GCC IPO transactions generate $1.03bn in Q4

The fourth quarter was remarkable for the GCC equity markets in 2018, with five IPO transactions generating total proceeds of $1.03bn, 42 percent of the annual GCC IPO proceeds. The market witnessed activities across issuers from all six GCC countries. Qatar Stock Exchange (QSE) has welcomed its largest IPO of the past four years in terms of total proceeds – Qatar Aluminium Manufacturing, which generated $ 758m.

‘PwC GCC Capital Markets Watch’ noted REIT IPOs cooled off in H2 of 2018 after strong activities in H1. This is mainly due to lower demand for real estate across the region and declining spreads between returns of REITs and deposit rates for safer time deposits.

The equity markets remained active in 2018, although showed declining statistics in terms of primary IPOs compared to 2017. Q4 was a noticeable quarter for 2018 but still some way behind the eight IPOs in the last quarter of 2017, which generated $2.46bn. Tadawul continued to lead the GCC stock markets with the most active stock exchange by number of listings and proceeds raised. The GCC IPO outlook for 2019 hinges on the oil price as well as the geopolitical climate. There is a cautious investor sentiment which is expected to linger in the early months of 2019.

Steve Drake, PwC Middle East Capital Markets Leader said: “The final quarter of 2018 ended on a strong note for GCC equity markets despite ongoing macro-economic and geopolitical uncertainties, which are expected to remain in the immediate future. As the market continues to adjust to this new norm, the opportunity lies in the hands of the companies that are able to adapt, innovate and compete against this still unfolding backdrop.”

Globally, 2018 started as a promising year for IPOs, but eventually did not fully live up to its potential. High equity valuations, low volatility and strong economic and corporate fundamentals were evident, but as the year progressed, geopolitical unrest, weakening fundamentals and less accommodative monetary policy put a brake on activity levels. Numerous IPOs were postponed or even cancelled.

In the fourth quarter, 284 IPOs raised $56.1bn compared to proceeds of $67.7bn from 439 IPOs in Q4 2017.

A wide range of jumbo IPOs were executed throughout the year, most notably the SoftBank spin-off in December. With pregreenshoe proceeds of $21.3bn, it is the fourth biggest IPO in history, and has the potential to become second largest if the greenshoe is exercised.

This led Asia-Pacific to become the leading region in terms of IPO activity. The region accounted for 45 percent ($99.1bn) of proceeds and 55 percent (649) of the number of deals in 2018. Coming second is the Americas which accounted for 34 percent ($75.3bn) of proceeds and 25 percent (295) of volume. Trailing behind is EMEA, accounting for 21 percent ($47.3bn) of IPO proceeds and 20 percent (235) of volume.

Drake noted: “Despite increasing Federal interest rates, fluctuating oil prices and global economic downturns, the GCC bond market has shown commendable performance. It has delivered stronger risk-adjusted returns than many other traditional bond markets since 2013.”

The decision to include GCC nations in JP Morgan’s Emerging Market Bond Index (EMBI Index) from January 2019 and the ascending tendency of oil prices were likely to have contributed to the overall GCC performance and boosted the issuance of GCC debts in 2018.

Source from: The Peninsula