Despite the headwinds brought on by the pandemic, GCC equity capital markets were able to sustain a reasonable level of activity with strong government support and significant stimulus measures globally.
With the ‘new normal’, GCC IPOs have resumed albeit with limited activity. In contrast, the debt market has been highly active and we expect the debt market activity to continue in the near future, PwC said in a report.
During 2020, initiatives were taken in the Kingdom of Saudi Arabia and UAE to facilitate equity capital market activities on their respective stock exchanges:
Tadawul launched its first Derivative Market in Q3 to gain access to a broader spectrum of local and international investors.
Saudi Arabia’s Capital Market Authority approved the direct listing of Saudi White Cement Company on the Nomu Parallel Market, enabling Tadawul to become the first GCC exchange to allow direct listings, i.e. listings of shares without an offering, with the advantage of less time, cost and effort for entrants.
Nasdaq Dubai launched a Growth Market aimed at small and medium-sized companies. It has more relaxed requirements compared to the main board, providing more flexible options to raise capital through IPO.
Nasdaq Dubai also signed a cooperation agreement with Hong Kong based Zhongtai Financial International and Beijing Tian Tai Law Firm to encourage and support Chinese companies to list on the exchange.
REGIONAL IPOS
GLOBAL IPOS
The healthcare sector was the most active sector in 2020 with 911 transactions raising $120.5 billion. The vaccine rollout around the world should underpin a global economic recovery in 2021.
This will build from a position where equity markets have been benefiting from an extended period of low interest rates, low inflation and government stimulus, particularly in Europe and the US.
However, the timing of the expected positive impact on economies, corporate earnings and capital markets will depend on the progress of vaccination programmes.
REGIONAL SOVEREIGN TREASURES
This period also witnessed some sizable corporate issuances including the $1.5 billion sukuk by DP World in July 2020 which represents the largest outstanding emerging markets US dollar corporate subordinated hybrid, the largest hybrid Sukuk offering, and is DP World’s inaugural perpetual issuance.
Mohamed ElBorno, Partner, Head of Assurance at PwC Middle East notes: “It is encouraging to see some GCC IPO activities after a pause in Q2. In the past, Q3s had typically been the quiet quarter. Q3 2020, however, had benefited from the buildup of a backlog over Q2 2020 driven by Covid-19’s impact worldwide. This resulted in 3 IPOs across two GCC countries, raising $325 million compared to $93 million in Q3 2019.”
He added: “Q4 2020 experienced only 1 IPO on Tadawul with proceeds of $585 million compared to 4 IPOs raising $26 billion across multiple GCC stock markets in Q4 2019. Excluding the impact of the IPO of Saudi Aramco, IPO proceeds in Q4 2020 remain in line with the prior year.”
