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MENA Equity markets in the red for the year but buoyed in recent weeks

The UAE and other Gulf bourses are heading for their best monthly performance in August in 2020, buoyed by the progress towards Covid-19 vaccines, the easing of US-China tensions, and a rebound in crude prices

The MENA region recorded an increase in IPO volume and value during Q1 2020, with total proceeds of $814 million The value of mergers and acquisitions with any MENA involvement fell 55% year-on-year to $50.7 billion in H1 Debt issuance in the MENA region hit a record first-half high of $69.5bn during the period, up 26% year-on-year

The UAE and other Gulf bourses are heading for their best monthly performance in August in 2020, buoyed by the progress towards Covid-19 vaccines, the easing of US-China tensions, and a rebound in crude prices, according to Allied Investment Partners PJSC.  

Analysts expect the markets to continue their upward trend in the weeks ahead, on the back of support from central banks. 

For the MENA region, the equity markets continued the positive momentum to close higher during the week ending August. Investors were encouraged by a gradual rise in business activity, coupled with new measures to aid investment and bolster government finances such as Saudi Arabia’s move to allow FDI in its debt instruments and the UAE’s new law aimed at boosting its real estate market. 

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MENA Activity 

As of June 2020, Saudi led IPO activity in the MENA region. Following Saudi Aramco’s IPO, several companies expressed interest in pursuing listings on GCC stock exchanges in 2020. 

According to the EY MENA IPO Eye Report, the MENA region recorded an increase in IPO volume and value during Q1 2020, with four IPOs raising total proceeds of $814 million. This represents a 14-fold increase when compared to the $57.6 mn raised from one IPO in the same period last year.

The Saudi SE led IPO activity in the MENA region with two listings in Q1 2020 with net proceeds totaling $748.7 mn. Dr. Sulaiman Al-Habib Medical Services Group raised $700.9 mn by issuing 15% of its shares, while Sumou Real Estate Co. raised $47.8 mn, issuing 30% of its shares.

In Oman, Aman REIF, a REIT listing, floated 50% of its shares on the Muscat SE in a deal that raised $52.5 mn in January 2020.

Kuwait strengthened its capital markets with the privatization of its stock exchange in December 2019 and the introduction of the BK Main 50 Index. When Kuwait upgrades its equities to its main emerging markets index in 2020, it could trigger billions of dollars in inflows from passive funds.

MENA M&A Q1+Q2

The value of mergers and acquisitions with any MENA involvement fell 55% year-on-year to $50.7 billion in H1. In volume terms, “the number of deals declined 9% from last year, according to Refinitiv’s MENA Investment Banking report. 

“M&A activity gained momentum by the end of June on the back of the $15.6 bn NCB-Samba Financial Group merger in Saudi, followed by an investment of $10.1bn by a consortium of investors into ADNOC’s gas pipeline assets in the UAE, The National reported.

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Fundraising on the region’s equity markets was slower, declining by 58% in value terms to $875.7 mn. 

Debt capital markets proved a bright spot as governments looking to provide fiscal and monetary stimulus measures to lessen the economic impact of the coronavirus tapped investors for cash.

Debt issuance in the MENA region hit a record first-half high of $69.5 bn during the period, up 26% year-on-year.

The UAE and Saudi Arabia were the most active issuer nations, raising $23.3 bn and $19.1 bn, respectively.  Mena investment banking fees by volume and deal type, 2000-2020, according to Refinitiv.

The total value of investment banking fees earned in the Mena region in the first half stood at $522m, Refinitiv said. Morgan Stanley was the most active advisor in terms of M&A deals, with a 51% market share.

Rival data provider Mergermarket said in its half-year review that M&A deals in the wider Middle East and Africa region dropped 50% in both volume and value terms.