The Gulf Cooperation Council (GCC) countries accounted for IPO issuances valued at US$1.1 billion in 2013, according to Bloomberg. Notably, Qatar Exchange bounced back this year with the successful IPO and listing of Mesaieed Petrochemical Holding company Q.S.C. (a Qatar Petroleum Subsidiary), the first IPO in Qatar since 2010 and the first under the current listing rules of the Qatar Financial Markets Authority.
With momentum returning to local exchanges combined with increasingly favourable market conditions, the GCC IPO market is expected to post strong growth in 2014.
Top 3 Drivers of Middle East IPO Growth
Increased investor confidence in GCC IPO markets. Given the lull experienced in regional IPO activity, companies have adopted a cautious approach when considering listing shares. A demonstrable track-record of successful listings on the local exchanges will entice potential issuers who are seeking access to capital.
MSCI upgrade. Both the UAE and Qatar were recently upgraded from “frontier” to “emerging” market status by MSCI, which is among the criteria used by a large number of institutional investors and private equity funds to identify markets in which they can invest. It has been reported that the upgrade may draw as much as US$500 million of new investment into Qatari and UAE securities with the entry of foreign institutional investors and passive or index-tracking investors. The anticipated impact of the MSCI upgrade on local exchanges is yet to materialize however it is expected to end the GCC’s reliance on retail investors by creating a more attractive investment environment for institutional investors. The upgrade, which took place in May 2014, may encourage regulators, companies and banks in the UAE and Qatar to revise their foreign ownership restrictions, which will in turn attract more institutional capital to IPO markets.
Improved disclosure mechanisms. GCC local exchanges are seeking to match the disclosure standards of their European and US counterparts. Currently, the enforcement of disclosure mechanisms, transparency and corporate governance in the GCC is developing in line with the more mature bourses. Best practices are set to emerge in the region as the exchanges mature and MSCI inclusion imposes best practices onto the market.