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The GCC IPO avalanche 2018: More than 2 dozen companies to raise funds

We are often attracted to  an IPO of magnitude like Aramco’s $100bn 5% asset sale at end 2018, or beginning 2019, but there are privatization efforts taking  place which perhaps a better measure of equity markets in the region.

2018 will witness heightened IPO activity in Saudi and the UAE with as much as 30 GCC companies expected to go public, Kuwait Financial Centre (Markaz) reported in its recent Monthly Market Report.

Is that any different than 2017?

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Robust 2017 for IPOs

The Kuwait report highlighted some of last year’s results, saying 2017 witnessed a record 17 issues raising $2.95bn in capital.

“While stock markets witness heightened volatility, there is good news in the form of renewed interest for initial public offerings (IPOs) in the Gulf Cooperation Council (GCC) region,” said the report.
The combined value of  IPOs in the Gulf surged to $2.5bn in Q4 2017 alone.

Stock markets of the six-member economic bloc received eight listings in the last quarter of the 2017, compared to just one in the same period in 2016, and five recorded in the third quarter of 2017, said PriceWaterhuseCoopers (PwC).

Public offerings are making a comeback after a slowdown in economic growth forced several companies to shelve plans to raise funds via share sale amid concerns of not getting proper valuations for their businesses.

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2018 catalysts

Saudi’s cabinet approved a new bankruptcy law last February providing foreign investors with a legal vehicle to recoup assets in cases of solvency, opening the way for a more interest in equity markets and encouraging the growth of small and medium enterprises (SMEs).
Kuwait which is selling 44% of its stake in the national bourse end 2018, in a much anticipated IPO, received an S&P scorecard of “AA/A-1+” long-term and short-term foreign and local currency sovereign credit ratings, with a stable outlook.

S&P also projected Kuwait’s economic growth to hover around 3% yearly between 2019 and 2021.

Watch: Kuwait rushing to beat Saudi IPO- What is it selling and why?

The region will benefit from the MSCI Emerging Market index.

The MSCI GCC Countries Index captures large and mid cap representation across 6 GCC countries.

Nasdaq Dubai launched its first index-based futures contracts, linked to DFM’s General Index and ADX’s main share index, the ADI, in n effort to increase liquidity, attract international investments, and provide a framework for hedging.

GCC markets are also capitalizing on the oil price rebound which has prices hovering in the $70 mark.

For regional stock markets, Bahrain followed by Kuwait were the region’s top performers, gaining 1.4% and 0.5% in February, respectively.