gregory Hughes, EY’s IPO and transaction diligence leader for the MENA region, said investor confidence in the region has remained high “despite challenging financial headwinds across the world. As we look into Q4, we see no signs of that changing.”

Among the deals coming to the market are Saudi utility Marafiq, which secured $897 million in orders for its shares in early October and is due to make its market debut in the coming days. The Dubai government is also planning to sell a 10% stake in district cooling firm Empower next month, with a book-building exercise expected to start on October 31.

Slightly further out, oil giant Saudi Aramco is planning to sell a stake in its energy trading division either later this year or in 2023 and grocery retailer Lulu Group International is planning to list on the Abu Dhabi Securities Exchange next year.